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Explaining China’s Economic Resilience

It is naive to believe that forced technological decoupling, trade sanctions, or forced changes to global supply chains will put an end to China’s future economic expansion. If critics are too short-sighted to see this, it will be their loss.

SHANGHAI – Widespread lockdowns and border closures aimed at combating the COVID-19 pandemic have interrupted global supply chains and largely paralyzed the global economy. Yet, the real weakness of today’s global economy is not the vulnerability of its globalized production networks, but rather souring attitudes toward globalization – and toward China in particular.

Fear of China’s growing economic clout drives many countries’ foreign-trade and investment decisions these days, and not only in the United States. Concerns about the dependence of global manufacturing on China have prompted calls to reshore production and cut the country out of global supply chains. And the US is even threatening to stifle the Chinese economy through technological decoupling.

But China’s critics are mistaken in assuming that the country’s continued economic growth depends almost entirely on the maintenance of the global free-trade system and access to Western technology. Although China is undoubtedly an important global manufacturer, the real drivers of its economic performance over the last decade or so have been rapid growth in its huge purchasing power and fixed-asset investments – including in the country’s thriving technology sector.