Growing U.S.-China tensions took a turn for the worse after China’s new foreign minister, Qin Gang, cautioned the U.S. to change its course or face conflict. But despite the rhetoric, the two superpowers are not headed toward any sort of ‘real conflict’, Derek Scissors, American Enterprise Institute Senior Fellow and China Beige Book Chief Economist, tells Yahoo! Finance Live. Although Scissors emphasizes there’s no ‘decoupling’ on the horizon, divergence depends on whether businesses choose to divest from China. “If American businesses choose to do less business with China, you’re going to get those very intertwined economies,” he says. “But that’s not conflict.” Still, U.S. businesses deciding to move out of China will face tough decisions, he says. “Vietnam isn’t big enough,” Scissors says. Companies have recently made overtures to diversify their production, most notably Apple (AAPL) supplier Foxconn, which has invested in several states in India in the hopes of eventually establishing new factories. Such moves will face growing pains, says Scissors. “India doesn’t have the right policies…Mexico is already pretty crowded with companies,” he explains. “They don’t necessarily have great alternatives.”
