Opinion: Beijing, Washington Face Similar Economic Challenges
Moderating rising income disparities. America’s version of capitalism has had no more success in curbing inequality than China’s. Both have generated a Gini coefficient of inequality around 0.45, but different factors are at play. The dominance of China’s state-owned enterprises is seen as exacerbating disparities. But crony capitalism and dollar politics in the West can be just as pernicious. Both favor connected insiders over innovative outsiders. Globalization is also under attack for exacerbating disparities. The incomes for highly skilled workers have increased while returns to the average worker have stagnated across countries. This has contributed to stagnating wages for middle-class workers in the U.S. and widening disparities between China’s trade-driven coastal areas compared to its interior. Trying to moderate such disparities with regulatory and fiscal policies runs the risk of stifling innovation in both countries. However, there is no escaping the need for the American economy to invest more to increase the productivity of its workers. For China, it is more about moving up the value chain to keep growth going.
Yukon Huang is a senior fellow at the Carnegie Endowment and a former World Bank Director for China.