中美经贸事实

1、Key PointsThe US remains well ahead of the Peoples Republic of China across a range of important economic indicators, from domestic wealth to share of global foreign direct investment. Because China is rapidly aging, most of the gaps are unlikely to close, con- trary to conventional wisdom. Policyma

2、kers should not worry that China can be the global economic leader.Instead, the focus should be on harmful Chinese behavior. While intellectual property coercion deserves attention, subsidies are the worst economic action. In particular, state-owned enterprises are often granted monopoly power and a

3、lways protected from competition, denying everyone else opportunities in China and around the world.The first step the US should take is boring: documenting the problems. But this will justify the harsh retaliation necessary for any change in Beijing. Retaliation should include closing a few industr

4、ies to China the way subsidies close many Chinese industries and treating large-scale beneficiaries of intellectual property coercion as criminal entities.Some US-China Economic and Trade FactsBy Derek ScissorsOctober 2020The United States has created as much wealth as the second-, third-, and fourt

5、h-wealthiest countries in the world combined. It is a clich to say that getting our own house in order should always be the top priority, but it is also right. The Peoples Republic of China (PRC) is an economic predator, and stronger American responses, even closing certain sectors to China entirely

6、, are overdue. These responses must be based on sound infor- mation, such as exactly how and where Chinese state ownership makes it impossible for Americans to compete. Not only is the US the worlds domi- nant economy, but it can be indefinitely.The US vs. the PRCHow to fix our own house is complica

7、ted, contro- versial, and the topic for a book or two. Why to fix our own house can be shown partly by comparing America to China.The effects of the COVID-19 pandemic will be hard to evaluate for years, but the picture at the end of 2019 was clear. From 2000 through 2019, the PRC made enormous econo

8、mic progress, but that progress slowed. Even using Chinese govern- ment dataknown to be manipulated1growth in gross domestic product (GDP) was 8.5 percent in 2000, hit 14.2 percent in 2007, then fell steadily topercent in 2019.2Beijing admits further declines are coming.3 The PRC is indebted, is agi

9、ng rapidly, and has natural resources strained by a huge population. The best case is Chinese growth slows to a pace the US has recently achieved, but in a society much poorer than ours.4 More likely, the coming demo- graphic sledgehammer will combine with a debt anvil to push China down Japans path

10、trivial growth for at least a generation, at a lower income level.5 The US may resign from global economic leadership, but the PRC replacing us is nonsense.Numbers speak louder than words. Using sources relying on official PRC data, and therefore spun in Chinas favor, Americas advantages are stark.

11、(See Table 1.) In 2000, the American lead in national wealth was estimated at close to $38 trillion. In mid-2019, the same estimation put the gap at$42 trillion. The average American had almost$26,000 more than the average Chinese citizen in annual income in 2000 and almost $46,000 more in 2019. Thi

12、s stems from US workers being $94,000more productive annually in 2000 and $98,000 more productive in 2019.Chinas results as a proportion of Americas haverisen or even soared, which is often misinterpreted. Ratios cannot buy things; prosperity for individuals is a function of how much money they have

13、.20 The same is true for what national wealth can accom- plish. The raw amount is what funds programs or purchases aircraft, say. Related, confidence in a countrys currency is primarily determined by the wealth behind it. After two decades of the PRCs rise, the yuan is still short of 2 percent of gl

14、obal reserve holdings, while the dollar is steady above 50 percent. The world talks about how impressive China is, but it wants dollars.An obvious response is China will close these gaps. Probably not. In 2000, its debt burden was far lighter than ours. In 2019, it was comparable. In 2000, the PRC h

15、ad a considerably younger population than the US did, but in 2019, medianTable 1. US vs. China in the 21st CenturyUS 2000China 2000US 2018China 2018US 2019China 2019GDP6$10.25 trillion$1.29 trillion$20.58 trillion$13.90 trillion$21.43 trillion$14.34 trillionGDP, PPPAdjusted7$10.25 trillion$3.69 tril

16、lion$20.58 trillion$21.42 trillionNet Private Wealth8$42.3 trillion$4.7 trillion$102.1 trillion (midyear)$61.9 trillion (midyear)$106.0 trillion (midyear)$63.8 trillion (midyear)Disposable Income per Capita$26,6219$76010$48,222$4,258$50,310$4,462Labor Productivity11$100,620$6,131$126,424$28,309$128,

17、768$30,143Median Age1235.230.038.237.738.238.1Debt/GDP131.861.322.492.502.542.59Share of Global Forex Reserves1456%58%1.8%57%1.8%Share of Global Outward FDI1536.4%0.4%20.5%6.3%22.3%6.1%Share of Global Trade16 (Goods and Services)19.9%3.3%11.4%10.6%11.3%10.7%Outside Citations Ratio (Inverses)1729.90.

18、032.010.501.820.55Research and Development Spending (% GDP)182.1%($215 billion)0.9%($12 billion)2.8%($576 billion)2.1%($292 billion)Carbon Emissions195.92 billion tons3.71 billion tons5.25 billion tons11.18 billion tonsSource: See endnotes.age was essentially the same. While debt accumu- lation is a

19、 choice, the One-Child Policy, lack of immigration, and other failings mean the PRC will unavoidably be much older than the US in 2040.21In 2000, the research and development spending gap was $200 billion; in 2018, it was $280 billion (latest data that use comparable methods). Less important but the

20、 subject of much discussion: Chinas global share of outward foreign direct investment (FDI) seems to have peaked in 2016 or 2017, well below Americas. China cannot buy the world, as some feared, because the trade surpluses Beijing used to finance an FDI explosion are gone.22 The other response is to

21、 stress GDP, where China does better. GDP is not “the economy”; it is an activity measure. When nearly all activity is productive, GDP is a valuable indicator of eco- nomic health. But when there are many filler transactions, it is not. Chinas 2019 GDP per capita was more than double its own reports

22、 of disposa- ble income.23 This is because Chinese GDP contains a great deal of government-driven activity that never benefits people. Chinas GDP per capita ispartly empty because its GDP is partly empty.The reason to respond forcefully is not that China will surpass us; it is that China is an econo

23、mic predator.Chinese GDP adjusted for purchasing power parity (PPP)in which China is supposedly leading the worldis worse. Adjusting for prices, as PPP does, is sensible, but the practice is horribly flawed. For PPP to hold, there must be arbitrage pressure causing global prices to converge.24 This

24、requires liberalized markets, but the PRCs capital market is deliberately closed. When tested, PPP does nothold for China.25PPP should be used to compare consumer buying power in one small area to another, with markets open between the two. It should not be used to generate a single price level for

25、the entire Chinese economy compared to the entire Ameri- can economy, with that adjustment then applied to Chinese investment and government purchases, in which markets are not open and PPP does notwork. PPP showing China matching the US is fraudulent.Predatory ChinaThe reason to respond forcefully

26、is not that China will surpass us; it is that China is an economic pred- ator. The PRCs best performance since 2000 is in trade, and it is first in global goods trade. This is due partly to competitiveness but also partly to cheating, cheating the US has talked about for decades but (still) never se

27、riously responded to.One reason for this is overemphasizing currency manipulation and, related, the bilateral trade deficit. Beijing manipulates the yuan, intervening to steady it against the dollar. For devaluation, Beijing would sell yuan to put more in circulation, buying up dollars and other for

28、eign exchange. Yet Chinas foreign-exchange reserves dropped from 2014 to 2017, before seeming to stabilize in the past three years.26 While the PRCs official statistics are a mess, six years with no sign of rising reserves argues against the yuan being artificially cheap.The bilateral trade deficit

29、puts more money in Beijings hands. It matters. But it rarely costs Amer- ican jobs. From 2000 to 2019, PRC reserves rose$3 trillion. The cumulative American trade deficit with China over this period was $4.8 trillion; it was our money.27 In 2009 and the first half of 2020, the bilateral deficit fell

30、, but jobs vanished because our economy shrank. In 2019, the bilateral deficit fell sharply, and jobs growth slowed. Most of the time, though, American demand for Chinese prod- ucts rose because the economy grew and jobs were added. (See Figure 1.) From 2000 to 2019, the correlation between the bila

31、teral deficit and US employment was positive.An important exception is manufacturing jobs in the early 2000s. The bilateral deficit is correlated with lost manufacturing jobs from 2000 through 2019, but the correlation greatly weakens when the first few years are excluded. That was when the US grant

32、ed China permanent normal trading status, effectively accepting Beijings practices of mass subsidies and coercive acquisition of intellectual property (IP), including theft. It is those practices, not the deficit itself, that harm Americans.The practices stem from core principles of the PRCs develop

33、ment model: state control ofFigure 1. Trade and EmploymentSource: US Department of Commerce, Bureau of Economic Analysis, “International Trade in Goods and Services,” July 2020, https:/www.bea. gov/data/intl-trade-investment/international-trade-goods-and-services; and US Department of Labor, Bureau

34、of Labor Statistics, “Current Employment StatisticsCES (National),” HYPERLINK /ces/data/ /ces/data/.strategic sectors and technology upgrade by any means.28 State ownership is ensured by legal mandate and supported by financial subsidies. In many sectorsaviation, banking, coal, and so on state-owned

35、 enterprises (SOEs) are guaranteed a regional monopoly or a predominant position.29 Elsewhere, they are “only” guaranteed never to fail due to commercial competition.The biggest financial subsidy is borrowing with no need to repay. China estimated SOE debt accu- mulation at $20.4 trillion at the end

36、 of 2018, rising almost 14 percent that year. The Organisation of Economic Co-operation and Development put SOE debt at $16.7 trillion in mid-2018.30 Chinese growth has slowed, yet SOEs borrow more on a net basis. Similar to a government, they are never accountable for their debt. The bulk of it sho

37、uld be considered outright grants, many trillions over time.While SOEs are barely involved in Chinas top exports to the US, the inability to compete with SOEs blocks American exports. The PRCs share of global imports trails its shares of global GDP and global exports. Further, the PRCs imports from

38、the US underperform their imports from otherpartners.31 Comparative advantage explains part of this. But part is explained by China wanting to pro- duce what America produces, by making it illegal to outcompete First Automobile Works nationally or compete at all with Sinopec in south China.The prote

39、ction and subsidization of SOEs are also advantages in third countries, with the Fortune 500 suggesting global scope. In the 2000 edition, there were nearly 200 American firms and fewer than 10 Chinese firms. The 2020 tally is almost even at 120 each. Chinese government media number private firms at

40、 19 of these. A label of “non-state” or mixed ownership would raise that, but the 2020 group is at least 70 percent SOEs32 because they are guaranteed monopolies, cannot fail, or can borrow forever. It is $6.5 trillion of global revenue American companies cannot genuinely compete for.Given the natio

41、nal security implications of tech- nology loss, coercive technology acquisition has received more attention than subsidies. Consider- ing economics only, technology theft is not as important. Chinese subsidies apply everywhere, not just in IP-intensive industries, and in fact areused to hike product

42、ion and drive out competitors after China acquires their IP.The PRC obviously does not document forcible acquisition of foreign technology, but we can get a rough sense of how it affects the US. The most comprehensive assessment was by the Commission on the Theft of American Intellectual Property (I

43、P Commission) in 2017, giving a range of$225$600 billion in annual American losses from all foreign activity. China was clearly the biggest offender, but there was no single figure for China.33 This and the huge range show the difficulty of estimating IP losses.What should the US be willing to do? T

44、he first step is simple and yet still unsettled: Focus on the worst problems.Sales of US technology companies in the PRC provide another angle. In 2018, majority American- owned affiliates in the computer and information industries had $100 billion in Chinese sales. Firms such as Qualcomm, Micron, a

45、nd Texas Instruments receive more than two-fifths of their revenue from China,34 undermining claims they can resist tech- nology transfer. Of course, IP is not limited to advanced technology. Total sales by American companies in the PRC were $390 billion in 2018, encouraging a blind eye to IP losses

46、.Still, few US firms would do business with the PRC if it accounted for most of the $600 billion in annual losses. The annual China figure is more likely in the high tens of billions. However, in con- trast to the trade deficit, it is pure loss. The trade deficit sees hundreds of billions in America

47、n money exchanged for products. Tens of billions in IP losses are revenue taken from American firms, much ending up at Chinese competitors.Finally, tariffs from the Trump administration do not help with IP, though that was the announced justification.35 The tariffs do not single out firms that benef

48、it from IP coercion, leaving no reason for behavior to change. The administration calls tariffs an IP success because the phase 1 trade agreement addresses coercion.36 Previous administrations madesuch deals, of course. They never work, because acquiring foreign technology remains vital to Bei- jing

49、s development model and is worth far more than threats of future action the US has never been willing to take.Best ResponsesWhat should the US be willing to do? The first step is simple and yet still unsettled: Focus on the worst problems. The bilateral trade deficit and Beijings currency manipulati

50、on are not the worst problems. The US should not want balanced trade; we should want open trade. American exports are not per- mitted to compete with SOEs, regardless of the exchange rate. American comparative advantage is in agriculture and innovation. China buys our farm products but steals our in

51、novation, ultimately turn- ing what should be US exports into PRC exports.The second step is time-consuming, so no administration has ever done it properly. The pervasiveness of SOEs, the drop in competition when SOEs are present, and the absence of any trend to limit SOEs should be documented in de

52、tail. Subsidies extent and trends should be documented. The IP Commissions loss estimates should be updated with specific breakdowns by country. The US Department of Justice (DOJ) has greatly expanded its China IP investigations,37 which will make estimating the cost of theft easier. All results sho

53、uld be compared to other major trade partners. This will show how extreme Chinese behavior is and demonstrate that the problem is not trade but trade with the PRC and any countries like it.The third step is enforcing our laws. The DOJ has dozens of Chinese economic espionage cases on file, with the

54、pace accelerating recently.38 Some past cases have proved extremely destructive.39 Others could prove extremely destructive in the future.40 The US Department of Commerces Entity Listfrequently used by the Trump admin- istrationmerely requires an extra license appli- cation to sell to borderline-cri

55、minal entities, which is ridiculous. Firms benefiting from theft on a large scale should be banned from all business with Americans and American companies. If criminal behavior continues, global financial sanctions should be imposed.Because the US has not compre- hensively measured Chinese subsidies

56、, including suppressing competition, we have not fully applied antidumping duties to China-made products. This is a superior alternative to across-the- board tariffs, which do not retaliate against specific Chinese actions and are therefore in some cases too low. For instance, antidumping duties can

57、 be many times higher than 25 percent.41Other steps move beyond enforcing laws but fit decades of American policyFigure 2. Policy SummarySource: Author frustration.But coordinating with friends and allies must beprinciples. The World Trade Organization wrongly treats most subsidies as acceptable if

58、they do not support exports. Subsidies that inhibit imports have similar effects. After documenting subsidies, the US can invoke the reciprocity principle to close some markets to China (and any others with sim- ilar practices). The US should not simply mirror the sectors China protects, and we shou

59、ld not join the subsidies race. Instead, we should punish and discourage subsidies. This will also be much cheaper.Coerced IP transfer in China is even harder to evaluate than IP theft, making the best retaliation hard to determine. But the US definitely should not be helping Chinese firms benefitin

60、g from anti- competitive practices or using coerced or stolen IP. This implies investment from America into China needs some sort of review or restriction. There is none right now, and the issue deserves more attention. At best, US portfolio investment in China set a record in June 2020 at $246 bill