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Jacob Warren
ENGL 1101
Dr. Molly Daniels
27 October 2019
China VS The USA: The Economic Battle for Power
When China rose as a leader in the world economy in the late 1970’s and early 1980’s, it
changed the world’s economic structure forever. Today China is the main contender for
economic power, next to the United States, and tensions run high. The economic relationship
between the United States and China is one of the most complex relationships in the world, and
there is no simple answer when questioning whether it is good or bad. In short, it is complicated.
While things do not seem to be improving, they are also not getting any worse. However, such a
delicate matter is liable to cause world economic collapse at any given time. Scary, right? Both
sides could be argued; the United States and China may not agree politically, but it is in neither
countries best interest to inflict economic harm on the world’s economy, but rather use it as a
tool for shaping policy and trade deals. China is a threat to economic growth in the United States,
therefore leading to possible conflict as each country struggles for economic power.
Historically, the world was viewed as having one reigning economic power, the United
States. Today that could not be farther from the truth. It could be argued that this was the
standard up until the signing of the One China Policy in 1979 by then President Jimmy Carter.
China, along with this policy and major economic reforms lead by China’s Vice Premier Deng
Xiaoping, was well on its way to becoming a global economic power by the end of the 1980’s.
Fast forward to the year 2000 when President Bill Clinton signed the US-China Relations Act of
2000; this granted China permanent normal trade relations with the United States and eventually
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resulted in China joining the World Trade Organization in 2001. However, this relationship was
put to the ultimate test during the 2007-2008 global financial crisis. The global market tanked
around September 15th 2008 with the collapse of global bank Lehman Brothers.
The Chinese took multiple measures in response to the crisis; however, this help came with
strings attached. China, in order to boost the United States economy and stabilize their largest
trading partner, bought large quantities of US securities. Some policy makers in the United States
have expressed concern over China’s larger holding of United States securities citing that it may
be used as leverage against United States policy that it might oppose. In the past, China has made
no secret of its intended use of this strategy and how it can benefit it in trade and other arears
such as currency appreciation. This could spell trouble for United States policy makers in the
future (Morrison 45). This strategy could lead the United States being forced to play into China’s
hand when it comes to economic policy, and it could ultimately stunt the United States’
economic growth in the future. I have yet concluded wither the global financial crisis helped or
hindered economic relations between the countries. Nevertheless, I do know it highlighted the
growing interdependence between the United States and China and how China is not afraid to
use its power to get what it wants.
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In present-day context, the relationship between the two countries is simply constant; it is
not worsening or improving. One question that sparks debate in the economic world is whether
or not China reaps the benefits from this relationship, and there is no easy answer. The United
States benefits more than what is commonly understood from China, but it also suffers losses.
“For example, recent data shows that U.S. exports to China support around 1.8 million jobs in
sectors such as services, agriculture, and capital goods. [1] However, trade with China has also
led to job destruction in some U.S. industries—particularly low wage manufacturing” (Meltzer
and Shenai). China has both a positive and negative impact on the United States’ economy and
job market. Thus, leading to a possible trade war. A trade war is a war of tariffs and the battle
over trade between the 2 countries. A trade war seemed almost enviable as:
“On 22 March 2018 the US Trade Representative (USTR) presented the findings of a
report on China's IPR policies. The USTR had been working on this report since Aug. 2017 as a
part of an investigation initiated by the Trump Administration. The report found China is
involved in unfair trade practices and stealing American intellectual property rights, and costing
the American economy. The USTR revealed that the USA is losing about $50 billion via IPR
theft in China…. the report recommended flat 25% tariff on certain Chinese import (Sengupt and
Rastogi 197).
On this same day, President Trump signed a bill that imposed a 25% tariff on certain categories
of Chinese imports along with purposing new restrictions on Chinese investors. (Sengupt and
Rastogi 197). In the months following, the United States imposed 2 phases of tariffs equaling
$50 billion USD and in retaliation China imposed the same level tariff equaling approximately
$34 billion USD. This issue is far from over and trade talks between the United States and China
are set to happen for the 13th time this year later this month. Trade will continue despite trade war
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fears because between 1980 and 2004 US-China trade increased from 5 billion to 231 billion, a
4520% increase. With this major increase, China became the 2nd largest trading partner of the
United States surpassing Mexico and the EU, falling short of Canada. Today China is the leading
trade partner of the United States as well as being the leader of imported goods for 34 other
counties including Australia, Japan and The European Union. "Over the past three decades,
China has emerged as the world's major exporter with a sustained trade surplus earned against
most nations" (Sengupta 190). With trade also comes a trade deficit. A trade deficit is the dollar
value of how much more a country imports rather than exports. The latest numbers show the
United States trade deficit with China has reached 419.2 billion dollars. In the graph below it
shows the growing trade deficit between the United States and China between the years 19982016.
While this may seem like a growing problem, a trade deficit is not always negative; it can be
misleading. “The U.S. trade deficit is less a product of restrictions on U.S. imports than it is a
reflection of a low U.S. domestic savings rate…In addition, the trade deficit does not account for
the activities of affiliates of U.S. and Chinese companies in each respective market, a calculus
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that shows the U.S. selling more to China than vice versa” (Meltzer and Shenai). China has
restrictions on imported goods from the United States while the United States has much looser
import restrictions thus widening the gap. The trade deficit also neglects to show numbers from
affiliate companies which will show that United States is actually selling more compared to
Chinese companies. The trade deficit will likely only grow in the future but should not be a
major factor when evaluating the economic relationship between the 2 countries.
A more current issue of concern is the stealing of intellectual property from the United
States. “On 22 March 2018 the US Trade Representative (USTR) presented the findings of a
report on China's IPR policies….The report found China is involved in…stealing American
intellectual property rights, and costing the American economy” (Sengupt and Rastogi 197).
Intellectual property can be defined as: “creations of the mind, such as inventions, literary and
artistic works, and designs, symbols, names and images used in commerce” (Bloomberg). These
things are protected by laws such as patents. Not only does this break United States patent law,
but it is also costing American companies. This cost is shown best in lost profits due to the sale
of Chinese counterfeit goods accompanied with the lowering of prices to be competitive in
markets that may be supported by a domestic company/industry. This is no small issue: “A 2015
paper by the Federal Reserve Bank of Minneapolis concluded that more than half of all
technology owned by Chinese firms was obtained from foreign companies” (Bloomberg). This
showing that ½ of all technology owned by Chinese firms has been stolen. Thus, costing
American companies billions in sales and ultimately rising prices for domestic consumers.
China, now the second largest economy in the world, is the United States’ number one
competitor when it comes to global economic power and will remain a threat for the foreseeable
future. I Mrs. Katie Simmons, the Associate Dean at The University of North Georgia, and asked
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her for her opinion on the debatable issue of the on the issue of if she believed the Chinese
economy posing a threat to the United States. She stated: “The US does face a threat from China
particularly in the form of a trade war. US manufacturers have invested in Chinese production of
intermediate goods. … China is the world’s largest trading nation and is the largest manufacturer
of exported goods. It is the second largest consumer market in the world. Tariffs and trade
restrictions could send the US into a recession because of slow production and consumers’
reacting to higher prices after cutting spending.”
Her response clearly explains how the Chinese economy poses a threat to the United States as
seen in previous trade wars. She also explains how China could send the United States into a
recession due to the slowing of United States manufacturers. She described the current status of
relations by saying: “The United States and China have been on a collision course economically
for many years.” When this collision is going to happen and what effects it will have is still
unknown. What does this mean for the everyday consumer? Unfortunately, the negative
externalities of a bad economic relationship with China will fall on them. This will more than
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likely come in the form of higher priced goods and the loss of jobs as domestic companies try
and compete with the Chinese market.
Ultimately, China is a threat to the United Sates’ economic growth. However, a
relationship between the world’s two largest economic powers is necessary. China is the United
States number one trading partner, and while it may be challenging to regulate it, it is also
necessary. The main threat from the negative effects caused by China stealing intellectual
property. In the coming years, China will most likely overtake the United States as the largest
economy in the world. However, this does not mean that the United States economy will not
continue to grow; it will only slow the shifting of economic power from the United States to
China. The United States is losing its regional economic hegemony, and with that comes a new
era of economic structure and power struggle.
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Works Cited
Emilio Casetti. “Power Shifts and Economic Development: When Will China Overtake the
USA?” Journal of Peace Research, vol. 40, no. 6, 2003, p. 661. EBSCOhost,
search.ebscohost.com/login.aspx?direct=true&db=edsjsr&AN=edsjsr.3648382&site=edslive&scope=site.
Ming Wan. “The Political Economy of U.S.-China Relations and the Trump Administration.”
Washington Journal of Modern China, vol. 13, Sept. 2017, pp. 53–75. EBSCOhost,
libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&
AN=131014541&site=ehost-live.
Morrison, Wayne M. “China and the Global Financial Crisis: Implications for the United States.”
Washington Journal of Modern China, vol. 9, no. 2, Dec. 2010, pp. 39–46. EBSCOhost,
libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&
AN=55738552&site=ehost-live.
Sengupta, Anirban, and Siddhartha Kumar Rastogi. “US--China Trade War Data: Truth and
Post-Truth.” World Economics, vol. 19, no. 4, Oct. 2018, pp. 189–211. EBSCOhost,
libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&
AN=134295304&site=eds-live&scope=site.
“Timeline: U.S. Relations With China 1949–2019.” Council on Foreign Relations, Council on
Foreign Relations, www.cfr.org/timeline/us-relations-china.
Glaser, Bonnie S. “Us-China Relations.” Southeast Asian Affairs, Jan. 2014, pp. 76–82.
EBSCOhost,
libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&
AN=96548015&site=eds-live&scope=site.
Agar, Michael. “Infographic: 2008 Financial Crisis Led to Closure of 800,000
Businesses.” Metro, Metro.co.uk, 13 Apr. 2017, metro.co.uk/2012/08/16/infographic-2008financial-crisis-led-to-closure-of-800000-businesses-538207/.
Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2018-12-05/what-sintellectual-property-and-does-china-steal-it-quicktake.
Elwell, Craig Kent, et al. Is China a Threat to the U.S. Economy? [Electronic Resource]. Nova
Science Publishers, 2008. EBSCOhost,
libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=cat06
568a&AN=ung.9913739752002931&site=eds-live&scope=site.
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Meltzer, Joshua P., and Neena Shenai. “The US-China Economic Relationship: A
Comprehensive Approach.” Brookings, Brookings, 6 Mar. 2019,
www.brookings.edu/research/the-us-china-economic-relationship-a-comprehensiveapproach/.
Mgmresearch. “China vs United States - A GDP Comparison.” MGM Research, 14 May 2019,
mgmresearch.com/china-vs-united-states-a-gdp-comparison/.
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Rhetorical Rational
When throwing around ideas for this project I found that my passion for politics was one of the
main drivers of my decision making. Many political issues today are extremely polarized and
can spark debate and conflict between people. However, I feel that the topic of United Sates
and China economic relations has more middle ground than some may think. The countries may
be at odds politically but would rather see economic growth than destruction. The images I
used I used to help explain the content, especially the one about the 2008 financial crisis. The
other two images I used to help show the size and scope of certain numbers as it relates to the
economy. Most of the sources I used because they were easy to understand but also gave
knowledgeable insight to the issue. One of the sources I began with was a entire book, I ended
up not using it but the parts I read were very good. I also used MLA because I am more familiar
with it and didn’t feel it appropriate to use APA.