The truth about China's success

As missiles, bombs, and drones fly over the Persian Gulf, the prospect of an even more devastating war in the Pacific grows. De-escalating the new Cold War between the United States and China must now become a global priority. To that end, it is essential to dispel a powerful myth that increases the likelihood of war: the idea that China has cheated its way to prosperity.

The Chinese economy is contributing to serious global macroeconomic imbalances, and that must be addressed. But that is quite different from the convenient fiction, woven by Western elites to hide their own failures, that China owes its success to duplicity, dishonesty, and deception. And it is not just a convenient fiction. To the extent that it prepares Western public opinion for war, it is also dangerous.

This myth makes five false accusations. The first is that China has “stolen” the intellectual property of Western companies. In reality, Western multinationals have been racing for decades to hand over their intellectual property in exchange for access to the vast Chinese market. The Chinese authorities, who plan for a 50-year horizon, simply made them an offer they couldn’t resist: you can enter our market, but you’ll have to teach our people how to make your goods. Western CEOs, obsessed with the coming quarters and intoxicated by the magnificent medium-term prospects, gladly accepted.

The second charge is that China is undervaluing its currency. This would mean that there is a "correct" exchange rate and that Chinese authorities are pushing the renminbi below that rate. In theory, the correct exchange rate is one that balances each country's current account. In practice, this would mean that the dollar is massively overvalued, as evidenced by the huge US current account deficit.

In short, the accusation that the Chinese are artificially keeping the renminbi too low is just the flip side of the claim that the US is financing its deficits by attracting foreign capital. Westerners who rely on an overvalued dollar are, in this sense, living in glass houses. Throwing stones is unreasonable.

The third charge concerns China's capital controls, which are presented as yet another form of fraud. Have we forgotten that the golden age of capitalism, the Bretton Woods era of the 1950s and 1960s, rested on capital controls in the US, Europe and Japan? The reasoning was simple: no government is legally or morally obligated to allow financiers to flood its country with eager "hot" money at will or, equally, to allow uncontrolled capital outflows on a whim.

The fourth pillar of the myth - the alleged massive overcapacity of Chinese industry - is refuted by the data: capacity utilization in China is below 75%, which is lower than in America. Inventories are stable. Profits of Chinese exporters have increased by over 10%. So, there is no overcapacity.

This accusation serves as a defense against what really troubles Western authorities: the extraordinary competitiveness that China has achieved thanks to excellent planning and investments in top-notch, accessible education and training. When you see how a company in Shenzhen can develop four prototypes for a fraction of the cost and time it takes in Stuttgart or Illinois to launch a single prototype, it is difficult to seriously argue that China’s competitiveness is the result of dumping. But such a claim is more politically acceptable to Western leaders than explaining to voters how China has developed a unique distributed neural network for manufacturing intelligence.

The fifth, and perhaps most common, accusation is that the Chinese spend too little and are underpaid. Perhaps. But relative to whom? Household consumption in China has grown much faster than in the West's Asian industrial allies, from Japan and South Korea to Indonesia and Malaysia. Moreover, when these "miracle economies" reached similar levels of development, they experienced a sharp slowdown in consumption growth - something that China does not experience.

Likewise, Chinese wages have risen dramatically. Two decades ago, hourly wages in China's manufacturing industry were lower than in India. Since then, they have increased eightfold, while in India they have only doubled. In fact, wages in China are now higher than in any other developing country in Asia.

These truths echo uncomfortably in the corridors of Western power. China’s technological prowess is a threat to Western corporations that once felt invincible. Other developing countries are now turning to China for more reliable, better-quality, and cheaper goods. While it may be understandable to react with accusations of cheating, we in the West must seize this opportunity to reevaluate ourselves, because telling the truth serves the cause of peace.

And the truth is that Western corporations have not lost to China; they have sold out to China. They have moved jobs overseas, destroyed unions, and surrendered their intellectual property for the sake of quick profits. While the US, UK, and EU have bailed out criminal bankers and waged illegal wars, China has invested in education, rail networks, functioning healthcare systems, green energy, smart grids, and manufacturing hubs capable of research, development, and innovation that most Western countries cannot match.

It is time for the West to stop blaming China for the decisions of its own big business, Wall Street, and its sycophantic politicians. Sanctions against China are an absurd substitute for industrial policy. Worse, lazy Sinophobic narratives, spread by the same people who created the current quagmire in the Gulf, could pave the way for an even crazier military conflict in the Pacific.

Copyright: Project Syndicate, 2026. (translation: NR)