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US-China trade

America is losing its greatest strength: human capital

Published 14 March 2023

Scholars of innovation will tell you that one of the keys to advancing the frontiers of knowledge is diversity of thought. But an increasing number of engineers and scientists of Chinese descent are leaving their academic and corporate positions in the US as anti-China rhetoric heats up on Capitol Hill. To retain its talent, America should make sure it's not sending the wrong message.

We are entering a new era of great power competition, a strategic contest between the US and China. Aggressive industrial policies by the US aimed at winning back industries or at least leveling the playing field, US investigations of scholars at American universities for links to Chinese institutions, and the Select Committee recently convened to assess Sino-US strategic competition,[1] all send strong signals about the threats that China poses to America’s global position. But we should consider whether they are unintentionally sending the wrong message about American ideals, and whether they threaten the core values that made America the magnet for the best and the brightest talents from around the world since the nation’s founding.

Americans and people from Asia

As a first-generation descendant of immigrants from China, I sometimes worry about what message we are sending to people of Asian origin. Will chasing researchers who have worked with China put a chill on academic collaboration? I know I had already started being careful about not saying or sending things that might be misinterpreted by Chinese officials, because I knew that e-mails or phone calls could be overheard or read by people other than the intended recipients. How will the strong anti-China rhetoric at the first House Select Committee hearing color what people around me think? Do I have to worry about how my words may be interpreted in the US now?

When US Attorney General Merrick Garland, an alumnus of my high school, was asked at his confirmation hearing why he wanted to serve the country, he talked about how the US had protected his grandparents who fled anti-Semitism and persecution, and how he wanted to give back to the country that shielded them. I grew up in the same community as Garland. My parents had left China at the end of World War II, and after the Communist takeover of the mainland, they decided not to return. They told me later that they didn’t think I would have survived, and they were undoubtedly right. Like Garland, I feel the US has been extraordinarily good to me, offering opportunities limited only by how hard I was willing to work.

Growing anti-China rethoric

There are many complaints about China from Western companies and governments, particularly the US, but also increasingly other nations. Not “playing by the rules” that we expected them to, when they started taking advantage of the Western-led global trading order – technology transfer through mandatory joint ventures, subsidies to Chinese companies that made it impossible for others to compete -- we hear these all the time. Increasing US-China tensions have also fueled anti-China rhetoric in the US. I once visited a multi-billion-dollar factory in China, and asked why it was located in this particular city. I was told that the company built factories where they received the largest subsidies. In this particular case, the level of Chinese subsidy was so high that even the most efficient Korean manufacturer of that product told me they could no longer compete. I also once interviewed a manager at one of China’s largest battery and electric vehicle manufacturers, and he recounted for me how the American company he used to work for had really put them into the battery business because it needed to meet domestic content rules in order to sell its products in China. He knew because he worked for that company before switching sides. So I’m not sure how many of these cases were forced technology transfers versus Faustian bargains to gain a market position in China.

Today, there is a lot of anti-China rhetoric in Congressional hearings, in the press, and among internet pundits. I don’t think anyone who knows me would question my motives as an American citizen, but how about others who are caught up in the anti-China sentiment, polarized by a soundbite-driven 24-hour news cycle? Will people actually take the time to understand the issue in depth, or will they just buy into the rhetoric as they keep shopping at a big-box store or online, not realizing how many of their products come from China? I know I am much more careful about what I say these days. My experiences at Harvard tell me that you can be labeled for uttering a single sentence that doesn’t sit right with somebody.

America without strong human capital

We should be thoughtful about what message we are sending to people of Chinese descent, as history has taught us many times. In the 1920s, if you wanted to get an advanced education in the sciences, you went to Germany. That all changed in the 1930s as people fled persecution. For people like Albert Einstein, Felix Bloch, Erwin Schrödinger, Leo Szilard, Edward Teller, and many others, it was Germany’s loss and America’s gain. America was built by immigrants, whether it was Germans and Scandinavians who emigrated to the Midwest, Italians and Irish who emigrated to the Northeastern states, or the Chinese laborers who built the first western railroads. What if the US could no longer cultivate, attract, and retain human capital such as people like Jensen Huang who built Nvidia, Lisa Su who turned around Advanced Micro Devices, or Eric Yuan, the founder of Zoom, on our shores? Would the country be better off?

Scholars of innovation will tell you that one of the keys to advancing the frontiers of knowledge is diversity of thought. You need the widest possible “funnel” of ideas, and you need a mechanism to select the best of them. This has been a core strength of America – we attract people from all over the world, and we foster a strong market-based competitive system, where survival of the fittest manages the selection process better than any centralized planning bureaucracy ever could. Yet The Wall Street Journal recently reported that an increasing number of engineers and scientists of Chinese descent are giving up tenured faculty and corporate positions in the US to leave for China or elsewhere.[2] Shouldn’t that worry us? Shouldn’t we be trying to attract more bright Asians and getting them to stay rather than scaring them away? I have seen many students from China decide to go back after completing their degrees because they think America no longer welcomes them. That most certainly should not be the outcome that we want as the most market-oriented economy in the world.

Enjoying the best of both worlds

As a country, we should reflect on how we got into this mess. On the one hand, we love the cornucopia of inexpensive products the China trade has brought us, yet we rue the dependency the US has built on China for manufacturing. We offshored work to China that we didn’t want to do ourselves, or couldn’t do for cost reasons. But now we want to bring it back, even though it will cost more, and we might not like doing the work. When I was in the consumer electronics business in the early 2000s, I remember being told in no uncertain terms by Walmart purchasing agents that if we didn’t produce in China, we would not sell in their stores. The reason was cost, but also scale. Where else could Apple’s assembler Foxconn muster hundreds of thousands of workers to assemble millions of iPhones for the next product launch weekend?

To me, it was already evident in the early 2000s that the US would eventually regret the loss of capabilities associated with making high-tech products. I remember visiting the cable TV operator in Beijing and hearing their plans to lay optical fiber all the way to apartment buildings and businesses. Then I visited an optical components factory in Shenzhen, and thought to myself that one day the American defense establishment would wonder how China developed those capabilities. My colleague Gary Pisano and I wrote a widely read piece in the Harvard Business Review on this subject in 2009.[3] This is the crux of the debate today: the US is losing the ability to innovate, and the implications are serious particularly when you have an autocratic regime on the other end who now controls critical capabilities.

The US should also look at its own investments in research and development. China recognized as early as 1986 with its “863” Plan the importance of investments in R&D and science education. It has already overtaken the US in the number of scientific journal publications, bachelor’s degrees awarded, and number of researchers. China has reinvested the money earned from making components for TV sets and iPhones, shoes, and furniture, and poured it into R&D. It has surpassed the US in total R&D investments annually, and a report published recently by the Australian Strategic Policy Institute put China-based researchers ahead of Americans in 37 of 44 important technologies.[4]

We should welcome Chinese immigrants, especially those who want to bring a business here or come here for advanced studies. One of my Singaporean colleagues once commented that the truly remarkable thing about America was that it was one of the only nations that had successfully integrated people of such diverse origins. We should take advantage of that.

As anti-China rhetoric heats up in venues like the House Select Committee on China, we should make sure that we send the right message. And that message should be: “Send us your best and your brightest, those who thirst for opportunities to better lives for themselves and their families, and to improve our society. You will be welcome on our shores, and you will strengthen us in building a better America.”

[1] Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party
[2] US-China Tensions Fuel Outflow of Chinese Scientists From US Universities, Sha Hua and Karen Hao, The Wall Street Journal.
[3] Restoring American Competitiveness, Gary P. Pisano and Willy C. Shih, Harvard Business Review.
[4] ASPI’s Critical Technology Tracker, Australian Strategic Policy Institute.

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Willy Shih

Willy Shih is the Robert and Jane Cizik Professor of Management Practice in Business Administration at the Harvard Business School.

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