Abstract:

Purpose: The Chinese economy has become the world's second largest economy evolving from an underdeveloped country. Today, its impact on the US economy is discussed. The purpose of this study is to find an answer to the question of which growth model has China followed to achieve economic power. Methodology: An input-output analysis is used in the study. The competition war between China and the USA within the framework of the export-led growth model is addressed. This comparison is analyzed for the periods of 1990-2003 and 2003-2011. Findings: The analysis revealed different outcomes for China and the USA. China has gained competitive power with low-cost production, low-value exchange rate policy, and high technology. In the 1990-2003 and 2003-2011 periods, it gained economic strength with the export-driven growth model. In the USA, on the other hand, high-cost production was dominant. Over time, USA competitiveness against China decreased and it had a constant deficit in foreign trade. For this reason, the study concluded that China's competitiveness and its role in the economy of the USA were of great importance. Originality: Unlike the studies in the literature, this article compared two different periods and examined the competition between the two countries through institutional factors, using input-output analysis. It also investigated the relationship between wage increase and the exchange rate.

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