Behold the latest exercise in mental gymnastics from the illustrious Wall Street Journal:

No one knows how to cope with Beijing’s ‘beggar thy neighbor’ economic model

Pop quiz. Who has contributed more to the rest of the world’s growth this year: China or the United States?

The answer is the U.S., and it isn’t even close. Even as the U.S. rolls out tariffs, its imports are up 10% so far this year from a year earlier. And as China moralizes against protectionism, its imports are down 3%, in dollar terms.

So you “contribute to growth” by consuming more than you produce? You “contribute to growth” by exporting to the world mass-printed pieces of paper called “dollars”, whose only practical use, were they not treated as the global reserve currency, would be burning them for a few minutes of heat in winter, while in return everyone else gives you useful, tangible goods that took real labor and industry to produce? Maybe a good deal for the US, but a shitty one for everyone else.

The U.S. figures might be an anomaly, reflecting front-running of tariffs. China’s are not. In the past five years, its export volumes have soared while imports have flatlined. China is swallowing up a growing share of the world’s market for manufactured goods. This reveals an uncomfortable truth: Beijing is pursuing a “beggar thy neighbor” growth model at everyone else’s expense.

A recent report by economists at Goldman Sachs starkly laid this out. In the past, they wrote, 1% more output in China would raise the rest of the world’s output by 0.2% as it pulled in imports.

In their new forecast, the Goldman team has concluded¹ that the relationship has turned negative. China’s growth, they write, is being driven by its “leadership’s determination and capability to further advance manufacturing competitiveness and boost exports.”

¹[all hail the infinite wisdom of Goldman Sachs!]

This is positive for other countries insofar as cheaper Chinese goods boost purchasing power. But that benefit is more than offset by the hit to their manufacturing sectors from Chinese competition. The upshot is that Goldman sees China growing about 0.6 percentage point a year faster over the next few years, but that will reduce the rest of the world’s growth by 0.1 point a year.

Or is it perhaps that Western-style economies prefer to sink further into financialization and deindustrialization rather than invest into maintaining and developing their industrial base, as China is doing? Why do you hate free market competition all of a sudden, now that China is outcompeting you in virtually every aspect of manufacturing production? Just because you can’t hack it, should China hold itself back?

China’s growth is still good for the Chinese people², and for some countries that sell inputs to its export machine³. But Goldman projects it will generate growing headwinds for other industrial economies in Europe and East Asia, and for Mexico.

²[nice admission - so why the hell would they abandon their model then?]

³[and for the global south countries that China is helping to develop…but who cares about “the jungle”, right?]

From positive to negative sum: A fundamental axiom of economics is that when two individuals or countries trade, both are better off. In the decades after World War II, the U.S. was the world’s largest exporter and economy and as it grew, it imported more, helping its partners. As they grew, they bought more of what the U.S. made. Expanding trade helped everyone specialize⁴, leading to more competition, innovation and choice, and lower costs.

⁴[here’s that magic word: specialize - yes, yes, we’ve all heard the “comparative advantage” sales pitch before - quite convenient when it ends with the West specializing in advanced manufacturing and the global south specializing in providing raw materials and growing monocrop cashcrops]

China is now the world’s second-largest economy and its largest exporter, but its philosophy is quite different. It has never believed in balanced trade⁵ nor comparative advantage. Even as it imported critical technology from the West, its long-term goal was always self-sufficiency.

⁵[lol, how rich of the US to speak about “balanced trade” when its entire global financial hegemony is based on imbalanced trade]

And here we have finally the admission of the real problem, of what is really infuriating the Western imperialist elite beyond belief: the fact that China is self-sufficient! This is the one thing they cannot abide because self-sufficiency means true independence, it means that China is outside of the reach of imperial and neo-colonial extortion. China can no longer be pressured, threatened and blackmailed with having its access to goods and services turned off.

In 2020, Chinese leader Xi Jinping codified this approach as “dual circulation.” This would, he said, “tighten the international industrial chain’s dependence” on China while ensuring China’s production was “independent” and “self-sustaining.”

And as China expands into high-end manufacturing such as aircraft and semiconductors, Xi has decreed it must not relinquish low-end production such as toys and clothes⁶. Beijing has discouraged Chinese companies that invest abroad from transferring key know-how, such as in the production of iPhones and batteries⁷. Xi has rejected fiscal reforms that would tilt its economy away from investment, exports and saving and toward household consumption and imports.

⁶[of course if they were pushing low end production completely onto poorer developing countries, the WSJ would accuse China of using those countries as its sweatshops]

⁷[unlike the West which has never refused to transfer know-how for critical technologies like chips to China, right?]

Thank 天 for Xi Jinping! And what a great decision they made in rejecting the failed, neoliberal, consumption-driven Western model. That’s why they are now winning while you are whining, forced to write articles in finance capital’s propaganda rags crying about how China is eating your lunch.

Of course, China isn’t the first to pursue export-led growth or industrial policy (government support of favored sectors). West Germany, Japan and later South Korea all did the same, eventually running up surpluses that became longstanding irritants with the U.S.

But as part of the democratic West, they didn’t fear economic interdependence nor seek to eliminate imports. And as they moved up the value chain, they allowed lower-end manufacturing to migrate to poorer countries.

And look what happened to them. Look at the state of Germany, Japan and occupied Korea today. They are the perfect example of what happens when you give up your independence, when you allow your own economy to be sabotaged by the US imperialist elite. Japan being forced to sign the humiliating Plaza Accords that put them into decades long stagnation, Germany and the severing of its cheap energy supplies leading to rapid deindustrialization…

Those countries “were driven by a desire for prosperity,” said Rush Doshi, a China expert who served on President Joe Biden’s National Security Council. “China is driven by a fortress mentality and sees industrial dominance as key to wealth and power. These are longstanding goals deeply rooted in nationalism and the Communist Party.”

Two decades ago, China’s economy was small enough that its trade surplus mattered little to the world. Today China accounts for 17% of global gross domestic product. Goldman estimates its surplus on the current account—the broadest definition of trade—will reach 1% of world GDP by 2029, larger than any country at least since the late 1940s.

As recently as 2020, international automakers supplied around 60% of the roughly 20 million units sold in China, usually from local factories operated with domestic joint-venture partners. Their executives insisted⁸ they would never cannibalize sales outside China by exporting from those joint ventures, recalls Michael Dunne of market research and advisory Dunne Insights.

⁸[corporate executives: “trust us, we pinky promise not to pursue profit above all else!”]

In the years since, Chinese automotive brands moved into electric vehicles, driving foreign brands’ market share below 40%. Saddled with excess capacity for internal-combustion-engine cars, those joint ventures began exporting.

Cannibalization has begun. Four of the top five Chevrolet models sold in Mexico are made in China by General Motors’ joint-venture partners, Dunne said. They would previously have been made in Mexico or South Korea.

All i’m hearing is the sound of China winning.

Divided we fall: Many countries are frustrated by China’s strategy, which is squeezing out their own manufacturing sectors and export opportunities. None has a solution.

Yeah because our leaders are ideologically blinded and slaves to capital. Here’s a solution: ditch neoliberalism, nationalize the banks, nationalize the energy sector, and start a colossal program of state investment into industry and infrastructure. In the meantime, get along with China because you’re gonna need their exports for the foreseeable future.

China’s dominance of so many categories of manufacturing gives it formidable leverage. When the Netherlands took control of Dutch chip maker Nexperia from its Chinese owner for national security reasons, China barred the company from exporting chips from its Chinese operations, crippling auto-assembly customers. The Netherlands backed off.⁹ President Trump, whose tariffs have met almost no pushback elsewhere, had to compromise when China restricted exports of critical minerals.

⁹[L Netherlands; maybe next time you try to pick a fight look at the size of your country vs the size of the country you are trying to take on]

What’s wrong? Usual bullying tactics not working? Finally picked on someone your own size? Bitten off more than you can chew?

The most effective way to turn back China’s export onslaught would be for the U.S. to coordinate with like-minded partners, such as imposing common restrictions on its autos while maintaining low restrictions on each other.

Lol. I’m sure trying the same thing you’ve tried half a dozen times already will work if you just try it one more time, if you try just a little harder. It’s all a matter of willpower right? Go ahead and show China the Triumph of your Will. While you’re at it, go ask the EU how the 20th sanctions package on Russia is coming along.

Trump has to date shown no interest in such a united front. Still, his bilateral deals do include incentives for resisting China’s exports. Malaysia, for example, agreed to match U.S. restrictions imposed on China for national security.

North America would be a natural candidate for a united front. To preserve the low tariffs codified in the U.S.-Mexico-Canada Agreement, Canada and Mexico might be willing to join the U.S. in raising barriers to China.

Great job building your united front. Hey how about you try threatening to annex them, invade them, or bomb them under the pretext of fighting cartels some more? I mean, why not, you’re pretty much out of carrots at this point (China is growing and handing out all the carrots these days), all you have left is that stick - and it’s started to rot from the inside.

But time is running out. Canada last year copied the U.S.’s 100% tariffs on Chinese electric vehicles. Then Trump hit Canada with auto tariffs, and China retaliated against Canadian agriculture. Caught in a two-front trade war, Canada is reviewing its tariffs on China.