Op-Ed Contributors

Is US changing places with China?

By John Milligan-Whyte and Dai Min (China Daily)
Updated: 2010-11-17 08:01

China's modernization is changing the wealth and competitiveness of other countries. But some experts see China's economic growth as cumulative and accelerating.

Time magazine recently reported that Robert Fogel, a Nobel Prize-winning economist at the University of Chicago, estimates that 30 years from now, China's GDP will increase to $123 trillion, because of its enormous investments in education and the increasing productivity of its people. It also commented on an advertisement by a United States conservative group, which shows a Chinese professor explaining to his students in 2030 how the US response to the great recession destroyed the once great nation, stating: "They work for us now."

Only 30 years ago, Deng Xiaoping opened China to the outside world for foreign trade and investment. His policies remain the basis for China's unexpectedly rapid economic modernization. Such has been the pace of China's development that its GDP has increased tenfold since 1978, according to the CIA Fact Book.

China's per capita income may be among the 100 poorest developing nations, but these are still the early years of its reform and opening-up. The fact is that China's economic modernization and growth are surpassing in decades what developed nations took centuries to achieve. The world's two largest economies, the US and China, currently have GDPs of $15 trillion and $5 trillion. China saves and invests 35 percent of its GDP, but Americans consume more than they produce.

The US has unsustainable trade deficits globally, besides its huge deficit with China. It has transformed itself from the largest creditor into the largest debtor nation in 20 years. China's success and savings enable it to invest massively in its future. For example, it will invest $1 trillion in green technology from 2010 to 2013. That is the key to a $40-trillion global market.

The US has to realize that to end the current crisis in the country and ensure economic and employment growth it has to implement new economic policies, instead of blaming China for all its ills.

US President Barack Obama has pledged to double US exports in the next five years to increase the country's competitiveness, stimulate its economy and create 2 million jobs at home. But US policies restrict high-tech sales to China, which is one of the world's largest importers as well as the US' second largest trading partner. This is causing the US' already huge trade deficit with China to grow further.

To increase exports and eliminate trade deficits with China, the US will need to transcend policies that restrict trade, and implement new policies that allow Chinese companies to invest and create jobs in the US.

During his initial days as US president, Obama announced that he would launch a new era of partnership, but his administration's policymakers launched a new era of confrontation. They have continued selling weapons to Taiwan (even when cross-Straits relations have improved rapidly), started monthly naval maneuvers with the Republic of Korea and Vietnam within striking distance of Beijing and key Chinese coastal cities, and declared that the US has national interests in the South China Sea. They have also imposed tariffs on steel, tires and other goods imported from China.

In the first five months of this year, US policymakers introduced 23 anti-dumping, anti-subsidy and special protectionist tariffs, and began six Section 337 investigations against China for alleged unfair practices in exports. The 53-percent increase in the number of cases involved $7.6 billion worth of Chinese exports, which is 800 percent more than in the previous year. They have threatened to impose massive tariffs if China does not revaluate its currency and does not accept US-proposed caps and trade rules.

Newsweek reported recently: "As Washington and Beijing slug it out over trade deficits and exchange rates, Europe has quietly overtaken America as China's No 1 trade partner. Chinese trade with the EU soared to $306 billion through July of this year - compared with $243 billion in trade with the US. China has also become far more dependent on Europe for importing the technology and infrastructure that underpin its breakneck development." US policymakers are not aligning their country's interest with China's economic success, even though major US companies have done business in China to be profitable. Will the US align its success with China's or are the two countries changing places? The answer depends on many factors, but the Obama administration's current policies assure failure. What he needs is a new grand strategy that assures success.

John Milligan-Whyte is chairman and Dai Min is president of the Center for America-China Partnership, a US think tank that studies international ties.