What should American business leaders understand about China right now?

There’s a lot going on, from China’s recent abandonment of its zero-Covid approach to the pandemic, to the increasing perception among many lawmakers that China is an economic and security threat to the U.S.

Today we’ll hear part of a conversation between two Kellogg professors and a senior fellow at the Brookings Institution about the relationship between the Chinese and U.S economies.

The challenges of “decoupling” the U.S. and Chinese economies

The conversation is between Nancy Qian, a professor of managerial economics and decision sciences, and codirector of the Global Poverty Research Lab, Benjamin Jones, a professor of strategy who studies economic growth, and David Dollar, a senior fellow at the Brookings Institution and leading expert on China’s economy.

Here’s a brief and lightly edited excerpt of their conversation, where they discuss the challenges of “decoupling” the U.S. and Chinese economies without taking a wrecking ball to the broader global economy.

QIAN: When I think about decoupling today, two issues come up.

One is just implementation: How does one actually implement decoupling? I can see how you can do that for narrowly defined products with short supply chains. But if it’s a complex product, you know, it’s almost impossible without going all the way and building a wall. Most companies don’t know the suppliers or their suppliers. To ask them to know the suppliers of the suppliers of the suppliers all the way down to the raw material to make sure that some aspect isn’t coming from China, that’s just administratively very cumbersome, if not completely impossible, given the complexity of the products that we’re making these days.

And the second concern is about spillover effects. I have had conversations with people, entrepreneurs in the U.S. and China, who are very concerned about decoupling and making business decisions based on that fear. I was speaking to a vice president of one of the U.S.’s largest food-manufacturing companies. They produce candy and food and food coloring, nothing strategic at all. But she was telling me that the discussion they’re having with the corporate leadership is that they’re probably not going to be in China for the next 30 years. And the reason is because they just can’t deal with the policy fluctuations.

JONES: Building on that, I was working in the White House in the first term of the Obama administration when the tsunami came to Japan and took out the Fukushima nuclear reactor. That shut down a regional economy in Japan, which is very important potentially to the global economy. We were struggling to figure out, what is the implication of the Fukushima shutdown for the U.S., for U.S. workers, for U.S. manufacturers, for the world, et cetera. We found ourselves calling major multinationals, like major auto manufacturers in the U.S., and saying, do you have suppliers in this area of Japan? And then they would say to us, “Well, we know where our direct suppliers are, but we don’t know where the suppliers of our suppliers are much of the time.”

Qian, Jones, and Dollar also discuss firms’ recent moves to build redundancy into supply chains, and why it may be in the U.S.’s self-interest to keep a brand presence in China. You can listen to the podcast here or read the Q&A version here.

Check out our 2 upcoming The Insightful Leader Live webinars

We’ve got two great webinars coming up this month.

Tomorrow, get the latest on inflation and the economy.

Inflation remains stubbornly high both in the U.S. and in much of the world. This has businesses, policymakers, and consumers alike wanting to know: Is the worst behind us? When will the price increases on everything from energy and iphones to groceries and rent finally slow down? And will attempts to tame inflation lurch us into a recession?

Join professor Sergio Rebelo as he walks us through the state of the global economy and where we may be headed next. The free webinar will take place Thursday, Jan. 12 at noon central time. You can register here.

And Jan. 20, learn how to help your team (and yourself) manage stress.

The last few years have been incredibly stressful. Often this stress is exacerbated by gaps between how people want to live and how they actually live. But there are concrete things that managers can do to help their teams (and themselves) be intentional about prioritizing the right activities, reducing their own anxiety in the process.

Hear from clinical professor of entrepreneurship, author, and venture capitalist Carter Cast, who will share a variety of tools and strategies that leaders can use to help employees maintain good balance in their lives and their work. The free webinar takes place Friday Jan. 20 at noon central time. You can register here.