More than 170 years after
China’s humiliating defeat in the first opium war, 70 years after the establishment of New China, 40 years after China’s reform and opening up and 18 years after China’s accession to the World
Trade Organisation – just as the nation seemed firmly set on an irreversible trajectory to become a world power – the
trade war and
technology boycott led by the US threaten to deal a body blow to Beijing’s global ambitions.
Despite its record trade surplus with the US in 2018, significant declines in China’s total exports (by 4.4 per cent) and imports (by 7.6 per cent) in December show the devastating effects of US President
Donald Trump’s tariffs. Even more devastating than the tariff war is the tech war waged by the Trump administration. The ban on the export of specialty chips to China and the banishment of China’s tech giant
Huawei from the
5G markets of the US and its “Five Eyes” allies send clear signals that a US-led coalition is bent on keeping China’s tech development at bay.
One cannot pin the blame solely on China’s “state capitalism” or its “egregious” national industrial policy. There is nothing fundamentally different from what
East Asian economies like
Japan and
South Korea pursued to jump-start their economies after the second world war.
As is well documented by scholars on Japan’s post-war economic miracle, Japan adopted a deliberate strategy of domestic market protection by erecting tariff and non-tariff barriers, grooming “national champions” in selected industries, targeting US rivals and making copycat production by reverse engineering.
The economic development of both Japan and South Korea in their nascent years was marked by a symbiotic relationship between their governments and big corporations. The governments of other smaller
Asian “tigers” –
Taiwan and
Singapore – abstained from building tariff barriers but followed suit by picking winners with strong backing from the state.
In China’s case, size clearly matters. According to Professor Lawrence J. Lau, from 1978 to 2017, China’s share of world trade rose from 0.5 per cent to 10.2 per cent; while its share of the world’s GDP rose from 1.75 per cent to 15.2 per cent. As a continental economy with the world’s largest population, the unleashing of its teaming manpower and, more recently, brainpower, lifted the largest numbers of people out of poverty in human history.
