Key Points
The US remains well ahead of the People’s Republic of China across a range of important economic indicators, from domestic wealth to share of global foreign direct investment. Because China is rapidly aging, most of the gaps are unlikely to close, contrary to conventional wisdom. Policymakers should not worry that China can be the global economic leader.
Instead, the focus should be on harmful Chinese behavior. While intellectual property coercion deserves attention, subsidies are the worst economic action. In particular, state-owned enterprises are often granted monopoly power and always protected from competition, denying everyone else opportunities in China and around the world.
The first step the US should take is boring: documenting the problems. But this will justify the harsh retaliation necessary for any change in Beijing. Retaliation should include closing a few industries to China the way subsidies close many Chinese industries and treating large-scale beneficiaries of intellectual property coercion as criminal entities.
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