The emergence of China as an economic superpower

"As if exporting $12 billion more than they imported wasn't enough. China decided to go for $13 billion"

Is there a decision on the Chinese part to "go for 13 billion"? Or is it the dollar printing in the US is out of control? The dollar is a piece of junk and without China and Japan's support it ain't worth anything. So why don't you get off China's back and start say "Thank you China!" Or a better way yet, go find a job and start produce something.

Thanks for stopping by and for your comments. If you read some of my other posts, you will see that is exactly what I said ...America! Get back to work!

Looks like we agree on this one.

I don't think too much trade surplus is always good news to China. This not only cause other countries' hostility, but also affect the upgrading of our own industry. We should focus more on hi-tech and environment-friendly industries.

Wrong Assertion # 6

Some US politicians, especially those in our Congress, wrongly assert that China’s RMB is undervalued, and that China’s manipulation of the RMB is the main reason US has a trade deficit with China. I understand it is popular for US politicians to bash China, especially if they are running for office, since there is little risk playing to the US American audience, to pander for votes, by bashing China. Notwithstanding the political rhetoric, this assertion is wrong, and easily refuted. My post is not to argue whether the RMB is undervalued or not, since even professionals who are paid to know these things cannot agree on it. My post examines the second part of this frequently wrong assertion – blaming China for US trade deficits.

1. Since China removed the currency peg in 2005, it has steadily appreciated the RMB, yet not only do we not see a reduction of US trade deficit, the deficit has actually increased steadily. This fact refutes the political rhetoric. A more real world explanation as to why the US trade deficit is increasing is because US MNCs have increased their exports to US. Wu Yi stated that 85% of the deficit is a result of US MNCs exporting back to USA. There is also a second real world explanation. Many Asian countries use China as the export platform, which understates that country’s exports, and overstates China’s exports. For example, I use a Panasonic Shaver. Panasonic is a Japanese company, yet the final assembly of this shaver was “Made in China”. A product like this gets counted as a Chinese export, but it is really for a Japanese company. US media will not tell you that 85% of the deficits are actually because of US MNCs, and are happy to scapegoat China. The export numbers don’t truly reflect what China actually exports for its own behalf, versus what it exports for some other country.

2. If it was only about RMB value, and the wrong assertion that China manipulates the RMB for its benefit, then US should only see a trade deficit with China. But the fact is, US has trade deficits with many other countries. Does this mean all the countries have manipulated its currency to create a surplus for themselves, and a deficit for US? If someone believes that rhetoric, then why don’t US go after all countries that have a trade surplus with US? When we honestly look at this situation, it cannot be just about RMB, given that USA has trade deficits with too many other countries. A more real world explanation is, US monetary policies, both past and present, have so far inflated the US economy that it cannot realistically compete with many other countries in the world. US purchasing power has reduced by over 80% since 1970, as real inflation has truly hurt US Americans and its competitiveness much more. I know the idea was to inflate the debts away, but that is cutting off the nose to spike the face, because inflation has hurt American global competitiveness, far more than it helped with repaying existing debts, using depreciated dollars. That is why despite currency differences, the majority in the world don’t have an over inflated economy, and can easily undercut US labor, and other associated costs, rendering US non-competitive in the global marketplace. US can try and innovate more, but innovation alone, will not fix this problem, since the shelf life of most innovations is short, as the market can make a faster, cheaper, better version of whatever, pretty quickly.

3. Other countries don’t have as high a deficit with China. Some even have a surplus. Countries like Japan and Germany actually make things that China wants to buy, so they don’t have the kind of high deficits with China like USA. US restrict what it sells to China, which exacerbate the deficit. I understand the National security concerns, and why US feels it needs to restrict sales of certain things. But those actions carry consequences of higher deficits. Perhaps US can look for other areas it can develop and sell to China, to reduce the deficit. For example, investing in more R&D to come up with workable solutions to renewable energy, alternative energies, environmental cleanup, etc. may be an area where US can fill a need and sell some things that China wants. But US needs to get serious because the Europeans are treating global warning much more seriously, and have current technologies that may serve China’s needs. This opportunity window will not stay open indefinitely, so if I were USA, I would move on it yesterday.

4. USA doesn’t really have many competitively priced things to sell. Many other countries can make and produce products cheaper than US. US monetary policies created this mess, as US is paying a very harsh price, since global competition has exposed its weakness – an inflated economy, with inflated cost of living, inflated balance sheet and income statement, which usually price US out of global competitiveness. When you have a global market, US loses, especially when it comes to a price-sensitive product, since it is not realistic for US to compete on price. USA’s inflated economy handicaps it, making it difficult to compete globally.

5. China’s currency policy is China’s business. That’s the same for all sovereign countries, as a country’s currency is that country’s business. USA would not welcome other countries tells US what should be its currency policy. US can get more done, accomplish more, if it follows the “Golden Rule of Reciprocity”, and honestly assess why it cannot compete globally, instead of alienating others by attempting to scapegoat them. Our own monetary policies, our over consumption, spending more than we earned, did this to the USA. China didn’t make US overspend, and adopt inflationary monetary policies. We did it ourselves. It’s high time, we face up to it.

- author the USA

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