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Such an economy - the progress of the Middle Kingdom

Such an economy – the progress of the Middle Kingdom

Former US President Richard Nixon wrote in 1980 that “China is about to wake up and the world may soon move.” This was confirmed by the Covid 19 pandemic at the latest. Even if the virus originated in China, the country overcame the epidemic faster than the West. The Chinese economy is booming and the political elite is aggressively pursuing its ambitious goals. Examples include the conclusion of the Regional Comprehensive Economic Partnership (RCEP) with 14 other countries, the investment agreement with the European Union and the New Silk Road. China is everywhere and is steadfastly pursuing the goal of becoming the largest and most innovative economy in the world and ending the hegemony of the United States of America.

Harald Oberhofer is Professor of Economics at the Vienna University of Economics and Business. – © Roman Reiter / WU

In the United States, President Joe Biden has adopted a quote from Paulo Coelho, “A good fight is one we fight in the name of our dreams,” and so has instituted the greatest economic and investment programs of all time. Here, too, the goal is clearly defined: the US economy must quickly regain its speed once again. Investment programs should make the USA fit for the future and decide to compete with China in favor of the United States. But for an economy with a large trade deficit in goods trade, there is a risk here. The Chinese economy can benefit from US fiscal programs by increasing exports to the US. The European Union would also like to bite into the US fiscal policy pie. To prevent this, the US administration will continue Donald Trump’s “America First” strategy under the rubric of “Buy America”. New trade disputes seem inevitable.

The European Union has reacted relatively tepid to the consequences of the pandemic and the conflict between the United States and China. Much of the budget for the upcoming MYFF, such as spending on the Common Agricultural Policy, could have been financed from the EU budget even without the pandemic. In addition, 800 billion euros is available, as EU countries have already announced planned measures and not just additional ones.

At the EU level, trade policy must be set on a new basis with the concept of “open strategic autonomy”. It is unclear what specific measures are derived from this. Intelligently designed, it can serve the common interest with USA. The two largest Western economies can serve as an economic balance for China. Close coordination and a unified approach within the rules-based multilateral global trading system will be essential to ensure that Western health, safety and environmental standards are implemented at a global level. If that doesn’t work, the global rules for the economy will likely be set in Beijing.