I have an issue with the "China Shock 2.0" narrative. The narrative, championed mainly in Western countries, portrays China's export-led model as one built on unfair competition — due to China's industrial policy instruments — and as contributing to overcapacity and global imbalances. The narrative heavily glosses over the double standards of these accusations: the US and Europe were heavy users of industrial policy during their periods of economic development, and still are. The US CHIPS and Science Act is, in fact, the largest industrial subsidy bill in human history. Perhaps most egregiously, the China Shock narrative conveniently overlooks the fact that the West welcomed China's export-led model with open arms — even encouraged it — for decades. Why? Because it benefited them enormously. It lowered prices for Western consumers, enhanced the structural power of Western-based corporations, kept inflation in the West in check, and subsidised wage growth in Western domestic service sectors. China's export-led model only became a problem when China climbed the value chain and threatened Western hegemony. This, rather than China's trade surplus, is the real motivation behind the China Shock narrative. JD Vance captured this hegemonic anxiety well when he said that "the idea of globalisation was that rich countries would move further up the value chain while the poor countries made the simpler things." The China Shock narrative has even found a way to spin China's clean energy exports as problematic because they are producing too much, too cheaply. Yes, China is apparently making too many solar panels, wind turbines, and EVs in the middle of a climate emergency. The real China Shock is that China continued to develop its economy rather than sticking to producing t-shirts and toys.

The biggest myth of economic history is that rich countries developed by embracing free trade. The truth is that rich countries relied heavily on state intervention. Then, they told the rest of the world to embrace free trade, kicking away the ladder they had climbed up. We are now witnessing, once again, rich countries turning to state intervention and protectionism. In fact, they are actively dismantling the ideology of free trade they pushed onto the rest of the world. Why? The answer is simple: they now need protectionism again to compete with countries that “accidentally” caught up.