China Is Not the Competitive Threat That Biden Says It Is

Economic competition is one of the oldest and most bipartisan cliches in American politics.

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In his address to Congress last month, President Biden used some variant of “compete” a dozen times.

“We’re in competition with China and other countries to win the 21st century,” Biden said. “We’re at a great inflection point in history.”

Chinese President Xi Jinping, Biden said, is “deadly earnest about becoming the most significant, consequential nation in the world. He and others, autocrats, think that democracy can’t compete in the 21st century with autocracies because it takes too long to get consensus.”

In response, Biden insisted, we need to spend trillions on education and social welfare spending. Biden quoted his wife, first lady Jill Biden: “Joe, any country that outeducates us is going to outcompete us.” She was echoing a point Barack Obama often made: “We know the countries that outteach us today will outcompete us tomorrow.”

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  1. James D

    Looking at this as a question of "competitiveness" in the free market economic sense is fundamentally incorrect. The CCP isn't trying to have the most "competitive" companies. It is willing to absorb HUGE losses on behalf of its public and private champions if that means those companies will go on to dominate key strategic industries. It will be small comfort to Americans thirty years from now that China's economy is not particularly "competitive" if they have hollowed out industries which previously compromised the bleeding edge of US economic and technological development through massive state subsidies & unfair dumping.

    The CCP has thrown the entire weight of the Chinese state behind surpassing the US in a number of key sectors and has made progress at a meteoric rate this past decade or so.
    There is no natural law which states the US must be the world's #1 economic power in perpetuity. The CCP's specific, stated aim is to pilfer, overtake, and displace every high-tech industry dominated by the United States in order to retake its previously dominant position at the center of the world economy, and they have bent the full resources of the Chinese state towards this goal.

    Jonah, I would encourage you to subscribe to your excellent fellow Substack newsletter Sinocism (I know Rep. Gallagher is an avid reader!) in order to cultivate your understanding of the full scope and nature of the CCP's ambitions, and the threat posed by same.

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    1. James D

      In other words - the CCP is spending massively on strategic industrial and technological programs, as well as investing in domestic STEM, and has already reaped significant rewards (note how they are the world's leading provider of 5G technology, with the US not even in the race).

      I understand this may not be palatable to classic free market conservatives, but no government intervention in the economy is not going to be an option when it comes to facing down China. This is a peer rival unparalleled in U.S. history and, unlike Japan in the 80s, is ideologically deeply hostile to the U.S., having openly declared economic and political warfare with the U.S. internally (though they will not admit it if asked).

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  2. David A L

    Economic competitiveness is more a code word for another means of warfare than it is about per-capita income. To you and me personal income is what matters. But if the size of a nation's armies is a reflection of the size of its GDP, it matters very much how large China's GDP is. Their aggressiveness in the South China Sea is a reflection of their economic strength. No money, no army. Our ability to pay for our armed forces is what makes us strong and allows us to project strength around the globe. We are one Great Depression away from being just another country that the rest of the world can ignore.

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    Dustin Anglin

    I'm not sure comparing per capita GDP with a country that has 1 billion more people than we do is the best measure of success against a centrally controlled economy like China's. In fact, being 70th in per capita GDP (IMF's 2021 estimate) with 1/7th the world's population is concerningly impressive.

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    Old guy named Bill (OGNB)

    Why was Trump trying to buy Greenland when the real power move would have been to buy Luxembourg?

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    Pat Riot

    Can I state the obvious?

    China is on track to surpass our GDP in the next 10 years, and their dictatorship would portend a more "profitable" (from the government's standpoint) model should they want it in order to build up arms. Wars are not won with per-capita income lest, yes, Luxembourg would be the most powerful country in the world.

    And China is a slave state that cares nothing whatsoever of our notion of Rights, in particular property rights and even more particularly, intellectual property rights. Hence it's quite correct to be wary of their military intentions.

    Our "competition" with China is to see which form of government--freedom or slavery--will win out. Usually when countries "compete" like this it isn't called "competition", it's called "war".

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      George.Skinner

      The system is the interesting question, isn't it? There's no question that when Chinese people move to a free democratic society that they prosper - it's been the case in North America since the 19th century despite considerable discrimination, and also apparent in places like Taiwan, Hong Kong, and Singapore. Meanwhile, China itself has an abysmal record of innovation and human achievement except in the relatively brief periods when it's chosen to liberalize. Inevitably, there's been an inclination to reimpose centralized authoritarian control that's throttled the nation and set it back. This isn't a new trend - it's thousands of years old, and looks set to repeat as Xi has started cracking down on free expression and private industry.

      A second thing to consider is the demographic bomb China has created for itself. The "one child" policy has cratered the birth rate, resulting in a nation that may grow old before it grows rich. Even with a relaxation of that policy, birth rates haven't risen for the same reasons that have depressed them in the rest of the developed world. That's also a direct impact on Chinese military power. They can't rely on vast armies of conscripts as they used to, and any significant conflict is going to cost a great many families their only children and primary source of support as they age.

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        Pat Riot

        The Founding Fathers understood that freedom involves a complicated set of interlocking principles, not just, say, democratic elections. Putin and Kim Jong-un are both "democratically elected" for instance. Hence any movement toward liberalization is a direct threat to the dictator.

        I certainly get that China has its own problems and I'm optimistic in the long run if we keep *our* house in order. To me, China is not a hawk but rather a vulture. (For instance I disagreed with Mr. French's thesis that the US could break apart because of our political divisions: we won't live long enough to do so).

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          George.Skinner

          Exactly - independent and robust courts, rule of law, property rights, free markets, and free expression are key ingredients to western societies. Those were the key to why Britain flourished and became a world power, surpassed as the United States advanced the same principles. The flaw of the Chinese authoritarian approach is being unable to allow those things in their own society, and failing to understand the extent to which their current prosperity relies on an import of those things from the rest of the world. Trade with the Soviet Union and 3rd world regimes didn't make China richer - that happened when they were able to engage with the West.

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    CynthiaW

    "Which just shows that competitiveness really isn’t the issue."

    No kidding.

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    Jesse Blankenship

    All of which leaves us no choice but to try out Culver's for lunch and enjoy our day.

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      Paul Reichardt

      My wife loves the cheesecurds. Everytime we visit her family in WI--we land in Milwaukee then beeline for the nearest Culver's.

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    2. Ingenero.lux

      I miss Butterburgers and the flavor of the day. Ah, the halcyon days of my youth, enjoying frozen custard while the temperature was well below zero…

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      Jason Gibson

      I will do so. Breaded port tenderloin here I come

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    Nick H

    Nice touch citing 1994 Paul Krugman, back when he wasn't a completely political hack with positions that depend entirely on how they can benefit the progressive movement.

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      Pat Riot

      Krugman is clearly a partisan, politically, but his economic doctrine has taken in by both parties.

      It's clear now, for that matter, that Republicans agreed with Krugman intellectually back in 2010 but they didn't want the economy to improve under Obama. When the time came and there was a Republican in the White House, they were full-on Krugmanites.


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    2. Bob Bell

      Krugman is still an outstanding economist. The problem is that he's such a hack pundit that the economics is overshadowed. There's probably a lesson about sticking to what you're good at in there someplace.

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        Logical

        He likely makes more money as a hack than as an economist. Good old American way.

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        1. Bob Bell

          I'm sure being a partisan hack pays much better. Maybe that's why I never see any openings in the want ads.

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    Logical

    National investments in defense, infrastructure, international trade, r&d, etc., are not based on per capita income. It is based on the total tax base which is proportional to GDP. Adjusted for purchase power parity, China is already ahead of US in many sectors, and may surpass in all measures in a decade.

    Mr. Goldberg's argument falls flat.

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      George.Skinner

      In which sectors do you think China is ahead of the US?

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      1. James D

        China is ahead of the US on 5G technology thanks precisely to the CCP's stage-managed campaign of massively subsidizing key strategic industries/technologies and acquiring/thieving from foreign competitors to prevent the rise of rival companies.

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        Logical

        Let's take the biggie itself, the defense budget for 2021. US budget $700+B$ goes mostly into legacy costs (maintaining old systems, pensions, etc) + cost of war fighters

        China's budget of ~$200B on a purchase power parity basis covers a lot more ground than our $700B. They get a lot more than 3x ours for their money.

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      Pat Riot

      I made the same point. I found the focus on per-capita income rather bizarre.

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  10. R. James

    Well, this headline is going to age poorly. The geopolitical and economic realms cannot be so easily seperated. What does it matter that we should sell China our soybeans when the CCP has ideological goals of global hegemony, annexing Taiwan, and controlling the South China Sea by 2049? These are ideological goals wrapped up in countering the century of humiliation which will dominate any concerns about economics. Throttling of trade through the SCS alone will put 60% of global trade at risk. Not to mention that the major technology drivers of the future economy such as AI, 5G and Quantum Computing all have national security implications and will be decoupled. This is all to say that the geopolitical competition will overcome economic concerns and drive the US-China relationship for at least the next two decades. The Era of fueling China's economic development in the hope that they turn democratic ended over a decade ago and it's long past time politicians and political commentators realize it.

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      CynthiaW

      "Not the competitive threat that Biden says it is" is not the same as "Not a competitive threat."

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      1. R. James

        I've read the piece and I've listened to Jonah trying to explain his point on the Remnant but I still don't see a problem with these statements, “We’re in competition with China and other countries to win the 21st century,” “We’re at a great inflection point in history.” Because they are geo-politically and geo-strategically true. In a purely economic sense do all countries benefit from free trade? yes. Will that matter when the CCP is using its wealth to invade neighboring countries and redefine the international order in their own terms? No. So I ask again, when faced with an expansionist authoritarian regime that has a million of its own people in concentration camps and medium term plans to redefine the post WWII international order, why does it matter how many soybean we sell them?

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          CynthiaW

          What I mean is that the threat the U.S. and the world face from China cannot be "the competitive threat that Biden says it is," because Biden thinks free daycare and reducing our supply of energy are meaningful responses to the "competitive threat" he perceives.

          My point is about the framing, not the actual facts.

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          1. R. James

            I agree with your framing point. If Biden was going to spend 2 trillion on anything this year, it would have been better spent on defense and foreign investment in the ASEAN countries. Instead of using it to overheat an already growing domestic economy. But I still don't think your framing point is the point of the article.

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    2. Ingenero.lux

      “Annexing Taiwan”.

      Good luck with that. Same goes for the South China Sea - they aren’t the only people with a say in that, and none of their aims will happen without a (literal) fight - and I wouldn’t assume China will triumph even if the US isn’t involved. All of which is to say that I have my doubts about the prophets declaring China’s rise and true competitiveness with the US. Their system is riddled with massive flaws that will only get worse, but are currently papered over by the leadership and generally minimized, because China is obviously a swimming success and destined to power. But there are deep systemic problems they simply can’t evade forever. A reckoning will not be delayed indefinitely - even less delayed if they make the stupid decision to actually go to war with their neighbors.

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      1. James D

        The PLAN floated more new tonnage this year than the displacement of the entire U.S. 7th Fleet. The PLAN is larger than the USN, regionally concentrated, and outbuilding us at an increasingly rapid rate.

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      2. R. James

        I don't want to presume your experience but the assumption that China would not be able to invade Taiwan or conduct a successful A2/AD campaign in the SCS is flawed. Likely, if the Chinese tried to take Taiwan they would be able to and then the US would face the stark choice of whether to dedicate blood and treasure to retake it. Any conflict in the INDOPACOM AOR will require a heavy lift from our maritime services, which thanks to decades of playing a support role to a land war in Asia; a decade of sequestration or decreases in Inflation Adjusted Defense budgets; and a broken acquisition process are frankly not ready for the coming fight. China has the largest Navy in the world as of last year. And its still growing. They certainly have a regional numbers advantage. And the quantity to quality gap is shrinking as China defense investments grow and our fleet ages. I recommend this blog, if you want a cold dose of reality of how badly our fleet is sucking wind right now. http://cdrsalamander.blogspot.com/

        As for our allies, ASEAN is split 50/50 in a future US-China conflict with even countries that will directly suffer from China's SCS policy, like the Philippines, being reluctant to criticize the CCP's policies. Our European allies are just as economically compromised and very reluctant to do more than whimper about China's human rights abuses and say nothing about their expansionist policies. Even the UK, while a staunch ally, lacks the maritime power it once had. Last year during the summer tanker crisis, the UK was unable to stop Iran from harassing its merchantmen in a much closer theater. The UK only fields 30 truly ocean going warships, is currently downsizing its army to lowest its been since the Revolutionary War, and has even recently discussed eliminating the Royal Marines. Make no mistake, China has vital ideological interest in annexing Taiwan and has set a timetable for itself to achieve it before 2049. The US needs a new Two Ocean Navy Act. And it needed it passed like a decade ago. Pax per virtutem

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        1. Ingenero.lux

          There’s success and “success”. Could they do it? Very possibly. I’m not commenting from a feasibility standpoint, I’m saying that if they did manage it, the victory would almost certainly be pyrrhic. I doubt their government would survive the attempt, it would rip the living guts out of them, and regardless of what the CCP says, I severely doubt their people would buy that turning the South China Sea red with the blood of their young men was worth it. Even dictatorships have limits, and China’s less stable than they would like the world to believe. I won’t argue at all about our Navy or the need for another strategy - I simply believe any victory would end up resulting in regime change.

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          1. R. James

            The Taiwan military is not as strong as you think nor is the PLA as weak as you presume. If the US does not come to Taiwan's aid neither will the rest of the nations without US leadership. Even if the US mounts a defense it's unclear how long the US will stay in the fight, especially over a territory most Americans know nothing about.

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        Will Bates

        You might be right. But for a few things:
        1. We cannot assume China makes rational decisions - at least not the way we define 'rational' in western culture. For example, people that play the game of 'risk' know that sometimes you roll the dice on a 5-on-5. That's not rational, but you do it anyway.

        2. China fully-well-knows the U.S. has spent umpteen trillions on unpopular foreign wars. If China goes in for Taiwan, I'd bet my house the U.S. would just huff and puff and do absolutely nothing about it, beyond maybe sanctions or UN resolutions. I just do not find it plausible the U.S. would start a military war - the likes the world hasn't seen yet - for the sake of Taiwan. We didn't do it for Ukraine.

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        1. Mary Stine

          Also this: China has repeated the lie for decades that Tibet and Taiwan were always originally part of China. The world stood silent while PRC ruthlessly ran over Tibet, killing Tibetan Buddhist monks, women and children in their path. They have a hissy fit every time the Dalai Lama visits the White House. So of course they feel safe in saber rattling at Taiwan. However, if our Secretary of State or President were to suggest that invading Taiwan would be as despicable as a father seizing his successful son's business out of envy...that might cause severe loss of face?

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          1. R. James

            Not if China calls the US's bluff and the US caves. The Longer Telegram and other defense think tank analysis strongly suggests that China will invade Taiwan, if it thinks it can get away with it. There is also a disparity in end goals. For China annexing Taiwan is a vital interest. The US doesn't even have a mutual defense treaty with Taiwan anymore.

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        Nick H

        I wouldn't be so sure that China will be unsuccessful if it chooses to forcibly take over in Taiwan and the U.S. doesn't intervene. Who else in the region can? Japan perhaps, but its forces are limited. Same for South Korea. The Philippines? Vietnam? Neither one has the strength to stand up to China (although Vietnam might be able to teach Taiwan quite a bit about guerilla resistance tactics). Bottom line, China could spend a million lives taking over Taiwan and barely make a dent in their population. If they want to succeed at any price, they will, and no country in the region can stop them. You're correct that long term it may cost them much more than they benefit, but that will be cold comfort to Taiwan. What it comes down to is whether or not there is a cost that is too much for China to pay. That's an open question. If there is, then the best way to keep the cost that high is with the U.S. committed to helping Taiwan.

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        1. David R

          The thing is the Taiwanese would almost certainly rather burn TSMC's factories (and everyone else's, but TSMC's the biggest deal considering how large a percentage of high-end chip manufacturing they've got and how much of Taiwan's economy that one company is) down than let the Chinese have them, and I'm sure the Chinese know this.

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          1. R. James

            I'm sure the CCP doesn't care if the Taiwanese set the entire island on fire, as long as it results in the annexation of Taiwan. Ideological vital interest do not and often don't make sense to outsiders. But they are no less deeply held.

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            George.Skinner

            The US and the West could also sabotage a Chinese conquest by offering residency to everybody fleeing an occupation of Taiwan. The west would gain by importing the people who built the high tech industries in Taiwan while simultaneously denying that benefit to to the Chinese Communist Party.

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          3. Ingenero.lux

            I have the same suspicion.

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        2. Ingenero.lux

          A million lives would completely change their country - and I doubt the cost would be that low. Taiwan has been preparing for invasion for 70 years, much of that under a paranoid dictator with unchecked power. Even if the toll were that low, that would equal half their current active duty personnel, not counting the untold costs in equipment and the inevitable attacks on mainland China itself. It would inevitably include reservists and others called up in an emergency, and a similar number wounded, often gravely. As the PLA also acts as internal security, you would have a massive change in their internal power dynamic, along with a national tragedy. There are whole regions with excellent reasons to stage uprisings, and no love for the Han-supremacists in Beijing. And then you have neighbors besides Taiwan who would either likely help (Japan, South Korea, Vietnam, anyone else they’ve bullied lately), or take advantage (India has some beefs over their current border situation, and I’m sure things will be chummy with Russia right up until it’s not worth Putin’s time to do so).

          This wouldn’t be something they’d shrug off. It’s the type of thing that causes governments to fall and maps to be rewritten, and there’s good reason to believe China would experience both to its detriment.

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          1. R. James

            Annexing Taiwan is a vital interest for China. Meaning, they will sacrifice lives to retake it. How many lives? Well...China is an authoritarian dictatorship, which has a very low opinion of human dignity and no accountability to its public. I'm guessing many lives. China deals with internal resistance by putting people in concentration camps. I have no doubt that the CCP would go scorched earth on Taiwan to stamp out resistance. It is true that Taiwan has been preparing for invasion for a long time. But you cannot assume that means their preparations have been fruitful. Taiwan's air force is made up of only 600 planes, which includes aging aircraft like the F-5. As for other countries in the region, they will not act without the US leading them.

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            George.Skinner

            China's "One Child" policy also means that their casualties will cost many families their only child. Not only is that a human tragedy, it's also an economic catastrophe in a society where one's children are the primary source of support in old age. The political consequences would be considerable even if those lives are lost winning a nationalist goal. If they failed to achieve their goal, the backlash for those wasted lives would be toxic to the regime. A million grieving mothers who blame the Chinese Communist Party?

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