‘Coopetition’ offers pathway to improve US-China relations

Yang Jiechi, head of the China ruling Communist Party's office on foreign affairs, left, holds an online conversation with the U.S. National Committee on United States-China Relations on Feb. 2. Photo: Xinhua News Agency, via The Associated Press

By Michael R. Malone

Yang Jiechi, head of the China ruling Communist Party's office on foreign affairs, left, holds an online conversation with the U.S. National Committee on United States-China Relations on Feb. 2. Photo: Xinhua News Agency, via The Associated Press

‘Coopetition’ offers pathway to improve US-China relations

By Michael R. Malone
To reassert U.S. economic authority and to promote global prosperity, University of Miami Herbert Business School experts urge a new sensibility to international relationships and increased cooperation and competition with China.

The United States’ self-imposed isolationist stance of the past four years damaged relations with allies and the short-sighted trade war with China not only increased tensions, but counterproductively aided the Asian superpower’s influence, especially with emerging nations, according to China and business experts at the University of Miami. 

Both Miami Herbert Business School Dean John Quelch, in recently published articles, and management professor Yadong Luo, in an interview, suggested that the U.S. can best reestablish its global influence and help ensure world peace by broadening relations with China and embracing “coopetition”—a strategy that simultaneously promotes cooperation and competition. 

“Deeper, not weaker, trade and investment relations between the United States and China are the best guarantee of peace between the two nations,” wrote Quelch, who is also dean emeritus of the China Europe International Business School, Shanghai. In another article, he described the trade war of the past few years as “futile” and said that “clumsy trade policies” exacerbated tensions with China, provided minimal benefit to the U.S. consumer, and aggravated the European Union—“our most important ally in pressuring China for economic reforms that level the playing field for foreign competitors.” 

Quelch expressed his hope that the new U.S. administration will seek to broaden and repair relations with China while promoting democratic values. “China’s rise must be respected, and China must be represented appropriately on the international stage,” he said. “But China must be resisted when our values and the security of allies who share those values are at stake.” 

Luo, a Emery M. Findley Distinguished Chair who was recognized last fall as among the world’s most highly cited researchers, has been refining a political-economic philosophy that fuses respect, cooperation, and competition for decades. 

Prior to coming to the United States, Luo had worked in industry and for the Chinese government—at one point serving to negotiate China’s entry into the World Trade Organization. His early scholarly interest explored cooperation in global networks and international business. 

When he first heard the phrase coopetition—coined by the CEO of Honeywell in the early 1990s and popularized by two Harvard economic professors in their book on the subject—he was enthusiastic for the possibilities. 

“When you combine my industrial and scholarly interests, it was a natural progression for me to look at both the collaboration side and competition side,” he said. 

Luo developed the concept in his 2006 book “Coopetition in International Business” and became among the first in the international business field to elaborate the philosophy in global competition.   

He divides the concept into two levels—micro and macro. Micro, he explained, refers specifically to international business and multinational enterprises, such as Apple and Samsung that compete business-to-business, yet also collaborate on a multitude of projects. The macro level is more country to country or region to region—the United States and China, for example. 

Trust—essential to cooperation—is easier to forge at the micro level, Luo recognized. “At a macro level, we bring in geo-political, diplomatic complexities, and military complications, so there is more uncertainty and unpredictability,” he explained, noting though that many suggest that the macro uncertainties actually provide more impetus for countries such as China and the United States to find ways to collaborate. 

He emphasized that economic interdependence and economic control can help to govern trust at the macro level and noted that both the United States and China enjoy a high degree of economic interdependence. That interdependence must be safeguarded, however, he said, through economic controls such as bargaining power, a key component of coopetition. 

Who will be the winners? 

“Most studies confirm my proposition that is whoever can leverage bargaining power more effectively will be more likely to be the final winners and that applies to governments as well,” Luo said. He added that to repair their relationship both China and the U.S. must eschew short-term interests and look at the bigger picture and a longer horizon. 

He suggested that both China and the United States must eschew short-term interests and look at the bigger picture and with a longer horizon. 

“If both countries only look at issues opportunistically in the short-term there’s no solution,” Luo said. “Coopetition always carries the bigger picture and to succeed requires that firms, executives, or government see economic competition as more than one technology or trade—that creates cannibalism and backfires horizontally—instead they must look vertically from one industry to another, upstream and downstream. 

“And a longer horizon is a must,” he added. “Trust naturally means a longer horizon. And it’s important to look at the bilateral relationship from trade, capital flow, workflows, digital flows, human resources, and from every aspect economically and politically.” 

He recommended, too, that both countries need to see their bilateral relationship within the broader international framework. 

“There are many planned and unplanned, friendly and unfriendly, outcomes from bilateral coopetition gaps or actions,” he said. “What are the global implications if again we impose tariffs against China? What would the intended consequences be for Southeast Asia? For other emerging economies?” 

Ultimately, he said coopetition and resolving the issues between the two economic superpowers will require dialectical thinking—the ability to view the scenario from multiple perspectives and to arrive at reasonable conclusions from seemingly contradictory vantage points. The Chinese philosophy of yin-yang is helpful to understanding this approach, he pointed out. 

“In some areas the two countries will compete on a zero sum, but in most areas, there will be a positive sum,” said Luo, suggesting as an example the model that GE has been using for the past 25 years. 

“Designed in the United States, manufactured in China, and sold worldwide—that is coopetition as a positive sum where you leverage what you are good at,” he said. “That is the strategy the U.S. government can follow. You find areas where you create positive sum games, but you are able to leverage global consumption.”

According to Luo, industries characterized by open global consumption are especially viable for coopetition and can serve to improve U.S.-China relations and global prosperity. 

“Who can conclude that industries—from technology to infrastructure to green and sustainable energies—have a fixed demand? Their demand is open-ended,” he said. “And if the lead global players can provide better products and better solutions and a greater experience, there will be a bigger demand for buying more iPhones or whatever the technology might be.”

“Coopetition can change the philosophy of zero sum and unleash the potentiality of global needs,” Luo added. “So why shouldn’t these two economically powerful countries collaborate? I hope that’s the philosophy adopted by more politicians.”