With the Biden administration now under way, getting America’s China policy right is important for building back this nation’s economy. China drives global economic growth, so a sound bilateral relationship is important to American consumers and workers, as well as to families who are counting on stock market returns to pay for their retirement.

In the 10 years through 2019, China, on average, accounted for about one third of global economic growth, larger than the combined share of global growth from the U.S., Europe and Japan. We can’t — and should not want to — decouple from this engine of global growth, as we manage the other aspects of the bilateral relationship.

The President’s advisors are now in the midst of a comprehensive review of U.S. policy towards China. They are charged with coming up with recommendations for managing one of the most important issues the Biden administration will encounter. Understanding how that policy will affect people in the United States is critical. So let me outline some of the key issues Washington needs to keep in mind.

While some insist that China’s rise has had harmful effects on the American economy, the evidence would show that overall, economic engagement with China has been good for American employment. Some manufacturing jobs have been displaced by imports from China, but other manufacturing jobs have benefitted from lower-cost inputs from China as well as from exports to that fast-growing market. 

American manufacturing, in fact, is very healthy. U.S. industrial output nearly doubled between 1980 and the end of 2020. Trade is not the problem. Rather, our domestic policies have failed to adequately help workers who have suffered the negative consequences of change, whether due to imports or to technology.

A study by economists at the St. Louis Fed found that although imports from China do cause short-term pressure, “manufacturing industries across U.S. states are better off in the long run,” and “the U.S. economy is better off, as it benefits from access to cheaper goods from China.” It is also important to note that, according to Oxford Economics, exports to China — our third-largest market — supported an estimated 1.2 million American jobs in 2019. 

Engagement with China has also been good for American consumers. It helps lower prices for American families, especially low-income households, who spend more on tradable goods. A recent study by economists at the Fed concluded that “U.S. consumer prices fell substantially due to increased trade with China,” and that “these price effects are particularly large in product categories selling to low-income consumers.” This has been critical during the pandemic, a time many Americans are working and studying at home, as more than 90 percent of laptop imports have come from China.

Engagement with China has also benefited American companies. While China has not lived up to all of its World Trade Organization commitments, it has done enough that U.S. exports to that market are up by more than 500 percent since Beijing joined the WTO in 2001. In contrast, U.S. exports to the rest of the world rose by 84 percent. Even during last year’s trade tensions and pandemic, U.S. exports to China rose 17 percent year-over-year (YoY), while our exports to the rest of the world fell 15 percent.

China’s entrance into the WTO has also been good for American farmers, with our agricultural exports up more than 1,000 percent since 2001, while farm shipments to the rest of the world increased 130 percent. Last year, U.S. agricultural exports to China were up 91 percent YoY, while they declined 3 percent to the rest of the world. 

Many of our companies have thrived by doing business in China, which is the world’s fastest growing consumer market. For example, Nike reported double-digit revenue growth in Greater China for 22 consecutive quarters prior to the Covid outbreak. After a three-quarter pause due to the pandemic, double-digit growth resumed in the company’s quarter ending last November. Apple reported its highest-ever revenue in China during its quarter ending last December. And China is especially important to the U.S. semiconductor industry, accounting for about 26 percent of Intel’s global revenue, 55 percent for Texas Instruments and 60 percent for Qualcomm.

There has even been meaningful progress in China on intellectual property theft over the last decade. As Chinese companies have moved up the value chain, the need for stronger legal protection of their own IP has driven change, and this has also benefited foreign firms. Also, the Chinese government has made significant improvements to its framework for protecting IP. All major IP laws have been amended, and the results have been positive for American companies. In software, for example, Microsoft has won all 63 of the copyright infringement cases it brought in Chinese courts, and Autodesk won all 10 of its cases. 

The American Chamber of Commerce in China recently surveyed its member companies, and only 3 percent reported being forced to transfer IP or technology “due to informal pressure from business authorities.” Only 17 percent of the companies surveyed said the lack of sufficient IP protection was a barrier to their innovation in China, down from 26 percent in 2019.

Our continued economic engagement with China, including bringing them into the WTO, has facilitated dramatic structural changes which have benefited the average Chinese citizen.

We need to be clear about what has been accomplished, and realistic about whether alternative policies will achieve more, or less.

China has become entrepreneurial. When I first worked in China during the early 1980s, as a very junior American diplomat, there were no private companies. But small, entrepreneurial private firms now account for almost 90 percent of urban employment and all net new job creation.

Since China joined the WTO in 2001, per capita household income rose by 403 percent in real (inflation-adjusted) terms. As a result, spending by Chinese consumers — which was equal to only 15 percent of U.S. retail sales in 2001 — is now equal to 88 percent of American consumer spending. China is the world’s best consumer story, and many American brands are thriving there.

Most Chinese lead a healthier life, and their kids have far better access to education. In addition to a better standard of living, most Chinese people also enjoy far greater personal (although not yet political) freedom. The absence of political rights and the rule of law are serious long-term problems, but most Chinese people have the freedom to run their own lives to a degree that was unimaginable 25 years ago. 

Of course, not all Chinese have been permitted to enjoy these new freedoms. Like many in Washington, I share the frustration over the limitations of engagement in achieving our objectives with the Chinese government. But we need to be clear about what has been accomplished, and realistic about whether alternative policies will achieve more, or less.

President Biden recently said that the nation’s foreign policy must be conducted “with American working families in mind.” Continued economic engagement with China, based on a level playing field for our companies, supports his objective of our domestic economic renewal.

President Biden also said that “when we invest in the economic development of countries, we create new markets for our products and reduce the likelihood of instability.” Working with our allies and partners to update the global trade and financial architecture we designed decades ago, and continuing to incentivize the Chinese government to abide by these rules, is the best way to earn back our leadership position and reduce the risk of conflict between the world’s two largest economies.

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