11:00 am EDT - 2:00 pm EDT

Past Event

America’s economic strategy on China

A Brookings-CSIS US-China economic workshop

Tuesday, October 10, 2023

11:00 am - 2:00 pm EDT

As part of the ongoing project, “Advancing Collaboration in an Era of Strategic Competition,” the Brookings Institution and the Center for Strategic and International Studies convened a group of roughly 30 leading experts on U.S.-China economic relations on October 10, 2023. The group addressed two related questions: First, what should be the guiding objectives and strategy governing America’s economic interactions with China; and second, what strategies would most effectively advance these objectives? The assembled group of bipartisan experts represented leading U.S. companies, business organizations, consulting firms, universities, media outlets, and think tanks. The discussion was held under Chatham House rules to maximize candor.

Participants framed America’s economic strategy on China around three areas of focus: domestic, bilateral, and international. Several participants observed that there was little scope at present for progress through bilateral negotiations for resolving longstanding U.S. complaints about China’s investment environment and non-market trade practices, such as government subsidies or implicit and explicit barriers to market access, given the deep entrenchment of Beijing’s state-drive economic model. Several participants disagreed with this view, cautioning that it could be short-sighted to abandon efforts to resolve bilateral economic issues, and that China’s economic slowdown might make Beijing more likely to make adjustments that restore China’s attractiveness to foreign companies and investors.

Participants described several factors that have contributed to diminishing U.S. enthusiasm for attempting to address economic concerns with China through bilateral channels. These include: China’s shift toward a more Communist Party- and state-driven economy; China’s growing emphasis on self-reliance; diminished American confidence that China will implement any agreements reached through bilateral negotiations; loss of confidence in the World Trade Organization as an arbiter of bilateral disputes; and greater focus in both countries on national security and economic security.

Private sector voices noted that the American business community’s level of concern about the U.S.-China economic relationship has shifted. Previously, there was concern that domestic political and security imperatives would push U.S. policy and regulatory measures further in the direction of restricting American companies’ opportunities to compete in the Chinese market. Over the past year, the pendulum has swung in the opposite direction, as risk factors arising from the course of Chinese economic policy and Chinese economic performance have come to exceed the risk of U.S. policy overshoot.

While there was broad consensus that policy measures from Beijing are the larger contributor to business uncertainty in the U.S.-China economic relationship, there was less consensus around the benefits and stability of America’s “small yard, high fence” approach to managing technological competition with China. Multiple participants expressed concern that the Biden administration’s current approach would generate unintended outcomes, namely by accelerating efforts by China and others to design-out U.S. technology. Participants also noted the risk that Chinese customers would find workarounds for acquiring restricted technology, or that foreign competitors would backfill reductions in U.S. technology exports to China.

Participants predicted U.S. policymakers are likely to face future pressure to expand the “yard” of protected technologies, both as China improves its own technology stack and as Beijing’s behavior and political pressures within the United States strengthen the perceived need to slow China’s advancements in technologies that strengthen China’s military capacity. Several participants voiced skepticism that U.S. efforts to trap ideas would serve as a long-term impediment to Chinese innovation. One longtime observer of the U.S.-China relationship warned that the United States has a history of underestimating China’s rate of technological development, particularly in the defense sector.

Some participants noted that productivity growth has the most direct impact on America’s economic growth, which is spurred by openness and slowed by efforts to restrict flows of people, ideas, and capital. They argued for the United States to increase its focus on an affirmative agenda for competing with China, including via increased efforts to attract high-skilled immigration and to advance a free trade agenda that lowers barriers to trade, data, and financial flows. Several observers warned that the United States’ withdrawal from multilateral trade talks risked ceding leadership on free trade issues to Beijing.

Others, however, countered that previous economic orthodoxy of seeking to maximize growth through international economic integration has insufficiently served U.S. national interests, and that a more holistic economic approach is needed. Unless the interests of workers and the environment are factored in, these participants argued, economic policies will fail to attract durable political support and instead will seed a shift toward greater isolationism, populism, and nationalism. They urged Washington to focus on investing at home to compete more effectively with China.

The discussion explored the risk of “silos” emerging between the U.S. national security community and commercially focused actors. These two communities have different views on how much economic efficiency should be sacrificed to protect national security, and even have disagreements on how to precisely define national security. A national security community focused on the possibility of a U.S.-China conflict in the coming years may be wary of arguments that appear to prioritize efficiency over actions designed to protect America’s military edge. Similarly, members of the private sector and other economy-focused stakeholders focusing on profit maximization and commercial competitiveness may not be able to gauge the full range of national security concerns members of the defense and intelligence communities diagnose in relation to ties with China. Bringing these conversations into greater convergence will help ensure the development of a more holistic overall strategy toward China that respects U.S. imperatives for both national security and economic competitiveness.

In the end, the discussion revealed a range of perspectives on what should constitute America’s top objectives in its economic relationship with China. Perhaps the most striking conclusion of the discussion was the lack of consensus around any specific objectives or strategies for advancing them. There was broad agreement around the need for the United States to complement its defensive measures against unfair Chinese competition with offensive measures to spur greater growth and resilience and guard against dependence on China for specific inputs, such as rare earth elements, clean energy technologies, and pharmaceutical products. There was no support for returning to the pre-Trump status quo of seeking to adjudicate specific economic irritants through regularized U.S.-China dialogues. At the same time, there were few — if any — voices arguing that the Biden administration’s current economic policy approach toward China is calibrated to maximize outcomes that favor America’s long-term national interests.

What seems clear is that the U.S.-China economic relationship — like the broader bilateral relationship — is in a period of transition. There is still substantial interdependence between the U.S. and Chinese economies, but no consensus on whether such interdependence is stabilizing or destabilizing. There is growing concern about China’s economic trajectory. There is broad consensus on the need for the United States to better protect its economic and national security, but still an active debate about how best to do so.

Looking forward, it will be important for members of the private sector and the policy community to continue interrogating policy options for dealing with the U.S.-China economic relationship. A rigorous and cross-disciplinary examination of costs and benefits of various economic policy options will advance efforts to realize a U.S.-China economic relationship that supports American security and prosperity.