The U.S. and China are the two largest economies in the world, their mutual dependence cannot be ignored simply because of the human interactions between the 330 million Americans and the 1.4 billion Chinese citizens. The interactions include blood relationships, in-law relationships as well as other relations bounded by education (school-mates), business (trading partners and custom-clients), professional contacts (colleagues, associates, even including politicians who represent civil and cultural groups). Yet today the U.S. government is practicing a Cold War mentality against China adopting an economic sanction policy in cohorts with its allies. The policy is word-smithed from de-coupling to de-risking, in reality, it is an all-out economic war with the intention to crush China’s economic rise.
Driven by the ideology legacy (Communism is evil and the Western Liberal Capitalism based democracy is supreme), China was on the evil list next to the Soviet communist bloc despite China’s independence from the Soviet Union and its pursuit of economic development in its own way. Russia was the leader of the Soviet Union primarily practicing real goods economy (manufacturing and production) whereas the U.S. led Western world was practicing a capitalistic economy (Capital creates industries, farms, and products). One key difference can be illustrated by the following example. The Soviet Russia would aid or loan its 50 horse-power tractors and machines to others like China. China would pay back the debt with agricultural products. Whereas the U.S. would aid or loan capitals to Germany, France and Japan for economic development. Capital is far more liquid (flexible) for recipients to to develop their preferred profitable industries. (Germany, France and Japan all quickly developed their industries post-WW II) Hence the capitalist economic development model is proven to be efficient, although capital tends to be concentrated in a few hands,
China started out as a communist country (in the 1950’s) and received aid from the Soviet, but its economic development was not so smooth. Following the example cited above, 50 horse-power tractors may be great for Russia or Ukraine, but they are not too practical on the Chinese small farms and tiered mountain-side farmland. In 1962, China parted its way from the Soviet Union because of their differences in interpretation of Marxism and the extreme poverty in China. The Chinese Communist Party (CCP) experimented and learned from many economic development models in history as well as from contemporary cases. China had made mistakes over nearly two decades until the late 1970’s when Chinese leader Deng Xiaoping implemented a massive reform program taking advantage of the U.S. strategy of opening up to China to rival with the Soviet Union. China indeed learned and reformed from 1979 to 2009 and became the world’s second largest economy in 2010. China embraced capitalism but massaged it with socialism under its largely state-driven enterprise systems with rigorous planning and control. China continued her rapid growth for another decade until the COVID Pandemic hit the world.
Over the 40 years, the U.S. succeeded in winning the Cold War against the Soviet Union whose economy collapsed and the union disintegrated in 1991. The U.S. became the most powerful nation in the world believing in its supremacy owing to its governing system (Liberal Capitalistic Democracy). However, the rapid rise of China was casting doubt on the American supremacy notion. China’s GDP was growing three times faster than that of the U.S. China now is the world's largest purchasing power enjoying the status of being the number one trading partner with over 120 countries. China has become 'the world manufacturer'. Despite the U.S. effort to suppressing China’s economic rise, China has single-handedly built a space station while the one U.S.-Russia collaborated launching is about to retire. China succeeded in lifting its billion citizens out of poverty, having the best public transportation infrastructure in the world, and using its own GPS system with communication capability. Understandably, the U.S. felt uneasy, but losing the Olympic spirit to compete and applying all tricks to destroy a strong competitor with the possibility of mutual destruction is an insane strategy..
In the U.S. many talks predicting China’s inevitable demise can be found, but sadly they are mainly based on superficial arguments: Our Liberal capitalistic democracy is supreme and China’s system will eventually collapse. Very little deep analysis was done other than citing a few economic data of suspicious accuracy, for example, GDP prediction, youth unemployment rate, real estate vacancies, etc. China is a big country with a sophisticated culture capable of dealing with complex problems and crises. On August 20, 2023, The Wall Street Journal published an article, entitled, “China’s 40-year Boom Is Over, What Comes Next?”, authored by Lingling Wei and Stella Yifan Xie. As if the paper's content did not match the title enough or politically correct enough, there is a follow-up commentary on this paper appeared anonymously in Wordtune Read, which further emphasized a perilous outlook for China’s economy. Wordtune Read cited an IMF estimate of China’s GDP growth rate going down to 4%, world demand for Chinese goods ebbing, the housing bubble popped and borrowing unsustainable. Wei and Xie hinted that China’s economy might follow a Japan-like slowdown and interpreted that China’s boom was the result of an excessive investment in infrastructure (overbuilt airports and highways) but they ended their article with Xi’s resolve to double-down “the control” to pump up the economy, whereas the commentary article gave a far more gloomy future for China.
This author cannot help but worry that the baseless anti-China sentiment will lead the U.S. to a disastrous path. To be fair, we must leave the legacy of ideology and examine China’s failures and 40-year boom based on economic principles and accurate data. China did make mistakes, such as forcefully organizing farm villages into communes to receive the rationed Russian tractors, engaged in the Korea and Vietnam wars sacrificing China’s economic development for political objectives, and Isolated itself from the Western world, especially its capital market, impeding China’s economic development and nation building. Then came the U.S. policy changes, the U.S. adopted the 'allying China against the Soviet Union strategy' (open to China) and China initiated a broad-ranged reform program (embracing the West) and selectively adopted capitalism, which started China’s 40-year boom. The details of China’s rapid rise are complex, but the principles are easily understandable. The Chinese leaders understood deeply the Chinese history and Chinese people’s nature, culture, and desire. They simply unleashed the Chinese people’s conservative and disciplined respect for history, experience, education (learning, experiments and innovation), diligence, sacrifice and reward relationship, and respect and mandate of government performance.
The CCP initiated a rigorous economic development process, planned, reviewed, and measured every five years. China examined the 'success and failure' economic development cases (in the West and in the entire world history) to select and adopt the best suitable and avoid the worst harmful models. Their daring ‘learn while you do and do while you learn’ approach had made their double-digit economic growth possible. However, they have paid prices as well such as pollution and environmental damages. China’s infrastructure investment may not satisfy the Western liberal capitalist’s return on investment (ROI) expectation, but its impact as a locomotive for China’s economic development is undeniable. Furthermore, China’s Belt and Road Initiative program (BRI) for promoting global economic development (China’s sacrifice and early investment) will have a long-term dividend. The U.S. and EU have certainly failed in such long-term investment. A win-win program like BRI, originated from China’s ancient Silk Road idea, but its implementation has definitely incorporated many good ideas not only from the Silk Road but also from post-WW II Marshall
Plan and more current World Bank projects. The BRI will be a locomotive for world economic development, any badmouthing on the program is just sour-grapes rhetoric.
The so called double-down decision by the CCP did not appear to be a decision out of ideological argument. China has gained tremendous growth (and experience) from its urbanization program, supported by its national infrastructure investment. Urbanization came with a cost, shifting productive labor from countries to cities creating a big wealth gap between cities and villages. To further pull China up above the poverty line into the middle class, China must rein in the liberal capitalist development process (which created urban real estate overbuilt problems) and divert attention and capital to China’s vast rural areas. China has already initiated programs such as green energy, environmental protection, and population balancing (incentives and jobs for city folks to move to the countryside). China may have a few bad economic data due to COVID-19, but China is by far the best nation in pandemic management. To the China doomsday sayers, this author would advise that we need to be humble to admit the problems associated with liberal capitalism and cooperate with China, the fastest train in world economic development, to reap a win-win outcome.
Ifay Chang. Ph.D., Inventor, Author, TV Game Show Host and Columnist (www.us-chinaforum.org) as well as serving as Trustee, Somers Central School District.
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