China’s Manufacturing Dominance: State Directives & Ruthless Competition —Arthur Kroeber
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Today, I'm interviewing Arthur Kroeger, who is the founder of GavCol Dragonomics, which is a research consultancy focused on China and author of China's Economy, What Everybody Needs to Know. A friend while I was in China recommended it to me, and it's been the most valuable and useful resource that you can get today on how China works. So, Arthur, thanks for coming on the podcast and taking the time to chat with me. It's
great to be here. Thanks.
First question, what really is the problem if China becomes as wealthy or if its economy grows as big as America's or grows even bigger? I know maybe it's not your perspective to be a China hawk, but I've never really understood why this is a problem in the first place.
Yeah. It's a very good question. It's a very good question. There's a lot of criticism of China from the standpoint of, okay, you're trying to get rich. That's fine. Okay. But you're basically trying to get rich on the backs of everyone else in the world by running this gigantic manufacturing export machine where it seems like the Chinese ambition is to produce all the manufactured goods in the world, for everyone, run an enormous trade surplus, which means that they are depending on other people's buying power to support them, and that this is basically not fair, not sustainable, not a stable
I mean, the trade surplus point, to the extent that it is made possible by, the government involvement in industry, which is actually not even clear to me that that's the case. I mean, just like if you have high savings and not enough investment domestically, just like the accounting identities are just that you will have a trade surplus. Right. But suppose that's even the case. On paper, it just seems like what is happening. The the Chinese taxpayer, the Chinese saver is, like, subsidizing Right. Foreign importers. So on paper, it just seems like we're getting a good deal. I'm sure some peopl
think there are a couple of things beneath that. One is the systemic difference politically is really important. Right? So The US self identity is, of the leader of democracies around the world. And we are very invested, at least for now, in our democratic system. We'll see how that evolves over the next two or three years. There's some question marks around that. But, historically, that's been a really huge part of The US identity. And, basically, the morality play of World War two and the Cold War, which has really been the crucible in which US foreign policy has been formed, is that you had
Mhmm. Okay. So two points. On the political system, I wonder if we've learned a bad example from, World War two and the Cold War, which is that the way in which great power conflict culminates is that the other person totally collapses. Right. I think that was actually necessary obviously for Hitler and even for, you know, the Soviet Union. I think they were evil regimes. I think, China today is an evil regime in a way, but it's just not not in the same order as Stalin or Hitler. And so the the end state for any great power competition for America, you know, history is long. Right? So there th
Yeah. Well, there's a a few different questions in there. So let let me break that down. So first, I think the first thing that you alluded to there is, essentially, is a cold war the right, you know, framing for whatever this conflict is that we have with China? And my answer to that is absolutely not. And you can, address that question both empirically and conceptually. So empirically, if you just look at patterns of trade and investment during the Cold War, the actual Cold
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