China vs. US? Dui Bu Qi
Remember back in June, when China revalued its currency? It was hailed as a subtle victory for the Obama administration, and Treasury Secretary Timothy Geithner especially.
Americans have long been obsessed with the dollar-renminbi (RMB) rate of exchange. The strong RMB -- propped up by Chinese government support -- is blamed for our lousy trade deficit with China, a failing American industrial and manufacturing economy, and pretty much every other economic problem we can find.
Not so fast, says Yiannis Mostrous in InvestingDaily:
On the political front the protectionists in the US can declare victory even though they know that, economically, their arguments about the RMB and its impact on the US economy are shaky at best. Recall, for instance, that from 2000 to 2004, when Chinese export prices were falling by around 1 percent a year, inflation in the US for corresponding goods (i.e. apparel, personal care products, sporting goods, toys and audio/video products) was also falling by 1.2 percent. But when Chinese export prices started rising between 2005 and 2008, at a rate of around 3 percent year over year, the corresponding inflation in the US fell around 0.7 percent.
This may sound trivial. But although China exports represent around 60 percent of these goods in the US, the domestic situation in that country doesn’t have any real impact on the US economy--at least not a negative one. The reason, of course, is that more than 70 percent of the final prices US consumers pay for these products is attributable to costs associated with shipping, advertising, rents, profits margins, sale costs and the like. Chinese producers have no material cost contribution to speak of.
It doesn’t matter how much wages will rise in China, or how much stronger the RMB will be in the next five years. The big costs are to be found after the products leave the Chinese factories, and therefore the eventual “haircut” will need to take place in the US in terms of money charged for services once the goods reach the US coasts.
And in any case, it doesn't look like the Chinese were serious about revaluing their currency. The RMB has actually fallen since June. And the timing couldn't be worse.
Writes Ambrose Evans-Pritchard, in The Telegraph:
Tension between the US and China is escalating on several fronts. China has restricted exports of rare earth minerals by more than 70pc in the second half of this year, cutting off the world supply. China produces 97pc of these minerals, used in a wide range of high-tech industries, from hybrid engines to computers, mobile phones, radar, navigation and precision-guided weapons.
The US is to conduct naval manoeuvres with Vietnam in the South China Sea in response to live fire exercises by China, which has stepped up its claims to total sovereignty over a region disputed by a ring of countries. The US is also conducting manoeuvres with South Korea, prompting accusations of "gunboat diplomacy" in the Chinese media.
In a trade and currency and saber-rattling war between the United States and China, who do you think is going to win? Can you say duí bu qï?
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Comments :
Jul '10
Re: China vs. US? Dui Bu Qi
OK
duí bu qï
Now where's my cookie?
Feb '10
Re: China vs. US? Dui Bu Qi
Dui bu qi (dway boo chee) = "sorry"
Jul '10
Re: China vs. US? Dui Bu Qi
It's a been a busy ten years, so I guess we can all be forgiven for forgetting the message the Chinese sent to George Bush by forcing down our spy plane in 2001.
But something tells me that message is still quite relevant.
Re: China vs. US? Dui Bu Qi
Wow. I had forgotten that, the spy plane crisis. All of that seems like distant history -- everything pre-9/11, but at the time, the Bush administration was telling everyone who would listen that they were going to focus on China issues -- security of the region, trade, etc. -- and let the Middle East enjoy a period of "benign neglect." Didn't work out that way.
I don't subscribe to the China-is-our-future-overlord theory, by the way. My guess is, the place will erupt into some serious internal trouble before it becomes time to put the debt squeeze on us.
Jul '10
Re: China vs. US? Dui Bu Qi
Rob Long: Wow. I had forgotten that, the spy plane crisis. All of that seems like distant history -- everything pre-9/11, but at the time, the Bush administration was telling everyone who would listen that they were going to focus on China issues -- security of the region, trade, etc. -- and let the Middle East enjoy a period of "benign neglect." Didn't work out that way.
I don't subscribe to the China-is-our-future-overlord theory, by the way. My guess is, the place will erupt into some serious internal trouble before it becomes time to put the debt squeeze on us. · Aug 23 at 10:43am
I hesitate to predict anything where China is concerned. But with regard to their inevitable unwinding of their U.S. debt position, I do think that having a little gold in one's cookie jar might not be a bad idea.
Jun '10
Re: China vs. US? Dui Bu Qi
I think it depends on what model they decide to follow. I hope, but don't assume, they'll follow the traditional non-expansionist Chinese model. I think it's just as likely that they'll choose a kinder gentler 19th-century-European-colonialism model.
Jul '10
Re: China vs. US? Dui Bu Qi
etoiledunord
I think it depends on what model they decide to follow. I hope, but don't assume, they'll follow the traditional non-expansionist Chinese model. I think it's just as likely that they'll choose a kinder gentler 19th-century-European-colonialism model. · Aug
Well, we know this: they are roaming the planet gobbling up rights to oil, minerals and agricultural products.
Re: China vs. US? Dui Bu Qi
Rob Long: Wow. I had forgotten that, the spy plane crisis. All of that seems like distant history -- everything pre-9/11, but at the time, the Bush administration was telling everyone who would listen that they were going to focus on China issues -- security of the region, trade, etc. -- and let the Middle East enjoy a period of "benign neglect." Didn't work out that way.
I don't subscribe to the China-is-our-future-overlord theory, by the way. My guess is, the place will erupt into some serious internal trouble before it becomes time to put the debt squeeze on us. · Aug 23 at 10:43am
A serious and sustained economic downturn will more seriously destabilize which society? The answer to your squeeze, question, Rob, is right there.