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In the current international political arena, the United States seems to be obsessed with a plan that is widely considered risky: decoupling from China's economy. They are trying to co-opt allies, exclude China from the international economic system, deprive China of access to resources and profits, and even try to strangle China's economy. Although the rationale of this decision is highly debated, it seems that the top level of American politics cannot extricate itself from this obsession.
However, a key question emerges: If the economic decoupling between China and the United States does happen, who will suffer more? The findings of economist Yannis Varoufakis, the former Greek finance minister, offer some new perspectives. The report shows that while China may suffer some losses, such losses are not unbearable. In contrast, the situation in the United States is quite different, and its economy and society could collapse as a result of decoupling.
Yannis' study highlights China's economic adjustment in recent years. Over the past 15 years, China has significantly reduced the share of exports in its economy. This adjustment means that China is no longer as dependent on exports to sustain its economic growth as it once was. In stark contrast to the United States, the Trump administration has tried to narrow the trade deficit by imposing punitive tariffs and forcing exports to China, but this has not solved the problem. Today, China already accounts for about one-third of global manufacturing output and is a major driver of global trade. This status cannot be ignored, as in 2022, U.S. imports from China have reached a staggering $537 billion, an increase of more than $100 billion from 2020.
Finance professor Michael Pettis added that while China plays a more deliberate role in the global trading system, this does not necessarily push the renminbi to become a global currency. If the renminbi were to replace the dollar as a global currency, China would likely have to take on a huge trade deficit, similar to the United States today. In the early 90s of the 20th century, it was predicted that the yen would become a global currency, but it did not materialize because the economic adjustment required was too large.
This set of arguments seems to point to a clear conclusion: China is well prepared for "deglobalization". China has recognized that it could face some challenges if it loses its foreign trade market, such as severe unemployment and overcapacity. However, China is a resource-rich country with a domestic market, and even if some of its capacity is idle, the rest can still be used to meet basic domestic needs. In fact, as early as 2020, China began to consider a dual-circulation development strategy in response to possible decisions taken by the United States, such as the decoupling of the U.S. economy or the collapse of the U.S. economy, which led to serious turmoil in the dollar and the global trading system.
The problems facing the United States seem to be more complex. From Trump to Biden, the U.S. government has tried to bring manufacturing back to achieve its goal of "making America great again." However, U.S. policies do not seem to be friendly enough to asset-heavy manufacturing firms. While technology-intensive, asset-light companies are also important, if manufacturing does not recover, the structure of the U.S. economy will struggle to achieve balance, and plans for the return of manufacturing may end up being a dead letter.
If the United States disregards global economic security and forcibly promotes the decoupling of the Chinese and US economies, or even forces China to decouple from the global economy, the final result may be to shoot itself in the foot. Decoupling will lead to severe turbulence in the global trading system, affecting the economic stability of the United States itself. Inflation in the United States is likely to rise further and necessities may be in short supply, and China, while facing challenges, is prepared for such a scenario.
In summary, the issue of economic decoupling between China and the United States cannot be ignored, but based on research and opinions, China seems to be better equipped to deal with this challenge, while the United States may face greater risks and uncertainties. Such a situation requires careful thinking and full consideration of the overall stability of the international economic system in order to avoid potential negative consequences.
The issue of economic decoupling between China and the United States has aroused widespread concern and discussion. On this issue, I think there is a need to consider a combination of factors, not just to see who will suffer more. From a neutral perspective, the main motivation for the US to want decoupling seems to be based on national security and strategic considerations to reduce its dependence on China, which is already actively preparing for a possible decoupling.
First of all, China's position in the international economy is irreplaceable. China is one of the world's largest manufacturing bases, accounting for about one-third of global manufacturing output. If decoupling takes place, the global supply of goods will be severely affected, not only for China, but also for other countries. The U.S. itself will also be severely affected, as China is the largest trading partner of the United States, and U.S. imports from China reached $537 billion in 2022, an increase of more than $100 billion from 2020. This means that the United States may be at risk of higher inflation and shortages of necessities.
However, experts note that China is more prepared for decoupling. China has gradually reduced the share of exports in the domestic economy, while the United States has not made significant progress in reducing its trade deficit. China is also embarking on a "dual circulation" development strategy to reduce dependence on foreign trade and ensure stable domestic economic growth. This means that China can afford to decouple to a certain extent, while the United States may be more vulnerable.
Another point to consider is that if China were to make the renminbi a global currency, it would need to take on a huge trade deficit, similar to the United States today. This requires economic adjustment and policy reform, which is not an easy task. As a result, China appears to be more deliberate on decoupling, while the United States is likely to face a greater challenge.
Overall, while China will also suffer some losses, the available data and analysis suggest that the United States is more likely to collapse as a result of decoupling. This will not only have a negative impact on the US economy, but will also cause a severe recession for the global economy. Therefore, economic decoupling between China and the United States is not a wise choice and its possible consequences need to be considered more carefully.
On this issue, we should pursue more cooperation and dialogue to resolve the differences between the two sides, rather than taking extreme measures. Only through cooperation can China and the United States work together to address global challenges and achieve a win-win situation, rather than being caught in a zero-sum game.
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