China and the West
There is a strong case for saying that since late last century China and the West have helped each other. Cheap Chinese goods have helped keep inflation down in the West, while access to Western markets has enabled China to lift millions from poverty subsistence farming and achieve decent living standards.
This argument rests on the idea of a mutually beneficial economic symbiosis between China and the West since the late 20th century, especially after China’s reform and opening-up policies from the late 1970s and its deeper integration into the global economy in the 1990s–2000s.
China’s abundant labour supply and low wages in the 1980s–2000s meant it could produce consumer goods at far lower cost than Western manufacturers. As Western economies imported more Chinese products, from clothing and electronics to furniture and white goods, the cost of living for consumers stayed lower than it otherwise would have been.
By the 1990s and 2000s, economists were talking about a China price, the rock-bottom manufacturing cost that reshaped global pricing. This exerted downward pressure on inflation in the US, Europe, and other developed economies, even as they enjoyed economic growth.
China became a “workshop of the world,” allowing Western firms to keep profit margins healthy without large domestic price hikes. Western markets absorbed huge volumes of Chinese exports, creating steady demand that fuelled China’s industrial expansion.
Western companies investing in China brought not just capital but also management practices, advanced machinery, and production techniques, accelerating China’s climb up the value chain.
Millions of rural Chinese moved into urban manufacturing jobs, earning wages far above subsistence farming levels. This was one of the largest poverty alleviation stories in history. The World Bank estimates that hundreds of millions were lifted out of extreme poverty between 1980 and 2010.
It was a symbiotic cycle. China provided goods that kept Western inflation low and maintained Western consumer demand. Western demand plus investment fuelled China’s industrial growth, improving living standards in China. Both sides benefited. The West had cheaper goods, low inflation, and corporate profits.China had massive export revenues, urban job growth, industrial modernization.
The real acceleration happened after China’s 1978 reforms under Deng Xiaoping’s policies. And their WTO entry in 2001 opened Western markets even more to Chinese exports. By the 1990s, the West and China were deeply tied in global supply chains.
There were some caveats. While the relationship was mutually beneficial overall, there were side effects. There were some Western manufacturing job losses and regional decline in some industries. There were environmental and labour challenges in China.
There were growing geopolitical tensions as economic interdependence met strategic rivalry. As China grew rich, it sought to exert the authority it thought it deserved. This led to confrontations in the South China sea, to their absorption of once-independent Hong Kong into Chinese Communist authoritarianism, and to tensions over Taiwan.
The story is not over, but it they were a remarkable series of decades that saw living standards rise across the world to unprecedented levels. Not many periods of history have witnessed such remarkable progress worldwide.
Madsen Pirie