Breakingviews – Measuring the US and China’s conscious decoupling
Breakingviews - Measuring the US and China's conscious decoupling Reuters
Start with U.S.-China trade, the bedrock of the bilateral relationship. The flow of goods between the two accelerated sharply after the People’s Republic joined the World Trade Organization in 2001, to the benefit of American consumers and Chinese workers. The headline numbers are still robust: U.S. imports of goods from China rose to $536 billion in 2022. However, the figure masks several trends.
First, growth in American imports from China is faster in goods which are not subject to U.S. tariffs. This shows how the trade war launched by former U.S. President Donald Trump in 2018 is biting.
In finance, the separation is more pronounced. Western investors have slashed their exposure to the planet’s second-largest economy.
The average allocation of global equity funds to Chinese assets peaked at 3.13% in April 2015. As of September 2023, it was 1.75%, data from fund flow tracker EPFR shows. That partly reflects a broader retreat from emerging markets after the U.S. Federal Reserve raised interest rates. But it seems unlikely that allocations will fully recover even if investors rediscover their appetite for risk.
Chilling financial ties might be expected to eventually squeeze companies’ overseas operations but for now the data offers a mixed picture.
Chinese companies never had a huge presence in the United States but their assets are plateauing and revenue is shrinking, Rhodium Group data shows. This trend could accelerate as U.S. authorities grow more suspicious of Chinese firms. For example, U.S. Republican presidential candidates are vowing to ban social media app TikTok, which is owned by China’s ByteDance, citing spyware and antisemitic content.
The flow of people between two countries is often overlooked but can be a useful indicator of the state of a bilateral relationship. Here, the data suggests the world’s understanding of China is likely to plunge dramatically in coming years.
The number of U.S. students studying in China for academic credit fell to just 211 in 2021/22, the lowest level in over two decades, according to data released this week by Open Doors. Though Covid-era restrictions explain much of the steep decline, the numbers seem unlikely to recover to pre-pandemic levels.
Strains over Taiwan set the tone for the entire relationship between the U.S. and China. Here there is rising risk of a potentially sudden and harsh decoupling.
The United States’ “One-China” policy acknowledges Chinese claims of sovereignty over Taiwan, a democratically governed island. Yet Washington may impose large-scale sanctions if China invades Taiwan or prompts a major military crisis.
NOT THE POINT
Politicians from the world’s two superpowers will doubtless continue to debate whether they are decoupling or de-risking. The discussion overlooks the more important point: Sino-American ties have deteriorated on many fronts. Links built up over many decades will be difficult to untangle. But the conscious decoupling between the U.S. and China looks set to continue.
SDGs, Targets, and Indicators
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 17: Partnerships for the Goals
- Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries
- Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
- Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources
- Gross domestic product (GDP) growth rate
- Investment in infrastructure
- International cooperation and partnerships
The issues discussed in the article are connected to SDGs 8, 9, and 17. SDG 8 focuses on promoting sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. SDG 9 aims to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation. SDG 17 emphasizes the importance of partnerships for achieving the goals of sustainable development.
Based on the content of the article, specific targets that can be identified include Target 8.1, which aims to sustain per capita economic growth, and Target 9.1, which focuses on developing quality and sustainable infrastructure. Additionally, Target 17.16 highlights the need to enhance global partnerships for sustainable development.
The indicators mentioned or implied in the article that can be used to measure progress towards these targets include the GDP growth rate, investment in infrastructure, and international cooperation and partnerships.
|SDG 8: Decent Work and Economic Growth||Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries||Gross domestic product (GDP) growth rate|
|SDG 9: Industry, Innovation, and Infrastructure||Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all||Investment in infrastructure|
|SDG 17: Partnerships for the Goals||Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources||International cooperation and partnerships|
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