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Is the US Economy Ready to Navigate the Asia Century?
For years the US has been unmatched in education and innovation. But the past 30 years of relative political stability in China has constituted a unique period in its modern history, providing China with the opportunity for considerable economic growth, which has led to improvements in its national infrastructure and overall competitiveness. China’s proven ability to continue high level economic growth requires the US to shift its foreign policy objectives and adopt a more economic focused policy to successfully navigate the potential Asia Century.
The US can no longer afford its past inefficiencies. Emerging markets like China will continue to compete for labor and investment, which in turn have serious implications for the future health of the US economy. The issues of an undervalued RMB, growing US debt and the trade imbalance all hinder US economic competitiveness. Politicians who make calculated decisions in response to the US election cycle only exacerbate the inability to address these issues. Running fiscal deficits limits the government’s future ability to react to business cycles and when there is no political certainty, economic growth is difficult. If this continues, it will undermine the US national interest and the ability to set policies that will allow the US to remain competitive in the 21st century.
Despite the drop in overall economic competitiveness, the US economy is still highly sophisticated and innovative, supported by an excellent university system that collaborates with the business sector. The scale of opportunities afforded by the sheer size of its domestic economy combined with expansion of its export capabilities signal the potential for a brighter economic future. But the inability to create sustainable economic growth will leave the US within an Asia Century, nostalgic about the past American century. To avoid this, the US will need to develop domestic policies that can build upon its existing framework. The US can prioritize economic drivers with a mix of neo-liberal economic policies and government spending by supporting R&D with favorable tax breaks, create a better system for commercializing university research, better protect intellectual property rights in China and improve immigration policy that attracts highly skilled individuals. Implementing successful non-partisan domestic policies to maintain a highly sophisticated economy will allow the US to maintain its dominant position in the world and better manage the rise of China.