CSIS: Stephanie Segal (2018)Economic Policies to Meet the China Challenge
As the world’s two largest economies, the United States and China enjoy advantages conveyed by sheer economic size, but our future economic trajectories are far from assured. This essay argues that the domestic policies China will have to change if it is to achieve sustainable economic growth over the medium term will result in greater competition and economic opportunity; and that regardless of China’s policy choices, the outlook for the U.S. economy is largely in our own hands. Only by investing in ourselves can the United States meet the range of challenges on the horizon, “the China Challenge” being just one of many.
China Has Its Own “China Challenge”
President Xi has called for building a “science and technology superpower,” an objective that is advanced through its Made in China 2025 initiative and associated programs, such as the creation of national data labs. China’s ability to articulate a vision for the future, backed by specific policies and the full power of the state, presents a competitive challenge to the United States. But China will need to get its macroeconomic house in order if it aspires to be a global leader. In the meantime, the relative positions of China and the United States in the global economy depend not just on China’s policies but also on how the United States responds.
U.S. Leadership Depends on U.S. Policies
The outlook for the U.S. economy is favorable provided we take steps to address known vulnerabilities and foster those aspects that have allowed the United States to be the global economic leader for the last 70 years. As a market economy, the United States does not dictate the activities of economic actors; nor does it suffer from the same magnitude of distortions as the Chinese economy. The key question is whether we are investing in ways that will add to our economic potential and support our outlook. There is work to be done, but I would not bet against the United States.
Recommendations
• Boost public investment in infrastructure and basic research.
• Prioritize educational policies and expenditures that address disparities in educational
outcomes.
• Maintain the openness of the United States to attract human and investment capital from
around the world.
Source: Meeting the China Challenge Responding to China’s Managed Economy , January 29, 2018 CSIS
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