Is China really a beggar-thy-neighbor power?
When major economies are running at near full capacity, it is not clear that trade deficits should be a cause for concern, since they represent a transfer of purchasing power from surplus countries. Under the current circumstances, then, China’s widely criticized surpluses might as well be called enrich-thy-neighbor.
China's trade surpluses have drawn criticism as countries view the country's economic growth as coming at their expense. Critics argue that China's industrial policies and growth model are examples of "beggar-thy-neighbor" policies. The term "beggar-thy-neighbor" has a history dating back to the 1860s in Britain, with its first appearance in Adam Smith's "The Wealth of Nations".
Joan Robinson further popularized the term in the 1930s, describing how policies like import tariffs and currency devaluations could lead to global unemployment. However, the current global economic situation is different. Major economies are operating near full capacity, and unemployment rates are low in the United States and Germany.
Thus, it is unclear if trade deficits, represented by China's surpluses, should be a cause for concern. Rather, they can be seen as a transfer of purchasing power from surplus countries to deficit countries, which could boost consumption or investment. The potential problems with China's surpluses include macroeconomic imbalances, industrial decline in deficit countries, and social issues.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
