American Jobs Plan announced this week by President Biden moves away from small government, tax-cutting policies. The President wants big Western Democracies work together to Counter China’s Belt & Road Initiative.
When the Biden administration unveiled a US$2.3 trillion infrastructure plan on Wednesday, some economists could hardly ignore its similarities with China’s economic stimulus therapy.
According to the American Jobs Plan announced by United States President Joe Biden, the US will fix the nation’s ageing roads and waterways, expand broadband internet access and invest in green-energy initiatives such as electric vehicles over eight years. The plan, subject to Congress approval, would be financed by higher corporate taxes.
“It’s a once-in-a-generation investment in America,” Biden said during a speech in Pittsburgh on Wednesday, casting a shift in economic thought away from the small-government, tax-cutting approach embraced decades ago under former US president Ronald Regan, a Republican.
However, China is no stranger to such a strategy. Infrastructure investment, for its quick effect, has been a top choice to spur economic growth on mainland China in recent decades.
To ward off the impact of the 2008-09 global financial meltdown, China launched a 4 trillion yuan (US$609 billion) stimulus package under which central and local governments invested heavily in roads, railways, airports and subsidised housing.
“The approaches are very similar,” said Chen Fengying, the former director of the World Economy Institute at the China Institutes of Contemporary International Relations.
“China’s stimulus package, though with the consequence of higher debts, effectively expanded the size of gross domestic product,” Chen said. “The US is searching for effective ways to avoid a severe economic slowdown. It’s not who’s learning from whom. During crisis, the two countries’ minds think alike, coincidentally.”
Zhang Fan, a professor of economics at Peking University, said the Biden administration’s infrastructure plan was necessary because US weakness was further exposed by the February power blackout in Texas.
“Such measures are somehow like Beijing’s investment toolkit, but it should be traced to the New Deal adopted by Franklin Roosevelt to fight the Great Depression,” he said.
While China’s state media did not delve deeply into the proposal, articles and social media posts, including on WeChat and Weibo, used nationalism to draw attention.
“The US is quietly copying the playbook of Beijing,” a Weibo user posted. “But can it succeed? Unlike China’s quick approval and implementation, Biden’s plan faces great uncertainties at Congress.”
Shi Yinhong, an international relations expert from Renmin University in Beijing, said China should be sober-minded. “Competition is about learning from each other. China has been learning from the US for a long time. This time, the US is doing what they need to do, such as repairing roads and bridges.
“Arrogance will do China no good in the future competition with the US,” he said.
In his first foreign policy address in February, Biden described China as the “most serious competitor” to the US and vowed to confront Beijing on various fronts, including human rights, intellectual property and economic policy.
In “Build Back Better”, Biden’s jobs and economic recovery plan for working families, the administration vowed to spend US$300 billion federal on research and development (R&D) and breakthrough technologies from electric vehicle technology to lightweight materials, 5G and artificial intelligence to create high-quality jobs.
The proposed national industrial strategy also includes US$400 billion federal spending on “Buy America” purchases of domestic products, materials and services.
There is a striking similarity between Biden’s list and President Xi Jinping’s “Made in China 2025” Initiative, which was announced six years ago as an effort towards China’s domination of hi-tech sectors such as aviation, semiconductors and AI and to make China largely independent of Western suppliers for critical technology.
“China is out-investing us by a long shot,” Biden said at a news conference late last month, “because their plan is to own that future”.
Biden said he had suggested to Prime Minister Boris Johnson of Britain that the big Western democracies work together to counter the Belt & Road Initiative (BRI), China’s ambitious efforts to build better trade routes around the world.
Launched in 2013, Belt & Road is a multi-trillion-dollar plan to invest in ports, rail lines, roads and other infrastructure in Asia, Africa, Latin America and Europe. The project would significantly expand China’s economic and political influence, raising concerns in the US and elsewhere.
Pang Zhongying, a specialist in international relations at Ocean University of China, said Biden’s plan risked backfiring although it remained unknown how it would be carried out.
“The US has been accusing China of [having] industrial subsidy policies. If it chooses to do the same, it would betray the non-discriminatory competition principles it claims to uphold and hurt the interests of its European partners,” Pang said.
George Magnus, associate at Oxford University’s China Centre and research associate at SOAS, University of London, said Chinese industrial policy had always been about building national champions, establishing commercial privileges for local firms and aiming for degrees of market dominance or, more recently, self-reliance.
“In China, the state sector is unequivocally in the driving seat while private firms seem no longer to be as essential as they have been in the past, and are certainly bring encouraged or pressured to support party objectives. This is as far away from even Biden’s America as one could get,” Magnus said.
“Of course, there is going to be competition between China and the US in emerging and developing nations for soft power advantage, markets, opportunities and access to resources. The BRI is a manifestation of this, and I think it’s fair to say the US and allies would like to offer these nations an alternative to China with regards to goods and services as well as standards and values.
“In this sense, yes, the US is taking a leaf out of China’s book, but only to revert to past behaviour, which had been allowed to become sloppy,” he said.