US-China relations: Joe Biden's embrace of post-pandemic 'industrial polices' shows 'bust of Washington Consensus'
The Biden administration's US$1.9 trillion coronavirus relief package and other interventionist fiscal measures are a pivot towards China's economic model and signal a bust of Washington's long-advocated neoliberal ideology, according to a new report by Renmin University of China.
By signing off on the Covid-19 relief package and other initiatives, such as the now-reduced and split US$1.2 trillion infrastructure plan, US President Joe Biden has given de facto endorsement to China's state-led growth model, the report said.
"The US embrace of government interventionism and industrial policies has officially announced the bust of the Washington Consensus," said the report, which was released at the university's Sino-US Political and Economic Forum on Thursday.
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"It will let the world think positively about China's economic achievements and its economic governance."
The report said China should remain on alert for spillovers of US stimulus policies and particularly its China containment strategy, which is a key pillar of "Biden economics".
To compete with China, the White House has introduced the Innovation and Competition Act that - if passed by the House - will boost investment in key domestic industries, and has rallied Western allies including Britain, the European Union, Canada and Australia to confront Beijing on various issues, from trade practices to human rights.
But the report labelled the US initiatives "fake multilateralism", and questioned their economic effectiveness.
"The short-term effects of Biden economics will be obvious, but it faces high uncertainties in the long run," the Beijing-based university said.
Liu Qing, one of the report's co-authors, said Biden's China policies "largely reflect US ideological anxiety".
Policies like Washington's trade strike force, which aims to halt the "hollowing out" of American industry, have been viewed in some circles as a turn towards aggressive industrial policy to counter China.
The US has long criticised Beijing's own industrial policy, "Made in China 2025", as merely a conduit for the government to channel funds to state firms for unfair competitive advantages. But Beijing has defended its government-led growth model, while advocating for a Beijing Consensus.
Liu Yuanchun, lead author of the report and vice-president of Renmin University, said the "America First" strategy of former American president Donald Trump already indicated the US, which accounts for a quarter of global gross domestic product (GDP), was losing ground in global leadership and supply chains.
"Biden economics can hardly reverse the rising debt, fiscal monetisation and deindustrialisation," said the senior government adviser.
He estimated the American economy would grow by about 2 per cent annually over the next five to 10 years, which, compared to China's forecast 5-6 per cent annual growth over the next five years, means a further narrowing of bilateral strength.
"The China-US rivalry may have substantially changed by 2025," Liu said.
Chinese GDP was about 71 per cent of the size of US economic output last year. Some Chinese economists, such as Peking University professor Justin Yifu Lin, believe China's economy will surpass the US in 2028.
Chinese financial officials have been on guard for spillover effects of the large US stimulus and the Federal Reserve's earlier-than-expected policy tapering.
Guo Shuqing, party secretary of the People's Bank of China and chairman of national banking regulator, has said US and European stimulus policies had ramped up global inflation risks.
China's own stimulus, although more moderate than most developed Western nations, has also stoked inflation, with factory-gate price prices hitting a 13-year high last month and manufacturers now passing on surging raw material costs.
To curb inflation, the government has warned it will crack down on speculation in the commodities market and auctioned metals from its state reserves.
The report comes at a delicate time for relations between the world's two largest economies, as they clash on a range of geopolitical and economic issues.
Although there is no sign of official bilateral talks on the horizon, Vice-Premier Liu He has spoken to both US Trade Representative Katherine Tai and US Treasury Secretary Janet Yellen since May. Last month, Commerce Minister Wang Wentao also spoke with his American counterpart Gina Raimondo.
This article originally appeared on the South China Morning Post (SCMP).
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