There Is No China Crisis
THE UNITED STATES has a long and distinguished history of freaking out about powerful rival nations. When countries even begin to approach the United States in economic might, the political reaction often borders on the hysterical. At the height of the Cold War, high rates of Soviet gross domestic product (GDP) growth caused policy makers to fret that the USSR’s centrally planned economy would outperform American capitalism. Members of Congress reacted with their usual aplomb, tolerating the rise of McCarthyism and the blacklisting of suspected communists in the arts. Sputnik triggered a similar panic about whether the United States was losing the space race to a communist foe.
A few decades later, the Japanese were the source of anxiety. After four decades of rapid growth, they seemed poised to overtake the United States economically. A pallet of books with titles like Japan as Number One, The Enigma of Japanese Power, and The Japan That Can Say No caused Americans to panic again. A Cold War treaty ally was suddenly viewed as something different: a rival with a novel variety of capitalism, one relying on greater state intervention than ours, that was threatening American hegemony. Members of Congress continued to react in a calm and professional manner—for example, by smashing a Toshiba boombox on the grounds of the U.S. Capitol.
As it turned out, American fears of both countries were wildly overhyped. Decades of Soviet demographic decline and economic stagnation proved that the Stalinist system was not, in fact, terribly viable. Likewise for Japan: Decades of demographic decline and economic stagnation proved—you get the idea.
The current freakout is about China, and the parallels to past freakouts are striking. After two generations of rapid growth, the Middle Kingdom now has the second-largest economy in the world. Its 1.4 billion people already make it the largest import market for everything from crude oil to hair dryers to automobiles. It has been the most important engine of global economic growth since the 2008 financial crisis, and the debate among most private-sector analysts is whether its economy will overtake the United States in this decade or the next one.
The corresponding reaction from American officials has been predictable. For decades, successive U.S. administrations paved the way for China to enter the liberal economic order. The Trump administration has thrown away that welcome mat and blasted the notion that engagement was ever a good idea.
Whenever a Trump official gives a talk at the Hudson Institute, a China hawk gets its wings. In 2018 it was Vice President Mike Pence saying mournfully, “America had hoped that economic liberalization would bring China into greater partnership with us and with the world. Instead, China has chosen economic aggression, which has in turn emboldened its growing military.” In 2019 it was Secretary of State Mike Pompeo’s turn. “Frankly,” he said, “we did an awful lot that accommodated China’s rise in the hope that communist China would become more free,
