China Goes Generic! — Dean Baker

Must-read. It's short.

Not only does this have a potentially huge impact on Big Pharma, but it is also China poking the US in the eye in retaliation for it regards as humiliation. So it is also "saving face."

Perhaps the largest and longest lasting impact of the trade war that is already occurring is the change in attitude of Chinese consumers about American products. The Chinese are very nationalistic and patriotic. They are also ethnically proud and justifiably so based on being able to boast of the longest functioning culture on earth that is still going strong.

Insulting the China, which means the Chinese people, is a bad idea in a lot of ways, not the least owning to economic reasons. China has not only the largest market but also the fastest growing middle class of large developed countries. And there is a long way to go, even though China has the largest economy based on PPP. Loosing its initial foothold that market would/will be difficult for the US to deal with. This is, of course, especially true if Chimerica decouples, as the China hawks wish.

Worst of all, President Trump recently labeled President Xi an "enemy." The Chinese will understand "Xi" here as identical with "China," and that the US regards China as an enemy. This was a really, really dumb move that is impossible to reverse without kowtowing, which, of course, the American president would never do. It goes far beyond a strategic blunder. It changes the entire game.

At this point, it's "locked and loaded," and it is turning into more than a war of words. It didn't need to go this way.

Beat the Press
China Goes Generic!
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C