Authored by William Robert Barber
Regarding China and all that is Chinese, we in the West, particularly in America, have been inundated with general as well as specific information. Everybody and anybody has developed opinions on the encroaching economic/military might of China. Voluminous documentation of statistics and graphs reinforce from a variety of sources an assortment of disinformation, misinformation, lies, truths, and boundless estimates of possibilities and probabilities. An encroaching China is a topic grandiloquently asserted regularly by politicians, wonks, and the ever-all-knowing media; they, as if psychic (evidence not required), opinionate on every angle of China’s intentions and motivations.
The sum of all this inundation is a growing anxiety that China will surpass the United States in GNP by 2023. The fear that China may at sometime in the future stop purchasing issued US Treasury’s IOU’s, the result for US consumers being an abatement or even a full-stop of discretionary consumption; thereby, invoking an economic reality thus far successfully ignored. Congress and the administration are outwardly upset that China refuses to devalue their currency or allow their it to float according to market inclinations. Hence, the declaration: Chinese goods are artificially lower causing unfair export competition within the global economy.
The pressure, mostly from the United States, for China to appreciate the Yuan is founded on two uppermost suppositions. The first is that Yuan appreciation will eventually stimulate US domestic manufacturing, causing a positive employment growth. The basis of this stimulation of US domestic manufacturing requires a substitution of Chinese products for American made because the home grown products are now price competitive with the Chinese imports. Naturally, the presumption that this event (Yuan value appreciation) will significantly increase employment, is presumptive hypothesis.
The second is that US products, just as they would for the US consumer, be more competitive to the Chinese consumer, thereby stimulating US exports resulting in a more neutral balance of trade or payments equation between the two countries.
Although there certainly are other grievances and concerns related to the China trade but I do believe the focus is now on Yuan appreciation. In fact the focus is so all-purposed If the Chinese did appreciate their currency, then and only then, will the Treasury Department, the unions, and US manufacturing realize that the sky will not fall and indeed the universe would be finally righted into some kind of corporeal balance. However, in the present the government of the United States is sorely distraught over China’s reluctance to submit to this nation’s or even Obama’s persuasion.
My inclination as to Yuan appreciation is quite the contrary to the belief of congress and the administration. Of course my contrariness includes a differing, not simply with congress and the administration, but also, with a whole bunch of very bright, intelligent, and specifically informed economist. Nevertheless, I believe they are resting their analytical sum on a number of erroneous premises.
For instance, China is not a world-class competitor because it does not possess a strong domestic consumer base. In reality the very fact that it imports less and exports more is a negative. When the Chinese import goods to America it either must originate the order by having a US domiciled Chinese owned company initiate, receive, transport, store, distribute, and finally wholesale/retail; or respond to a US company’s order wherein the same number of transactions apply. In everyone of these transactions American enterprise and workers benefit; but, it is more than that, the financial beneficial goes out further to finance, insurance, and hundreds of assorted collateral business entities. The importation of Chinese goods is a multi-billion all-American financial plus.
China is not only NOT a threat to US interest it is an ally. China must strategically position itself in order to receive a geographic dividend from the global marketplace; in other words, China must invest in the global infrastructure as a geo-economic compulsory. Such a strategy of investment-positioning is a surety on two pillar levels. One for China need to invest globally is to insure access to the vagaries of world commodity, currency, real estate, equity, assorted opportunities, and discretionary resources. The other is to stimulate per targeted tactical-investments a continuance of the world’s populous purchasing Chinese goods. Remembering China utilizes USD, Euros, Yen, as well as a multitude of other currencies to make these global investments.
The Chinese are characterized as a nation of hyper puissance; a nation that is growing in every measurable way. But in fact China is no more than the manufacturing sector of every American metropolis. This manufacturing sector has no pollution, it does not churn on the environment, and there is no risk of a technology change eradicating the workforce. China is wholly dependent on US consumer demand; as goes the American consumer so does China. In China’s case particularly we Americans make more money on reselling Chinese goods than the Chinese do selling it to us.
The United States and China, for mutual benefit, are in a symbiotic embrace. The renminbi rate pegs to the US Dollar. This is the truthful Yin and Yang of it.
I do find it intensely hypocritical that the President Obama, Secretary Geithner, an array of other such notables declares that China is not playing fair. How silly and childish these persons are. Is not the object of trade to position oneself to the advantage? Can anyone imagine that the Saudis will cut the price of a barrel of oil in half in the interest of being fair? A trade is measured when the transaction is completed. Whether it is fair or not will depend on if the same buyer, seller, agree to another transaction under the identical terms and conditions. If they do then one could speculate that fair has been established. Within the marketplace of goods, services, and people fair is not a moral equation.
For now, I think that all is well within the partnership of “Chimerica.” Now if we can just get along…