In his Washington Post column George Will explains why Americans should be optimistic:
Decades of growth have propelled China’s rise from an almost entirely peasant society, to one that still has an enormous peasantry. This growth, which was more rapid than can be continued, pulled China’s per capita gross domestic product to $9,770, 72ndin the world, slightly better than Mexico’s, still behind Russia’s, one-fourth that of neighboring Japan and one-third that of South Korea, and about 15 percent of the United States’ $62,887. The bitter fruit of China’s “one-child policy,†from 1980 until 2016, is an aging population that will become gray before it becomes rich. Last year, China’s birthrate fell to 1.05 percent, a record low (the U.S. rate is 1.73), and China is projected to be among 55 nations with fewer people in 2050 than today. By 2030, Chinese deaths might exceed births. Today, China’s working-age population is 70 percent of the total population; it is projected to plunge to 57 percent by 2040, when there will be barely two workers to support every retiree.
Importantly, there is nothing whatever the Chinese can do to remedy that now. Even if present trends were to reverse, something of which there is no sign, it would take fully two decades before China’s working age population started to grow again. He continues:
In a March review for the Financial Times of two books on China’s economy, Geoff Dyer, the paper’s former Beijing bureau chief, noted that China cannot become “the first authoritarian regime to enter the exclusive club of high-income countries†unless it avoids “the ‘middle-income trap,’ where it can no longer compete on cheap manufacturing but does not yet have the skills or technology to sustain more advanced industries.â€
Then there are socialism’s inevitable irrationalities: State-owned banks favoring state-owned industries is one reason China’s debt burden is more than triple the size of China’s GDP. Writing in Foreign Affairs (“China’s Coming Upheavalâ€), Minxin Pei of Claremont McKenna College says inefficient state-owned enterprises “control nearly $30 trillion in assets and consume roughly 80 percent of the country’s available bank credit, but they contribute only between 23 and 28 percent of GDP.†Posters in glistening, modern Shanghai depict rays of light flowing from Chinese President Xi Jinping’s head, but he urges followers to fill their heads with the pre-modern musings of Stalin, Lenin and Mao, a recipe for economic sclerosis.
The U.S. trajectory is different. Also writing in Foreign Affairs (“The Comeback Nation: U.S. Economic Supremacy Has Repeatedly Proved Declinists Wrongâ€), Morgan Stanley’s Ruchir Sharma notes that in 2010, after the weakest decade of U.S. growth since World War II, the nation had a full decade without a recession for the first time since at least 1850, when record-keeping began, and the U.S. share of global GDP expanded from 23 percent to 25 percent, back to where it was in 1980, before China’s ascent began.
In the 2010s, the U.S. stock market rose 250 percent, almost quadruple the average gains of other national stock markets. (China’s rose 70 percent.) “By 2019,†Sharma writes, “the United States accounted for 56 percent of global stock market capitalization, up from 42 percent in 2010. The value of the U.S. stock market, relative to all others, was at a 100-year high.†Today, “seven of the world’s 10 largest companies by total stock market value are American, up from three in 2010.†Globally, 75 percent of loans to individuals and companies are denominated in dollars, up from 60 percent before the 2008 crisis.
Although technology investments, partly the result of a culture of innovation fueled by great research universities, have been crucial, Sharma says, “the more important U.S. advantage has been a relatively high population growth rate: babies and immigrants, not Stanford and Google.†Sharma adds: “The most important driver of any economy is the working-age population, which is still growing in the United States but started shrinking in China five years ago.â€
I don’t believe that’s the right metric. A better one would be working age population with net positive income. Said another way the United States cannot remain an egalitarian largely middle class country while continuing to import large numbers of uneducated non-English speakers and providing expensive social services. Something’s got to give.
Mr. Will then recapitulates his leitmotif:
Donald Trump says a Biden presidency would mean “China will own the United States.†Trump’s reelection would entrench his misunderstanding of both nations.
I was misled into reading that column. I expected to read Mr. Will’s advice to Joe Biden. What I encountered instead was more evidence of his disdain for Donald Trump.
I’ll open the issue to the floor. What should President Biden’s policy with respect to China be, what is it likely to be, and what can it be? My concern about a Biden China policy is that it could be so firmly rooted in the 1990s that it is irrelevant to the 2020s and that President Biden will be caught between the Scylla of the ptofessional diplomatic bureaucracy and the Charybdis of the vast bulk of his constituents, trying to steer a course through increasingly dangerous waters.
What was a strong hand became much weaker after the last 2 months (and especially the last 2 weeks).
One of the US strengths, soft power, is practically gone.
As for Biden’s, I predict he will try to pursue what Obama did, a mix of engagement and attempt to use some variation of the TPP as his policy. It will have much more worse results now — giving China time to choose the terms and timing of divorce.
I prefer a policy of pursuing a quick divorce (not give the Chinese time) and not focus on containment but self-isolation. Try to give this country time and space to focus inward.
“but does not yet have the skills or technology to sustain more advanced industries”
Dyer is utterly delusional. I cannot think of a more wrong-headed statement. Who does he think made his cell phone and lap top? China has a state-of-the-art industrial sector that is in fact superior to ours. They have many, many more engineers and scientists than we do, many of them trained at places like MIT, Cal Tech, et al. Moreover, they don’t really need to send their students to our schools, because their universities are as good as ours (likely better) and produce as much high quality science as we do. Right now, because of our sanctions, they are starting a Manhattan-style project to create an ultramodern chip manufacturing base. And they will do it, and we will lose yet another industry.
China has a serious population problem, but so does every country in the word except for sub-Saharan Africa. Immigration is masking the US’ population problem: the collapse of its White population. With a declining White population, it is the US that will lack a working age population that is capable of sustaining an advanced economy.
China’s problem and opportunity is that it still has one billion people living in a peasant society. China has already raised 300 million people to middle class living standards. What will China be if they can raise the other billion to the same economic level?
The emphasis on the stock market is a bad joke. No one seriously believes stock valuations are based on anything real. The market is driven by interventions by the Fed.
The real problem is that our entire Ruling Class is as delusional as Dyer. They seriously think China is inferior to the US. Focusing on currency exchange rates they think the Chinese economy is only half the US’ economy. Let us hope they don’t convince themselves the US can defeat China in a shooting war.
I think Biden should concentrate on improving our own internal policies that would keep our businesses from going to China to begin with. I dont see our trying to force China to change working so well. Work with other countries who also have an interest in resetting terms.
Steve
improving our own internal policies that would keep our businesses from going to China to begin with.
Do what? Bring slavery back?
Tariffs can be countèred or subverted but the point of them is to make it more expensive to produce in China, not to try and change China. But Xi can always drive production costs down if that’s what he wants. The cost of coerced labor is never free though as workers must be fed, (although Hitler avoided even that), the military and police state must grow and be fed while producing nothing of material substance.
Still we can never match their low production costs and Biden is certain to revert to appeasement disguised as diplomacy. Walmart and Bezos will thrive and we can continue squabbling among ourselves about the blame.
Comparative advantage isn’t operative for a country like the U. S. with an emergent foreign policy. It would work for a country with a centralized foreign policy like, for example, the Britain of the 19th century.
Only absolute advantage is. While free trade with China might be fine managed trade with China of the sort we have can’t be. It’s long past time to recognize that our half century experiment with China is a failure and cut our losses.
There is evidence that countries with diverse economies (rather than specialized ones) have more robust growth than countries with specialized economies. As long as we have a diverse population which is to say forever we need a diverse economy that includes primary production and manufacturing as well as services.