How Does China's Growth Affect US Workers

Topics: United States, International trade, Economics Pages: 6 (863 words) Published: August 6, 2014

How China’s Massive Economic Growth Affects the US Economy Haley Hagearty
Front Range Community College

Everyone knows the United States as a great economic power, but recently, another country has come up quickly to challenge this power. China is well on its way up the ranks as an economic and trade power, and the United States should be concerned. China’s rapid growth challenges the United States’ economic sectors, has productive economic policies, and has the opportunity to show a possible American decline. The biggest problem with China’s growth is its challenge to the US’s economic sectors, mainly in manufacturing. Although we, as Americans, love less expensive items, importing those goods from China is removing those jobs to make the imports in the US. In fact, “between 2001 and 2008, the U.S. lost 2.4 million jobs as a result of increased trade with China” (Estrin). Low-cost labor in China is the major reason for this, and it is “blamed for bankruptcies and/or plant relocation to China, job losses, and stagnant U.S. wages” (Congressional Research Service, 2007). These jobs may not have an overall effect on employment, but “likely does have some negative effect on employment in particular trade-sensitive sectors of the economy,” such as in manufacturing (Congressional Research Service, 2007). Another job problem is that the labor force outside of the US has “all of a sudden doubled with the entry of India, China and former Soviet bloc countries into the liberalized global market in the recent period” (Izurieta, Singh). More people are available for the same jobs that Americans are doing, but other countries are willing and able to do them for fewer wages. As technology changes, China is growing faster than ever, and exporting many more electronic goods, and the US is falling behind in this innovation. Chinese workers have adapted to these new technologies much more quickly, but “Americans who can adapt and learn new skills that are necessary for technology-intensive industries will be able to compete” (Estrin). The problem is that the world demands cheaper products, but China is willing to supply those products much cheaper than Americans. In order to turn their economy around, China began new economic policies, starting with offering price and ownership incentives to farmers so they could sell crops freely. Their next step was to “establish four special economic zones along the coast for the purpose of attracting foreign investment, boosting exports, and importing high-technology products into China” (Congressional Research Service, 2007). The government “sought to decentralize economic policymaking in several sectors, especially trade” (Congressional Research Service, 2007). Coastal cities were allowed to operate more freely to encourage trade, and many price controls were eventually eliminated. These new reforms pushed China into the 3rd largest trading economy in the world, and they continue to have a very strong trade balance. As seen in Table 2, China’s merchandise world trade has increased 42x since 1980, and 3x just between 2000 and 2005. These massive increases make China look very strong, but also makes the United States look like its headed downhill. The US’s large trade deficit, as seen in Table 10, does not look good compared to a very favorable Chinese trade surplus. But, the reasons for the US’s very large trade deficit may “include currency manipulation, trade and investment barriers, industrial policies, failure to protect intellectual property, dumping, and low labor and environmental standards” (Congressional Research Service, 2007). Another factor about the jobs in the US is “job losses disproportionately affected workers without a high school degree, who comprise 70 percent of the workforce” (Estrin). Requiring US citizens to at least finish high school will help strengthen the economy because there will be more qualified workers. More...
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