The American Entrepreneurs Who First Opened The Chinese Market

Tracy Alloway (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, needless to say, always a lot of anxiety about the US-China trade relationship these days. I feel like there are new tariffs and new developments, or new conversations about overcapacity and EVs, and new headlines about planes and stuff, basically every day right now.

Tracy Alloway (0:40)

Yeah, there were new headlines this morning, weren't there, from one of Trump's economic advisors?

Joe Weisenthal (0:45)

Right, right.

Tracy Alloway (0:45)

I can't remember what it was. Oh, that's why God created tariffs.

Joe Weisenthal (0:48)

Oh, yeah.

Tracy Alloway (0:49)

But you're absolutely right. I mean, it's been years, if not decades now, where China manufacturing has been this sort of thing that looms large over the US economy. And I think what's interesting about the US-China economic relationship is the way we think about it, or the way we talk about it, it seems almost like it was an inevitability.

Like it was inevitable that the two biggest economies in the world were going to have some sort of trade relationship, and maybe because of specific decisions undertaken by the Chinese leadership, like Deng Xiaoping or whoever, to build out the Chinese economy in a certain way led to a lot of the increased tension. But in advance of this discussion, I was kind of thinking about it, there was no inevitability, right? India could have been our biggest trade partner.

Joe Weisenthal (1:43)

Yeah, that's a really great point. Or we might not have a big trade relationship at all. Or China could have been more like Russia, in which trade is very modest. Right, this idea is like, okay, the US is rich, and we do services and stuff like that here. China is poor, their comparative advantage is cheap labor.

Therefore, China produces everything, or produces a lot. That's how we talk, and it just sort of seems, as you say, like, yeah, inevitable, this is the natural order of things. But there are lots of countries that have big populations that aren't particularly rich, or that aren't manufacturing powerhouses the way China has. So I think it's interesting, as you say, like, there's this conversation, like, it's sort of inevitable.

And we talk about it now, like, okay, this is the state of things.

Do we want to change it, et cetera? But really not much conversation about, like, how we got here, or how we built this relationship in the first place.

Tracy Alloway (2:38)

Yeah, I think there's, going back to that inevitability point, there's usually an underlying tone of, like, well, the market's going to market.

Joe Weisenthal (2:45)

Yeah, market's going to market.

Tracy Alloway (2:46)

Market's going to market.

Joe Weisenthal (2:47)

Invisible hands going to invisible hands.

Tracy Alloway (2:49)

That's right. And that's how we ended up with, you know, lots of stuff being built in China, where there is cheap labor. By the way, Joe, I'm old enough to remember when I was living in...

Joe Weisenthal (2:59)

We're both old enough, but go on.

Tracy Alloway (3:00)

Yeah, when I was living in Japan in the 1980s, I distinctly remember that most of my toys, like, my cheap little plastic toys, they all came from Taiwan.

And I remember when I was like six years old, not really understanding where Taiwan was or what it was at that point. But I distinctly remember thinking that it was this magical land where all the toys were made. But, you know, like in the 1980s, I guess we were in that transition point from moving from Taiwan being a massive manufacturing base into China. But even as late as the early 1980s, Taiwan was still making a lot of stuff.

Joe Weisenthal (3:39)

For me, when I was 10 years old, I lived in Malaysia for a year. And then I have this memory of visiting a friend's house when I was 11, back in the US.

And I noticed that one of his Hot Wheels was made in Malaysia.

And I was like, oh, that's so cool. I didn't even know anyone else had heard of Malaysia. And so the idea that this company had gone to Malaysia to manufacture the Hot Wheels, I just thought it was so cool. It was like, oh, I've been to that country. I didn't know anyone else knew about it, let alone going up to setting up a toy manufacturing operation. I guess there's a little bit of a diversion, but it does remain true that a lot of the countries that are powerhouses of advanced manufacturing were one-time powerhouses and still are of low-end manufacturing.