NEW YORK - Doug Guthrie, dean and professor at George Washington University's international business school, is an expert on economic reform in China, not politics.

However, he thinks US President Barack Obama missed a golden opportunity last year to stand up to Republicans and make a critical statement that could have set the agenda for future US-China relations.

In April, Chinese telecommunications giant Huawei was attempting to acquire 3Leaf Systems in the US, a server network firm. But a strongly worded letter to the White House written by six Republican congressmen caused Obama to not support the deal and Huawei wound up withdrawing its bid.

"It showed a lack of leadership in my opinion," Guthrie said. "He should have said, 'Bring it on' and that we're sick and tired of this kind of thing."

The letter begins: "We write to you about national security risks associated with the government's recent and proposed investment in broadband technology. We are concerned that these initiatives provide an opportunity for the introduction of potentially harmful technology to US broadband infrastructure."

Senators Jon Kyl (R-Ariz), Saxby Chamblis (R-Ga), Richard Burr (R-Nc), James Inhofe and Tom Coburn (R-Okla) along with Darrell Issa (R-Calif) said companies such as "Huawei and ZTE could benefit from federal investment in broadband technology (and that) these companies receive extensive support from the Chinese government."

"We should want to be affiliated with them," Guthrie said. "In my opinion, we should be encouraging all sorts of job creation. (China's) sitting on $3.2 trillion in foreign exchange reserves and Huawei invests in Africa, all over Europe, the UK. Huawei is the second-largest telecommunications equipment company behind Ericsson in the world."

The US concerns revolve around Huawei President Ren Zhengfei, who once served without rank in the People's Liberation Army's (PLA) Engineering Corps. Huawei is a private company and has consistently denied any ties to the Chinese government.

In 2010, Huawei and ZTE attempted to acquire Sprint Nextel, which could have infused between $5 billion and $7 billion into the company. But that bid was also rejected because of US government concerns over national security.

Guthrie said he thinks the Committee on Foreign Investment in the United States (CFIUS), which reviews acquisitions by foreign companies that would result in national security implications, has become a barrier to investment in the US.

"It's not very transparent. It just kills deals. They just say we can't tell you what happened, but it's bad," Guthrie said.

The dean has been extremely outspoken about the currency exchange rate issue, saying forcing China to raise the appreciation of the yuan through legislation or other means will not bring jobs back to America. He said the jobs will just flee to other emerging markets, such as Vietnam, Cambodia and Malaysia, which can offer cheaper wages.

Guthrie explained that there's a misconception, particularly among politicians, about how to bring jobs currently outsourced by US companies back home.

"For many in the United States, the common assumption is that greater protectionism is the easiest way to create American jobs," Guthrie said.

"Unfortunately, the logic of offshore manufacturing is so much more complicated today than it was when the practice was pioneered in the 1960s and 1970s. Today it is not just a matter of finding the cheapest labor; it is also a matter of balancing the access to internal markets, access to skilled labor, balances of trade and internal politics," Guthrie explained.

The Senate passed a bill in October - clearly targeted at China - that would have imposed tariffs on countries that undervalued their currency, but the House and Obama dismissed it. Guthrie does not support legislation that would punish China over its currency.

"If we are going to be successful in getting the US economy back on track, foreign direct investment in the United States will be a necessary part of this. And our most important partner in this endeavor will be China," said Guthrie. "At this point, we need China more than it needs us. Yet, instead of focusing on how to rebuild skilled labor, how to foster competitive business environments, and how to attract capital back to the United States, we obsess over issues like China's currency manipulation as the source of our problems."

The focus, Guthrie contends, is to find a way to create a "business-friendly environment" in which the $3.2 trillion in US currency that China is looking to invest abroad can return to the US. "By some estimates, China would be willing and ready to invest $200 billion a year in the US economy. But we are so skeptical and apprehensive about China's motives that we would rather reject these overtures and risk the future of the US economy than figure out how to work with our largest trading partner," Guthrie said.

"Our politicians are sadly cynical about it," he said. "I don't think they care about creating jobs. It's a bizarre debate. It's easier to blame our ills on China than to do something to solve them ourselves."

Guthrie has two main solutions: to invest heavily in improving vocational education and to develop what he terms "cross-industry strategies".

"We need to talk about difficult issues. (China) has better skilled labor, and better subsidies than we do. We're not getting enough government development in our economy. From China through Singapore, the government tries to help to develop the economy," Guthrie said.

"The ultimate irony is that the largest communist polity in the world is much more hospitable to business than the world's largest capitalist economy," Guthrie added.

China Daily