Abstract
The trade war strategy that the US once used to successfully contain Japan's development is unlikely to work on China today. This is because China is larger in scale, more diverse in its economy, and has a stronger industrial foundation. China promotes mutual benefit through initiatives like the Belt and Road, and its development model has gained recognition from more developing countries. Unlike America's protectionism, China insists on openness and cooperation, promoting common development through shared technology, which is reshaping the global development landscape.
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Author: Grzegorz W. Kolodko
Director of the Center for Transition, Integration and Globalization Research at Kozminski University, former Deputy Prime Minister and Minister of Finance of Poland, Distinguished Professor at the BNU Institute of the Belt and Road, Beijing Normal University
China is making efforts to transform its growth momentum, shifting from large-scale investment expansion to greater reliance on consumption-driven growth, while increasing capital outflows and engaging in various forms of outward direct investment to maintain development momentum. Some countries welcome this development as they need Chinese capital and technology; others are concerned because their relative positions in the global economy are weakening.
It is not easy to draw a direct analogy here, but the competition between the US and Japan decades ago can provide some reference. After World War II, although Japan was occupied by the US for seven years, its economy quickly embarked on a path of rapid growth. In the 1960s, the average GDP growth rate in the US was about 4.5%, while in Japan it was as high as 10.4%—at this rate, GDP would double in seven years. By the 1970s, the two countries' economic growth rates were around 3.2% and 5.2%, respectively. Over those twenty years, Japan's GDP increased by 347%, while the US GDP grew by 113%. The acceleration of Japan's economy was due to unique national intervention policies at the time, and later some Southeast Asian countries attempted to emulate them with varying degrees of success.
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Although it was already a time of peace, the Cold War was being fought fervently on multiple "frontlines." Japan and the US became allies during this period, and this relationship has persisted to this day. However, this did not prevent the outbreak of the US-Japan trade war. At that time, there was a saying among Japan's political elite: "Trade is war." The Japanese were eager to win this "war," or more accurately, they wanted to use it to erase the humiliation suffered by previous generations in the hot war.
On the other hand, the US clearly also wanted to win this "war." To the US, Japan was both a hypothetical ally and a real competitor. Therefore, the US implemented a series of restrictive and protectionist measures aimed at slowing down Japan's economic growth. Initially, these measures were not effective, but over time, along with other factors, the expected results finally emerged. The Japanese often talk about the "lost 20 years"—and indeed, from the perspective of national income, it can be said so. According to World Bank data, calculated in 2015 constant prices, Japan's GDP in 2023 was $4.61 trillion, slightly higher than $4.07 trillion twenty years earlier; while the US GDP in 2023 was $22.06 trillion, compared to $14.48 trillion in 2003. That means that over these 20 years, the US GDP grew by 52.3%, while Japan's only grew by 13.3%.
Today, the US plans to repeat its old tricks, transplanting the tactics it once used against Japan onto China. However, this time, it is destined to remain a pipe dream. There are many reasons for this, first of all, China's population is more than 11 times that of Japan and more than four times that of the US. But the more important factor is the diversity of economic dynamics. Over the next 20 years, the gap in economic growth rates between China and the US will be smaller than in the past 20 years, but as long as there are no unexpected events, China's average economic growth rate will still be higher than that of the US. One of the main reasons is that the share of industrial production in China's GDP is relatively large, although it has been declining, it is still more than twice that of the US—approximately 38.3% versus 17.6%.
How to interpret globalization is a major game. Besides security and environmental issues, it also concerns the survival of our civilization. China can help countries around the world shape an ideal future to a great extent, manage global crises, and control major disaster risks far beyond the economic sphere. If the world economy returns to the old path of neoliberalism, if the tide of new nationalism continues to rise, especially if the momentum of "America First" and "Making America Great Again" is not curbed, the world may face such a disaster. We can only hope that neoliberalism and new nationalism do not prevail, and this largely depends on China's strength—this point is becoming increasingly clear to people.
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In the past 30 years of globalization, China has become one of the biggest winners thanks to its consistently wise policies. More importantly, China's achievements have not come at the expense of other countries but through active collaboration with foreign partners. This is one of the main differences in how China and the US approach globalization, and this distinction has become clear during Trump's second term as president. I wrote more about this in my upcoming book, "Trump 2.0: Global Chaos and Power Shift."
Globalization is a long-term process that leads isolated national economies toward liberalization and integrates them into interdependent global markets for goods, capital, and technology. Especially in terms of technology transfer, China has greatly benefited from globalization. It first absorbed a large amount of technology from developed countries and then in recent years transferred a significant amount of capital and technology to other countries, helping poorer economies accelerate their development.
Who feels uneasy about China's achievements? China has not only developed its own economy but also promoted global economic growth and contributed to the development of other countries. Yet instead of hearing praise for China, we hear criticism and even condemnation. Often, this criticism stems from misunderstanding or misplaced concerns, leading to unnecessary jealousy. Some believe that China has ambitions of hegemony, and its economic expansion and diplomatic activities are certainly serving its hegemonic purposes. However, these views overlook China's consistent commitment to promoting mutual respect and win-win cooperation in international relations, emphasizing open and inclusive development.
Some say that American values "may be imperfect in reality, but they still attract people all over the world, while China's communist values are far less appealing." However, in fact, given the developmental essence of the Belt and Road Initiative and especially the positive example set by China in poverty alleviation, China's values are becoming increasingly attractive in economically underdeveloped countries, while American-style values are losing favor, especially during Trump's second term, when its luster will continue to fade.
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The original article was published in International Edition of China Daily, with the title "Uncontainable Ascent".
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