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China Experiences Declining Rate of Economic Growth-The U.S Response?

11/08/2019

Michael Beckley writing in the October edition of Foreign Affairs in an article entitled United States Fear of Faltering China predicts a more aggressive “mercantilist expansion” by that Nation. Beckley notes that China’s economy is growing at a progressively lower annual rate down from 20 percent in 1970 to 6.1 percent in 2019.  Along with many Western economists, Beckly warns that statistics released by China are always suspect. He cites approximately $6 trillion in non-productive investments in real estate and in government-owned or managed enterprises.

Based on the response of the U.S. to declining growth in the late 1800s, and in turn-of-the-19th century Tzarist Russia, Beckley anticipates that China will continue to manipulate international rules, exert pressure where it is capable and use conflict with the U.S. to divert distrust and disillusionment among the middle class at home. Viewed from this perspective, it is evident that China will not respond to short-term trade pressure exerted by the current Administration although some concessions might be made in the interest of expediency.

China is playing a long game even beyond their 2025 “Made in China Initiative” that will be characterized by assertiveness and international expansion. President Xi has warned of a potential Soviet-style collapse. As a counter measure Beijing has enhanced security, intensified propaganda and has employed xenophobia to generate patriotism.

Beckley advocates cooperation with potential allies including those in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership that could, subject to appropriate conditions, be expanded to include China. The U.S. must not only dominate in the military sphere but technological dominance should prevail allowing some Chinese investment in U.S. companies and immigration to our shores. Beckley anticipates that Chinese power will mellow in response to a sense of security. The U.S. must “contain China with a balance of deterrents, reassurance and limitation of damage”. Confrontation is unlikely to achieve any degree of resolution of the structural issues that are the source of conflict in U.S.-China relations.