In conventional mass media and online of late, one can discover abundant information describing the unprecedented scale and intensity of industrial cooperation and capital migration between the United States and China.

On the one hand, there is huge American foreign direct investment in China and plentiful highly efficient China-U.S. joint ventures involved in subcontracting and outsourcing and mostly doing well even under the hard conditions of the global crisis.

On the other hand, China holds more than $1 trillion in U.S. government bonds representing a long-term investment in the U.S. economy — an especially significant fact in the light of an eventual default threatening the credibility of the U.S. administration.

All this, it seems, calls for a new approach to the interpretation of the modern stage in Sino-American economic relations. What does it represent par excellence — large-scale, albeit traditional, commercial trade, or something else? Should we regard these processes merely in the context of internationalization of economic life? It looks like the answer to both questions is “no.”

Here we find a case of far-reaching interlacing, although the partners, both standing aside in the world thanks to their unique economic potential, are divided by the largest stretch of ocean geographically, and by a gulf of social and political differences, historically.

The term “internationalization” depicts the mare fact that certain economic processes have been overstepping the borders of individual countries. It is a universal and omnipresent feature of modern economic life providing a background for more specific and more concentrated manifestations of tight cooperation between individual states or their groups, which we routinely call “integration.” In the application of the term, we are emphasizing the growing interdependence between countries, as well as on the emerging intertwining and the functional tieup of their national economies — something far more comprehensive and far-reaching, with more meaningful consequences, than the usual “internationalization.”

Thus, to describe this rather unusual situation as “integration” seems to be fine, though applied without the adjective “regional,” of course.

In other words, we can call what has been happening between the U.S. and China “functional integration” or even the “twinning” of the two giant economies — a favorite metaphor for describing rare cases of a full-scale physical accretion of two creatures into one organism with a common metabolism. However, what represents an undesired ugly mutation in the realm of organic life may become something intended, useful and quite effective in the business world where such exceptional cases tend to become an everyday reality! The toolkit of “twinning” is very rich and diverse.

It includes, in particular, many instruments servicing migration of capital and cooperation of production, including foreign investment, both direct and portfolio, joint ventures, cross-border mergers and acquisitions, widespread subcontracting networks, sophisticated outsourcing schemes, multilateral consortia, joint development projects, etc.

Nowadays, “Siamese twins” as specific new formations within the global economy can emerge not only among the neighboring countries of more or less same type (if not same caliber), but also through the accretion of economic organisms divided by oceans and representing different social and economic models.

Among them the “Siamese pair” of the U.S. and China obviously stands out and draws world attention thanks to the sheer magnitude of the interlacing economies and an especially high degree of mutual complementarity of their resources and economic structures. It is not an ordinary pair indeed!

Rather it might be seen as a newfangled voracious “elephantine household,” on whose annual “family feast” not much less than half of the global “economic pie” is served.

According to some forecasts, by 2015 China’s economic potential (GDP) will amount to 14 percent of the world production, against 11 percent at the beginning of the century. China ranks second (after the U.S.) in total market capitalization in a list of Top 500 Global Companies for 2009 released by the Financial Times.

On the other hand, one should not disregard the fact that about half of all industrial activities are foreign-controlled and concentrated in the coastal regions with their famous free economic zones, which are among the most attractive and successful in the world.

Besides, China — by its own judgment — is “a major manufacturer but not an innovative power.” It ranks 43rd on the Global Innovation Index 2010 — far behind the U.S. and Japan.

All this makes technological cooperation with the U.S. absolutely vital for China’s economic future. Note that this applies also to China’s cooperation with Japan, which has placed on the mainland a considerable chunk of its science-intensive and technologically sophisticated “offshore production” (also “twinning” of a kind, albeit with one-way capital migration so far).

During the last few years, more than half of all current American and European long-term investments have been directed to China (in comparison with 20 percent in 1990). American transnational corporations have decisively substituted the “overseas Chinese” (“Huaqiao“) as a major source of foreign investment funds.

Up to one-third of China’s export trade goes through joint ventures. Foreign, predominantly American, capital controls about three-fifths of China’s exports and imports. The U.S.-China trade turnover is the third biggest in the world (after U.S. trade with Canada and Mexico within the NAFTA system), and a considerable part of it consists of components that are used in carmaking and electronics.

The paradox is that so few are trying to grasp the meaning of what has been happening so far! The importance of this sea change stems not only from the mega-figures characterizing economic interaction between the U.S. and China as such, but also from the growing impact that this new, unexpected alliance begins to exert on the overall world picture — through the imperious obliteration of borders between geopolitics and geo-economics. This issue as well as its far-reaching economic and political implication call for special analysis.

Andrey Borodaevskiy, a noted Russian professor with half a century of research and teaching experience on the world economy and international economic relations, is co-author of the recent monograph “Russia in the Diversity of Civilizations” (Moscow, 2011).

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