The Economic Interdependence between China and the United States

China U.S economy

The China-United States relations is a very complex matter. These two of the largest economies in the world are known to have a high level of interdependence in many aspects, including geography, economics, and in energy-related matters. In this article, we will discuss the economic interdependence between China and the United States.

China and the United States both share a need for stability in broad relations at present, here are some of the major factors that depict the fundamentals of the China-U.S. relations.

China Is Dependent on Exports to the U.S.

Since the 1980’s, China’s economic approach is focused on exports which turned out to be very beneficial for the country and for the rest of the world including the U.S. in terms of trade and international peace. China has achieved 30 years of fast economic growth primarily being dependent on exports.

As of 2015, 20% of all Chinese exports went to the United States, making U.S. the largest market for China’s exports.

The U.S. Relies on China’s Cheap Imports

China depends on the exports to the U.S., but a similar case could be made with the U.S. as they are addicted to cheap imports from China. Data shows that more than one-fifth of all U.S. imports came from China in 2015.

Economically, America is dominant in areas like food production, education, technology, and precision industrial manufacturing. China, however, is strong in areas like heavy industry, light manufacturing, and cheap labor. This presents a recipe for complementary economic interdependence.

The Geography of China and the U.S.

The U.S. is located on the most resources and capital-rich continent, the North America. This advantageous environment has let America to focus on projecting power and dominate global merchant marine traffic. Since China resides across an ocean dominated by the American Navy, neither directly threatens the other.

China, on the other hand, cannot afford to antagonize America, since it would require American support or tacit neutrality in any conflict with Russia or India. Geography ensures that China does not see American naval dominance on its shores as a comparable threat.

Complementary Energy Interests

Over the coming decades, China will strive to become more self-sufficient by expanding its hydropower capacity and coal plants. America has the same goal, and with the shale revolution will likely end up exporting energy to China, including oil and liquid natural gas.

Since oil is a non-renewable resource, OPEC nations will likely be unable to meet China’s growing demand.  However, America now controls the world’s largest untapped oil reserve, the Green River Formation. As Chinese demand increases, Beijing will likely become the top importer of this oil. No other oil source can supply China’s needs as efficiently.

Eastern European and Russian oil shale reserves are smaller and less politically and economically extractable than America’s emerging sources. American control over future markets for natural gas is almost as certain as for oil. The U.S. produces natural gas abundantly and is building the facilities to export it to foreign markets, including China.