This post by Oxford economist J. Zachary Mazlish is very good; I encourage you to read it. (HT David Levey)
Nevertheless, there are two points that I think to be worth making in response to Mazlish’s post.
I will here respond to one of these points. In a follow-up email I’ll respond to the other of these points.
Mazlish writes:
These doomsayers are responding to what has been dubbed “China Shock 2.0.” China Shock 1.0 was the rise in Chinese exports of low value added goods that occurred in the early 2000s. Shock 2.0 is when China begins exporting the high value added goods that constitute what remains of the industrial bases in the US and Europe.
Critics of trade with China do indeed worry about what will happen outside of China when that country “begins exporting … high value added goods” – goods different from the low-value-added goods that China exported during the so-called “China Shock 1.0.
But President Xi and his many mandarins can escape neither the reality of scarcity nor the law of comparative advantage. If China does indeed start producing more high-value-added goods, it will have to produce fewer of other goods – and the goods that in China will likely be produced in reduced quantities are the kinds of goods that China produced and exported during the “China Shock 1.0.”
And so shouldn’t Americans and other people outside of China who lament the consequences of “China Shock 1.0” applaud rather than agonize over this so-called “China Shock 2.0”?
