China Learned to Embrace What the US Forgot: The Virtues of Creative Destruction
In Beijing, competition is in. In Washington, not so much.
China faces rising US tariffs from President Donald Trump. Its property market is slow-motion imploding. Its economy is deflating. So will Premier Li Qiang announce the shock and awe stimulus that markets have been pining for at this month’s National People’s Congress? Don’t count on it. After decades following British economist John Maynard Keynes and his doctrine of demand management, China’s leadership is taking a lesson from US economist Joseph Schumpeter and his creed of creative destruction.
The latest headache for policymakers: a 10 percentage point tariff hike on all exports to the US, on top of the 25% duties Trump decreed during his first term. Forecasting the effects with any precision is tough to do, but estimates from the academic literature suggest the new curbs could trigger a 20% drop in China’s US sales.