economy
Who will win the war of neo-mercantilists?
China's high degree of self-sufficiency also reduces its vulnerability to coercion by others
TL;DR
- The world is experiencing a neo-mercantilist era where security and prosperity are equally important policy concerns.
- China is better positioned for mercantilism than the US and EU due to its economic size, technological frontier, large labor force, and high savings rate.
- China holds powerful monopolies in global supply chains for solar photovoltaics, lithium-ion batteries, rare earths, and shipbuilding, granting it coercive power.
- China's economic policies, characterized by large and persistent trade surpluses, create deficits for other nations and drive protectionist pressures.
- Despite its strengths, China's economic growth is declining, and its domestic demand has stalled, with a rebalancing towards consumption remaining unrealized.
- The US and EU are also increasingly adopting mercantilist strategies, though less coherently than China.
- A new metric, the 'resilience account', is proposed to measure geopolitical dependency alongside economic accounts.