China’s challenge and opportunity in the era of Trump
By Jeffrey D. Sachs |
chinawatch.cn |
Updated: 2019-04-29 11:30
The administration of US President Donald Trump is targeting China through a set of unilateral economic measures designed to slow China’s rapid technological advance and rapid economic growth.
The Trump administration asserts that China’s growth has relied on unfair practices, including protectionism, forced transfers of technology from multinational companies to Chinese partners, and outright industrial espionage. China vehemently rejects these assertions, yet aims to find a pragmatic working relationship with the US rather than a breakdown of relations. Let me share my own perspective on the US-China economic frictions.
Most of the US assertions are vastly overblown, even illusory. For example, Trump regularly asserts that China’s bilateral trade surplus with the United States reflects unfair trade practices by China. Yet this claim is simply mistaken.
Bilateral trade surpluses or deficits say nothing per se about trade practices. They reflect specific structural characteristics of the trading relationship (for example,China’s import of intermediate products from third countries for finishing and exporting to the US) as well as overall macroeconomic conditions. The US runs overall trade deficits, as with China, mainly because US national saving rates have declined over time, and this has occurred to a large extent because the US federal budget deficit has continued to rise as the result of repeated tax cuts.
More generally, where the US sees “cheating” by China, an objective analysis sees skillful “catching up” by China. China’s rapid growth reflects, first and foremost, the fact that China is catching up for lost time.
As of 1980, China’s per capita income, measured in purchasing-power-adjusted prices (according to the International Monetary Fund), was just 2.5 percent of US per capita income. China was far behind in technologies and in the capital stock per worker. Through adroit policies over 40 years, China was able to close some but not all of this income gap. As of 2019, China’s per capita income at PPP is now around 30 percent of the US per capita income.We can predict that China will continue to have economic growth higher than in the US for many years to come as the income gap continues to decline gradually.
The real issue behind the US complaints are not specific policies by China but two other considerations. The first, and most important, is simply that China is becoming a US rival. That, by itself, would lead to tensions with US strategists, who simply can’t imagine or tolerate a real rival to US primacy.
This is a serious problem with the US foreign policy mentality. A country with a mere 4.2 percent of the world’s population can’t presume to sustain its primacy in economic power and geopolitics. China’s population alone is 18 percent of the world population. In truth, neither the US or China should aim for primacy. We should be aiming for a multipolar world in which power is shared, dispersed, and governed in any event by international law under the United Nations Charter.
The second consideration, a bit less important in practice but also tricky, is that China’s socio-political system and economic strategy are different from America’s. Partly this reflects the fact that the US is the economic leader and China is in the mode of “catching up”. And partly it reflects very deep differences in national histories, ideologies, and outlooks. We do need global rules that “make the world safe for diversity”, in the famous phrase of US President John F. Kennedy. The US and China should work honestly to devise rules on industrial policy, trade, technology, and finance that allow both systems to operate effectively and transparently, and without one country unfairly hindering the other country.
One of America’s specific complaints is the "Made in China 2025" program, an industrial guidline by which China aims to catapult itself into the cutting-edge of advanced 21st century technologies, in transport, renewable energy, computation, semiconductors, medicine, agriculture, and other areas.
The US claims that China is unfairly aiding its state enterprises via this program and thereby hindering US high-tech companies. But the truth is more complex. Technological advances require public-private partnerships, a point the US has long known and recognized. After all, the internet itself, not to mention space flight, semiconductors, aviation, self-driving vehicles, genomics and computation were often advanced by the US government through public-private partnerships and industrial policies.
I have two overarching recommendations for China that I believe would benefit China, the US, and the world. The first is for China to continue to be a global champion of the UN multilateral system and the specific international rules of the World Trade Organisation and other UN agencies. We need China’s voice to defend and protect the multilateral system from dangerous claims of nationalism that could wreck the international order and propel the world towards conflict.
The second is for China to lead by example, especially in the area of sustainable development. China has launched the visionary Belt and Road Initiative to connect all of Eurasia with 21st century infrastructure. This is a wonderful idea, one,and even beyond that can benefit all of Eurasia from China to South Asia, Southeast Asia, Central Asia, and Europe.
But it must be done right, in conjunction with the Sustainable Development Goals and with the Paris Climate Agreement. I would strongly urge Chinese President Xi Jinping to announce that the BRI will be the champion of zero-carbon energy in order to protect the planet from global warming and to clean the air over Asia. The BRI should stop financing fossil fuels and turn China’s great vision towards a clean, green future built on renewable energy (wind and solar power) and hydroelectric energy.
China has a wonderful initiative, GEIDCO, or Global Energy Interconnection Development and Cooperation Organization, to interconnect the world’s high-quality sites for renewable energy and to transmit the clean, zero-carbon energy to the world’s population centers. By marrying the BRI and GEIDCO, China could demonstrate phenomenal global leadership that would inspire the world to join the BRI and to join with China in preserving the multilateral trading system.
The author is a professor and director of Center for Sustainable Development in the Earth Institute, Columbia University.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
The administration of US President Donald Trump is targeting China through a set of unilateral economic measures designed to slow China’s rapid technological advance and rapid economic growth.
The Trump administration asserts that China’s growth has relied on unfair practices, including protectionism, forced transfers of technology from multinational companies to Chinese partners, and outright industrial espionage. China vehemently rejects these assertions, yet aims to find a pragmatic working relationship with the US rather than a breakdown of relations. Let me share my own perspective on the US-China economic frictions.
Most of the US assertions are vastly overblown, even illusory. For example, Trump regularly asserts that China’s bilateral trade surplus with the United States reflects unfair trade practices by China. Yet this claim is simply mistaken.
Bilateral trade surpluses or deficits say nothing per se about trade practices. They reflect specific structural characteristics of the trading relationship (for example,China’s import of intermediate products from third countries for finishing and exporting to the US) as well as overall macroeconomic conditions. The US runs overall trade deficits, as with China, mainly because US national saving rates have declined over time, and this has occurred to a large extent because the US federal budget deficit has continued to rise as the result of repeated tax cuts.
More generally, where the US sees “cheating” by China, an objective analysis sees skillful “catching up” by China. China’s rapid growth reflects, first and foremost, the fact that China is catching up for lost time.
As of 1980, China’s per capita income, measured in purchasing-power-adjusted prices (according to the International Monetary Fund), was just 2.5 percent of US per capita income. China was far behind in technologies and in the capital stock per worker. Through adroit policies over 40 years, China was able to close some but not all of this income gap. As of 2019, China’s per capita income at PPP is now around 30 percent of the US per capita income.We can predict that China will continue to have economic growth higher than in the US for many years to come as the income gap continues to decline gradually.
The real issue behind the US complaints are not specific policies by China but two other considerations. The first, and most important, is simply that China is becoming a US rival. That, by itself, would lead to tensions with US strategists, who simply can’t imagine or tolerate a real rival to US primacy.
This is a serious problem with the US foreign policy mentality. A country with a mere 4.2 percent of the world’s population can’t presume to sustain its primacy in economic power and geopolitics. China’s population alone is 18 percent of the world population. In truth, neither the US or China should aim for primacy. We should be aiming for a multipolar world in which power is shared, dispersed, and governed in any event by international law under the United Nations Charter.
The second consideration, a bit less important in practice but also tricky, is that China’s socio-political system and economic strategy are different from America’s. Partly this reflects the fact that the US is the economic leader and China is in the mode of “catching up”. And partly it reflects very deep differences in national histories, ideologies, and outlooks. We do need global rules that “make the world safe for diversity”, in the famous phrase of US President John F. Kennedy. The US and China should work honestly to devise rules on industrial policy, trade, technology, and finance that allow both systems to operate effectively and transparently, and without one country unfairly hindering the other country.
One of America’s specific complaints is the "Made in China 2025" program, an industrial guidline by which China aims to catapult itself into the cutting-edge of advanced 21st century technologies, in transport, renewable energy, computation, semiconductors, medicine, agriculture, and other areas.
The US claims that China is unfairly aiding its state enterprises via this program and thereby hindering US high-tech companies. But the truth is more complex. Technological advances require public-private partnerships, a point the US has long known and recognized. After all, the internet itself, not to mention space flight, semiconductors, aviation, self-driving vehicles, genomics and computation were often advanced by the US government through public-private partnerships and industrial policies.
I have two overarching recommendations for China that I believe would benefit China, the US, and the world. The first is for China to continue to be a global champion of the UN multilateral system and the specific international rules of the World Trade Organisation and other UN agencies. We need China’s voice to defend and protect the multilateral system from dangerous claims of nationalism that could wreck the international order and propel the world towards conflict.
The second is for China to lead by example, especially in the area of sustainable development. China has launched the visionary Belt and Road Initiative to connect all of Eurasia with 21st century infrastructure. This is a wonderful idea, one,and even beyond that can benefit all of Eurasia from China to South Asia, Southeast Asia, Central Asia, and Europe.
But it must be done right, in conjunction with the Sustainable Development Goals and with the Paris Climate Agreement. I would strongly urge Chinese President Xi Jinping to announce that the BRI will be the champion of zero-carbon energy in order to protect the planet from global warming and to clean the air over Asia. The BRI should stop financing fossil fuels and turn China’s great vision towards a clean, green future built on renewable energy (wind and solar power) and hydroelectric energy.
China has a wonderful initiative, GEIDCO, or Global Energy Interconnection Development and Cooperation Organization, to interconnect the world’s high-quality sites for renewable energy and to transmit the clean, zero-carbon energy to the world’s population centers. By marrying the BRI and GEIDCO, China could demonstrate phenomenal global leadership that would inspire the world to join the BRI and to join with China in preserving the multilateral trading system.
The author is a professor and director of Center for Sustainable Development in the Earth Institute, Columbia University.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
