DIMON DOESN'T GET CHINA

Because He Really Doesn't Want To

JPMorgan Chase CEO Jamie Dimon says “We must get real engagement with China” in the wake of his recent meeting of his bank’s and other business leaders in Shanghai.

My question is what does Dimon mean when he says “real engagement”? I have been hearing about “engagement” with China since I was Counselor to the Secretary of Commerce in the Reagan administration and we led the first U.S. trade mission to China in the fall of 1982. We thought we were having “real engagement” then. Later in the 1990s, Bill Clinton switched from his campaign line of “no dictators from Baghdad to Beijing” to “positive engagement.” Indeed, his U.S. Trade Representative Charlene Barshefsky was fond of repeating that “in trade you always engage.”

But wait. In 2005, then Deputy Secretary of State Robert Zoelleck said in a major address that: “We want China to become a responsible stakeholder in the liberal, rules based global order.” To this he added that “from China’s perspective it would seem to be strongly in its national interest to work with us to shape the international future.” How could one make a better effort at real engagement than that?

Of course, Zolleck could not know that the risky, dishonest antics of top Wall Street players, including former Goldman Sachs CEO Henry Paulson who was now Secretary of the Treasury would come back to haunt not only Wall Street, but the U.S. government itself. The Great Recession of 2007-2009 was the result of implosion of the global mortgage market as a result of fraudulent construction of a wide variety of mortgage packages. When the implosion occurred, Paulson was at the U.S. Treasury and was forced to beg China to “act responsibly” in helping the U.S. government bail out its own economy and that of much of the rest of the free world. Paulson had acted as a kind of mentor to China’s officials charged with making its economy competitive in world markets. Now, his former students told him they no longer entirely trusted his judgement. They did act helpfully to support the U.S. bailout, but the Bush administration was in no position to continue talking to China about becoming a “responsible stakeholder in the liberal, rules based, global order.” As far as Beijing could see, it did not seem to work too well.

Brookings Institute scholar Jeff Bader was the key China official as Assistant National Security Advisor for China in the Obama administration. In an article for The Wire China and in later interviews, he makes perhaps the most important point about engagement with China. Beijing was now visibly changing its outward attitude and doing so at a time when a new top leader would emerge whose outward statements and actions would represent a sea change from what had gone before and what America had come to expect and actually to desire.

HIDE YOUR LIGHT AND BIDE YOUR TIME

When he took over after the death of Mao and decided to open China at least partially, Deng Xiaoping faced opposition from steadfast Communist Party leaders who warned that opening would allow “flies” to come into China. Deng responded that the party would be able to control the flies. He also cautioned his comrades to “hide your light and bide your time.”

What lies behind a statement like that? A leader doesn’t say such things unless he/she is scheming and aiming at achieving some end or goal that may be at odds with the wishes and/or expectations of others who might have a bearing on the outcome. The leader may wish to deceive potential opponents until his/her time has come. In the case of Deng and the Chinese Communist Party, the ultimate objective was the creation or the recreation of a China that, as had been the case in the storied past, outshined and surpassed the accomplishments of other countries and civilizations. Deng was not thinking about next week’s election. Rather, he was looking far, far into the future for which his ambitions were enormous.

Why American scholars, business leaders, and government officials did not pay more attention to what Deng and his followers were thinking and wanting has always puzzled me. I mean, if the leader of a country tells his key people to hide their light, it would seem only natural to ask Why? But none seem to have done so.

Obama did initiate what was called “the pivot” which entailed reducing resources and efforts aimed at Europe and shifting them to Asia. U.S. forces were increased in Australia, southeast Asia, and Japan and a free trade agreement with most of the nations of North and Southeast Asia was negotiated, but Obama’s failure to follow up on his warnings to Xi Jinping about seizing and militarizing islands and shoals in the South China Sea and the relatively small shift of actual forces from elsewhere to the Asia/Pacific theater seemed to leave China more or less in the driver’s seat. This was especially true when the new Chinese regime under Xi Jinping announced its Made in China 2025 program aimed at making China the world leader and self-sufficient in production of semiconductors, aircraft, artificial intelligence, solar energy, and essentially everything high tech. This project inevitably included massive subsidies and buy China policies and was therefor completely at odds with WTO rules and requirements. Yet, neither the Obama administration nor the leadership of American big business gave much reaction.

The response of the American business community was interesting. Neither Dimon nor any other important U.S. CEO was “engaging with” or wanted to “engage with” China said very much. Here was Beijing telling them it was going to beat them in the high tech game with indigenous producers, and Apple, GM, Volkswagen, Walmart, and many others just went ahead and tied themselves more and more into China with new investments. They did not call for “more engagement.”

XI JINPING THOUGHT

For sure, they did not engage themselves in learning about Xi Jinping Thought which was the doctrine and belief system of the new Chinese leader. It was going to be the Bible of the Chinese Communist Party for as long as Xi would be the leader which has turned out to be at least fifteen years. Nor did they seem very interested in Beijing’s talk of what the future of China would look like. What did, Xi mean by the “rejuvenation of the Great Chinese People? How would that affect foreign corporations operating in China? Would the foreigners be subject to the civilian=military fusion rules applied to Chinese corporations? No major foreign business leader seemed interested in engaging on those kinds of topics.

Xi, of course, is a princeling whose communist=leninist- marxist doctrine was fed to him with his mother’s milk. He has established a crusade and made the resurrection of the Qing and other great empires of the past the major objective of that crusade. Xi is not a politician, but a prophet, a holy leader preaching the gospel of the inevitability of Chinese greatness and leadership in all walks of life. He is more like Moses than like Joe Biden or even Franklin Roosevelt. His doctrine (Marxism=Leninism) is, in his mind at least, scientific. He can already see the signs. “Things not seen in a hundred years are now occurring”, he insists. In his vision, it is only a matter of time, and not very much time, before China will be the world leader in virtually every area and acclaimed by the other peoples of the world.

Do Dimon and other major business leaders want to “engage with” Xi on these topics? That would certainly be real engagement, but, of course, it is not what they are interested in. Indeed, it is likely that they would simply not be able so to engage.

REAL ENGAGEMENT WITH OURSELVES

What Dimon and the American business community badly need is engagement with America and the rest of the free world. Xi and China have a vision of where they are going and of how to get there. Does Dimon or any American business leader have a vision for where America is going. I do not mean a vision of where he or his company may be going in America, but rather of where the whole country is going and how it is going to get there?

No. They do not. President Biden and the U.S. congress just avoided by a narrow margin the bankruptcy of the U.S. government. In 1980, the United States was a creditor nation. Other countries owed us more than we owed them. We are now in debt to them to the tune of about $25 trillion. In 1989, the median income quintile for Americans was $57, 705. Today it is: $68, 703. In 1989, the top quintile was $107, 221. Now, it is $142, 501. Another way to look at income inequality is the so called gini coefficient. In 1970, the U.S. gini was about .348. Today, it is .450. Our inequality of income looks like that of Mexico rather than that of Japan or Germany.

Big U.S. corporations like Apple, who owe their lives to the research and development of the U.S. Defense Advanced Research Development Agency and who in the past produced in America while paying good wages and obeying environmental requirements while also paying taxes to Uncle Sam are now investing and producing in China where environmental regulations are skimpy, there are no unions and workers wages are relatively low, and they pay more taxes to China while holding off-shore earnings in tax haven locations like Singapore, Bermuda, Ireland, etc.

I do not know what Jamie Dimon means when he says he wants “real engagement” with China. He has had plenty of time to have such engagement and has stourly resisted what I would call “real engagement” with China. But I do know, that America badly needs some real engagement with Dimon and his colleagues in Big Business America.