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09 May 07 - 10:23 AM (#2047012) Subject: BS: Chinese Trade Time bomb From: beardedbruce From the Washington Post- Worth thinking about? China's Trade Time Bomb By Robert J. Samuelson Wednesday, May 9, 2007; Page A17 It sometimes seems as if almost everything we buy comes from China: DVD players, computers, shoes, toys, socks. This is, of course, a myth. In 2006, imports from China totaled $288 billion, about 16 percent of all U.S. imports and equal to only 2 percent of America's $13.2 trillion economic output (gross domestic product). Does that mean we don't have a trade problem with China? Not exactly. China is already the world's third-largest trading nation and seems destined to become the largest. On its present course, it threatens to wreck the entire post-World War II trading system. Constructed largely by the United States, that system has flourished because its benefits are widely shared. Since 1950, global trade has expanded by a factor of 25. By contrast, China's trade is mercantilist: It's designed to benefit China even if it harms its trading partners. There's a huge gap in philosophy. By accident or design, China has embraced export-led economic growth. The centerpiece is a wildly undervalued exchange rate. Economist Morris Goldstein of the Peterson Institute thinks the yuan is 40 percent cheaper than it should be. The resulting competitive advantage props up exports, production and jobs. Since 2001, China's surplus on its current account -- the broadest measure of its trade flows -- has jumped from $17 billion to $239 billion. As a share of China's GDP, it has zoomed from 1.3 to 9.1 percent. These figures include Chinese firms and multinational companies doing business in China. Despite popular impressions, China's trade offensive hasn't yet seriously harmed most other economies. For example, America's current account deficit (to which Chinese imports contribute) was $857 billion last year, up from $389 billion in 2001. Still, that hasn't stymied job creation; the U.S. unemployment rate is 4.5 percent. And world economic growth has accelerated. But what's been true in the past may not be true in the future. The huge U.S. trade deficits, fed by Americans' ravenous appetite for consumer goods and heavy borrowing against rising home values, stimulated economies elsewhere, including China's. Now that stimulus is fading as U.S. home prices weaken and consumers grow more cautious. For China to expand production, demand must come from its own consumers or other nations -- or some other country's production must be displaced. There's the rub. Even Chinese officials favor higher local demand. But either they can't or won't stimulate it. Personal consumption spending is a meager 38 percent of GDP; that's half the U.S. rate of 70 percent. The Chinese save at astonishingly high levels, partly because they're scared of emergencies. The social safety net is skimpy. Health insurance is modest: Out-of-pocket spending covers half of medical costs, reports economist Nicholas Lardy of the Peterson Institute. There's no universal Social Security, and only 17 percent of workers have pensions. A mere 14 percent are covered by unemployment insurance. The surplus of personal savings, supplemented by business savings and foreign capital, means that Chinese and multinational firms can build more factories -- and that raises the need to export. A low currency thus serves two roles: as an inducement to attract foreign investment, and as a tool to balance the economy and to check popular discontent. But for the rest of the world, the consequences are potentially threatening. As China moves up the technology chain, it may become the low-cost export platform for more and more industries. This could divert production from the rest of Asia, Europe, Latin America and the United States. It is not "protectionist" (I am a long-standing free-trader) to complain about policies that are predatory; China's are just that. The logic of free trade is that comparative advantage ultimately benefits everyone. Countries specialize in what they do best. Production and living standards rise. But the logic does not allow for one country's trade systematically to depress its trading partners' production and employment. Down that path lie resentment and political backlash. Everyone complains about America's trade deficits, but they actually symbolize global leadership. Access to the U.S. market has promoted trade by enabling other countries to export. But the deficits cannot grow indefinitely. Imagine now a trading system whose largest member seems intent on accumulating permanently large surpluses. Nor, it might be added, are surpluses ultimately in China's interests. They drain too much of its production from its citizens and contribute to growing domestic economic inequality. What everyone needs is more balanced Chinese economic growth, less dependent on exports. Given the immense stakes -- literally the future of the global trading system -- the Bush administration has been too timid in pushing China to change. The Treasury Department won't even declare China guilty of currency manipulation. No doubt doing so would irritate the Chinese. But avoidance is no solution; the longer these problems fester, the more intractable and destructive they will become. |
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09 May 07 - 03:14 PM (#2047206) Subject: RE: BS: Chinese Trade Time bomb From: Rapparee Why bother when you can leave the problem, like the national debt, to those who come after you? |
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09 May 07 - 03:25 PM (#2047217) Subject: RE: BS: Chinese Trade Time bomb From: GUEST,petr global leadership? much of the US agricultural industry is heavily subsidized see big sugar for instance.. Americans pay 3x what the rest of the world pays for sugar.. Developing nations wanting to export agricultural products face high tariffs and other barriers in the US (as well as Europe).. Chinas has pegged its currency below the US dollar and has monetary export controls that helped China avoid the Asian meltdown 10 years ago.. Whereas other countries such as Thailand and South Korea suffered huge devaluations in currency thanks to rampant currency trading when the Asian bubble burst. China's been around for several thousand years longer than the US and and in the end will do what it wants. The US under Clinton thought opening up trade with China will open up the 1billion + market to the US but it ended up the other way around. iTs also laughable that the US would accuse China of currency speculation.. ONe of the ways the BUsh administration has handled its overspending is to let the US dollar fall to about half of what it was worth when Bush started. ITs the way the empire taxes the rest of the world. Especially when the Currency of oil trade is the US greenback, and nations that purchase oil need to keep large amounts of US currency.. Goldman Sachs predicts the Chinese economy will overtake the US in 20years. and in the end economics trumps all. The irony is that the current #1 superpower cannot even make the steel for its battleships. |
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09 May 07 - 03:28 PM (#2047222) Subject: RE: BS: Chinese Trade Time bomb From: beardedbruce petr, Point of fact: The US does not presently have any active duty battleships. ( one from WWII is in mothballs) |
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09 May 07 - 06:37 PM (#2047369) Subject: RE: BS: Chinese Trade Time bomb From: dianavan Thats why its a smart move for today's kids to start learning Cantonese. |
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09 May 07 - 07:55 PM (#2047442) Subject: RE: BS: Chinese Trade Time bomb From: kendall I didn't do well in economics in school, what would happen if China calls in her loans? |
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09 May 07 - 08:22 PM (#2047458) Subject: RE: BS: Chinese Trade Time bomb From: GUEST,petr ok - warships then. |
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09 May 07 - 09:19 PM (#2047494) Subject: RE: BS: Chinese Trade Time bomb From: EBarnacle About 40 years ago, when I took my first economics course, in Resources, my professor made an outrageous statement: The American economy was going to be based more and more upon providing services and less and less upon manufacturing. We students thought he was insane. I guess not. More and more of our stuff is being outsourced to the rest of the world while we trade rocks back and forth and live on the profits. One of the major sources of the American Revolution was England's insistence upon doing all the manufacturing and only letting us produce raw materials. Now we are doing it to ourselves. |
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09 May 07 - 09:35 PM (#2047504) Subject: RE: BS: Chinese Trade Time bomb From: Bobert The danger isn't as much as what China exports but how much American debt the Chinese are bankrolling... Heck, it could be argues that without China lending, the US might not have the resources to invade and occupy Iraq... Think about that one, will ya'??? |
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09 May 07 - 10:53 PM (#2047539) Subject: RE: BS: Chinese Trade Time bomb From: Rapparee And the second biggest holder of US debt is...the EU. As of May 8, 2007, the US Treasury says that the US owes US $8,828,073,000,000 (rounded to the nearest million). That's eight trillion, eight hundred and twenty-eight billion, seventy-three dollars. On January 21, 2000, the US debt was US $ 5,711,818,000,000. Both figures are from the US Treasury Department's daily summary and represent the TOTAL debt (as far as I can tell -- I'm a librarian, not an accountant). |
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09 May 07 - 10:58 PM (#2047543) Subject: RE: BS: Chinese Trade Time bomb From: Bill D I had a couple of GE (General Electric) night light bulbs give up MUCH earlier than it said on the package. For some reason I found the package in an odd pile. ...............yep..."Made in China"....now, for some reason, this worries me..... |
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10 May 07 - 09:26 AM (#2047977) Subject: RE: BS: Chinese Trade Time bomb From: EBarnacle Why should it worry you? If there is no ZD [zero defects] effort in the quality control because the suckers, excuse me--customers, are in a position where they have no recourse they will continue to receive crap. At least when a reasonable proportion of things are made in the USA, we are supporting our own workers instead of a bunch of leeches who outsorce all the work on the theory that cheaper is better because it makes for more profit. |
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10 May 07 - 11:49 AM (#2048128) Subject: RE: BS: Chinese Trade Time bomb From: Rapparee I think that there is, or should be, a difference between "profit" and "reasonable profit." I don't object to the latter. |
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10 May 07 - 12:10 PM (#2048152) Subject: RE: BS: Chinese Trade Time bomb From: GUEST,petr an acquaintance who just moved to canada from Germany pointed out that there arent all that many Chinese products sold there and if they are they arent any cheaper than the EU products.. (I understand the EU has put up a lot more trade barriers to China.. Id be interested in what European mudcatters say). |
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10 May 07 - 08:45 PM (#2048676) Subject: RE: BS: Chinese Trade Time bomb From: The Fooles Troupe I bought a (chinese) GE CFL - it ran once for a couple of hours then would not light. In Aus, we have the Trades Practice Legislation - I got my money back under the "not fit for purpose" clause... |