Seeing the Light of the U.S.–China Relationship

Two things you need to know about the two biggest economies.

By Geoffrey Garrett

Wharton Dean Geoffrey Garrett

Don’t be fooled by all the negative economic headlines about China these days—slower growth, tougher times for western firms and renewed talk of trade deficits and currency manipulation.

The rise of China is a boon for the American economy for two reasons lots of people don’t know about. First, our multinationals—from the iconic firm of the 20th century, GM, to the first icon of the 21st century, Apple—are big winners. Five years ago, we would have been talking about how both firms used China as a low assembly line to sell to the world. Now China’s half a billion plus middle class consumers are their biggest and fastest growing market.

Second, the US benefits big time from all the cash China has accumulated. Massive Chinese purchases of US Treasuries have made possible the super low interest rates on which the post-2008 recovery has been built. Now rapidly growing Chinese outward foreign direct investment is ready to provide much needed new capital to keep the recovery going—starting in real estate but poised to expand into many other sectors.

The US-China economic relationship is the biggest, deepest and broadest in human history. That is a win-win-win: for China, for the US, and for global peace and stability.

Sure, the rise of China against the backdrop of American global power will inevitably generate frictions—this is an immutable lesson of geopolitical history. But don’t forget all the positives that come from the unprecedented interconnected-ness of the world’s two biggest economies.

These economic positives are at the top of my mind as I wing my way to Beijing for the opening of the Penn Wharton China Center. I hope and expect we will do our small part to continue to drive forward business relations between the two countries on whom the fate of the first half of the 21st century disproportionately rests.

Geoffrey Garrett is dean and Reliance Professor of Management and Private Enterprise at the Wharton School of the University of Pennsylvania.

Connect with us: Read more of Dean Geoffrey Garrett’s thought pieces by following him on LinkedIn and on Twitter at @garrett_geoff.

Wharton Magazine - Background

Type to Search

See all results