Catching Up with China
Tuesday, January 18, 2011
With the arrival of Chinese President Hu Jintao in Washington this week, it's time to catch up with the world's most ascendant superpower. By "catch up," we don't mean economically—although that's a huge cause for concern in America. For now, we'd do well to refresh ourselves, looking at the reasons our relationship with China is tense, how the country has navigated the global economic crisis (and continued to grow), and what's at stake if the two biggest kids in the sandbox can't get along.
Here's a roundup of reports, articles, and opinion pieces that should give a window to the world of U.S.-China relations. Of particular interest during Hu's visit with President Obama will be the issue of currency manipulation, with China fueling its export economy by keeping the value of its yuan low even as its GDP expands. The two leaders also will likely discuss China's halt in rare earth exports and the relative success of the two countries' economic stimulus packages.
On Currency Manipulation
In past meetings, Mr. Hu and his prime minister have indicated that they would let China’s currency gradually rise. But the Commerce Ministry promptly labeled the move a 'catastrophe' for the Chinese economy. Despite Mr. Hu’s repeated assurances that the Chinese market would continue to open up to foreigners, business leaders complain that regulators have made it more difficult for foreign energy, communications and banking concerns to compete with China’s state-backed favorites.
China Leader’s Limits Come Into Focus as U.S. Visit Nears (New York Times)
By selling its own currency and buying up foreign reserves like the U.S. dollar, China has essentially pegged the yuan's value to the dollar instead of allowing it to move freely in foreign exchange markets. A weak currency cheapens the price of a country's exports, making them more attractive to international buyers by undercutting competitors. China's economy is primarily export-driven, so having a leg up on the international competition has allowed its economy to grow at a staggering speed.
What is currency manipulation, anyhow? (CNN Money)
Lawmakers are seizing on the visit to again raise longstanding concerns about currency manipulation and the impact on U.S. jobs. Some are seeking to sanction China for economic policies they see as unfair or even illegal..."China's actions to subsidize its exports through currency manipulation pose both immediate and long-term challenges to American manufacturers and workers still recovering from the economic recession," the lawmakers said in a letter.
Congress threatens currency bill as Obama and Hu prepare to meet (Washington Post)
On Respective Economic Stimulus Plans
Britain...focused almost all its stimulus on tax cuts; China focused almost entirely on spending measures; The United States fell in between....China's GDP growth reached 10.7% in the fourth quarter of 2009, which Albert Keidel of the Atlantic Council partly attributes to the fact that China devoted its stimulus to boosting the real economy (the part of the economy concerned with producing goods and services, rather than buying and selling in financial markets), whereas the United States spent significant resources on recovering the financial sector.
The Stimulus Report Card (Council on Foreign Relations)
Perhaps it is time to take another look at democracy as we know it, not just because of the economic success of authoritarian China, the very emblem of non-Western modernity, but because the West itself has changed. In much of the West, especially in the US, we no longer live in an industrial democracy, no less the agriculture-based landed aristocracy in which most political systems and their constitutions were originally conceived. We live in a consumer democracy.
China vs. America: Which government model will triumph? (Christian Science Monitor)
On Rare Earth Exports
Prices have surged for rare earth minerals since the authorities in Beijing slashed exports by 40 percent this summer. Beijing said the curbs were aimed at ensuring supplies for Chinese clean energy companies it is trying to promote internationally, but it has also said its dominance as a producer should give it more control over global prices.
The United States and China are now so entangled with each other economically that conflict — whether escalating trade protectionism or belligerent rivalry for spheres of influence or military provocation — inflicts major harm on both countries. And there are so many global problems that require U.S.-China cooperation if the world is to find solutions — including climate change, energy scarcity, nuclear proliferation, genocide and pandemics — that we have large incentives and responsibilities to cooperate. The central problem in the U.S.-China relationship right now is mutual mistrust.
What America and China must not forget (New York Times Op-Ed)
Back in October, Bob Garfield and Brooke Gladstone of WNYC's On the Media looked at a campaign ad against wasteful spending that used the style of a famous Apple Super Bowl commercial to appeal to American anxieties of a rising China. The commercial calls American stimulus spending "wasteful," but neglects to mention that the Chinese stimulus plan was almost entirely infrastructure spending. The relative wastefulness is a different story (see The Stimulus Report Card), but this ad and much of the political discussion around China so far have done little to counteract "mutual mistrust."