US trade with China is under scrutiny at the highest political levels. With President Donald J. Trump’s tough talk on trade with China, accusations of illegal currency manipulation and threats of punitive tariffs, many fear a trade war that would damage economic growth.

 

Such fears were cause for Cai Chaolin, vice mayor of Guangzhou, and other high-level officials to come to Washington in mid-March.

 

"As the commercial relationship between the US and China moves into uncharted territory, the private sector and cities, such as Guangzhou, are increasingly vital to strengthening economic ties and promoting co-investment,” said Chaolin. He showcased China’s third-largest city at a conference to re-emphasize why strong economic and commercial ties between the two countries are more important than ever – not only for trade, but advanced manufacturing.

 

 

Speakers at the conference were optimistic about the coming state visit by China’s President Xi Jinping, his first with Trump. “I see this as a positive,” said Dan Glickman, former US Secretary of Agriculture. "And once Trump’s Secretary of State Rex Tillerson has a team in place, this too will make a big difference in diplomatic relations.”

 

Also easing tension could be the new Congress of the Communist Party of China in the second half of 2017. “There should be a greater balance between China and the US,” stated Tian Deyou, China's economic and commercial minister counselor in Washington. "We do not want a trade war. We want a win-win situation.” But he added that the geopolitical situation between the two nations is extremely complex.

 

Glickman emphasized that both the US Congress and Trump are experiencing an unprecedented period of transition and re-evaluation of long-term global trade engagements and relations. That includes national security issues related to North Korea.

 

“My opinion is that we cannot retrench,” he said. “US engagement in the world has to be with China.”

But some Americans are reeling over lost jobs and dislocation and blame globalization. Despite its importance to the US economy, trade has become a sticky situation, Glickman said. "The truth of the matter is technology, education, and globalization are responsible for a lot of the changes. Guangzhou is an example of a place that has brought together all three.”

 

Henry Levine, a senior advisor at the Albright Stonebridge Group and former deputy assistant secretary for Asia in the US Department of Commerce, emphasized that South China, and Guangzhou in particular, have created a climate of openness and a dynamic economy.

 

A recent survey by the American Chamber of Commerce in South China found that 70% of US companies operating there are pleased with their return on investment; 80% said the investment climate was either good or very good. Issues regarding unfavourable regulations and unfavourable regulatory environment, which rank high in other parts of China, ranked low in South China. In fact, 60% of the US companies surveyed chose to make their headquarters in Guangzhou. The basic drivers for increased investment in South China were openness to foreign companies and innovation.

 

“A major differentiator is that North China, Beijing in particular, is entrenched in politics and ideology,” Levine said. “The further you get away from Beijing, the more pragmatic people are. In Guangzhou, there’s a sense of entrepreneurship and business: ‘Let’s not mess around with politics. Let’s get things done.’”

 

GE has a large presence in China as an infrastructure company working with large state enterprises. “GE has been doing great in China,” said Karan Bhatia, GE’s vice president for global government affairs. “If you make an investment into localizing your capabilities, you end up being seen as a fabric of the community.”

 

One example is GE’s role in manufacturing equipment used to create medicines, drugs and biopharmaceuticals at Guangzhou International Biotech Island. “We have put together a package of equipment that looks like a shipping container to give a company extremely quick capabilities like a local drug manufacturing company, but at faster and lower

cost way,”Bhatia said.

 

The effort is being pioneered with GE’s local partner, which was able to construct facilities in only 18 months as opposed to the five to eight years Bhatia said it would take in the United States. The reason for the success: GE’s partnership with the local government and it commercial partner's appetite for risk. “This exemplifies that if you are on the ground and willing to put some skin in the game you can be extremely successful,” he said.

 

US company Mead Johnson, known for its Enfamil baby formula, established its Asia headquarters in Guangzhou 25 years ago. From there, it operates a manufacturing facility and the Mead Johnson Pediatric Nutrition Institute technology centre.

 

The institute is the latest link in Mead Johnson’s global R&D network and its third such facility around the world after the US and Mexico. In Guangzhou, Mead Johnson partners with leading Chinese scientists and experts.

 

“Together we have changed the nutritional profile of Chinese children largely because of new products, improved food safety and best practices,” said Andrea Erickson, the company’s vice president for public affairs. “We have benefited from China’s Food and Drug Administration and regulatory oversight. We’ve seen changes in how they’ve come to trust our products.”

 

Erickson added: “We used to have a motto: ‘Made in China, sell in China.’ Today our motto is: ‘Innovate in China and share in markets around the world.’”

This gets back to how Guangzhou is transitioning into an Asia-Pacific base for some of the world’s most innovative and fastest growing companies. “Guangzhou-based companies invested more than US$5.3 billion internationally in 2016, and nearly half of all Fortune 500 companies have operations there,” said Chaolin.

 

To grow stronger ties to the US, Chaolin unveiled the official launch of liaison offices in Boston and Silicon Valley, and stressed how Guangzhou is “a city of business and trade.” He pointed to Guangzhou Port and its 150 steamship line routes that connect the city to 400 ports in 100 countries and regions.“

 

Its cargo-handling capacity of 544 million tons in 2016 gave it a sixth-place ranking worldwide,” he said. “The port’s container throughput in 2016 was 18.86 million TEUs, ranking it seventh worldwide.”

 

Guangzhou’s Baiyun International Airport, one of China’s three major hub airports, has 136 international routes and a handling capacity in 2016 of 60 million passengers and is expected to handle 80 million passengers by 2020.