Awani International, the global affairs division of Malaysia’s leading news network Astro Awani, continues its signature series Woo.Says, a weekly dialogue between Professor Wing Thye Woo (University Chair Professor at Liaoning University and Distinguished Professor Emeritus at UC Davis) and Melisa Idris (Senior News Editor at Awani International).
In the fourth episode, “Why America Is Mad at China?”, Professor Woo unpacks the roots of U.S. frustration. He explores how China’s unconventional growth model challenged long-held assumptions in Washington, and whether the current decoupling trend marks a turning point or a temporary rupture.
Melisa Idris: What explains the strong backlash from the United States toward China’s rise? We first saw this under Trump in 2017, then continued under Biden, and now again in 2025. What’s really behind the anger?
Prof. Woo: The biggest shock to Americans and even to the Chinese themselves is just how successful China has been. But this success did not unfold in the way the U.S. had expected. Let me explain with two key examples.
When China joined the WTO, it signed an agreement in November 1999 outlining how it would open up its economy over time. The U.S., particularly its advanced sectors, especially high finance, were strongly in favour of China’s accession. Financial firms like JPMorgan and Salomon Brothers saw a backward but potentially massive Chinese financial market and wanted early access.
One key promise China made was to grant national treatment to foreign banks, meaning that they would be treated the same as Chinese banks. That would include allowing foreign banks to make domestic loans, accept deposits in renminbi, and operate without additional restrictions. But today, in 2025, some U.S. financial institutions argue that progress toward full national treatment has not met their expectations.
The second source of disappointment came from the U.S. tech sector. Initially, companies like Facebook, Instagram, and Amazon believed that even if China excluded them temporarily, they would eventually gain access and dominate, as they considered themselves technologically superior. But then came Alibaba, WeChat, and Huawei, Chinese tech giants that not only captured their domestic markets but became real global competitors.
So now, the U.S. tech sector is not just demanding market access, it is demanding what they call fair competition. According to the WTO framework, the state should regulate the economy, but not directly own or subsidize firms competing in the market. However, China’s industrial policy includes direct subsidies to both state-owned and private firms. This is seen in the U.S. as an unfair advantage. Initially, industrial policy didn’t raise much concern in the U.S., given its limited success in many other contexts. But China implemented such policies with notable effectiveness. And now, both high finance and high tech sectors in the U.S. see China as a serious threat, and they've influenced Washington’s tough stance.
Melisa Idris: So these sectors, especially finance and tech, are now aligning with voices in the U.S. critical of China?
Prof. Woo: Exactly. There have always been ideological critics of China in the U.S., such as the Heritage Foundation. But now they’ve been joined by disillusioned business groups. That’s what makes the current confrontation more serious and difficult to unwind.
One possible path to de-escalation is for the U.S. business community to re-embrace engagement. That would likely require China to take steps to reassure them, including by reaffirming commitments made in earlier periods such as in 1999.
Melisa Idris: Before we get to that, I’d like to ask, what was China’s “secret sauce”? You mentioned industrial policy, state-owned enterprises, and direct subsidies. But what exactly did China do right that others didn’t see coming?
Prof. Woo: First of all, China had enormous latent potential. In 1978, before economic reforms, China’s GDP per capita was less than 13% of the U.S. So even just catching up offered huge room for growth.
China unleashed this potential in four main ways:
Infrastructure investment: Massive spending on roads, ports, airports, and digital infrastructure reduced transaction costs and made it easier to participate in global trade, made possible by the end of China’s prior economic self-reliance strategy beginning in 1979.
Knowledge diffusion: China aggressively sought foreign know-how and encouraged domestic learning.
Administrative experimentation: China created special zones, like Shenzhen where new policies could be tested under different rules. For example, foreign firms could hire and fire workers more freely in these zones compared to the rest of China at the time. These experiments often informed national reforms.
Recognising and supporting the private sector: China gradually allowed private businesses to grow and even compete with state-owned firms.
Let me give a specific example. In economics education, Peking University created a new research institute that hired only PhDs trained overseas, offering salaries five to six times higher than existing faculty. For some universities, these scholars were even allowed to stay abroad and manage their research centers remotely, made increasingly easier with the fast improvements in messaging, audio and video communication. This parallel academic structure created a high-performing “sandbox” model that other departments in each university began to emulate over time.
Melisa Idris: Doesn’t that create challenges, having two systems side by side? Can this model really be replicated?
Prof. Woo: Initially, it may seem inconsistent. But the point is to create successful prototypes that others eventually adopt as role models. Over time, traditional departments adapted their curricula and hiring standards to match the new benchmark.
This same principle applies to governance. China started with a centrally planned economy, but it gradually introduced administrative decentralisation. Provincial party secretaries who produced strong economic growth were promoted. This reward structure incentivised policy innovation at the local level.
But for provinces to innovate, they needed fiscal autonomy. In contrast, in some countries like Malaysia, state governments don’t have the right to collect most types of revenue and rely on budget allocations from the central government which retained centralised control over most forms of tax collection. In 2008, Penang's state government budget was smaller than that of Universiti Sains Malaysia, a federally-funded university in Penang. Without money, local leaders can’t initiate reforms.
In China, provinces compete with one another, taking good ideas from each other provinces and implementing them better locally. This “competitive decentralisation” was a major growth driver in China.
Melisa Idris: Is this decentralised model still in place today in 2025? And based on what you’ve observed, how do you see China’s economic future?
Prof. Woo: The context has changed. The old model, opening a factory, paying low wages, exporting globally, no longer works as well. Cheap rural labour has largely dried up. Wages are rising. China is no longer primarily a low-cost hub for plastic spoons and toys.
Now, the focus must shift to high value-added production. That’s why innovation is so important, and why China has invested so heavily in upgrading its universities and emphasising quality in research.
Melisa Idris: So is China innovating fast enough to sustain growth, especially with U.S. technological containment efforts?
Prof. Woo: U.S. technology restrictions may slow China down, at least for a while. But it will also slow down technological innovation in the U.S.
Why? Because many of the best ideas came from U.S.–China collaboration. Silicon Valley benefited greatly from Chinese engineers. Biomedical innovations often involve U.S. designs and Chinese testing. Disrupting this ecosystem slows everyone down.
The U.S. is now highlighting concerns over cyber security and intellectual property issues involving actors it views as having links to the state, which have become key friction points in bilateral relations. Hence, continued dynamic global technological progress requires an updated agreement on international norms of technological competition, and mutual compliance to these norms.
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