Cheng Si-Wei (’83) On U.S.-China Trade: “The process should not be politicized.”
He is an international expert and renowned scholar in engineering, economics, finance and management. He has more than 40 years experience in the chemical industry and is a pioneer in growing China’s multi-billion dollar borax industry. He is the Former Vice Chairman of the 9th and 10th Standing Committee of the National People’s Congress, PRC.
But during a recent visit to UCLA Anderson, he told a Korn Convocation audience packed with UCLA Anderson students, faculty and an array of Chinese and Chinese-American business men and women that he prefers the simple moniker “professor,” suggesting, that with all his accomplishments, it’s the role of teacher that Cheng Si-Wei (’83) most enjoys.
During his whirlwind Anderson visit, Cheng was well-received during what proved to be a very busy day. In addition to his Korn Hall appearance, he addressed UCLA Anderson’s Board of Visitors and met privately with UCLA Anderson students from the Greater Chinese and Asian Management Business Associations. One particular highlight was a visit to the Charles E. Young Research Library, where he viewed the She-wo Cheng Memorial Fund collection. This collection of Chinese-, Japanese- and Korean-language materials relating to journalism and education was established by Cheng and his siblings (including UCLA Sociology Professor Lucie Cheng) in honor of their late father She-Wo Cheng.
Whether commanding a full house in Korn or addressing an intimate gathering of UCLA Anderson students from Greater China, Cheng exudes a learned charm. When addressing the case for U.S. investment in China and describing the state of U.S.-China trade relations, his persona is not that of a politician making the case for his country, but rather of a learned sage, logically advocating for expanded development of the two country’s economic relations.
It’s a relationship that Cheng characterizes as “mutually complimentary,” despite the United States’ $268 billion trade deficit with China. (That’s according to the US Census bureau.) Cheng suggested that China’s statistics indicate the deficit is less, noting that the U.S. figures include Hong Kong in the equation.
Cheng cited three ways in which the two countries enjoy a complimentary relationship. The first is China’s production of low-end goods, compared to the United States’ focus on high-tech products. Secondly, he noted, that the U.S. economy is based on consumer spending, while the Chinese economy is focused on savings. Third, the United States enjoys more advanced technology, while China boasts less expensive labor. Taken together, the U.S. trade deficit is currently inevitable. The Chinese people, who Cheng mentioned earn on average 50 cents an hour, cannot afford to purchase high-tech American products at the same level that U.S. consumers can buy less expensive Chinese goods.
“The United States still has the higher end of the market, but China is catching up step by step,” Cheng said in an interview with Assets magazine. “As time goes by, some labor intensive low-end production will shift from the coastal areas (of China) to the western areas or from China to other Asian countries. This is the normal process and, in this case, we are catching up. But I think it will take a much longer timeframe to catch up to the higher end production because we are a country of 1.3 billion people. We cannot rely on high tech industries.”
“If you want to balance the trade between the two countries, the U.S. must sell more products to China,” Cheng said. “But,” he added with emphasis, “The process should not be politicized.” The professor emphasized this point several times throughout his visit during various appearances, repeating the story of an American politician complaining that the ships entering the U.S. from China are “full,” while the ships heading back are “empty.” In response to what he sees as American political rhetoric, Cheng says with a smile that the consumer goods China sells to the U.S. are large and must be sent by cargo ships, while the computer chips and other high-tech gear traveling from the U.S. to China are more easily delivered by air. More to the point, Cheng believes that the imbalance should be solved by the U.S. gradually selling more goods to China, as the Chinese economy grows and becomes more globally integrated. What he does not want to see are regulations and other political instruments artificially interfering with economic progress.
Cheng understands the process after an “accidental” career in the Chinese Congress. As he explains it, his decision to enter the political realm came about because he wanted his ideas about economic reform to be heard and taken seriously by Chinese leadership.
As a leader in the chemical industry (and armed with an MBA from the United States), Cheng was a member of the Chinese People’s Political Consultative Conference (CPCCC). As a member, he made proposals to the government, including to various committees and party officials. In 1994, a senior member of his committee, a chairman of a democratic party in China (called the China National Democratic Construction Association) asked him to join his party. Cheng wondered why.
“He told me that ‘even if you are a member of the CPCCC, your proposals can not be well understood by the top leaders, because there are two thousand members,’” Cheng explained. “But he told me if I were a leader of the Democratic Party, I could talk to the top leaders face to face. So, I joined and after one year was elected to the chairman of the central committee of the party. But, really, I did it so I could talk to top leaders seven times a year. I was then elected to the National People’s Congress as vice chairman because according to our regulations the top chairman of my party is always the vice chairman of the National People’s Congress.”
Today, Cheng spends his time promoting financial reform in China. He cites three areas of focus: internationalization, market orientation and systemization. Internationalization, naturally, refers to China’s continued integration into the global economy.
“’Market oriented’ means (China’s) interest rates and (China’s) foreign exchange rate should be a ‘natural rate’ according to the market,” Cheng said. “At this point it is being controlled, but in the future, it should reflect the supply and demand relationship of money.”
“As for privatization, I would say there are two directions,” he elaborated. “One is to create more and more public companies. I even encourage state-owned companies to go public – not only for the capital, but also to improve their corporate governance. (But) on the other hand, we encourage the development of the private sector. At this time, the private sector is around one-third (of the economy) in China (and) most are small and medium sized companies. We need to encourage them to grow especially through alliances and through mergers and acquisitions. Otherwise it is a very slow process (for a company) to grow into a big company through only the accumulation of capital.”
For a complete biography of Cheng Si-Wei, click here.