China is not the only one that has to change its business practices, says Yale’s Stephen Roach



Yen Nee Lee and Saheli Roy Choudhury | CNBC

  • The U.S. and China have to “make big changes” in the way they do business with each other, said Stephen Roach, a senior fellow at Yale University.
  • “I hesitate to say all the onus of change just fall on China,” said Roach, who’s a former chairman for Morgan Stanley Asia.
  • A broadly “adversarial relationship” between the U.S. and China has overshadowed some of Washington’s legitimate concerns about Beijing, said Robert Kapp, president at Robert A. Kapp & Associates.  

The U.S. — and other countries — has complained about the difficulties of doing business in China, but the Asian economic giant is not the only one that should change its practices, according to a prominent economist.

America, too, has to re-examine the way it’s engaging with China right now to address those complaints, said Stephen Roach, a senior fellow at Yale University. Concerns that foreign businesses have raised about China include being forced to transfer technology to their Chinese partners and government subsidies for state-owned enterprises that distort competition.

“I think we need to make some big changes in the way we do business together. I hesitate to say all the onus of change just fall on China,” Roach, who’s also a former chairman for Morgan Stanley Asia, told CNBC’s “Squawk Box Asia” on Tuesday.

He added that instead of using threats to force China to change its trade and business practices, the U.S. may find it more effective to negotiate a bilateral investment treaty with the Asian country.

“Bilateral investment treaty opens up the Chinese market to our multinationals — which we need to do — and provide protection for that, and opens up our market to them. If we can negotiate that, that would be a huge breakthrough,” he said.

Amid the ongoing U.S.-China trade war, multiple news outlets reported last week that the White House was in the early stages of considering some curbs on U.S. investments in China. White House trade advisor Peter Navarro and others in President Donald Trump’s administration denied those reports.

‘Adversarial’ US-China relations

Nevertheless, moves that seek to “decouple” the U.S. and China could set “a very dangerous precedent,” Gary Locke, former U.S. ambassador to China from 2011 to 2014, told CNBC’s “Squawk Box Asia” on Tuesday.

“Are we to stop all exports, whether farm goods or manufactured goods from medical equipment to food to Boeing airplanes, to China? Where does this end?” asked Locke, who was U.S. secretary of Commerce from 2009 to 2011 under President Barack Obama.

The U.S. and China — the world’s top two economies — have been engaged in a trade war that lasted more than a year. The two countries have slapped elevated tariffs on billions of U.S. dollars worth of each other’s products. The uncertainties surrounding how both sides could resolve the trade fight have rocked financial markets and hurt business confidence globally.

Washington has long accused Beijing of unfair trade practices that includes intellectual property theft, lack of equal local market access, and forced technology transfers. But, addressing those concerns have been overshadowed by the broad “adversarial relationship” between the two countries, according to Robert Kapp, president at Robert A. Kapp & Associates.

“We started with a list of American grievances that was presented to the Chinese at the beginning of the Lighthizer negotiations. And there were some very serious matters on that list,” Kapp, who was previously president of the U.S.-China Business Council, told CNBC’s “Street Signs Asia.” He was referring to U.S. Trade Representative Robert Lighthizer.

That has “degenerated now into a tit-for-tat tariff exchange, in which, it seems that the personalities and the staying powers of the leaders are more important,” he added. “We’ll have to see whether Lighthizer and Liu He can get back to some of the very serious matters that the United States has raised with China that need to be addressed.”

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