Both President Obama and Mitt Romney portray China as a rival flaunting trade deals in order to steal American jobs, but what voters aren’t hearing is that the recent slowdown by the Asian juggernaut may also hurt the U.S. economy.
A new report Thursday by the bank HSBC showed that Chinese manufacturing has declined for the past 11 months as demand in Europe has waned. Many economists doubt that China will return to developing at a steady 10 percent annual clip—and that potentially has negative repercussions for American workers whose livelihoods increasingly depend on that nation’s newfound wealth.
U.S. exports to China have increased by 541 percent over the past decade. More than 800,000 American jobs last year relied on the $103.9 billion in goods and services shipped to China last year, according to government data.
“We simply have to—as a country, America simply has to grow exports by about, I think, 14.5 percent every single year,” U.S. Ambassador to China Gary Locke said in a Washington speech last week. “The thing about China is that there’s a love affair with American goods, products and services.”
With that in mind, here are other ways that Americans have profited from China’s meteoric rise:
- China holds $1.15 trillion of the roughly $16 trillion total in federal debt, enabling deficit-popping tax cuts and government expenditures on social programs and the military.
- Nearly 160,000 Chinese students attended American universities last year, a 398 percent increase over the past 15 years, according to the Institute of International Education.
- Chinese firms invested more than $4.5 billion directly into the United States in each of the previous two years, through either mergers or opening new factories, according to the Rhodium Group.
- More than 1 million Chinese tourists came to the United States last year—each spending an average of about $6,500. The Commerce Department estimates 3.25 million Chinese will visit in 2016.
The surge in trade—among other parts of the Chinese economy— helped fuel the American recovery from the Great Recession. But it’s “unrealistic,” said Kenneth Jarrett, chairman of the American Chamber of Commerce in Shanghai, to expect that pace to continue as Chinese corporate profits decelerate and property values drop 1.19 percent over the past 12 months according to government reports this week.
“They actually want to slow down economic growth because they recognize that they can’t sustain the double-digit growth that they’ve enjoyed for so long without serious consequences,” Jarrett said.
Peter Sykes, head of Dow Chemical’s division in greater China, stressed that no one is talking about “hard landing scenarios,” even if the broader economy has “a little softness ahead.”
Until recently, what unquestionably propelled China was its role as the workshop to the world, its factories cheaply humming out everything from iPods to zippers. That model has taken a bruising with the downturn in Europe and stagnant growth in the United States, creating a vicious cycle in which a Chinese slowdown could further compound the problems in the rest of the world.
“As the big economies in Europe and the U.S. have grown or contracted — grown at a far lesser rate or, in the case of certain European countries, have contracted, that’s reflected in the numbers in China,” FedEx founder and CEO Frederick Smith said on an earnings call this week. “I’ve been somewhat amused watching some of the China observers, I think, completely underestimate the effects of the slower exports on the overall China economy.”
However, China’s industrial might remains a major concern on the campaign trail. The rhetoric from Obama and Romney emphasizes the clear cost of Chinese factories, with one study estimating the U.S. lost 1.9 million manufacturing jobs after China entered the World Trade Organization in 2001.
Romney—whose private equity firm Bain Capital invested in Chinese businesses—tells voters that China only succeeded because it artificially lowered the value of its currency against the dollar. If elected president, the former Massachusetts governor promises to instantly label China a “currency manipulator.”
“It’s time to stand up to the cheaters and make sure we protect jobs for the American people,” Romney declares in a campaign ad released last week.
Obama stopped in Ohio’s three C’s on Monday—Cincinnati, Columbus and Cleveland—to announce a complaint filed with the World Trade Organization against China for “illegal” subsidies of their auto parts industry.
“These are subsidies that directly harm working men and women on the assembly lines in Ohio and Michigan and across the Midwest,” he said in Cincinnati. “We are going to stop it. It’s not right; it’s against the rules; and we will not let it stand.”
But what voters might miss is the paradoxical reason why Obama wants to protect the auto sector from China: If car parts aren’t made in the United States, they can’t be exported to China. The president touts the government’s rescue of General Motors and Chrysler, but to some degree, Chinese consumers also enabled that turnaround.
The Buckeye State exported $2.7 billion to China last year, an 838 percent increase since 2000, according to the U.S.-China Business Council. Mark Doms, chief economist at the Commerce Department, blogged this month that auto exports to China have increased under Obama by 457 percent to $4.55 billion in just four years. Chinese demand kept American car factories open.
“These increased exports,” he wrote, “help boost U.S. jobs, especially in manufacturing, an important industry for the middle class.”