Having your arguments centered on the psychological effects may be a rather weak argument, but this topic as a lot of meat on it regardless.
I think a more compelling argument would be if you tried going from a political standpoint on why the US gov't should not have China keep its favorite nation status. Give examples of where China being a "favorite nation" so to speak harms the U.S. Your best bet would be to show how China threatens the U.S. economically, i.e.--off shoring, and that if you look at the big picture, stopping the favorite nation status would benefit the US in the long run because we would stop aiding the growth of a potential super power nation that has very different goals as our democracty/government.
You may also have another contention about human rights violations. The US is a signer of the Universal Declaration of Human Rights, and I am unsure of whether or not China is, but Wikipedia or Google can easily give you the information on that. Violations could be control of the media, a lack of gov't tolerance for religious or political groups, or child labor, the latter of the three may provide you with the most information.
All in all, I think it would be paramount to show how China not having a "favorite nation" status is not a bad thing but indeed would benefit the United States in the long run. If the affirmative tries to go on the approach that it would somehow harm China economially or whathaveyou, all your team has to show is that China has more trade partners and allies than the United States, we are not co-dependant on each other.
Good luck and good skill!
