China is Attached to a Doomed Economic Model

Some economists assumed that the buying power of China’s expanding middle class would ultimately fuel global growth. China has instead become a destabilizing force in the global economy. Chinese President Xi Jinping is running the country as a government-subsidized, export-driven manufacturing juggernaut. This policy is not just bad for whole industries around the world; it’s also distorting China’s economy and alienating trading partners.Chinese manufacturers would be competitive without Xi’s help. He provides massive aid anyway—directly, with handouts and tax breaks, and indirectly, by suppressing the wages of factory workers and the value of China’s currency to make the country’s exports artificially cheap. The result is an economic model that favors producers, restrains consumers, and floods international markets with supercheap exports, including steel, solar panels, and electric vehicles. Foreign companies simply can’t compete. Chinese competition is costing Germany 10,000 manufacturing jobs a month and could strip Indonesia of hundreds of thousands of garment-worker jobs. China’s trade surplus ballooned to a record $1.2 trillion last year. As a share of the global economy, China’s surplus in manufactured goods is the largest amassed by any country ever.President Trump used to regularly complain that China was “ripping off” the United States and duly slapped tariffs on cheap Chinese goods. But lately Trump has seemed less concerned about the particular threat that China poses to America’s economic future. In Beijing last month, Trump fawningly called Xi a “friend” and agreed to work with China to create a mutually beneficial “board of trade” to help manage their economic relationship. At risk are industries that are vital to American growth, jobs, and national security, including the automotive, robotics, heavy machinery, and semiconductor sectors. “It’s going to be pretty catastrophic,” David Autor, an economist at the Massachusetts Institute of Technology, t