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'America first' will put America lastU.S. President Donald Trump's protectionist threats against China have spurred much concern. The combination of rising labor costs and weaker demand for Chinese exports has reduced China's annual GDP growth to 6.9 percent in 2015 and 6.7 percent last year.This is still a respectable pace; but it is not the best China could do. As Justin Yifu Lin and Wing Thye Woo have noted, in 1951, when Japan's per capita income relative to that of the U.S. was the same as China's is today, Japan was experiencing sustained growth of 9.2 percent.A stress-test analysis by the McKinsey Global Institute found that if China continued to pursue its debt- and investment-led growth model, the ratio of nonperforming loans could rise from 1.7 percent today (according to official figures) to 15 percent in just two years.While labor productivity is rising steadily in China, it remains less than 30 percent of advanced-country levels.In the end, this will isolate the U.S. far more than China or Mexico.Without the TPP facilitating capital flows among its member countries, China is likely to overtake the U.S. as the largest source of foreign direct investment for the ASEAN countries.
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