US Not The Source Of China's Growth, China Not The Source Of America's Problems

A sizeable portion of the US discussions about economic policy toward China seems to be based on two conceptual mistakes. One mistake is that China's rapid economic growth fundamentally depends on trade with the US. The other mistake is that the bulk of US economic problems depend in some fundamental way on trade with China.  

The inexhaustibly interesting Larry Summers puts the point this way in his Financial Times column yesterday ("Washington may bluster but cannot stifle the Chinese economy,' December 3, 2018, soon to be available at his website). Summers writes: 

At the heart of the problem in defining an economic strategy toward China is the following awkward fact: Suppose China had been fully compliant with every trade and investment rule and had been as open to the world as the most open countries at its income level. China might have grown faster because it reformed more rapidly, or it might have grown more slowly because of reduced subsidies or more foreign competition. But it is highly unlikely that its growth rate would have been altered by as much as 1 percent.
Equally, while some U.S. companies might earn more profits operating in China, and some job displacement in American manufacturing because of Chinese state subsidies may have occurred, it cannot be argued seriously that unfair Chinese trade practices have affected U.S. growth by even 0.1 percent a year.
This is not to say that China is not a threat to the international order. It is a seismic event for the United States to be overtaken after a century as the world’s largest economy.
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