Opinion | Trump’s incoherent policies take aim at a China that no longer exists

Failing to recognise a China in transition, the US president is applying bizarre trade and economic fixes that will end up destabilising the global economy

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US President Donald Trump swings a club at his golf course in Florida in February. The Trump administration is taking aim at Old China, when it is Next China it should be concerned with. Photo: AP

Published: 1:00am, 29 Aug 2019Updated: 2:04am, 29 Aug 2019

This will be the 10th year that I have taught a course at Yale called “The Next China”. The course focuses on modern China’s daunting economic transitions. It frames the moving target that eludes US President Donald Trump’s administration, which is taking dead aim at the Old China (a convenient target for a leader who wants to resurrect Old America).

The incoherence of Trump’s trade and economic policies, with all their potentially grave consequences for the global economy, is a destabilising by-product of this disconnect.

My course starts with the urgency of the challenges addressed by Deng Xiaoping in the late 1970s. But its main focus is how the resulting Chinese growth miracle presents President Xi Jinping with four transitional imperatives: the shift from export- and investment-led growth to an economy driven increasingly by domestic private consumption; the shift from manufacturing to services; the shift from surplus saving to saving absorption to fund the social safety net desperately needed by China’s rapidly ageing middle class; and the shift from imported to indigenous innovation, which will ultimately be decisive for China’s goal of being a “moderately well-off society” by the middle of this century.

The confluence of these four transitional challenges would be daunting for any country. That is especially true for China, with its blended political economy – the so-called socialist market system, with an ever-changing balance of power between the Communist Party and a vibrant private sector. It is a very tricky balancing act, to be sure.

I date the pivotal point on the path from Old China to Next China to early 2007, when then-premier Wen Jiabao correctly diagnosed the high-flying Chinese economy of the time as increasingly “unstable, unbalanced, uncoordinated, and unsustainable”.

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