“You Should Be Rooting for China”

While reports suggest China’s housing bubble may soon burst and some express the zero-sum sentiment that China’s continued rise means America’s decline, economist Zachary Karabell argues that a thriving China is actually in the best interest of the United States. From The Atlantic:

The need to see China fail verges on jingoism. Americans distrust the Chinese model, find that its business practices verge on the immoral  and illegal, that its reporting and accounting standards are sub-par at  best and that its system is one of crony capitalism run by crony  communists. On Wall Street, the presumption usually seems to be that any Chinese company is a ponzi scheme masquerading as a viable business. In various conversations and debates, I have rarely heard China’s economic model mentioned without disdain. Take, as just one example, Gordon Chang in Forbes: “Beijing’s technocrats can postpone a reckoning, but they have not repealed the laws of economics. There will be a crash.”

The consequences of a Chinese collapse, however, would be severe for  the United States and for the world. There could be no major Chinese  contraction without a concomitant contraction in the United States. That would mean sharply curtailed Chinese purchases of U.S. Treasury bonds,  far less revenue for companies like General Motors, Nike, KFC and Apple  that have robust business in China (Apple made $6.83 billion in the fourth quarter of 2012, up from $4.08 billion a year prior), and far fewer Chinese imports of  high-end goods from American and Asian companies. It would also mean a  collapse of Chinese imports of materials such as copper, which would in turn harm economic growth in emerging countries that continue to be a  prime market for American, Asian and European goods.[...]

[...]Suspicion and antipathy [...] are not constructive. They speak to the ongoing difficulty China poses to Americans’ sense of global  economic dominance and to the belief in the superiority of free-market  capitalism to China’s state-managed capitalism. The U.S. system may  prove to be more resilient over time; it has certainly proven successful to date. Its success does not require China’s failure, nor will China’s success invalidate the American model. For our own self-interest we  should be rooting for their efforts, and not jingoistically wishing for  them to fail.