China’s economy continues to survive despite major obstacles, including the real estate bubble and the trade war with the United States. Ironically, China’s trade ties with the United States—and U.S. dependence on Chinese goods—have been sustaining its economy.
Despite the debate in Washington about decoupling from Beijing and the Biden administration’s decision to keep most of the Trump-era tariffs (at least for now), the United States still wants to maintain trade relations with China.
China’s GDP Growth Rate Can’t Be Trusted
The Wall Street Journal’s Nathaniel Taplin recently wrote a piece about China’s economic troubles. According to the author, the three pillars that support Chinese economic growth—real estate investment, consumer spending, and exports—are all “shaky,” and the outlook for 2022 remains uncertain.
Taplin listed four factors that have recently tapered China’s economic growth: the property debt fiasco, the Delta variant outbreak, power outages, and snarled shipping lanes.
“Sharply weaker growth last quarter at 4.9% from a year earlier was expected,” he wrote.
From my own observation, however, China’s gross domestic product growth rate has always been anything but trustworthy, mainly because it has always been highly manipulated by the regime. I wouldn’t count on the veracity of any reports from the World Bank or International Monetary Fund (IMF) on China’s economy, either. For one thing, their China reports are often generated with data that come directly from Beijing. A recent scandal involving IMF Managing Director Kristalina Georgieva, who allegedly pressured World Bank staff to improve China’s ranking in the “Doing Business” report, is a case in point.
US Consumers Heavily Rely on Chinese Goods
Amid the pandemic, the United States is currently caught in a supply chain crisis—its ports are seriously congested, hundreds of thousands of containers are backlogged off the ports, and many stores are stricken with a shortage of goods or even empty shelves. Now, many Americans are waking up to this reality. China and the United States have long shared an international commodity supply chain—China is the supplier of the goods that Americans buy. The world’s two largest economies have an interdependent relationship.
No matter how you look it, the fact is that U.S. consumers still need “Made in China” products—that’s really what drives China’s economy.
According to data from China’s customs agency, from January to August, China’s total import and export value was $3.83 trillion, a year-over-year increase of 34.2 percent. The trade surplus was $362.49 billion, a year-over-year increase of 28.9 percent.
The Association of Southeast Asian Nations (ASEAN), the European Union, the United States, and Japan are China’s first-, second-, third-, and fourth-largest trading partners, respectively, according to official data. China had a trade surplus with all of them except Japan—including a surplus of $57.34 billion with ASEAN and of $117.82 billion with the EU.
The China–U.S. trade relationship totaled $477.8 billion, with China’s exports to the United States being $358.8 billion. China received a massive surplus of $241.2 billion.
What’s interesting is that despite the U.S. trade tariffs, China continues to enjoy its largest trade surplus with the United States—a figure that’s far more than what it gets from all its other trading blocs and countries combined.
The U.S. data look slightly different, but show the same trend: China’s exports to the United States are staying strong, even with the heightened tensions between the two nations.
Since the 1990s, the relationship between the United States and China has been dominated by a steady inflow of U.S. capital and the rapid expansion of bilateral trade. Although there have been political bumps along the way, because of the fundamental differences between the two countries on universal values and human rights issues, their economic ties have become increasingly closer.
Owing to China’s comparative cost advantage, the U.S. domestic manufacturing industry has been hollowed out over the last three decades, resulting in a stable international commodity supply chain between the United States and China. The current supply chain crisis in the United States stems from this heavy dependence on Chinese manufacturing.
“In many industries, China has successfully created unsurpassed ecosystems of industrial production encompassing the entire value chain from raw materials to final product,” reads a report by MForesight, a U.S. manufacturing think tank.
The report warned that as many U.S. companies invest in overseas research and development, offshore production in advanced manufacturing has reached a tipping point, and the “invent here, make there” strategy has become “invent there, make there.”
Over the years, I’ve seen a lot of articles trying to foretell a boom or crash for China’s economy. As I’ve always argued, China’s economy has never been as prosperous as many Western investment bankers have predicted, because Chinese authorities have often made very short-sighted decisions in order to accelerate development. Thus, hidden dangers are bound to emerge following brief prosperity, as we can see during the current debt crisis unfolding in China’s real estate industry.
However, China’s economy won’t collapse in an instant. As the current state of U.S.–China trade shows, Chinese manufacturing needs the U.S. market and vice versa. This strong U.S. demand has provided the Chinese economy with the strength it needs. Capital always follows profits closely and the U.S. business community doesn’t intend to abandon the lucrative Chinese market anytime soon. This is why the Chinese economy has survived and will continue to do so for some time, despite all the crises it has faced.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.