Business units within large organizations constantly compete and negotiate with each other for resources, this was a constant theme in most of the cases we studied within the collaboration module. Teams within business units either lose or gain as a result of these negotiations and changes in resource allocations. We learnt that organizations that are good in collaboration capably handle such trade-offs within business units and find some optimum that is good for the larger organization as a whole.
A typical scenario is happening at a global level with this whole issue on the value of the Chinese currency. As mentioned in this New York Times article, many US corporations will lose heavily if China heeds to pressure from the US government and appreciates its currency – an appreciated Chinese currency would also mean that US consumers would have to pay higher for many retail items that are imported from China. On the contrary, many corporations who are exporters of goods to China would gain with higher volumes of business if the Chinese currency appreciates. The article discusses similar such contradicting stories among Chinese corporations.
What is most striking, as mentioned in the article, is that both the governments are well aware of the fact that a balanced relation between the US and Chinese currencies is good for global trade. However, from the article, It is clear that both countries are looking for local optimum and not inclined to collaborate, although they know such a collaboration would be positive for the larger organization (or) world trade and ultimately positive for them. The question is why. As we discussed in class, most organizations fail in collaboration because they are unable to find a global optimum that works well for the organization. Maybe the case here is that though the countries know what to do, they don’t know how to accomplish it in a way that doesn’t give strategic advantages to the other.
5 replies on “US China currency wars and strategic collaboration”
I assume collaborations between governments or even just politicians are difficult. Most of the collaborations we’ve been talked about are primarily within businesses that share the same vision: maximize profits and productivity or in Kennedy’s cases: protecting America. In political scene, things are so different with each member possessing their own agenda.
In reality, how much jobs and economic growth can depreciated RMB contribute to the US? Economists.com suggestion? Not really, particularly in the long term. Think about it, if Walmart can’t buy cheap goods from China, what would it do? Buy it from Thailand, Vietnam, Africa… you name it. How likely is it for Walmart to come back to the States and buy goods from American manufacturers?
China on the other hand, is blamed to have focused too much on exports instead of increasing domestic demands. The government is under great pressure domestically for having too much US dollars, and still keeping buying it.
The government’s agendas are so different. And this is a battle. I might see compromises, but collaboration? Hardly.
I agree with your views on how different governments and companies are. But I still think that the framework of disciplined collaboration is applicable to governments. The problem, whether it is Kashmir or Palestine or as in this case trade policies, is in finding a shared vision. Moreover, isn’t collaboration all about compromises ?
Inherent in the name, politics, there is the political environment that these collaboration efforts need to contend with. The ways that these two countries collaborate will have much further reaching implications than simply optimizing on economic parameters. In order to make a cogent case for this, everything else cannot be neglected.
But obviously it is impossible to consider all, we can only strive to consider the most important aspects–whittle it down, make some assumptions. If the economic issue is not heavily prioritized, I don’t see the collaboration happening. But when stakes are higher, we will see how loudly money speaks.
This examples indicates how hard it is for nations to collaborate. Seems tougher than the case for companies. In this example, a number of companies stand to lose. You suggested Wal-Mart; I can only imagine the pressure they are exerting in Washington…..
Morten
China is also keenly aware that a significant factor in starting Japan’s unending deflationary spiral was US pressure to let the Yen appreciate back in the 1980s (http://www.project-syndicate.org/commentary/ito2/English)