ITIF argues that U.S. companies should continue to operate in the Chinese market to capture $441 billion in annual revenue. Meanwhile, CSIS hopes to leverage intelligence tools and real-time data to counter Chinese government influence around the world.
Two Washington think tanks released reports this week that take different views on competition with China. The two approaches could work together, with the US remaining in the Chinese market while challenging China’s power elsewhere.
The Information Technology and Innovation Foundation announced the findings on May 4th. According to the study, U.S. affiliates generated more than $640 billion in revenue from China in 2023.
About 70% of the production, worth $441 billion, was sold to Chinese consumers.
The foundation counted about 2,000 companies operating in mainland China and 921 U.S. companies in Hong Kong that reported assets, sales and income of more than $25 million last year. Of the listed companies, 173 companies revealed that their total revenue in China in 2024 will exceed $307 billion. Apple accounted for 22% of that total. The top 10 companies accounted for 61%.
Manufacturing will account for 55% of U.S. company sales in China in 2023, the highest share in the past 10 years. Food producers sold 96 percent of their production to the local Chinese market. Transportation equipment manufacturers sold 92% locally.
Research spending from U.S. operations in China has doubled in 10 years, rising from just over $3 billion in 2014 to nearly $7 billion in 2023. Companies with larger sales in China showed higher research intensity. However, U.S. companies invest less in research within China than those in Europe, Japan, and South Korea.
Labor force shrinks as profitability declines
Employment at U.S. affiliates declined steadily from 2016 to 2023, declining every year except 2021. Between 2018 and 2019, there was a significant 25% decline due to trade tensions. In 2023, total employment will be 1.2 million people, with manufacturing accounting for 52%. A survey by the American Chamber of Commerce in China found that 84% of its member companies’ management teams are comprised mostly of Chinese nationals.
Recently, the business situation has deteriorated. The U.S.-China Business Council reported that 18% of its members’ businesses were in the red. More than a quarter of companies have considered moving outside China in the past four years, an increase of 71% compared to the previous period.
The foundation says the U.S. presence serves the national interest in several ways. Companies will have access to Chinese technical talent. China produces 47 percent of top artificial intelligence specialists, compared to 18 percent in the United States.
Markets serve as a means of tracking technology trends and consumer behavior. Ford added features in 2021 based on feedback from Chinese customers.
U.S. technology creates dependencies in China’s supply chain. Operating systems for laptops and mobile phones show US dominance, with Huawei’s HarmonyOS reaching more than 1 billion devices. The China Civil Aviation Corporation relies on U.S.-made engines for its C919 aircraft, manufactured in partnership with GE Aerospace and a French company.
Public opinion shows different opinions on these issues. Seventy-nine percent of Americans are concerned about China’s unfair trade practices, but only 12% support a complete ban on U.S. investment in China. A further 46% support narrow restrictions on advanced technology, and 18% oppose any bans.
The Center for Strategic and International Studies published an analysis on April 29th. The report recommends leveraging open source intelligence to counter Chinese influence. The year-long discussion brought together 58 experts in national security, technology, and public campaigns.
This report highlights three strategies based on technology, media, and economic pressures.
The first is real-time monitoring to find weaknesses in Chinese influence operations, such as fentanyl trafficking routes. Second, improving information channels across government agencies and improving communication to counter Chinese lore at the local level. The third is to guard against potential conflicts, such as the acquisition of supply chain nodes or the disruption of China’s shipping network.
It also recommended highlighting moments when Chinese officials reveal their true intentions in an unscripted environment.
