The dopey US Congressmen and business exerting pressure on the Obama Administration to DO ‘something’ about China’s refusal to allow the Yang to float, haven’t done their homework.
Sure it’s an election year and the vainglorious in Congress want to be seen to be doing something about the latest global bogey country (remember how it was Japan 20 years ago, then Europe after the eurozone and euro were introduced?)
130 congressmen this week urged President Obama to label China a current manipulator.
For the roles in the subprime mess, recession and unemployment, US congressmen need a diversion and that is China for the next few months until the mid-term elections on the first Tuesday in November.
They all loved hogging the headlines, including Senator Charles Schumer, a New York Democrat in bed with a South Carolina Republican and leading the charge to ‘get’ China.
Some of the comments would be familiar in Australia where fear of Chinese investment is being whipped up by the conservatives and others playing the ‘yellow peril’ card that plays so well here from time to time.
They simply have no idea of who they are ‘getting’ because it seems US consumers will be the ones who will be ‘got’.
All those buyers of Iphones, Ipods, white goods, car parts, chemicals, other mobile phones, electronics, consumer goods, clothing, shoes and a host of products imported wholly or partially from China.
In fact huge companies like Wal-Mart, Costco, Target, Apple, Hewlett Packard, General Motors, Ford and more will be ‘got’ because they all have factories in China and either export out of China to the US or the world as a whole.
China understands that and has started its own lobbying of US based multi-nationals, pointing out how they will be hurt.
Chinese Premier Wen Jiabao led the charge at his news conference last Sunday when he pointed out that half of China’s exports came from the processing trade – where imported components were assembled at factories in China and 60% were made by foreign-funded companies or joint ventures with foreign partners.
"Therefore, to restrict trade with China is tantamount to causing difficulty for the businesses of your own countries," he was quoted as saying by China Daily and Xinhua.
According to statistics provided by the Ministry of Commerce, 55.9% of China’s exports were produced by foreign companies last year. The proportions were 83% and 75% respectively for high-tech products and electronic products. Over 90% of high-tech products exported to the US were made by foreign enterprises.
Normally this would be described as Chinese spin, but the figures are fairly easily confirmed from US import data.
But the final arguments against the driven hypocrisy (remember the way the US subsidises rural products) are also pretty conclusive.
America is a debtor nation, with China its Number 1 funder.
China doesn’t need to continue buying US Treasuries at previous levels, just cut back and redirect to other investments for a few months, and let the news of the change dribble out and watch the dollar drop and paranoia set in across the Pacific where another $US2 trillion in debt will be needed in the next year, and trillions more out to 2014.
On April 15, the US Treasury will release its latest semi-annual currency report.The next one after that will come just before the November polls, a maximum time for publicity for these nervy Congressmen.
Thanks to the campaign by the Congressional 133, pressure is building on the administration formally to describe China as a “manipulator” – a move that it has resisted until now even though Barack Obama attacked China for its currency regime during his 2008 election campaign.
But China can simply ignore all the lobbying and even the declaration and reply with some direct actions of its own.
It can slow or start to really discriminate against US companies by favouring other foreigners (and of course, Chinese companies, a development already happening and worrying all foreign groups in the country)
Some US and other foreign companies have started criticising the Chinese government over changes to its industrial policy aimed at lifting its own technological knowledge and expertise.
But the Chinese government knows something the US and its tormentors in Congress don’t understand.
China has been around for 5,000 years in various forms and levels of strength. It has seen off the barbarians before, and America’s role in the late 19th century and the early decades of last century still rankle.
The World Bank this week lifted its 2010 growth forecast for China to 9.5% from 9%, and added that the country would have to tackle the value of its currency.
America faces growth of 3% at best this year and possibly a bit less in 2011 and high levels of unemployment and all that debt, much of it handed on by President George Bush after two wasteful terms.
The bottom line is the old cliché that he who pays the piper gets to call the tune: and America faces years of being a mendicant economy, with its hand out to China and other international creditors.
