Decoupling from China is not the answer
By Zhong Sheng, People’s Daily
The U.S. has been addicted to slowing and even cutting China’s development through decoupling from China over the recent years.
It increased tariffs on imported goods from China and maintained the policy to date. It not only restricted investment from Chinese enterprises in the U.S., but also attempted to limit U.S. companies’ investment in China for political purposes.
Besides, the U.S. oppressed Chinese high-tech firms with political means, abused export controls, and coerced and incited other countries to form cliques to contain China.
These practices have severely undermined market rules and international economic and trade order, threatened the stability of global industrial and supply chains, and impeded global recovery.
The U.S. should realize that it’s impractical to decouple from China.
Based on their comparative strengths and the choices of the market, China-U.S. economic and trade ties are a mutually beneficial relationship featuring structural synergy and convergence of interests, which enjoy strong internal dynamics through win-win cooperation.
China-U.S. trade has set record highs in the recent two years, reaching $750 billion in 2021 and nearly $760 billion last year, much higher than the $583.7 billion in 2017.
Trade between the U.S. and China is on track to break records, a signal of resilient links between the world’s top economies amid fears of “decoupling,” Bloomberg has reported.
China boasts a complete industrial supporting system and well-developed infrastructure. It has more than 1.4 billion people including over 400 million middle-income earners, and is the world’s largest market with huge consumption potential.
Due to the enormous attractiveness of the Chinese market, it’s been a consensus in the business world that investing in China is investing in the future.
U.S. attempts to move industrial chains out of China are not in line with the interests of American enterprises. According to the 2022 American Business in China White Paper issued by the American Chamber of Commerce in China, China is still a prioritized market for U.S. companies – 83 percent of the chamber’s members report they are not considering relocating manufacturing or sourcing outside of China.
The U.S. would lose more than it gains by forcing decoupling.
Pinelopi Goldberg, the Elihu Professor of Economics at Yale University, said in an article that the U.S. seems to have forgotten how much it benefitted from China’s opening over the past three decades. She pointed out it is wrong to presume that global welfare is a zero-sum game, and that China’s ascent implies America’s decline.
By provoking a trade war and building barriers with a zero-sum game mindset, the U.S. will only harm others without benefiting itself. Studies have indicated that the cost of the trade war unilaterally started by the U.S. is by large shouldered by U.S. enterprises and consumers.
According to a report released by the U.S. Chamber of Commerce, decoupling from China severely threatens the interests of the U.S. in trade, investment, services and industry. The report said U.S. investors would lose $25 billion per year in capital gains, and American GDP would see a one-time loss of up to $500 billion.
An American semiconductor manufacturer predicted that the new round of export control measures against China could result in billions of dollars lost in its revenue and reduce its R&D spending which helps it maintain global competitiveness.
Former U.S. Treasury Secretary Lawrence Summers said it would be an enormous and staggering error for the U.S. to decide that it was its policy to suppress Chinese economic growth in the name of national security.
Facts have once again proved that China and the U.S. cannot decouple from each other. The U.S. practice to force decoupling from China, even at the sacrifice of itself and its allies, is an irrational and unsustainable choice against economic laws.
Economic globalization is a response to development of productivity and, as such, represents an unstoppable historical trend.
Despite the oppression by the U.S., China has maintained the world’s largest trading country in goods for six years in a row. Over 73 million yuan of cargo are traded between China and other countries every minute on average.
The decoupling strategy of the U.S. cannot stop economic globalization, but will only give up the opportunities to cooperate with China to other countries.
China has the world’s most complete industrial system and a domestic demand market that boasts the largest potential. It is able to achieve domestic circulation, which gives guarantee and confidence for China to cope with external oppression.
Decoupling will not stop China’s steps to make innovations, nor will it hinder the country’s high-quality economic development.
The U.S., following unilateralism and protectionism to contain and suppress China, hurts the global economy.
Australia’s East Asia Forum said in a recent article published on its website that U.S. policy looks very much like crude protectionism industrial policy, and the U.S. has become “spoiler-in-chief” of the international trade regime.
International Monetary Fund Managing Director Kristalina Georgieva warned that the longer-term cost of trade fragmentation could reach almost 7 percent of global output in a severe scenario. If technological decoupling is added to the mix, some countries could see losses of up to 12 percent of GDP, she added.
World Trade Organization Director-General Ngozi Okonjo-Iweala also said that decoupling and severing supply chains is not conducive to the development of the world economy and international trade.
The U.S. and China are vital and irreplaceable components of the global economic system, and the cost will be too high for both countries and to the global economy if the worst fears about decoupling materialized, said Singapore’s former top diplomat Bilahari Kausikan.
The Chinese and American economies are deeply integrated, and both countries can benefit from each other’s development.
As the world’s largest two economies, China and the U.S. should deepen cooperation to promote their relations. The two sides need to respect each other, pursue mutual benefit, focus on the larger picture, and nurture a sound atmosphere and stable relations for cooperation.
(Zhong Sheng is a pen name often used by People’s Daily to express its views on foreign policy and international affairs.)