American businessman and philanthropist Manuel C. Menendez is founder and CEO of MCM Holdings, a business advisory service organization. He played an active role in China’s return to the world market in the late 1970s. In the 1980s, he was CEO of Great Eastern Development, which completed the first U.S.-China equity joint venture in China for a major Fortune 100 company.

A photograph of Manuel C. Menendez.

Manuel C. Menendez

Manuel C. Menendez came to China in 1979 and has witnessed the entire process of the country’s reform and opening up. In 1985, Deng Xiaoping, the architect of the reform, gave him a Chinese name, Meng Deshi. His motto is “world peace through world trade.”

He thinks that the United States and China will not able to decouple. He shares his insights on the real problems in the current U.S.-China economic and trade relations.

CNS: It seems that after talks between the U.S. and Chinese trade teams resumed, their communication has advanced to deeper and more specific areas. How do you see this change?

Manuel C. Menendez: First of all, the frequency of the meetings is much higher than in the past. Each meeting has made a little bit of progress. I think positive signs have been built up based on the frequency and frankness of the meetings. What we need is more engagement, more meetings, more discussions. That has to be an urgent priority.

With respect to the U.S.-China trade disputes, I think both sides have legitimate concerns. There’s not going to be one meeting where they are all solved. It’s going to be a step-by-step process to make progress, an incremental approach.

Many countries face many challenges due to the global pandemic. There are pressing issues that take away the immediate focus. It’s like with so many fires burning, you have to decide which one to put out first. I think that people’s health and safety has to be the top priority of any country. Alongside of that, the U.S.-China trade relationship has to be one of the top priorities.

Overall, I would advocate more frequency in the talks. I’m very positive about the trade relations through the interactions. Talking is always better than silence. There’s already a good sign with these more frequent interactions between the U.S. and China, which means that the windows are open again for discussions. I think the U.S. trade representative has talked about recoupling.

CNS: What do you think of recoupling between the U.S. and China?

Manuel C. Menendez: I don’t think we’ve ever decoupled. Our economies and countries over the past 40 years have become interdependent, interconnected and intertwined since China’s reform and opening up.

I don’t think it’s possible for the two economies to ever decouple. There are going to be areas of high sensitivity when it comes to, for example, cyber security, selective areas in hi-tech. That’s why, again, I advocate higher frequency of discussions to work through differences and find common ground.

My only recommendation as a businessman is, you can’t address all the issues at the same time. What I suggest is to develop what’s called momentum. When you drive your car, the most energy is used when you just start, and as you get rolling you use less and less energy, and there’s less friction. What I would like to see happen is the U.S. and China start moving incrementally, make positive progress in areas both sides agree to create momentum. To do so we all need to get back to the talking table because creating positive momentum is important.

And the way to do that is, when you have these big meetings, just pick a few things that both sides in advance could agree to, like climate change. It’ll at least develop the momentum coming along. It is not only good for the U.S.-China relations, but also good for the world.

CNS: What could add to this momentum?

Manuel C. Menendez: When it comes to U.S.-China relations, I put things into two buckets. One is policy-related, and the other bucket is structural issues.

Structural issues are very complicated where you might have to change a rule or law. Dealing with them takes a long time. So if you’re going to create momentum, pick some policy issues. The tariffs (imposed by the Trump administration on Chinese goods) are a great policy issue to begin with.

I’m not saying both countries can agree on removing tariffs on the whole list tomorrow, but incrementally, certain categories can get rid of the tariffs immediately, going back to the way they were before. For example, agricultural products, health-related items, environmental technologies equipment, garments and footwear, or things that are not related to sensitive areas.

CNS: As the U.S. continues to face record inflation, import of quality but inexpensive products from China can help alleviate the pressures. With that as a basis, can the U.S. and China usher in a smoother trade relationship?

Manuel C. Menendez: Let’s take one step back before I answer that. I think the thesis about the trade imbalance has been a big political football in the U.S. When I speak to business people and many government officials, I tell them that the trade imbalance is actually not caused by China.

There is a market only when there is a demand. The trade imbalance where there are more goods coming from China to the U.S. is because many U.S. companies order and manufacture products from China as the quality is good, and the price is good. The rule of the world in business is that the winner has the best quality at the best price and with the best delivery. When companies like Walmart, Costco, Nike and Apple are ordering things for the U.S. market, that’s where the trade imbalance comes from.

Companies that set up early in China, including Procter & Gamble, Starbucks, McDonald’s and General Motors, have grown well. These companies have served the Chinese market well as well as the U.S. market. Some people in the U.S., like former President Donald Trump, say, “China is costing us jobs” but that’s not true. We need to get back to the kind of mutually beneficial and cooperative U.S.-China relationship that we had before.

CNS: What is the biggest misunderstanding and misjudgment some people in the U.S. have about China? Why has the misunderstanding deepened in recent years?

Manuel C. Menendez: Part of this is just the politics in the media. If people have never been to China and do not understand the situation, it may cause misunderstanding.

I’ve been here since China’s opening up in 1979. And my company put together the first U.S.-China joint venture. So I’ve seen what has happened in China with my own eyes. When you think of what China has been able to do in 40 years, it’s unbelievable.

If I were the richest man in the world, I would ask the mayors of every American city, the governors of every state, and even members of the U.S. Congress to come and see China. Not only Beijing and Shanghai, but wherever I am in China, people are very friendly to me. As Confucius said, “When friends come from afar, you should be happy and welcome them.”

Confucius also said China was a benevolent society. So China is not interested in conflict, and has never been aggressive. The other concern that people have is that as China rises, it doesn’t mean that the rest of the world is diminished. China’s rapid growth is driving huge demand and that has significantly helped other countries’ economies grow.

China is already playing the role of a stabilizer. For example, during the Asian financial crisis in 1997, many countries devalued their currencies, but the Chinese renminbi kept strong, which helped stabilize Asia.

CNS: How has the economic and trade friction between the U.S. and China affected American companies?

Manuel C. Menendez: There’s no winner in trade wars, only losers.

The trade war started by Trump has not worked at all till now. There was this idea floating around the previous administration and in some political circles that if the U.S. made the tariffs on imports from China so high that the price of Chinese imports would be equal to or close to the price of the U.S. goods, then the factories in China would close and move back to the U.S. But that never happened. What was missing in the thinking is that many of these U.S. companies that set up China operations sell in the huge China market and are making money for the U.S. shareholders. They were not set up just for exports to the U.S. Tariffs should not be used as a means of trying to improve competitiveness and level the playing field for every business.

China did not initiate the trade war. They responded to it with tit for tat. China’s way is to respond to external pressures.

When trade becomes difficult, and there are logistical interruptions as well, some U.S. companies need to expand and redesign their supply chains. As far as I know, the vast majority of companies have not, and will not, abandon the Chinese market altogether. If you’re a major player in the world market, you’re not likely to abandon your business in the world’s second largest market, which is China!

CNS: How does the U.S. business community want the U.S.-China relations to go?

Manuel C. Menendez: The vast majority of U.S. businesses, especially the ones that are involved in China, want the relations to get better, without any doubt.

They also want more dialogue on those areas that are issues on both sides. There are certain areas, certain markets in China that foreign companies, not just U.S. companies, want to enter, but sometimes the government hasn’t fully opened them up yet. People may go “Oh, it’s protectionism.” But it’s not true.

I always try to explain to my friends that sometimes you have to look at the timeline of China. In what I have learned, China never opens up its market completely and immediately, because it’s a big country, with 1.4 billion people. China will try maybe in one area opening up a certain market and seeing if there are any issues. If there are issues, they try to solve them and then they will open the market up step by step. So I ask my friends to be patient and remain positive.

(Interviewed by Pang Wuji)