We Warned About the First China Shock. The Next One Will Be Worse.
By David Autor and Gordon Hanson
Dr. Autor and Dr. Hanson, economics professors, pioneered research into how Chinese competition ravaged American manufacturing.
The first time China upended the U.S. economy, between 1999 and 2007, it helped erase nearly a quarter of all U.S. manufacturing jobs. Known as the China Shock, it was driven by a singular process — China’s late-1970s transition from Maoist central planning to a market economy, which rapidly moved the country’s labor and capital from collective rural farms to capitalist urban factories. Waves of inexpensive goods from China imploded the economic foundations of places where manufacturing was the main game in town, such as Martinsville, Va., and High Point, N.C., formerly the self-titled sweatshirt and furniture capitals of the world. Twenty years later, those workers haven’t recovered from those job losses. Although places like these are growing again, most job gains are in low-wage industries. A similar story played out in dozens of labor-intensive industries simultaneously: textiles, toys, sporting goods, electronics, plastics and auto parts.
Yet once China’s Mao-to-manufacturing transition was complete, sometime around 2015, the shock stopped building. Since then, U.S. manufacturing employment has rebounded, growing under President Barack Obama, the first Trump term and President Biden.
So why, you might ask, are we still talking about the China Shock? We wish we weren’t. We published the research in 2013, 2014 and 2016, along with our collaborator David Dorn of the University of Zurich, which detailed for the first time how Chinese import competition was devastating parts of America, through permanent declines in employment and earnings. We are here to argue now that policymakers are spending far too much time looking backward, fighting the last war. They should be spending much more time examining what’s emerging as a new China Shock.
Spoiler alert: This one could be far worse.
China Shock 1.0 was a one-time event. In essence, China figured out how to do what it should have been doing decades earlier. In the United States, that led to unnecessarily painfully job losses. But America was never going to be selling tennis sneakers on Temu or assembling AirPods. China’s manufacturing work force is thought to be well in excess of 100 million, compared with America’s 13 million. It’s bordering on delusional to think the United States can — or should even want to — simultaneously compete with China in semiconductors and tennis sneakers alike.
China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favorite. Today, it is aggressively contesting the innovative sectors where the United States has long been the unquestioned leader: aviation, A.I., telecommunications, microprocessors, robotics, nuclear and fusion power, quantum computing, biotech and pharma, solar, batteries. Owning these sectors yields dividends: economic spoils from high profits and high-wage jobs; geopolitical heft from shaping the technological frontier; and military prowess from controlling the battlefield. General Motors, Boeing and Intel are American national champions, but they’ve all seen better days and we’re going to miss them if they’re gone. China’s technological vision is already reordering governments and markets in Africa, Latin America, Southeast Asia and increasingly Eastern Europe. Expect this influence to grow as the United States retreats into an isolationist MAGAsphere.
In cutting-edge research, China often beats the U.S. by a substantial margin
Rank and share of the world’s most cited research in each field, by country
ELECTRIC BATTERIES (2023)
2.U.S. 6%
1.China 76%
A.I. ALGORITHMS AND HARDWARE ACCELERATORS (2023)
2.U.S. 12%
1.China 29%
ADVANCED OPTICAL COMMUNICATION (2023)
2.U.S. 8%
1.China 45%
ADVANCED MAGNETS AND SUPERCONDUCTORS (2023)
2.U.S. 15%
1.China 29%
MACHINE LEARNING (2023)
2.U.S. 11%
1.China 40%
QUANTUM SENSORS (2023)
2.U.S. 18%
1.China 27%
ADVANCED INTEGRATED CIRCUIT DESIGN AND FABRICATION (2023)
We Warned About the First China Shock. The Next One Will Be Worse.
By David Autor and Gordon Hanson
Dr. Autor and Dr. Hanson, economics professors, pioneered research into how Chinese competition ravaged American manufacturing.
The first time China upended the U.S. economy, between 1999 and 2007, it helped erase nearly a quarter of all U.S. manufacturing jobs. Known as the China Shock, it was driven by a singular process — China’s late-1970s transition from Maoist central planning to a market economy, which rapidly moved the country’s labor and capital from collective rural farms to capitalist urban factories. Waves of inexpensive goods from China imploded the economic foundations of places where manufacturing was the main game in town, such as Martinsville, Va., and High Point, N.C., formerly the self-titled sweatshirt and furniture capitals of the world. Twenty years later, those workers haven’t recovered from those job losses. Although places like these are growing again, most job gains are in low-wage industries. A similar story played out in dozens of labor-intensive industries simultaneously: textiles, toys, sporting goods, electronics, plastics and auto parts.
Yet once China’s Mao-to-manufacturing transition was complete, sometime around 2015, the shock stopped building. Since then, U.S. manufacturing employment has rebounded, growing under President Barack Obama, the first Trump term and President Biden.
So why, you might ask, are we still talking about the China Shock? We wish we weren’t. We published the research in 2013, 2014 and 2016, along with our collaborator David Dorn of the University of Zurich, which detailed for the first time how Chinese import competition was devastating parts of America, through permanent declines in employment and earnings. We are here to argue now that policymakers are spending far too much time looking backward, fighting the last war. They should be spending much more time examining what’s emerging as a new China Shock.
Spoiler alert: This one could be far worse.
China Shock 1.0 was a one-time event. In essence, China figured out how to do what it should have been doing decades earlier. In the United States, that led to unnecessarily painfully job losses. But America was never going to be selling tennis sneakers on Temu or assembling AirPods. China’s manufacturing work force is thought to be well in excess of 100 million, compared with America’s 13 million. It’s bordering on delusional to think the United States can — or should even want to — simultaneously compete with China in semiconductors and tennis sneakers alike.
China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favorite. Today, it is aggressively contesting the innovative sectors where the United States has long been the unquestioned leader: aviation, A.I., telecommunications, microprocessors, robotics, nuclear and fusion power, quantum computing, biotech and pharma, solar, batteries. Owning these sectors yields dividends: economic spoils from high profits and high-wage jobs; geopolitical heft from shaping the technological frontier; and military prowess from controlling the battlefield. General Motors, Boeing and Intel are American national champions, but they’ve all seen better days and we’re going to miss them if they’re gone. China’s technological vision is already reordering governments and markets in Africa, Latin America, Southeast Asia and increasingly Eastern Europe. Expect this influence to grow as the United States retreats into an isolationist MAGAsphere.
In cutting-edge research, China often beats the U.S. by a substantial margin
Rank and share of the world’s most cited research in each field, by country
ELECTRIC BATTERIES (2023)
2.U.S. 6%
1.China 76%
A.I. ALGORITHMS AND HARDWARE ACCELERATORS (2023)
2.U.S. 12%
1.China 29%
ADVANCED OPTICAL COMMUNICATION (2023)
2.U.S. 8%
1.China 45%
ADVANCED MAGNETS AND SUPERCONDUCTORS (2023)
2.U.S. 15%
1.China 29%
MACHINE LEARNING (2023)
2.U.S. 11%
1.China 40%
QUANTUM SENSORS (2023)
2.U.S. 18%
1.China 27%
ADVANCED INTEGRATED CIRCUIT DESIGN AND FABRICATION (2023)
中国重庆的航运码头，这里是连接中国与东南亚国家贸易航线的枢纽。 
重庆的一条电动汽车装配线。与一年前相比，中国今年生产的电动汽车数量增加了45%。
