Sunday, October 6, 2019

China as a Seller’s Market

Modern China’s past success was based on exports. Its future must be based on imports.

China owes much of its current economic success to former ruler Deng Xiaoping, who famously opened up the economy to the rest of the world. His reforms transformed China into a manufacturing powerhouse, and in doing so, they turned the country’s biggest liability – a massive and impoverished population that upsets socio-economic harmony at home and constrains Chinese power abroad – into its greatest asset. China became the world’s factory because its workers could make things cheaper than workers in other countries could. The ratio of China’s exports of goods and services to its gross domestic product increased from 4.6 percent during the first year of Deng’s rule to a high of 36 percent in 2006 – long after Deng had passed away. During the same period, its GDP increased by a factor of 18.
The transformation into an export powerhouse reshaped the global economy. China made so many goods so proficiently that it drove prices down and gutted the manufacturing sectors of formerly competitive countries. China’s workforce simply undercut most everyone else. The economic roots of the current U.S.-China trade war, as well as of China’s massive current structural economic challenges, are born from these developments...