What China Threat?

Abstract

There will be no more important strategic issue for policymakers and investors to manage over the coming years than the continuing rise of China’s economic power. But this is no reason to see the Middle Kingdom as a major economic threat to the world. Fears about her threat have been exaggerated. Distorted views about her development have been blindly followed. China’s economic ascent is in fact not different from the experience of the other Asian economies. Low production costs will not enable China to take over the world economy, as some have naively asserted. In fact, cheap costs — the most feared competitive edge of China — will not get China ahead in the long run. It could even hinder her development. Further, China’s economic reform has produced lower efficiency than has been hyped so that production cost is not really that cheap as many have feared.