US-China economic relations need a re-set – Arthur Kroeber

While US president-elect Donald Trump prepares to be sworn in, global business leaders worry what the near future might bring them. A trade war, business as usual or something in between? US-China economic relations for sure need a re-set, tells leading economist Arthur Kroeber, and author of China’s Economy: What Everyone Needs to Know® in the Chicago Tribune.

The Chicago Tribune:

Many U.S. business leaders are worried the next president will start a trade war with China that will seriously damage their interests here. Trump’s threat to raise taxes on American companies that manufacture abroad – repeated in a Washington Post interview this past weekend – would represent an even more direct risk to the interests of many firms.

Instead, what U.S. business leaders want is pressure on China to open its economy further to American investment.

Arthur Kroeber, managing director of Gavekal Dragonomics, an economic research firm, said frictions had risen because the “material fruits” of the United States’ engagement with China had been very unevenly distributed.

But in a client note, he said the problem could not be solved by “browbeating China to change its trade policies or bullying U.S. companies to move factories back onshore” – partly because job losses have had as much to do with cheap automation as with competition from a global labor force.

“A sensible re-set” of U.S.-China economic relations, he argued, should not look backward at trade in goods and manufacturing but instead focus on fostering a better environment for investment, “where the U.S. has more leverage and China has more to give.”