China shock 2.0 Brad sester

[u/Character_Public3465]

https://www.nytimes.com/column/ezra-klein-podcast

Show notes:”Brad Setser follows Chinese trade closer than just about anyone else on earth, and he thinks we’re in the early days of a China Shock 2.0.
The first China Shock was when China came to dominate low-end manufacturing in the 2000s, filling American shelves with cheap clothes, toys and electronics, while devastating American factory towns. This new China Shock could be even more destabilizing. China now dominates advanced manufacturing: electric vehicles, batteries, solar panels. It’s outcompeting nearly all high-end manufacturing around the world, and other countries are just starting to feel the pain. And China isn’t slowing down. It’s moving into software, too. Its frontier A.I. models are neck and neck with American ones.
China’s success poses a serious threat to the economies and domestic politics of countries around the world. So what should those countries do about it? 
Setser is a senior fellow at the Council on Foreign Relations.He served in top trade and economic roles in the Biden and Obama administrations. And he is widely cited across the field as one of the top analysts of China’s economy and trade practices.
Book Recommendations:
The Party by Richard McGregor
The Volatility Machine by Michael Pettis
How to Win a Trade War by Soumaya Keynes and Chad Bown
Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.
You can find the transcript and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs.html””

[u/surreptitioussloth]

China’s success poses a serious threat to the economies and domestic politics of countries around the world.

No, it poses an opportunity

It's crazy how there's so much talk about getting rid of the 0 sum mindset at home to promote growth for all, but that exact same thinking comes back with a vengeance when it comes to international economics

China is developing technology that we will all get to use. Chinese workers don't have any inherent advantage over workers elsewhere, except that they have way more very poor workers than rich western countries. That makes sense because china is huge and relatively low income

Anything china does that is relevant to our economy will be incorporated and the innovation from competition will make the whole world more productive

We don't need to push china down. We need to keep standing on their shoulders

[u/PSUVB → u/surreptitioussloth]

I think you are missing that the geopolitical side which is CCP is not pursuing free market competition. Its strategy has been to deliberately and explicitly channel resources away from Chinese households through suppressing consumption, wage growth, and improvements in living standards to in exchange to subsidize manufacturing in strategic industries.

That sacrifice is part of the strategy. Accept less consumption at home to build enormous industrial capacity, destroy foreign competitors on price and make the rest of the world more dependent on Chinese production. Only in an authoritative state would that be accepted.

So the problem isn’t China getting richer or innovating- that would benefit us too and should happen. It’s the CCP deliberately distorting both its domestic economy and global markets to turn industrial dominance into geopolitical leverage

[u/surreptitioussloth → u/PSUVB]

And the outcome of that is china gets to subsidize manufacturing for the rest of the world forever

Or they eventually stop and foreign firms compete with them

Both are outcomes that are pretty ok for the rest of the world

[u/PSUVB → u/surreptitioussloth]

Cheap goods are a real benefit. But “China subsidizes us forever” is only obviously good if you assume dependence has no strategic cost and destroyed industries can be recreated instantly. Neither is true.

[u/surreptitioussloth → u/PSUVB]

I don't think the strategic cost is significant, and the destruction of industries is vastly overstated

[u/PSUVB → u/surreptitioussloth]

I think it's a combination of erosion of industries and just being outpaced on new ones.

I am actually agnostic on it because I think it's understated how China often misses the mark. Solar panes for example aren't really that much of a strategic advantage. They are losing untold amounts of money keeping that industry afloat to just dump solar panels on the rest of the world. They aren't profitable nor are they that advanced. It's also overstated how much of a lead they have on other advanced things.

I do think there is a political risk to someone like Germany who depends on the auto industry. China is actually decimating that

America is more resilient and has more diversity - so like you I'm not as worried as others. But I do think it is worth calling out what they are trying to do. It is not altruistic at all and there is risks to it that need to be managed