On GOP debate stage, a sometimes oversimplified view of China’s economy

Analysis by Michelle Toh and Luciana Lopez, CNN

(CNN) — Florida Gov. Ron DeSantis called for “decoupling” the US economy from China. Vivek Ramaswamy said: “We need to declare independence from China.” And North Dakota Gov. Doug Burgum said the US is “in a cold war with China.”

On the Republican presidential primary debate stage Wednesday night, the candidates repeatedly invoked China as an antagonist to the United States, especially around economic and financial issues. But the US and China are, respectively, the world’s two biggest economies. That means the relationship between the two nations is interlaced and complex and far more nuanced than much of the debate might have suggested.

“We need a totally new approach to China,” DeSantis said in the first half hour of the debate. “We’re going to have economic independence from China, where we’re decoupling our economy.”

But the two economies are in fact deeply intertwined, and still depend on each other despite rising tension. This year alone, a parade of US officials and CEOs have flocked to China, underscoring the critical nature of the ties between the two nations.

When Treasury Secretary Janet Yellen made the trek to Beijing in July, she said the world was big enough for the US and China to thrive.

“The United States will, in certain circumstances, need to pursue targeted actions to protect its national security. And we may disagree in these instances,” she said at the time.

“However, we should not allow any disagreement to lead to misunderstandings that needlessly worsen our bilateral economic and financial relationship.”

In August, US Commerce Secretary Gina Raimondo echoed Yellen’s remarks on her own trip to China, telling Chinese officials that the United States was not seeking a decoupling.

“While we will never, of course, compromise in protecting our national security, I want to be clear that we do not seek to decouple or to hold China’s economy back,” Raimondo told officials.

‘Declare independence’

“Let’s have a policy debate, and the right answer is, we need to declare independence from China,” entrepreneur Vivek Ramaswamy said during an answer in which he said his own company had pulled out of doing business with China.

But there are plenty of US businesses that disagree with him. Among the US captains of industry visiting China this year alone are some of America’s biggest business names, including Elon Musk of Tesla (TSLA), Laxman Narasimhan of Starbucks (SBUX) and Jamie Dimon of JPMorgan (JPM).

Tim Cook, CEO of Apple (AAPL), nodded to how deep the multi-trillion-dollar company’s roots run in Beijing. “We have a very large supply chain in China. We also have a thriving App Store,” the Apple chief was quoted as saying in state-run China Daily.

The US bought $563.6 billion of goods and services from China in 2022, and China bought $197.3 billion of goods and services from the US, according to government data.

American consumers have benefited, as well. In 2019 researchers found that those lower-priced Chinese imports pushed down prices of US-made goods, as well, “increasing households’ purchasing power by about $1,500.”

In other words, Apple is far from alone in seeing strategic value to building out a presence in China.

Eric Zheng, president of the American Chamber of Commerce in Shanghai, told CNN in August that AmCham’s members “continue to see China as a very important market for them, a strategic market,” he added. “In order to be globally competitive, they have to be in this market despite all the challenges.”

A ‘cold war’?

Still, the relationship between the two economic powers has its issues.

“China controls 85% of the rare earth minerals,” Burgum said early in the debate. While the US Geological Service puts China’s share of global rare earth minerals at more like 60%, no one disputes the country has long controlled the majority of the world’s supply of the critical resource, which is key in generating clean energy and producing electric vehicles and consumer electronics.

The two nations this year have also been involved in a spat over chips, particularly as the AI boom has ignited the US stock market and has the potential to remake any number of businesses.

And the deepening ties between Beijing and Moscow — Russian President Vladimir Putin this month praised his country’s “excellent” economic relations with China — have raised concerns within the Biden administration.

That’s why Burgum sought to cast friction between the US and China at a deeper level, saying that “we are in a Cold War with China.”

But Yellen might have made her point most directly on US soil, in Washington, when she testified to Congress in June.

“We benefit greatly from access to cheaper products, a wide array of products and products in some cases where China has a technological lead. And in turn, China benefits from its purchases from us, and we benefit from our ability to export from China,” she said. “And so this is very valuable interaction and while we surely have concerns that need to be addressed, decoupling would be a big mistake.”

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