We review theoretical and empirical work on the economic effects of the United States and China trade relations during the last decades. We first discuss the origins of the China shock, its measurement, and present methods used to study its economic effects on different outcomes. We then focus on the recent U.S.-China trade war. We discuss methods used to evaluate its effects, describe its economic effects, and analyze if this increase in trade protectionism reverted the effects of the China shock. The main lessons learned in this review are: (i) the aggregate gains from U.S.-China trade created winners and losers; (ii) China's trade expansion seems not to be the main cause of the decline in U.S. manufacturing employment during the same period; and (iii) the recent trade war generated welfare losses, had small employment effects, and was ineffective in reversing the distributional effects due to the China shock.

We study the demand for government participation in China’s venture capital and private equity market. We conduct a large-scale, non-deceptive field experiment in collaboration with the leading industry service provider, through which we survey both sides of the market: the capital investors and the private firms managing the invested capital by deploying it to high-growth entrepreneurs. Our respondents together account for nearly $1 trillion in assets under management. Each respondent evaluates synthetic profiles of potential investment partners, whose characteristics we randomize, under the real-stakes incentive that they will be introduced to real partners matching their preferences. Our main result is that the average firm dislikes investors with government ties, indicating that the benefits of political connections are small compared to the cons of having the government as an investor. We show that such dislike is not present with government-owned firms, and this dislike is highest with best-performing firms. Additional results and follow-up surveys suggest political interference in decision-making is the leading mechanism why government capital is unattractive to private firms. We feed our experimental estimates and administrative data into a simple model of two-sided search to discuss the distributional effects of government participation. Overall, our findings point to a “grabbing hand” interpretation of state-firm relationships reflecting a desire by the government to keep control over the private sector.