Yale economist: China is America’s favorite foreign scapegoat

The consume-now-pay-later lifestyle, immediate gratification, low household savings and a current account deficit all contributed to America’s trade deficit with China, argued Stephen Roach, senior fellow and lecturer at Yale University, in an exclusive interview with CGTN’s Wang Guan.

The US had trade deficits not just with China, but with 102 countries across the world in 2017, which Roach said is “a natural outgrowth of our saving-investment imbalance, not a reflection of China doing damage to us through currency, unfair trade balances or industrial policy as the Trump administration is trying to convince Americans to believe.”

CGTN’s U.S. Correspondent Wang Guan interviews Stephen Roach, senior fellow and lecturer at Yale University. [Photo: CGTN]

The Trump administration launched a trade offensive against China on July 6, prompting China to announce retaliatory tariffs. The ongoing tensions are impacting markets, exporters and businesses.

The Trump White House cited intellectual property and forced technology transfer as grounds to launch the trade war. The American economist said while there might be individual cases, he disagrees with painting China with a broad brush. As former chairman of Morgan Stanley China back in the 1990s, Roach led his company in working with China’s Construction Bank to forge China International Capital Corporation, a Beijing-based joint venture and China’s first investment bank.

“It was a joint venture that we entered into willfully and voluntarily. We worked together. Of course, we shared people. We shared systems. We shared solutions and we shared strategies. There was nothing forced about it. We wanted to build a successful business. That’s what joint ventures are all about,” Roach said.

The cover of Stephen Roach’s book "Unbalanced: The Codependency of America and China." [Photo: CGTN]

In his book, "Unbalanced: The Codependency of America and China," Roach pointed out that China has emerged as America’s favorite foreign scapegoat. Why is that and why now? In the CGTN interview, Roach singled out the value proposition of America’s political system. “We have a very short-term political horizon. We have our house of representatives get elected every two years, senators every six years, presidents every four years," Roach said. "None of them could admit they may have made a mistake in governing and passing laws. They found it very convenient to blame others for issues that arise in the US with respect to income inequality, jobs and real wages.” The Yale senior lecturer believes scapegoating China and others is “a real character flaw in an otherwise great national character in the United States.”