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For the first time last year, Chinese consumers bought more Cadillacs than Americans, helping to generate profits at General Motors. And while the Cadillac models may have been designed in Detroit, almost all of the luxury cars were assembled in China by some of GM's approximately 60,000 local workers.
This growing dynamic – of US companies offering Chinese consumers products made in China – marks a shift in global trade that could be a major challenge for President Trump's "America First" program.
Trump based his campaign to rethink economic relations with China over the well-established notion that the country would undermine US workers through low-wage manufacturing of products exported to the United States.
This campaign entered a new chapter this week when Trump again raised tariffs on Chinese products after being declared unhappy with the pace of negotiations on a new trade deal.
However, many economists and leaders believe that, if it succeeds in securing a trade deal, the nature of US-China trade relations is already being redefined.
After four decades of economic reforms, China has shifted from a low-wage exporter to an increasingly important market for a growing number of industries, including automobiles, video games and computers.
"We are at the end of a period of globalization of production," said William Overholt, senior researcher at Asia Center of Harvard University. "We are at the beginning of a period of globalization of consumption in which the center of gravity is moving from baby boomers in the west to relatively young Chinese."
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According to the McKinsey Global Institute, for example, ten years ago, Chinese consumers bought 71% of products made in China. Today, the Chinese buy 85% of what they produce – and their economy is three times bigger.
According to the Organization for Economic Co-operation and Development, China's per capita income will double by next year.
The phenomenon, which is also found in other developing countries, such as India and Indonesia, will create a new set of winners and losers.
In the United States, the main beneficiaries of the globalized consumer era are probably investors and highly skilled employees, rather than blue-collar workers who have suffered from the relocation of companies overseas.
"It's definitely a profit story," said Dean Baker, senior economist at the Center for Economic and Policy Research. "It will have very little to do with jobs here."
In the past, Americans bought low-cost products made in China, which was a boon for Chinese workers but also for cost-conscious Americans. But, seeking to satisfy the Chinese consumer, the opposite is not true. Instead, US companies set up factories in these countries and other developing markets.
According to the Bureau of Economic Analysis, multinationals based in the United States have already created jobs faster in China than at home. Since 2009, Chinese companies have increased their Chinese workforce by 86%, reaching 1.7 million, about four times the increase rate at home.
For Trump, this means a trade policy that often seems to promise a return to a time before globalization could disappoint, even if it has a good deal with the Chinese.
The administration officials announced that they were working to rebalance their trade relations with China and other countries in order to rectify the mistakes made by Trump's predecessors. A new trade agreement with North America, for example, requires more motor vehicle manufacturing in the United States. (It still has to be passed by Congress.) President's tariffs are credited with boosting steel production, which has contributed to the creation of 452,000 new jobs in the manufacturing sector during his tenure.
Other trends could also benefit the United States. Increasing wages in countries such as China and increasing automation are making labor costs relatively less important in determining the location of new factories. This makes the United States more attractive as an investment destination, although increasing automation means that new plants require fewer US workers than factories that closed earlier this century, generating millions of jobs.
In the context of the Beijing trade talks, the administration is also seeking better access to the Chinese market, which could improve the US export prospects. But the most important new opportunities have little effect on the blue-collar workers who have lost the commercial ties that have developed over the last 20 years.
US negotiators are pushing the Chinese to open their markets to sectors such as financial services, insurance and cloud computing. They are profitable businesses, but they favor educated and skilled people.
The president has often portrayed a story of world trade that places the United States – not the foreign markets – at the center. He calls this a "privilege" for other countries to sell in the US market. And its decision to break a trade deal with 12 Pacific countries, known as the Trans-Pacific Partnership, on the fourth day of its mandate, has put US companies at a disadvantage in key Asian markets, at a time when developing countries are spurring growth in global demand. .
At present, many leaders say they do not expect the United States to regain its role as the world's dominant market.
Craig Allen, president of the American Council of Chinese Affairs, which represents companies such as Amazon, Goldman Sachs and Procter & Gamble, said the administration's position posed a dilemma for multinationals.
"A company told me today that it felt a certain tension between what its shareholders are telling it and what the Trump administration tells them," said Allen, a former US diplomat. . "The administration suggests or focuses on investing in the United States. The market is not there; this is not where the growth of the market is. "
It is true that, despite the growing role of consumption in China's growth, the country remains one of the world's leading exporters and enjoys a large surplus in merchandise trade. Brad Setser, a former White House economist under the Obama administration, said it was premature to speak of a new era.
"This is one of the possible future developments in the global economy. It's not necessarily the trajectory we already have, "he said.
China's economy has also slowed relative to its double-digit growth rate earlier this decade, and many business leaders question President Xi Jinping's commitment to pursuing market-oriented reforms. According to some economists, China is facing a huge burden of corporate debt that could trigger a financial crisis and delay the start of a new economic era.
The typical Chinese individual always earns far less than an American. In terms of purchasing power parity, which takes into account the cost of living of each country, Chinese per capita income is about $ 16,000, compared with about 60,000 in the United States.
Nevertheless, China has firmly established itself as an opportunity – if not an opportunity – for a wide range of US companies, including Apple, Walmart and Caterpillar. Over the last decade, China's per capita income has increased by 120 percent, compared to only 15 percent in the United States, according to Andy Rothman, investment strategist at Matthews Asia in San Francisco.
"It's the best consumer story in the world," said Rothman.
China's growing prosperity is part of a broader transformation of developing countries that affects the volume of goods traded from one country to another, the design of industry supply chains and the combination of labor and robots.
According to a study by the McKinsey Global Institute, fast-growing developing countries, led by China, are expected to account for 51 percent of global consumption, nearly double their 2007 share.
Companies in advanced economies, including the United States, the European Union and Japan, sold $ 4,500 billion worth of goods, including machinery, chemicals and cars, to customers in the poorest countries.
"This is exactly the wrong time to erect barriers to trade," said Susan Lund, a McKinsey partner who led the study.
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In recent years, China has accounted for more than a third of global economic growth, roughly matching the combined contributions of the United States, Europe and Japan, according to the International Monetary Fund.
For General Motors, this resulted in deliveries of 3.65 million vehicles last year to Chinese buyers, against less than 3 million to Americans. The automaker earned $ 2 billion last year from its joint ventures in China.
"We have recorded the highest global sales mark in Cadillac history for 38 years, with 382,184 units, mainly because of the strength of our performance in China," said Steve Carlisle, Executive Vice President of General Motors, last month.
US multinationals that thrive abroad generally add jobs at home, at their headquarters, research labs, and design studios. Successful companies like Cadillac generate profits that impact the bottom line of the company, generating job-creating innovations for Americans.
But these gains go to investors and more educated workers.
"The advantage of Chinese consumers buying more Cadillac benefits shareholders and highly qualified people. You will see more unequal distribution of benefits, "said Sergi Lanau, deputy chief economist at the Institute of International Finance.
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