Trade and Government

USA and China

By June 20, 2016 No Comments

China’s commitment to the economic success of the USA is parallel to the USA’s commitment to the economic success of China. The economic relationship likely eclipses military engagement for the next generations.

Lots of details gain disproportionate attention from news’ sources, and the overall outlook, the big picture suffers. Yet the big picture induces cooperation and provides a touchstone when distractions confuse. For example, comparing militaries is an especially difficult task for journalists and commentators. The small details seem vivid – China builds an artificial island in the South China Sea, China illegally announces controls over waters always considered international waters, and more. Though true, when placed in a broader perspective, these actions are small gestures. The big picture compares simultaneously the military, the demographic and the infrastructural changes: labor supply in China is shrinking, last year by almost five million people. The labor supply is shrinking due to an ordinary factor – the working population is aging. According to The Atlantic’s Howard W. French (June 2016), maintaining the world’s largest standing army and providing pension benefits are prohibitively expensive to China’s state economy. One small monetary palliative was to discharge 300,000 army personnel last year to the working economy.

Though some market gurus predicted that China’s go-go GDP might double or triple the perennially great USA’s, that scenario, according to French, is unlikely due simply to retirement of the workforce and its attendant costs. Over the next forty years, China’s workforce will shrink, and the USA’s will increase. Today China counts approximately five workers for every one retiree; by 2040 that ratio is predicted to be about 1.6 to 1. In the USA, the ratio is expected to stay in a range of 2.1 to 2.9 per one retiree due in significant part to immigration. China currently discourages immigration, and even if it theoretically wanted more immigration, there is little world-wide motivation to move to China. Most emigrants still aspire to move to the USA.

These metrics that describe the broad USA/China relationships are compelling much more than the South China Sea land grab. These USA/China factors are foundational principles that govern human behavior, that motivate human desires, and that inspire the government leadership. For example, Gen. Colin Powell in a lecture given June 18, 2016, said, drawing from China’s ownership of approximately 8% of the US Treasury’s debt and from the biggest trade arrangement on the globe, in summary, that China will not mess up its business relationship wherein it earns treasure from US taxpayers’ interest payments and additionally enjoys profits from US consumers. The USA’s cash to China is fair and necessary for all the marketplace and pension costs of the upcoming future.

The USA and China are allied more and more with each passing year and decade. And that’s great for us and the world.

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