Thread by @GaryWinslett

If there is anything that is common across the political spectrum in the U.S. these days, it’s China-alarmism married to an instinct to use unilateral trade retaliation as a cudgel response. That’s wrong. Everyone is over-reacting. A thread 1/

China’s mercantilism is real, but the impacts are either smaller or more ambivalent than most people think, and even where a response is necessary, the multilateral route offers better prospects for success than an ‘America alone’ approach. 2/

Let’s start with the China Shock. Here’s a summary of that argument. But that argument is a big overstatement and has numerous problems. @scottlincicome has two good research roundups showing a variety of weaknesses in it. 3/
cato.org/policy-analysi…

cato.org/commentary/fai…

Even if it were true, Trump’s trade war and Biden’s de facto continuation of it are causing further pain rather than helping. The steel and aluminum tariffs are hurting manufacturing. Farmers and consumers are getting hurt too. @christinemcdan 4/
mercatus.org/bridge/comment…

Yes, China’s subsidies are excessive and distort markets but the best way to take those on is through the WTO, not a counterproductive trade war that undermines global growth and alienates allies. See this @ChadBown and @J_A_Hillman piece. 5/

piie.com/sites/default/…

China’s forced IP transfers are unfair to foreign businesses though, as Fareed Zakaria points out, China seems to be improving in this area and will likely continue to do so. 6/

foreignaffairs.com/articles/china…

In the technology space, there’s a lot more synergy between Beijing and Silicon Valley than people realize. Also, check out this great new paper by @MatthewErie and @t_streinz on the digital side of the BRI. 7/

papers.ssrn.com/sol3/papers.cf…

Speaking of the Belt and Road Initiative (BRI) is likewise probably not as threatening as most people think. @loyaladvisor has a GREAT thread with lots of analysis and links on this. 8/

https://twitter.com/loyaladvisor/status/1374653589981921281

China’s industrial policy in telecom is obviously aimed at promoting Chinese firms, but that’s not all that different from U.S. support of Boeing. In any event, dragging the U.S. semiconductor industry into the trade war hasn’t helped it at all. 9/

https://twitter.com/Trade__Talks/status/1346829137961496577

Likewise, other efforts to ‘decouple’ the Chinese economy from the West are going to cause a lot of avoidable and unnecessary pain in the West. 10/
economist.com/leaders/2021/0…

More broadly, China is hitting its high-water mark now. Virtually all of its domestic problems- aging demographics, environmental degradation, and a shaky financial system, are likely to get noticeably worse over the next decade. 11/

Later this decade, a big bulge of Chinese workers will start to retire but, because of the one-child policy, there won’t be as many people in the younger age cohorts to support them. China’s aging problems will be like Japan’s, only worse and more sudden. 12/

In many Chinese cities, the smog is so bad that the air is practically chewy. With China’s reliance on coal, that is not likely to ease, and with more Chinese citizens being able to afford cars, it will likely get worse. That’s not good for the govts perceived legitimacy. 13/

China’s financial system is opaque and much more brittle than many people realize. It’s not exactly the same as Japan in the late 80s/early 90s but there are echoes there. 14/
economist.com/special-report…

China has some of the highest economic inequality in the world and massive urban-rural divides. Again, not great for the government’s perceived legitimacy, especially with a slowing economy. 15/

Overall, China’s economy is more rickety than people realize. This article by @ryanavent is almost 5 years old but it makes some really good points on this. And everything in it is truer today than when he wrote it. 16/

washingtonpost.com/business/econo…

China has virtually zero soft power. Its neighbors are wary of it. Its authoritarianism is plain for all to see. Everyone wants to profit from China, but no one actually wants their country to feel like Xinjiang. 17/

Given all of this, the proper response to the rise of China is firm but patient co-existence. On the economic side, we should undo Trump’s sabotaging of the WTO, scrap the baseless nat. sec. tariffs on our allies, not force other countries to pick sides, and join the CPTPP. 18/

On the humanitarian side, we should bury China with their own tyranny. Defend liberal values (and live them out at home). Give every Hong Konger a green card. Give any Uighur that can escape asylum. And then give them all microphones and platforms. 19/

centerfornewliberalism.org/latest-posts/l…

The greatest risk coming from China is the risk that we over-react, that we indulge in xenophobia, zero-sum drawbridges up thinking, and that we blow up good things like trade and student exchange. 20/

The War in Iraq was a poorly thought out over-reaction to 9/11 that had disastrous consequences. Detonating the liberal international order ‘because China’ would be a similar though possibly even worse mistake. 21/

If you’re interested in this topic, @Clark_Packard has an excellent new report out and there will be a great event on April 9th with Clark, @haliecraig, and @peterrough. 22/

https://twitter.com/RSI/status/1375500800215109638

In sum, China is illiberal, nationalist, and authoritarian but it’s also aging, polluted, unequal at home, and unloved abroad. The smart response to their mercantilism is patience not panic, containment not bravado, and multilateralism not unilateral lashing out. End/