By Ashley Feng:
Forty years after the Shanghai Communique began to thaw the relationship between Earth’s richest nation and its most populous, the second annual U.S.-China Forum at Yale (UCFY) on April 5-8, titled From Win-Win to Mutual Trust, has drawn speakers from fields as diverse as media, law, economics, and environmental advocacy to map out a blueprint for greater cooperation between the U.S. and China.
Professor Stephen Roach, lecturer at the Yale School of Management and Jackson Institute and former Chairman of Morgan Stanley Asia, opened the first full day of this year’s UCFY with an address to students and professors from China’s preeminent Qinghua and Beida universities, as well as Yale and Harvard. Professor Roach outlined the structural weaknesses of the two nations’ opposing economic models and called for trust, as well as mutually beneficial trade policies, between the pair of superpowers.
The U.S. economy has been driven by a steep climb in consumption, which has since collapsed with the implosion of the credit and housing bubbles. With annual U.S. consumption growth at less than a seventh of pre-recession levels, the heavily export-oriented Chinese economy has been forced to reconfigure its own economic model. China’s economy, in addition to its foreign investment addiction, also lags behind other major economies in employment growth and remains highly resource-intensive.
Roach criticized both countries’ economic models and laid out a several suggestions for mutually beneficial re-balancing and growth. Each nation must adjust its accounting preferences; the U.S. savings rate is currently too low and the Chinese rate too high to sustain their respective economic growth. China’s economy must shift from dependence on exports to increased domestic consumption, driven by increases in employment, wages, and financial security. To meet these goals, Roach proposed expanding China’s service sector by permitting foreign multinationals to compete domestically, reforming the household registration system to facilitate urbanization, and increasing funding for a meager social safety net.
Professor Roach deplored the “bipartisan China-bashing” taking place in Washington as a major barrier to a win-win U.S.-China relationship, and described the popular perception of China as a massive threat to American workers as “one of the most flawed macroeconomic views I have ever seen.” He criticized a hostile currency bill passed by an overwhelming bipartisan majority in the House, a similar measure in the Senate, and Mitt Romney’s promise to declare China a currency manipulator as glaring examples of American politicians dodging their share of blame for the state of the economy. Roach has repeatedly called for the U.S. government to accept responsibility for out-of-control consumption and debt fueled by its own myopic economic policies, a view for which at least one irate Congressional Representative furiously declared declared him a “panda-hugger.”
Roach urged U.S. policymakers to instead recognize China’s huge potential as a export market for U.S. goods (Roach noted that, for example, channeling Chinese demand toward the U.S. agricultural market could remedy China’s food security problem while eliminating U.S. agricultural subsidies), and negotiate with China for increased access to its domestic Chinese market, where U.S. companies could successfully compete while creating jobs in China’s service sector. Given that the nations control three-eights of global GDP between them, petty trade squabbling seems unlikely to last–and whatever the future of our trade relationship, Steven Roach will be there to keep everyone honest.
Ashley Feng ’15 is in Calhoun College. Contact her at ashley.feng@yale.edu.