A full-blown crises would mean a different kind of test for the United States.
It’s too soon to bet against its economy, but if China were to fall into a prolonged economic crisis, the effect on global markets would ripple around the world, economically and geopolitically. Instantaneous repercussions could be felt in worldwide capital markets. Recall that in 2015,sent all U.S. and international stock indexes into correction territory. On trade, the world could see a flood of cheap Chinese exports, while global exports to China could dry up.
Given the range of potential harms worldwide, it would be wrong to describe a crisis in the Chinese economy as an opportunity. But it certainly poses a test of two wildly different economic and political systems. The decisions that Chinese and U.S. leaders make in the months ahead could have enormous implications — for the global economy, global security, business and the future of the U.S.-China competition.
For the United States, the test is about confidence. Whereas China’s economic challenges have exposed its structural shortcomings, the foundation of the U.S. economic system and the competitiveness of our businesses are so strong and resilient that we have so far been able to withstand our government’s dysfunction and other significant challenges, including covid-19. But uncharted and volatile waters lie ahead with the upcoming presidential election.
Once and for all, China’s economic challenges should put to rest the belief that to compete, Washington should adopt more statist economic and industrial policies. Instead, U.S. policymakers need to do more to reduce our national debt and address our looming fiscal crisis, which is the primary threat to our economic and national security. And we need to resist the impulse to adopt more top-down, bureaucracy-implemented approaches and avoid populist bullying of private businesses.
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