China lashes-out towards the US---trade war put us to the brink.

The changes in China’s economic performance, which for decades seemed immune from the business cycles and growth constraints that apply to the rest of the world, have certainly been profound. From 1980 to 2019, China reported economic growth at a rate that was on average three times faster than the United States’. But since 2021, that outperformance has slowed. According to China’s official numbers, its growth rate barely surpassed that of the United States in 2022, at three percent to 2.1 percent. These numbers are suspect, however: the impact of COVID-19 restrictions on both consumption and investment, and the deep contraction of the property sector, mean that real economic growth in China was almost certainly negative in 2022. This year, growth in household consumption in China has been limited, investment has been flat, government spending has been limited by debt servicing costs, and net exports have contracted. Real economic growth in China in 2023 is likely below two percent, which is far short of the officially reported 5.2 percent in the first three quarters. Medium-term accounting forecasts now have China in the three percent range from the medium term onward, with the United States expected to achieve average growth of around two percent, according to the nonpartisan Congressional Budget Office. China’s exchange rate is likely to depreciate because of persistent capital outflows, further reducing China’s share of the global economy in U.S. dollar terms. Since the U.S. economy is about $10 trillion larger than China’s at present, the United States will likely contribute more to global growth than China over the next two decades.

Over the past decade, hostility has built between Washington and Beijing on several issues including unfair trade, intellectual property theft, the COVID-19 pandemic, and Chinese support for Russia’s invasion of Ukraine. It is unsurprising, then, that leaders in Washington are beginning to ask how China’s current economic straits can be exploited to U.S. advantage. For instance, in August, responding to congressional testimony advocating a measured U.S. response to China’s current economic travails, former U.S. Assistant Secretary of Defense for Indo-Pacific Security Affairs Randall Schriver joined the chorus of voices in Washington that are speculating how to “kick them [the Chinese leadership] while they’re down, if you will, to put pressure on them based on the experiences they are now having.”

The Biden administration insists that although it has introduced restrictions on some aspects of U.S.-Chinese trade, it is seeking only to build a high fence around a small yard—that any economic decoupling will be limited to areas that concern national security. But faith in that commitment to limited restrictions is fragile, not only in China but among U.S. allies and partners as well. If Washington goes beyond these limited controls on high-technology trade and investment with China to prohibit broader categories of financial, trade and technology flows indiscriminately—it will present Beijing with the ideal scapegoat for its homegrown economic problems. It will also increase the likelihood of conflict by reinforcing Beijing’s narrative that Washington is hell-bent on limiting China’s rise, or “rejuvenation,” as Chinese President Xi Jinping puts it. Rather than volunteer to take the blame for China’s malaise by announcing unnecessary decoupling policies, Washington should downplay its own role and demonstrate that it is not responsible for China’s present stagnation. Instead of kicking China while it is down, U.S. leaders should hold Beijing accountable for the predictable consequences of its policies and make good-faith efforts to give the Chinese leadership economic advice and opportunities for cooperation.