China’s Response to the Global Financial Crisis: Implications for U.S. – China Economic Relations

The consequences of the global financial crisis for United States-China economic relations are still unfolding, and it is still unclear whether trade tensions will escalate into trade sanctions. What seems clear, however, is that there is a rising tide of protectionism in both countries based upon what hardliners on each side perceive to be unfair practices and policies implemented by the other. Historically, mutual policies of protectionism between trading partners leads to trade sanctions, which would be an unfortunate result for United States-China economic relations. It remains to be seen whether hardliners in both countries will push the two trading partners into an escalating trade war or whether more moderate voices in the two countries can help to address existing trade issues without resorting to a trade war. This article discusses the potential for an escalation in trade tensions between the two countries as a result of measures taken by China in response to the global financial crisis. This article proceeds in three parts. The first part examines the effects of the global financial crisis on China. The second part examines China’s response to the global crisis. The final part of this article examines the position of the United States that China’s policies (some of which predated the global financial crisis) and its current economic stimulus package may, in the view of the United States, contain unfair trade practices that justify the imposition of trade sanctions