In a recent episode of the Odd Lots podcast by Bloomberg, Stephen Roach, senior fellow at Yale Law School and former chairman of Morgan Stanley Asia, issued a stark warning about the current U.S. policy towards China.
What Happened: Roach, a seasoned expert on Asian economies, cautions that the increasing vilification of China could lead to disastrous consequences, emphasizing the urgency of rethinking this approach.
Roach points out that the bipartisan consensus in Washington on being tough on China has led to an era of intense Sinophobia. Both the Trump and Biden administrations have maintained tariffs and imposed additional restrictions under the guise of national security.
Roach criticizes this trend, stating, “I know that’s an unpopular view to hold in this bipartisan era of what I’ve called ‘sinophobia.’ I’ve never seen in my adult lifetime an adversary that’s been so vilified as we are now vilifying the Chinese.”
A central theme in Roach’s argument is the exaggeration of national security threats posed by China. He cites several instances where U.S. politicians and officials have raised alarm over potential threats that lack substantial evidence. For example, Commerce Secretary Gina Raimondo‘s warning about Chinese electric vehicles potentially being turned into weapons of mass destruction is dismissed by Roach as baseless fear-mongering. Similar claims about Huawei, TikTok, and other Chinese technologies further illustrate the pattern of overblown threats.
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Roach emphasizes that the U.S. approach to tariffs and trade deficits reflects a fundamental misunderstanding of international economics. He explains that the U.S. trade deficit is not solely with China but with over a hundred countries, driven by America’s low domestic savings rate. The focus on reducing the deficit with China alone has only shifted trade to other countries, often at higher costs, without addressing the underlying economic issues.
The podcast highlights Roach’s concern about the potential for an accidental conflict between the U.S. and China. He references Henry Kissinger‘s warning about the two nations being in the early stages of a new Cold War.
“When you’ve got two nations acting in an adversarial position, both focused on national security and building up their defense capabilities… you can come very close and possibly even get into the realm of a kinetic, outright war,” Roach said recalling the 1969 Cuban Missile Crisis.
“And you know, if there was an accident, you know, at an invasion of Taiwan or something in the South China Sea, there’s no telling where that could go. So I think the time to take these concerns seriously is now, before it is too late.”
Roach advocates for a shift in U.S. policy that reduces budget deficits and invests in domestic infrastructure and human capital. He believes these steps are crucial for economic stability and independence. By addressing the root causes of trade deficits and focusing on building internal strength, the U.S. can create a more balanced and sustainable economic relationship with China.
Why It Matters: Roach’s perspective echoes the concerns raised by other experts about the deteriorating U.S.-China relationship. In a recent article, economist Jeffrey Sachs criticized U.S. policies aimed at containing China, warning that such actions are pushing the two nations closer to war.
The relations between the two nations are at an all-time high with multiple skirmishes involving countries in the South China Sea and Russia. U.S. Envoy Nicholas Burns accused China of undermining diplomatic relations and taking dramatic steps to complicate peaceful coexistence.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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