China tells US to put its house in order

[alexisfree]

By James Kynge in Beijing, Chris Giles in London and James Harding in Santiago
Published: November 22 2004 18:36 | Last updated: November 22 2004 18:36

in a mark of China's growing economic confidence, the country's central bank has offered blunt advice to Washington about its ballooning trade deficit and unemployment.

In an interview with the Financial Times, Li Ruogu, the deputy governor of the People's Bank of China, warned the US not to blame other countries for its economic difficulties.

“China's custom is that we never blame others for our own problem,” said the senior central bank official. “For the past 26 years, we never put pressure or problems on to the world. The US has the reverse attitude, whenever they have a problem, they blame others.”

Mr Li insisted an appreciation of the Chinese currency would not solve the US's structural problems and that although China was “gradually” moving towards greater exchange rate flexibility, it would not do so under heavy external pressure.

“Under heavy speculation we cannot move and under heavy external pressure we cannot,” said Mr Li. “So the best environment for us to gradually move towards a more flexible exchange rate is when people don't talk about it.”

His comments will disappoint US, Japanese and European politicians. Pressure has mounted on the Chinese administration to revalue the renminbi or to increase the flexibility of the Chinese exchange rate over the past two years.


http://news.ft.com/cms/s/f16a4694-3cb1-11d9-bb7b-00000e2511c8.html

[Arkana]

1. Your country might be fucked up if...

Really, when China is asking us to get our act sorted out, we know we've slid just a little too far down the slope.

[alexisfree]

2. just wait...

The avalanche is coming for the US economy

[liberal N proud]

3. Ironic, isn't it?

[ProdigalJunkMail]

4. what would happen to China's ecomony if we decided to correct

the trade imbalance? We impport VASTLY more from China than we export to and I would imagine that the US is the number one consumer of chinese manufactured consumer goods. While I am sure the upheaval would be tremendous...if China decides to hardball on economic issues then the US could start working against China's economic interests to its ruin...without the US purchases from China what would happen to their economy? I know it would mean higher consumer prices here...but there?

I am no economist by any means and am really just going with a gut reaction to this series of statements. I should probably look more closely...it is far more complex than my small amount of reading could possibly discern.

theProdigal

[VivaKerry]

7. WE -- operative word - cannot correct the trade imbalance

It's in corporate hands, and corporations have ZERO affiliation with any country. They are an inanimate ball of greed that knows no borders.

Look at china --- making trade deals the world over, as fast a lightning. They won't NEED us to have walmarts filled with their crappy plastic goods.

Our days of having economic (and political) leverage are OVER.

One thing about China -- they sure wouldn't make idle threats, or play their hand too soon.

They have their oil secured - by nations the usa wants to invade. Hmmm.

They have russia helping them to transform their military from a troops-based unit to more sophisticated high tech unit.

They have total influence on the entire pacific rim, and don't think for a minute that Japan -- if things get really tense -- will side with us.

This is the WW4 alignment, as I see it developing:

Russia
China
Syria
Saudi Arabia
Iran

And we can just guess all the countries that will follow those biggies, simply because it makes sense for them to do it.

I can't figure out what india and pakistan will do. Geographically, they should go with russia. And they each know they should be on the same side. Besides, China is ever so grateful for India giving China a big pass on doing whatever she wants to do in Tibet. I am sure India will be handsomely rewarded.

At this point, it is about time the Yanks learned a few things about the responsibilities inherent in being a world military and economic power. We squandered our privilege. And I think we will pay.

[ProdigalJunkMail]

8. the russians and the chinese don't exactly get along

russians are more afraid of the chinese than we are...if china needs additional resources...the Siberian plane is just a heartbeat away...

theProdigal

economic edit : the government CAN influence trade deficits...

[VivaKerry]

11. CAN influence trade deficits, but won't.

You think the gop donors will allow THEIR white house and congress to affect their loot? Guess again. Why do you think global domination is their sole objective? Beause the usa as a market is on the chopping block. Soon, the corps won't need us as much as china doesn't.

The corporations are running this country (understatement)

[VivaKerry]

12. russians and chinese afraid of each other?

That's why they have been meeting and greeting and working together on military objectives.

[NewJeffCT]

14. China has their own problems

Their banking industry has more troubles than ours did prior to FDR founding the FDIC...

their power grid needs serious upgrading, similar to the US...

they have huge problems with unemployment...

government corruption that makes Florida look like a boy scout troop...

their currency is currently tied to the US dollar, so if they decide to tie to the Euro or let the yuan float, their economy will likely have a recession in transition (though, ours would have a Depression as China would no longer have incentive to keep us afloat...)

I don't think World War 3 is coming, as I think China & the EU will collectively bring the US to its knees economically and force us to get our house in order that way.

[ProfessorGAC]

15. Highly Speculative, And Completely Wrong

First, this whole doom & gloom thing is getting annoying. The end is so far off that anyone who predicts it might as well get out binoculars and watch for the killer comet. They are econometric crackpots.

Secondly, there is ZERO evidence that the current trade gap, or the negative account balance is approaching critical. Just remember that the guy who has spoken most loudly about this lately is Greenspan. And in the past 15 years, he's been right about what again? If we are relying on him and economists of that ilk to be the basis of our speculation, we are speculating on top of speculating.

Also, if you think China's macroeconomic health is not dependent upon the United States, you've really got some data gathering to do. They NEED us more than we need them. The econometric data is abundantly clear. One bad month of this economy would have China's economy reeling for 3 quarters, at least.

The cross ownership of business properties by U.S. corporations and dual ownership entities all over the world obviate any economic alliance against the United States. Nobody, and i mean nobody, will have the economic clout to lead such an effort for, at least, 50 years.

You end your post with "And i think we will pay." So, you think this. You can't prove it, it's just your opinion. That's perfectly fine. We're all entitled to an opinion. But, the rest of your post is awfully self-assured given that your treading into measurable areas for which you have no supportive data.

You might want to reconsider your conclusions before you begin to believe them as the truth, rather than speculative opinion.
The Professor

[sangh0]

17. "reconsider your conclusions before you begin to believe them"????

I'm confused. Are you some NEW ProfessorGAC who is NEW to DU?


:-)

[ProfessorGAC]

18. Huh?

Was that a shot at me, or at another poster? Look i'm all for people believing in their conclusions and having the integrity to walk their own talk. But, if people have no data with regard to a clearly measurable and wholly objective phenomenon, then i'm not going to let that go unchallenged.

If someone presented the post to which i replied as a paper in an econ class, it would have required a complete rewrite before i even bothered to grade it.
The Professor

[sangh0]

19. Not at you

I was being sarcastic about the odds that some posters will stop jumping to conclusions about matters that they are unfamiliar with.

[ProfessorGAC]

20. Sorry. Completely Missed Your Point

Duh, on me!
The Professor

[sangh0]

21. No problem

Though I don't always agree with your conclusions, I've never seen you make an argument without some evidence to support your assertions.

[aneerkoinos]

9. China trade

China is getting increasingly independent from US market as trade growth with other markets outpaces that of US. Starting from this year e.g. EU is bigger trade partner with China that US. Biggest factor I think is quickly growing intra-Asia trade.

[ProdigalJunkMail]

10. thanks for the info...I did not know that

i still suspect that if the US were to start making trade with China more difficult it would hurt China more than the US...could be wrong...

theProdigal

[ProfessorGAC]

16. Not True

That's stictly a function of the change in currency value. In reality, the velocimetric aspect of the U.S/China trade alignment favors China WAY more than the one with the EU. Far fewer dollars changing hands far more quickly stabilizes cash flow positions for Chinese companies.

In addition, United States corporate investment in China FAR outstrips that of the EU. By far! That means that some of the goods and service provided by China to the EU are actually generating cash flow and profits that are going to U.S. firms!

I fear you're looking at a single variable and not looking at other aspects that properly dimension your finding.
The Professor

[aneerkoinos]

22. What is not true? ;)

That the relative importance of US market to China is not decreasing? I stick to my argument.

Yes, US corporate investment in China (ie "outsourcing") outstrips other competitors and EU and Japan are not bleeding jobs to China at the same rate as US. Outsourcing means that the direct investments and what little wages US firms pay benefit Chinese economy, hope you are not naive enough to assume that cash flows and profits "US" multinationals make from outsourcing really benefits US Federal budget and generally the well being of American people, ie the real US economy.

Whether the "velocimetric aspect" is good/bad/between and to whom is contextual, multidimensional and dependent on premises, ideological and other.

Yep, I brought up only one variable, IMO the most general and most meaningfull one, economies are of infinite complexity and debates about the multidimensional variables and all the complexities involved can go ad infinitum.

The Dilettante :)

[ProfessorGAC]

27. Sorry, But You're Missing My Point

I'm not going to go into an econ lecture here. But, it's NOT a fact that our relative influence on their economy is shrinking. It's your opinion! That's fine. It is just NOT a fact. As a fraction of their GDP, the EU may still be gaining, but businesses and state-controlled economies are not in the business of seeking volume, they seek profitability. The leverage of the United States on the margins of Chinese business is unchanged and will not change for a considerable time. (At least until the Chinese consumer becomes responsible for more than 50% of GDP, perhaps closer to 60%.)

And, there is no need to put velocimetric in quotes. If you don't know what it is, that's understandable, but it doesn't mean it's a special word that needs to be set aside as something unusual. It has to do with the impact of monetary velocity on other econometric parameters and the overall impact on macroeconomic predictability and stability.

You state that the EU's influence on China is reducing our leverage. Given the vast permutations of variables and interactions in macroeconomies, there is NO way to establish that as true. There are however, many indicators to indicate the relationship between the U.S. and Chinese economies is unchanged. One is factual, the other is speculative. You can decide which is which.
The Professor

[aneerkoinos]

29. All facts are opinions

if you wan't to go deep into philosophy of science and truth theory. All you have is opininions too, so why lecture on the self-evident?

I'm not talking about EU alone, I brought it up as just one example of the non disputed numbers that US percentage of total China trade with world is shrinking.

Velocimetric was in quotes for the simple reason that it was a quote from your post, not because it's "something unusual" that I would be unable to understand. What you haven't done is show the numbers to back up your claim and make your case why the alleged higher velocity of capital flows would make US market more important to China relative to others. Even assuming you got the numbers to back up your claim (Sure, China is swimming in dollars, but what is the trend relative to other currencies, esp. yen and euro?) and they function in US' benefit from certain point of view, you would still have to show that the significance of this outclasses or negates the other, undisputed trend.

You say "businesses and state-controlled economies are not in the business of seeking volume, they seek profitability". This equals making ultimately psychological assumptions (intent) based on some economic theory. I don't buy. Besides, defining profitability objectively is extremely difficult, and even if you can come up with some technical definition, equalling it with macroeconomic benefit in the scale of severe dependance is anything but unproblematic.

In the end, we can theorize all we want, but it is a matter of perception, not ours but Chinese perception of how dependant they are from US market and how this weighs against important factors. And with Chinese, we simply don't know how they think.


>>>You state that the EU's influence on China is reducing our leverage. Given the vast permutations of variables and interactions in macroeconomies, there is NO way to establish that as true. There are however, many indicators to indicate the relationship between the U.S. and Chinese economies is unchanged. One is factual, the other is speculative. You can decide which is which.<<<

You start your conclusion by misurepresentation of my argument, and then go on about saying something silly about truth, while it should be obvious all we can discuss about is which arguments are more plausible. I've shown your chain of deduction to be full of poorly demonstrated or undemonstrated speculative holes, and stating that relationship between US and Chines economies is unchanged is simply ridiculous, economies are allways in state of flux, there is no such thing as unchanged.

And, BTW, I'm not impressed by your attempt to intimidate me by talking down to me from academically "superior" position ("factual and speculative, take your pick" - duh!). My own academic background is in the study of language so I'm quite consciouss of such power games, which in your case may be an unconsciouss "professional" habit or consciouss attempt, which one I don't really care. No biggie, anyways. :)

[donsu]

24. yes, China has the entire rest of the world to do business with

they could drop business with the US. their financial boat would rock and roll for a time before they sailed smoothly.

[genieroze]

23. I sort of agree with you

They are bitching about our unemployment, yet our jobs are being outsourced.

[VivaKerry]

5. Wow, China has made great leaps

In just a few short years (relatively speaking), the USA propped china up in every way possible (starting with clinton naming it a most favored nation, I might add with MUCH hostility).

Seems to me that china is now financially independent enoough to tell us to shove it.

It's kind of like when Pakistan aligns with russia in WW4 against us, at least we can be PROUD of Pak's military strength - we gave it to them.

I see WW4 coming to neighborhoods about us before decade's end. Wonder if they will even have to shoot a shot at the USA by then? We will be and have nothing to speak of, and me thinks that we may even be at a loss in the hubris department by then.

[underpants]

6. Hey W! Your majority stockholders have a message for you

You better listen.

[alexisfree]

13. he is not home...

f* is on vacation...your message has being deleted..beep.

[knight_of_the_star]

25. That's pretty bad

If CHINA is saying something is wrong with us, that REALLY says something about us.

[raysr]

26. This is exactly

what the evangelicals want. A financial collapse, then they step in with some hand outs for the the small fee of your soul.

[Bluebear]

28. Third world nations are always ripe for their proselytizing.

We'll be one before all this is over.

[Endangered Specie]

30. You know shit is bad when CHINA is lecturing US.