I disagree with plenty of the fundamental statements/positions mapped out in Brad W. Setser’s article, “China’s Still-Too-High Savings Makes China 2025 a Bigger Global Risk.”
Here are my countervailing thoughts.
The tariffs are very low. The higher they go, the lower China will have to price its goods to export them. It knows that. That’s why its negotiating so hard with Trump. That’s why Trump is still in the power position versus Xi.
China wants to build more of what it is still importing because of the potential for US and EU sanctions. It wants to be a manufacturing and consumer economy at the same time. With the size of its population, it would continue getting considerably richer were it able to pull that off. The US is being much more politically competitive against China now, so pulling it off will be that much harder. The US will seek to undermine China’s rise to US levels.
The idea that manufacturing more inherently means exporting less is nonsense. The entire economy of humanity would have to reach total saturation before that would happen. We aren’t nearly there. Of course, there is the issue of the carrying capacity of the planet, but that’s changed via human ingenuity and resulting technology, which isn’t going to stand still.
China, under Xi, does not want to, and will not, “liberalize” its economy. That means it will not really move more and more toward the laissez-faire end of things even as it attempts to appease Western investors. Xi still wants to have his Marxist cake while eating his capitalist one. It won’t work in the long run because it will be impossible for him to keep reasonably balanced even if he comes to rely upon AI, but that is what he wants and is insisting upon. A truly mixed economy is not truly Marxist. There’s no way around that. Xi is simply being illogical.