November 22, 2018

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Fact-Checking Trump’s Claims About the Chinese Economy

Fact-Checking Trump’s Claims About the Chinese Economy
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What Trump said

If you know, China has come down tremendously. Tremendously. China would have superseded us in two years as an economic power; now, they’re not even close.

It’s true that China’s growth is slowing. The economy expanded 6.5 percent in the three months that ended in September, the slowest pace in almost a decade. (Those are the official numbers, at least. Many economists believe Beijing’s statistics are implausibly smooth and do not square with outside estimates.)

But even if China’s growth rate hadn’t slowed, the country was hardly about to eclipse the United States in two years. Last year, Chinese economic output totaled $12.2 trillion, according to the World Bank. The American economy’s output totaled $19.4 trillion. Assuming the two economies kept growing at last year’s rates, it would still take around a decade for China to surpass the United States.

What Trump said

China got rid of their “China ’25” because I found it very insulting. I said that to them. I said, “China ’25” is very insulting, because “China ’25” means, in 2025, they’re going to take over, economically, the world. I said, “That’s not happening.”

President Trump is presumably referring to Made in China 2025, a 2015 government plan for modernizing Chinese manufacturers through state support and intervention. The Trump administration has repeatedly held up the plan as evidence that China unfairly privileges its own companies over foreign competitors in the Chinese market. The administration says its tariffs against China are intended in part to compel Beijing to change these practices.

Perhaps in response to all the attention the plan has received, Chinese officials have lately stopped mentioning Made in China 2025 by name. News outlets have been ordered to keep it out of their stories.

But there is no indication that Chinese companies have halted or reversed their plans to upgrade their capabilities, or that officials are any less interested in catching up in areas like microchips.

“Chinese companies are trying to reach the technological frontier, and they’re continuing to pursue these plans even if the government has stopped being vocal about Made in China 2025,” said Dan Wang, a tech analyst for the research firm Gavekal Dragonomics. “Firms and the government have already invested billions into plants producing semiconductors, robotics, aviation equipment and other high-technology goods.”

Also, even if the plan’s goals are eventually met, it is debatable whether that would mean China will have taken over, economically, the world. The plan includes semiofficial targets for how much Chinese manufacturers sell by 2025 … in China.

What Trump said

But I have to say this: Billions of dollars will soon be pouring into our Treasury from taxes that China is paying for us.

When the United States places tariffs on Chinese imports, China doesn’t pay them. American importers do. And they might pass along the extra costs to American consumers. (Tariffs can still hurt Chinese companies, of course, if the higher cost means Americans stop buying their products.)

Mr. Trump may be correct that Washington will soon be raking in more money thanks to the tariffs. China’s exports to the United States have risen recently despite the new levies. But that may just be because American buyers and Chinese sellers want to move as much product as they can before the spiraling trade war leads to even higher tariffs.



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