Reference News Network, December 25 report: On December 8, the website of the American Enterprise Institute published an article written by the institute's senior researcher James P. Pesko, titled "Re-examining the 'China Shock' Theory." The article is translated as follows: In the minds of many Americans, the rise of the Chinese economy may have brought impacts such as factory closures and urban hollowing-out to the United States. Of course, there has also been a disturbing political shift in the United States that has continued to this day. But even though this narrative is widely spread, it is not complete: in fact, despite China reshaping the global economic landscape, the United States has become more prosperous overall. A sharp contrast exists between national-level gains and local-level pain, which explains why the "China shock" narrative continues to persist, and also illustrates why it reveals some truth while concealing other key facts.
A new study from the National Bureau of Economic Research (NBER) fills this missing context. In an article titled "Embracing Emerging Giants in Global Economics," economists Huang Zhuokai, Benny Kleinman, Ernest Liu, and Stephen Redding analyzed 60 years of global trade and productivity data to answer a simple question: What impact does it have on countries like the United States when large emerging economies grow faster than the U.S.? The original text of the study states: "We found that the reduction in global trade friction from 1960 to 2020, although it reduced the U.S.'s share in global GDP, increased its overall welfare level. Similarly, Japan's and China's productivity growth caused a decline in the U.S.'s relative income, but the expansion of global production possibilities also brought overall welfare gains to the U.S."
This conclusion seems counterintuitive, yet aligns with standard economic theory. China's rapid growth did indeed shrink the U.S.'s share of global GDP, but at the same time, it made various goods more affordable and lowered production costs for American companies, bringing tangible benefits to Americans. In terms of economic scale, the U.S.'s "relative size" has decreased, but in terms of absolute wealth, the U.S. has become richer.
This top-down macroeconomic perspective reveals some key facts that were obscured by the famous "China shock" theory proposed by David Autor, David Dorn, and Gordon Hanson.
Their research shows that regions in the U.S. heavily affected by Chinese import goods suffered deep and lasting damage: rising unemployment, falling incomes, and difficulty adapting to the new economic reality. They highlighted the significant losses endured by communities most affected by Chinese imports—while at the same time, the corresponding gains at the national level were spread among millions of households, making them difficult to detect.
Other studies further broaden the perspective. It is true that Chinese imports have indeed led to a decrease in U.S. manufacturing jobs, especially in areas where the production of goods that began to be exported after China joined the WTO. However, when researchers looked at the full picture—including the jobs created by the U.S. export growth to the global market—they found that export growth offset most of the lost jobs. At the industry level, from 1991 to 2011, U.S. exports almost offset all job losses related to China; at the regional level, over a full 20-year period, job losses and new job creation were roughly balanced.
The story we tell is crucial — there is nothing wrong with it, provided that we update these narratives as needed.
Original: toutiao.com/article/7587625112745099791/
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