Today, America and China are interconnected as never before. In the recent presidential elections, both President Barack Obama and Governor Mitt Romney singled out the supposed undervaluation of the Chinese Yuan as a key campaign issue. Their argument is tantalizingly simple: the US merchandise trade deficit has averaged a record 4.4% of GDP since 2005 and that has resulted in millions of jobs being shipped out of America. With China accounting for 35% of that shortfall, there can be little doubt as to the source of the problem and the key role a so-called manipulated currency plays in shaping the outcome. This reasoning resonates with the US public. Opinion polls conducted in 2011 found that fully 61% of Americans believes that China represents a serious economic threat.
However appealing this logic may appear to be, it is wrong. Due to its unprecedented saving shortfall, America runs a multilateral trade deficit with 98 countries, while China has allowed the Yuan to appreciate 32% against the dollar since mid-2005. Rather than vilifying China as a principal economic threat to America, the relationship should be recast as an opportunity for America to grow alongside China. With China being America’s third largest and most rapidly growing export market, the US is well primed to take advantage of the emerging Chinese consumer. There is also enormous scope for America’s global services companies to expand in China, given that China’s service sector is relatively small and likely to be growing rapidly in the years ahead.
The psychology of fear mongering over China is a very real threat to America’s own prosperity and long-term growth. And the root of that fear lies in a lack of understanding of China and its impressive growth in the past thirty years. We need a new generation of China watchers in America who understand the significance of China’s recent leadership transition, the importance of its ongoing urbanization, and the urgency of its pivot away from an investment- and export-driven economy towards a pro consumption model. While far from perfect, there are many aspects of Chinese economic management that we in the West can learn from, especially a focus on stability and strategy. This is what I attempt to teach in my class at Yale, “The Next China.” Only by looking at China from both sides of the coin can we realize that China’s rise brings not just challenges, but also tremendous opportunities to the United States.
It is important to broaden the base of this dialog in college communities such as Yale. I am very supportive of the role that “China Hands” can play in bridging the communication gap between students in America and China. In fact, several contributors to the inaugural issue of this magazine were previously students of mine in “The Next China.” The articles selected reflected various dimensions of the US-China relationship and many issues that are associated with China’s meteoric rise. They include insightful analysis on China’s impending water crisis, the entry of foreign banks into the Chinese financial system, the rise of a China lobby in Congress, the growing China-Africa relationship, and the future of American manufacturing in the face of Chinese competition.
I enjoyed reading these articles, and I hope you too will enjoy “China Hands.”
Board of Advisors
Stephen Roach is a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale SOM. He was formerly chairman of Morgan Stanley Asia and the firm’s chief economist for the bulk of his 30-year career at Morgan Stanley. Mr. Roach’s current teaching and research program focuses on the impacts of Asia on the broader global economy. His writing and research also addresses globalization, trade policy, the post-crisis policy architecture, and the capital markets implications of global imbalances. At Yale, he teaches courses for undergraduates and graduate students on the “The Next China” and “The Lessons of Japan.” His most recent book, The Next Asia: Opportunities and Challenges for a New Globalization (Wiley 2009), analyzes Asia’s economic imbalances and the dangers of the region’s dependence on Western consumers. Prior to joining Morgan Stanley in 1982, Mr. Roach served on the research staff of the Federal Reserve Board and was also a research fellow at the Brookings Institution. He holds a PhD in economics from New York University.
Jessica Weiss is Assistant Professor of Political Science and Research Fellow at the MacMillan Center for International and Area Studies. Her research interests include Chinese politics and international relations, nationalism, and social protest. She earned her PhD in 2008 in political science from the University of California, San Diego and won the 2009 American Political Science Association Helen Dwight Reid Award for best dissertation in international relations, law and politics. Her research has been supported by the National Science Foundation, Princeton-Harvard China & The World Program, Bradley Foundation, Fulbright-Hays program, and the University of California Institute on Global Conflict and Cooperation. Before joining the Yale faculty, she founded FACES, the Forum for American/Chinese Exchange at Stanford, while an undergraduate at Stanford. She teaches courses on Chinese foreign relations, state-society relations in post-Mao China, and anti-Americanism in world politics.
Deborah Davis is Professor of Sociology at Yale University. Her primary teaching interests are inequality and stratification, contemporary Chinese society, and methods of fieldwork. Davis is currently a member of the National Committee on US-China Relations, Associate Editor of The Journal of Asian Studies, and on the editorial board of The China Quarterly. At Yale she has served as Director of Academic Programs at the Yale Center for the Study of Globalization, Chair of the Department of Sociology, Chair of the Council of East Asian Studies, and Director of Graduate Studies in both East Asian Studies and Sociology. Author or editor of 10 books, her past publications have analyzed the politics of the Cultural Revolution, Chinese family life, social welfare policy, consumer culture, property rights, social stratification and occupational mobility. A graduate of Wellesley College, Davis received a Masters degree in East Asian Studies from Harvard, a PhD in Sociology from Boston University and post-doctoral research grants from ACLS, SSRC, the National Academy of Sciences, NIA, and the Luce, Rockefeller, and Templeton Foundations. In 2013 she was awarded the Yale College Lex Hixon ’63 Teaching Prize for Excellence in the Social Sciences.