The U.S. Should Grab the Talent China Is Driving Away

(Bloomberg Opinion) -- From the 1990s through the early 2010s, it looked as if China could do no wrong. Its economy grew at a breakneck pace as its companies hungrily gobbled up market share in a wide array of manufacturing industries. Its political system, although authoritarian, seemed increasingly stable, as power passed from Deng Xiaoping to Jiang Zemin to Hu Jintao to Xi Jinping in an orderly manner. As opportunities to get rich in China proliferated, Chinese students who came to the U.S. increasingly went back after graduation.

But now the seemingly unstoppable juggernaut is hitting a rough patch. The economy, which had already slowed earlier in this decade, is slowing some more. President Xi has changed the rules to allow himself to effectively be president for life. The country is growing increasingly repressive, not just toward the Uighurs and other minorities, but toward the general public. Even discussion of economic policy is now often off-limits. The country may yet regain its economic footing and resume opening up, but for now all of the trends look bad.

A slowing economy and rising government repression will push more Chinese citizens to flee. Already, this is happening. As part of a feature on an entrepreneur who decided to leave, the New York Times reports that the fraction of rich Chinese who feel very confident in their country’s economic prospects has fallen from two-thirds two years ago to just one-third today. More Chinese parents are sending their kids overseas, although it’s hard to say whether the point is to give them a broader education or to shield them from possible domestic unrest or persecution. A pattern of buying houses overseas may simply be a savvy investment strategy, but it also may be a way of keeping one foot out the door.

That there are so many elites who lack confidence in China’s stability and prospects should be a warning for the regime, but for the U.S. it could provide an unexpected bounty. If the U.S. were to welcome those Chinese people and make them Americans, it would receive a healthy dose of entrepreneurial talent.

This wouldn't be the first time the U.S. took advantage of another country’s unrest in order to snag top talent. Economist Petra Moser has found that the influx of Jewish immigrants escaping the Nazi regime in the 1930s increased U.S. progress in science and technology. A similar result was achieved with Russian scientists fleeing the collapse of the Soviet Union. These are far from isolated examples; when a country falls into chaos, poverty or civil war, the U.S. is often the destination of choice for its most skilled emigres. Immigrants to the U.S. also tend to be highly entrepreneurial; almost half of the Fortune 500 companies were founded by first- or second-generation Americans.

Taking in Chinese businesspeople and innovators is especially important because China is actively trying to entice people to return. In addition to attempting to lure overseas students and emigres back to the motherland with promises of business opportunities and plum jobs, the country is pouring money into research in order to appeal to top scientists.

The U.S. needs to take full advantage of disaffection with the Chinese regime and fear of the slowing economy in order to fight back. The biggest obstacle to taking in Chinese talent, however, will spring from U.S. attitudes. As trade competition heats up and American intolerance of Chinese espionage grows, there’s rising suspicion among U.S. leaders of Chinese nationals. The Donald Trump administration has begun restricting visas for Chinese science and technology students. Trump is reported to have declared that “almost every [Chinese] student that comes over to this country is a spy.” The administration is also considering restrictions on Chinese researchers. There’s even a worry that technology export controls may be interpreted broadly in order to block Chinese nationals from employment at top tech companies.

These measures directed at China are, of course, in addition to more general measures Trump has taken to restrict high-skilled immigration, foreign students and foreign entrepreneurs.

Even given the need to crack down on Chinese industrial and intellectual-property theft, this is a big mistake. Yes, some small percentage of Chinese students and employees who move to the U.S. will be spies. But most will not, because the type of people willing to abandon China for the U.S. will tend to be those who are dissatisfied with the regime. Those dissidents, in addition to using their formidable talents to help build U.S. power, will provide a fertile recruiting pool for American counterintelligence efforts.

The confrontation between the U.S. and China is a contest between an open society and a closed one. If the U.S. forsakes that advantage, it won’t prevail. Instead, it should use its openness to maximum effect, and harvest the talent that China’s repression and incipient economic sclerosis are driving away.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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