The NYT ran a brief article roughly two weeks ago about a new Chinese government initiative called “Made in China 2025.” The gist of the program is that the government intends to eliminate virtually all high tech imports from China by 2025 by making hundreds of billions of dollars of cheap loans to Chinese companies to create and acquire new technology in the identified fields.
I know that Trump only likes to read bullet points and watch TV, but one hopes that one of his advisers managed to get him to read the article, because “Made in China 2025” sounds like a blatantly protectionist program.
Let’s face it: “socialism with Chinese characteristics” means, in practice, a state capitalist, mercantilist economy, not a true market system. Chinese companies doing business abroad are operating, in the final analysis, as the agents of their government, and not vice-versa.
It makes sense for a government which asserts the ultimate right to control every facet of life and which puts the highest priority on national strength and stability to view trade as a zero-sum game. Our system, which is run for the benefit of individuals, not the government, is fundamentally different, so Trump’s mercantilist views on foreign policy are a horrible mistake. That said, he isn’t wrong about the nature of the Chinese system, and we are burying our heads in the sand if we treat China as just another market economy.
In other words, we cannot and should not try to emulate the Chinese system, but our response to it needs to be based on its actual characteristics, not propaganda or wishful thinking. Chinese claims to be standing up for an open global economy should be taken with a grain of salt.