US can’t decouple from China without China’s help
US would have to import more Chinese capital goods for years to reduce its dependence on China in the long term
Decoupling the US economy from China sounds like a good idea to Americans who blame the Asian giant for the massive loss of US factory jobs during the past 20 years.
The trouble is that the US imports most of its capital goods, so it would have to import more capital goods for years—including from China—in order to reduce its dependence on China in the long term.
China hawk Gordon Chang in a February 7 tweet declared: “In an era of #Chinese aggression, we cannot afford to have our products made in #China. Why should we remain vulnerable to a regime promoting, among other things, the violent overthrow of our government? Bring back every factory to this side of the #Pacific.”
I tweeted back: “US consumption of home-produced capital goods (total shipments net of exports) now LESS than capgoods imports. More investment to rebuild US industry means MORE capgoods imports including from China. That’s where 20 years of hollowing-out has left us.”
Chang wrote a 2001 book entitled The Coming Collapse of China. Rather than collapsing, China tripled the size of its economy in the interim.
Shown in the chart are shipments of nondefense capital goods excluding aircraft, adjusted for the small volume of US capital goods exports, that is, shipments of capital goods for domestic use. In 2021, capital goods imports exceeded shipments of capital goods for domestic use for the first time.
Adjusted for inflation, total US orders and shipments for nondefense capital goods excluding aircraft are about 10% below the 1999 peak.
It’s pitiable.
A more sensible point of view appeared in a New York Times op-ed on February 6 by conservative writers Sohrab Ahmari, Patrick Deneen and Gladden Pappin.
They wrote, “Americans should beware of mindless China hawkism. Yes, the United States has real differences with Beijing. We must punish industrial espionage. We must defend treaty allies. And we must seek a more balanced trade relationship. But we should also find areas of cooperation, exchange and shared interests, seeking to avoid any future wars and instead communicating with mutual respect for a civilizational equal.”
Among the industrial countries, China has some of the world’s best transport infrastructure, including 40,000 kilometers of high-speed rail; the US has some of the worst, with zero miles of high-speed rail. Transport bottlenecks are one of the biggest problems in US supply chains, and a major source of inflation.
With Chinese equipment, the US could build new rail networks at low cost. China makes track-laying equipment that can build 700 meters a day of railroad across valleys.
As a BBC report explained, “The SLJ is an all-in-one machine capable of carrying, lifting and placing sections of track, connecting pillar with pillar by heavy stone blocks…. After laying each section, the 92-meter (300-foot) vehicle – with the help of its 64 wheels – returns to collect another block. It then rolls forward over the part it has just laid to place another section…. It has already contributed towards several high-speed rail projects, including a new link between Inner Mongolia and the rest of the country, propelling China toward its goal of 30,000 kilometers of high-speed rail by 2020.”
There are lots of other ways that China could help the US re-industrialize, so that it would have the choice of whether to be dependent on China or not.