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Flailing at China

Despite years of denial, there can no longer be any doubt that the US is pursuing a bipartisan containment strategy vis-à-vis China. Whether justified or not, the real problem with this strategy is less the merits of the allegations leveled by US politicians than the incoherence of the Trump administration’s policies to address them.

NEW HAVEN – This will be the tenth year that I have taught a course at Yale called “The Next China.” The course focuses on modern China’s daunting economic transitions. It frames the moving target that eludes US President Donald Trump’s administration, which is taking dead aim at the Old China (a convenient target for a leader who wants to resurrect Old America). The incoherence of Trump’s trade and economic policies, with all their potentially grave consequences for the global economy, is a destabilizing byproduct of this disconnect.

My course starts with the urgency of the challenges addressed by Deng Xiaoping in the late 1970s. But its main focus is how the resulting Chinese growth miracle presents President Xi Jinping with four transitional imperatives: the shift from export- and investment-led growth to an economy driven increasingly by domestic private consumption; the shift from manufacturing to services; the shift from surplus saving to saving absorption in order to fund the social safety net desperately needed by China’s rapidly aging middle class; and the shift from imported to indigenous innovation, which ultimately will be decisive for China’s goal of being a “moderately well-off society” by the middle of this century.

The confluence of these four transitional challenges would be daunting for any country. That is especially true for China, with its blended political economy – the so-called socialist market system, with an ever-changing balance of power between the Communist Party and a vibrant private sector. It is a very tricky balancing act, to be sure.

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