By Saurav Raj Pant (1 September 201)- Americans feels proud as their head-head competitor; China is not a communist state economically. It is only the communist state politically but had adopted western market oriented economy with high level of state craft manner that even the west cite example of Chinese model in their academic and political work.
For them, China to rise so abundantly is because of Chinese adoption of a western oriented capitalism. American thinkers say; this makes the western civilization exception. Without adopting or assimilate with the western civilization, none of the country can survive or thrive. From Chinese side, they follow the Deng Xiaoping quote “It doesn’t matter if a cat is black or white, so long as it catches mice”. They are conceited as their goods and services had conquered the US market so concretely. China’s GDP (nominal) is $14.2 trillion whereas the US’s GDP (nominal) is $21.3 trillion in 2019.
Chinese know very clearly; de-valuate currency (1 USD=7.14 CNY) which makes Chinese goods and services around 7 times cheaper than US manufactured products in the US. This automatically forced the US consumer to rely on the Chinese products. It has been the great lessons for the developing world, whose policymaker’s wants to work for connectivity without preparing their country’s manufacturing system for international market. When country’s manufacturing system is weak, foreign goods and services automatically captures the market and create a dumping killing every potential product of the home market.
In case of the US, it has sophisticated manufacturing system but goods and services aren’t as cheaper as Chinese products. This had result the American market captured by the Chinese business. This was due to the USD & Chinese Yuan exchange rate. If there would have been the Chinese Yuan equals to USD, no one would have bought the Chinese product. But, exchange rates maters for the commoners. The US trade deficit with the China was $419 billion in 2018. This is because the US had exported $120 billion while imported $540 billion from China in 2018.
It is all due to Chinese goods and services are in high demand in the US by the consumer because it is cheaper whereas the American goods and services are comparatively expensive in the China making the US exports disaster. For the developing world if the proper preparation is not made before opening the market to the outside, what could happen to the economy? It will accelerate import. This grimmer picture shows, globalization is only working for those who can produce abundantly in cheaper rates as well as had established some sort of ‘protection’ for the International business community.
So, the fundamental flaw of global economic system had made politics much more reactionary—–Public outcry, the growing mass of globalization looser and winner, demands of re-adjustment of immigration policies, strategic alliance formation are all time high. Trumpian approach has led the world to re-think on the Multilaterism.
The US being the world’s dominant market; Trump’s felt that, globalization which was the US grand design is now not paying enough for the US effectively whereas the Xi whose country took the ‘juice’ of this system so effectively is in the mode to re-establish new international order with or without the US.
At last, it is not a time of ‘boosting oneself’ as China followed Western foot steps for its development as well as China devalued her currency just as to survive in the ongoing trade war. It is the time for the US presidency to work on the fundamental flaw of the economy such as working for the benefit of the lower income families, working strategically on the cyber warfare and intellectual property rights issues, relieving from high debt burden and increasing trade engagements with its allies. The US foreign policy experts should able to harness their negotiating skills with China for a win-win game not solely working for the zero-sum game. This is the age of integrated supply chain. One side engagement could be tragedy. The presidency should work to avoid any pitfall in the economy. Productive engagement with the allies and building constructive vigilance with the China is much more needed to avoid any Thucydides trap at this time.
- Views are personal. Author is a Research Associate in the Washington D.C based Think Tank known as Nepal Matters for America