CapitalistMarks

China — foe or faux?

Posted on 13. Mar, 2010 by scott in Social commentary, economic daydreaming

I was quite surprised to hear President Obama talk so realistically about China on Thursday.  To be frank, I should have expected it since the speech was in front of the Export/Import Bank and he was preaching to the choir.

The reasons for his approach are clear.  The imbalance in our trade with China is huge ($266 billion deficit in 2008) and the total trade with China has grown from $5 billion in 1980 to about $410 billion in 2008 — that’s 8000% growth.

President Obama recognizes that this kind of trade imbalance and expansion can’t continue.  Every year China gets the gift of a few hundred billion $$ to do with as they please . . . and they please to put more and more into their military budget and expansion of influence around the world.

China holds about $700 billion of U.S. debt and Obama made it clear that he doesn’t like owing China that kind of money–especially when the markets that create the debt are so lop-sided.  Still, China insists on keeping the value of their currency unrealistically low, which distorts (to their advantage) their real capacity to manufacture and export.

It is so easy a cave man could do it, because the Chinese leaders have a ‘command economy’ (they control everything about their economy) and we have a ‘market economy’ (the will of the masses directs economic results).  It comes down to the fact that  the Chinese have about a fifty point lead at the beginning of each year’s game (forgive the basketball analogy but it works).  America has no chance to make up the difference.

Obama started his first year in a conciliatory mode . . . expecting countries like Brazil, Russia, India and China (the so-called BRIC’s) to change from a tight-fisted acceptance of American leadership to an arms wide open welcome.  To give him credit it has worked a bit–but not with China.  They have taken this as a sign of weakness and followed-on with strident, aggressive and bitter language and actions.

Obama should have known better, his advisors didn’t do their jobs.  Heck I grew up in the orient and I could have told him that orientals have a vastly different view of the world.  To them respect is earned with strength, earnestness and real credibility.  Obama failed in all three cases.

China saw this as an opportunity to act.  They are planning to send a man to the moon (with US $$) and build aircraft carriers to extend the range of their military influence (with US $$).    But more importantly they are  ’purchasing’  loyalty from leaders in Africa and South America where the abundant natural resources will, in the future,  fill the voracious demand of Chinese manufacturing and the energy/fuel needs of a huge and rapidly growing middle-class.  Again with the American $$ they earn from the unlevel field of our mutual trade.  (note: to be fair the Eruo-zone nations are suffering the same ignominious treatment)

Back to the Obama speech on Thursday.  He spoke of a need for China to improve their human rights dealings.  He spoke of a need for them to let their currency float on international markets so that trade will be more balanced.  He spoke of leveling the playing field.  And his words were not very conciliatory, for the first time that I know of.

So, perhaps this marks the end of his effort to win friendship with hugs and kisses.  Perhaps now the Obama administration will put realistic diplomacy at the forefront of our international relations.  Perhaps this new effort will particularly include China–our 2nd largest trading partner, our 3rd largest export market (after Canada and Mexico) and our largest importing market.

I hope so because I am sick and tired of China running rough shod over America.  I am tired of their political and diplomatic hypocrisy.

They willingly broadcast their friendship with those who hate America such as the leaders of Venezuela, Cuba, and Iran–its like kicking sand in our faces.  But, shoot, when Obama meets with a revered international religious leader like the Dalai Lama, the Chinese leaders have an ickky fit.  They gripe and moan at our selling or sending defensive weapons to tiny little Taiwan whose entire population is not even equal to that of Shanghai.  Heck let tham ‘claim’ that Taiwan is a part of China but don’t ever let them pretend to be afraid of that miniscule little nation of free and entrepreneurial people.  More people are born in China every year than live in Taiwan.  Get real.

I don’t want our relationship with China to be adversarial but it sure as heck can’t be apathetic.

We have to recognize that they are a potential foe and recognize that today they are at best a faux friend.

President Obama and Secretary Clinton need to deal with the Chinese leaders as equals and do so without giving anything away.  The 1.3 billion people in China love western (read American) things but they also revere their own history and culture.    Wow, and 300 million American’s love Chinese things (almost everything we buy at Walmart or Best Buy) but we also revere our history and culture.

We can get along.  We have far too much mutual benefit at stake to do otherwise.  And besides I don’t think the people on the streets of either country want enmity . . . they want to be tourists of each country.  Every time I visited China the Chinese people I met wanted to be friends, to sit and talk, to spend a few hours doing Kareoke . . . and I have to tell you that they must have been sincere since listening to my rendition of anything is a chore.

We need to become real friends with China and use the relationship to benefit both nations people.  But we have to do it in a way that is fair to everyone.

Keep the pressure on Mr. President.  Until our relationship with China is fair and balanced.

thanks to flickr’s exfordy for the photo

Tags: China trade, Chinese currency, Chinese imports, Chinese leadership, President Obama, taiwan