David McCormick: Rebalancing the U.S.-China Economic Relationship for Continuing Development
As China rapidly rises to power, will the world economic pattern change dramatically? How will the USA, the only super power currently existing, cope with the emergence of a new rival and partner? How should the leaders of both countries further the Sino-US relationship to foster continuing significant economic development?
David McCormick, under secretary of Treasury for International Affairs of the U.S, delivered a speech at Peking University on September 20th, addressing the future challenges for the United States and China’s economic growth and how the leaders of both countries should overcome them.
“The United States and China have accounted for over 40 percent of total global economic growth in the past five years”, Mr. McCormick said, “We owe much of the strength and vitality of our economic relationship today to the remarkable success of China’s economic development over the last three decades.” However, looking towards the future, China still faces a big set of challenges in sustaining future economic growth. Mr. McCormick pointed out three major challenges that might possibly limit China’s continuous economic growth.
“First, growth has been increasingly energy-intensive, causing environmental degradation to accelerate” Mr. McCormick said. The second problem is that the economic growth of China has been highly capital-intensive, reducing the rate at which incremental growth creates new employment opportunities for the Chinese people. Thirdly, recent growth has gone hand-in-hand with a decline in both consumption as a share of GDP and household income as a share of GDP. “As a result”, Mr. McCormick emphasized, “the Chinese people are capturing a smaller and smaller share of the benefits of growth.”
To overcome these challenges, Mr. McCormick said that China’s leaders were right to turn their attention to reforms and aim at achieving economic growth generated from domestic demand, innovation, and high quality investment.
Additionally, Mr. McCormick talked about future challenges the United States faced in economic growth; “The U.S. trade deficit is an outcome that is not only driven by international economic factors, but also by domestic economic factors.” Mr. McCormick emphasized, “For the United States, our trade deficit can only be reduced through decisive measures to increase both private and public saving — the opposite problem China faces in its efforts to reduce a large trade surplus.” In this way, continuing to improve U.S fiscal outlook, particularly through measures which address the challenge of entitlement spending reform is extremely important.
Before concluding, Mr. McCormick emphasized the importance of re-energizing bilateral investment. “Both sides could benefit from sharing information on, and discussing our respective policies to foreign direct investment.” said Mr. McCormick, “On our side, we warmly welcome investment from all of our international economic partners, and China is a very important partner to us.”