Economy
Free Market Economy: How Will The United States' Economic Decoupling From The Chinese Economy Create New Industrial Revolution In The US And Create Millions Of High-Paying Jobs For Youth In The United States And Around The World?
The rise of the Chinese economy from 1978 to today is unprecedented in world history. No country in the world has ever grown at the rate that China has grown in its 40 years of economic journey.
But, during the time of Mao Zedong, China was never like today's China; it was the most closed and conservative economy on the planet due to the country's communist ideology, but everything changed after Mao's death in September 1976 and the arrival of Deng Xiaoping, who changed the entire world's economy as well as the economy of China.
China's largely agrarian economy has evolved into a global manufacturing and service hub. As a result, the country gained enormous influence on the global supply chain, and it now controls the lion's share of the global supply chain.
One of the most fundamental questions that arise here is how they became the world's manufacturing and service hub. They became the manufacturing hub of the world primarily because of the United State.
US bonhomie with China grew with the arrival of Deng Xiaoping, and he then opened the country's economy to allow private companies to invest in the Chinese economy and Chinese businesses to invest in other countries.
President Nixon was the first US president to visit China, even during the reign of Mao Zedong, whom the US government labeled as a hardline communist due to its extreme view of communism. Pakistan played a critical role in organizing the meeting of two leaders with opposing ideologies.
Deng Xiaoping paid a visit to the United States in 1979. The People's Republic of China (PRC) then established its diplomatic relations with the US on January 1, 1979, and Deng became the first Chinese paramount leader to visit the US. Deng met the present US president Jimmy Carter and also the former president Richard Nixon.
From that point until the election of President Donald Trump, the US-China economic relationship grew at an exponential rate. President Donald Trump was critical of China's economic growth and sought to limit it by imposing trade tariffs on Chinese goods and businesses.
Because of the outsourcing of manufacturing smaller to larger goods while keeping environmental pollution in mind, the United States has become completely dependent on Chinese manufacturing infrastructure. This increase in imports is due, in part, to China's critical role in global supply chains; Chinese factories assemble products for export to the US using components from all over the world. Furthermore, the value of US goods imports from China increased from approximately $100 billion in 2001 to $500 billion in 2021.
What is the reason behind this massive import?
One I already mentioned is pollution, a lesser manufacturing hub means lesser carbon emission.
The second reason was cheap goods from Chinese manufacturers, and American companies have reaped enormous benefits from access to China's market. In a 2019 study, economists Xavier Jaravel and Erick Sager discovered that increased trade with China increased the average US household's annual purchasing power by $1,500 between 2000 and 2007.
China has become one of the largest exporters of goods to the US market, but as Newton's law states, every action has an equal and opposite reaction. What is the reaction? Why is the United States desperately trying to go away from China?
There are several reasons for that but here we will only talk about the economical reason.
The benefits of separating the US economy from the Chinese economy: What are those?
This process is long overdue for the United States because the US economy is losing its crown as the world's largest and strongest economy due to the Chinese plan resurgence; they already control the world's supply chain, as seen during the Covid-19 pandemic.
The Chinese economy has already surpassed the US economy in Purchasing Power Parity(PPP). There are so many think tanks suggesting that China will cross the $23 trillion US economy in 2030 some say in 2045 some are also very skeptical about this rise.
However, the US must take this matter seriously because China is already threatening the US presence around the world by constructing the China-Pakistan Economic Corridor, the Belt and Road Initiative, and other projects. Chinese are also building the port network through the Ring of Pearls.
These are all debt trap programs by the Chinese government and the world is witnessing this event with the fall of Srilankan and Pakistan's economy. The fall of these economies is threatening the regional peace and integrity of the region.
China is also endangering US security by launching spy balloons into American skies. The world recently witnessed the drama, and the world was stunned to see China's audacity in targeting a sovereign nation's territory. Does China emanate war by other means?
Inefficient Chinese factories are also harming the earth's ozone layer and posing a serious threat to the global population by exposing the world to more harmful rays. The factories of the United States companies should be sent to a sensible democratic country like India, and they are doing so. Recently, Apple moved its manufacturing hub from China to India, where they are producing the latest Apple models of phones, tablets, and laptops.
To begin, the US government seizes the title of the Most Favored Nation(MFN) from China because decades of trade liberalization have failed to transform China into an ally, a partner, or even a more democratic society. In fact, the inverse has occurred. MFN has allowed two-thirds of China's exports to be subjected to little or no tariffs in the United States. However, in 2018, President Donald Trump imposed a 25% tariff on Chinese goods.
Beijing's exploitation of America's financial markets must also be addressed by Washington. Beijing is using the American market to raise funds for its state-owned companies, which are run by the Chinese Communist Party. These companies are deliberately dodging the US audit law to siphon money from the US market to the Chinese market.
The USCC(U.S.-China Economic and Security Review Commission) has identified 261 Chinese companies, including eight state-owned enterprises, that are listed on America's three largest stock exchanges, with a combined market capitalization of $1.4 trillion.
Even with high tariffs, the Chinese will continue to flood the US market with cheap goods because Chinese companies benefit from the inexplicably high threshold level imposed by US Customs on imports of small consumer packages.
This is wreaking havoc on the US economy. It is destroying jobs in the US market and creating millions of jobless youth who are engaging in other unacceptable activities that are causing a black hole in the US economy.
This economic loss will grow and become massive, Because of the US government's inattention. If this problem will be addressed in time then it will create millions of jobs for the youth population of the United States.
However, the US government is gradually waking up from its slumber, and the government has imposed a ban on Chinese companies doing business with US tech, pharmaceutical, and chemical behemoths.
Ban on Chinese Companies:
The US State Department has informed American technology companies that it will no longer issue licenses for technology exports or transfers to Chinese tech behemoths such as Huawei. Huawei was banned during the President Donald Trump regime.
Also, US rulings are doing so under increasing pressure from the Republicans who are controlling Congress now.
Chinese firms are prohibited from using American technology in 4G devices, Wi-Fi6, Wi-Fi7, artificial intelligence, high-performance computing, and cloud computing.
US restrictions on chip export are necessary because China can use semiconductors to advance their military systems, including weapons of mass destruction, and commit human rights abuses, which the nation is already doing with the Uyghur population.
The US has tightened its noose around Chinese chip manufacturers by signing the CHIPS and Science Act of 2022, which president Baiden signed into law. It also provides $52 billion to strengthen the domestic semiconductor industry.
The United States recently passed the Inflation Reduction Act. The Baiden administration is providing around $350 billion in subsidies to US companies under this act in order to shift their manufacturing base from China to the United States.
Under this law, the US EV manufacturers will be benefitted heavily and they will also be able to provide various kinds of jobs to their youth population.
Therefore, the US government must take decisive action to reclaim its throne from China and to build an economy that will be the pillar and strength of the global economy.
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