The first “China Shock” hit the global economy two decades ago when China rapidly expanded manufacturing exports and significantly increased its share of global markets in manufactured goods. Industrialized countries responded with tariffs and other protectionist measures to protect their manufacturing industries. A “New China Shock” has occurred in recent years as Chinese manufacturing firms recovered from the coronavirus pandemic and again flooded global markets with low-cost Chinese imports.
The origins of the first China Shock can be traced back to reforms in the Chinese economy enacted by Deng Xiaoping in the 1970s. Early reforms allowed Chinese manufacturing firms to experiment with the market economy, importing advanced technology and competing in global markets. But the reforms were limited to a few industries and were tightly controlled so that they did not…
