America should respond to China with a ‘second Sputnik moment – Yasheng Huang

MIT Sloan Professor Yasheng Huang

MIT Sloan Professor Yasheng Huang

From MarketWatch

The burgeoning trade war between the United States and China has as much to do with technology as with the balance of trade. Reports have surfaced that the Treasury Department is drafting rules to block Chinese firms from investing in American companies doing business in so-called industrially significant technology, while the Commerce Department is planning new export controls to keep such technologies out of Chinese hands.

These moves follow President Donald Trump’s proposal to impose tariffs on $50 billion worth of Chinese products, many of which are on the priority list for “Made in China 2025,” President Xi Jinping’s blueprint to transform China into a global leader in high-tech industries like aerospace, robotics, pharmaceuticals, and machinery. Although the Chinese government has refused to modify its initiative, the U.S. is demanding that China end all government subsidies and grants under the program. Trade talks have stumbled on this point.

America’s concern with Made in China 2025 is understandable; China’s approach to technology development has been controversial, to say the least.But there are better ways to respond to China’s policies. Two ways, to be precise. Read More »

China, the innovation dragon – Simon Johnson and Jonathan Ruane

MIT Sloan Professor Simon Johnson

From Project Syndicate

China has achieved much since 1978, when Deng Xiaoping initiated the transition to a market economy. In terms of headline economic progress, the pace of China’s transformation over the past 40 years is unprecedented. The country’s GDP grew by nearly 10% per year on average, while reshaping global trade patterns and becoming the second-largest economy in the world. This success lifted 800 million people out of poverty, and the mortality rate of children under five years old was halved between 2006 and 2015.

The question now is whether China, well positioned to become the world’s innovation leader, will realize that opportunity in 2018 or soon after.

China’s transformation has been underpinned by an unprecedented manufacturing boom. In 2016, China shipped more than $2 trillion worth of goods around the world, 13% of total global exports. It has also pursued economic modernization through massive infrastructure investment, including bridges, airports, roads, energy, and telecoms. In less than a decade, China built the world’s largest bullet train system, surpassing 22,000 kilometers (13,670 miles) in July 2017. Annual consumption is expected to rise by nearly $2 trillion by 2021, equivalent to adding another consumer market the size of Germany to the global economy.

Earlier this month, Apple CEO Tim Cook declared that, “China stopped being a low-labor-cost country many years ago, and that is not the reason to come to China.” The country’s manufacturing strengths now lie in its advanced production know-how and strong supply-chain networks. Understandably, China’s leadership wants to increase productivity and continue to move further up the value chain.

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Making economic sanctions on North Korea work – Yasheng Huang

MIT Sloan Professor Yasheng Huang

MIT Sloan Professor Yasheng Huang

From Project Syndicate

China is the only country with the power to compel North Korea to change its nuclear policy. Convincing Chinese leaders to wield that power, by fully isolating the regime economically, must be the international community’s top priority.

Last week, in a brazen rebuff to tough new United Nations sanctions, North Korean leader Kim Jong-un’s regime fired a ballistic missile over the northern Japanese island of Hokkaido – its second launch over Japan in less than three weeks. But, far from indicating that sanctions don’t work, Kim’s move shows that they still aren’t tough enough.

The latest sanctions cap oil imports, ban textile exports, and penalize designated North Korean government entities. Following Kim’s response, sanctions should be tightened even further, to stop all trade with North Korea, including halting all fuel imports.

North Korea is one of the most insular countries in the world. That insularity is a curse for the long-suffering North Korean people, but an advantage for a sanction-based strategy, because only one country is needed to make it work: China.

From an economic perspective, China is the only country that really matters to North Korea, as it controls about 90% of the North’s foreign trade and supplies almost all of its fuel. Yet China’s economy would barely register the effect of new sanctions: North Korea’s annual GDP, at a meager $28 billion, constitutes little more than a rounding error for its giant neighbor.

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Has China’s coal use peaked? Hear’s how to read the tea leaves – Valerie J. Karplus

Assistant Professor Valerie Karplus

Assistant Professor Valerie Karplus

From The Conversation

As the largest emitter of carbon dioxide in the world, how much coal China is burning is of global interest.

In March, the country’s National Bureau of Statistics said the tonnage of coal has fallen for the second year in the row. Indeed, there are reports that China will stop construction of new plants, as the country grapples with overcapacity, and efforts to phase out inefficient and outdated coal plants are expected to continue.

A sustained reduction in coal, the main fuel used to generate electricity in China, will be good news for the local environment and global climate. But it also raises questions: what is driving the drop? And can we expect this nascent trend to continue?

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The US can’t beat China’s robots but it can win by building the machines that make them – Matt Beane

MIT Sloan Ph.D. Student Matt Beane

From Quartz

As a US presidential candidate, Donald Trump made keeping manufacturing jobs in the country a key economic issue. He promised to bring back jobs from China, Mexico, Japan, and elsewhere; he pledged to force companies from Ford to Apple to Nabisco to open or re-open factories on American shores; and he vowed to revive the coal and steelmaking industries. His promise to create industrial jobs was key to his electoral victory.

Still, many were—and remain—deeply skeptical of Trump’s plans. Mark Cuban, internet entrepreneur and frequent thorn in the side of the president, says that bringing back manufacturing will backfire and lead to overall job losses. Instead, he says, the US ought to invest in robotics to compete with China. “We have to win the robotics race,” he says. “We are not even close right now.” (For what it’s worth, Trump’s labor secretary Steven Mnuchin recently disagreed, saying robots aren’t even “on my radar screen.”)

Cuban is on the right track, but the fact is that it’s too late to go head-to-head with China on building robots alone. We can’t compete with China’s robot revolution. But we can complement it.

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