US-China Relationship to be Based on Realism?
posted at 9:26 am on July 28, 2009 by coldwarrior
President Obama says the U.S.-China relationship will mold the 21st century.
And not to be left on the sidelines, Hillary Clinton and Tim Geithner want China to work with the United States to spur the American economy and create American jobs….among other things.
China is our most important partner in the 21st Century, according to the Obama Administration.
More empty words from the Administration?
How do the Chinese see it? What is their reality?
Are we asking China again to bail us out? Why? What’s in it for China?
And realism? The reality of it all is that China may not need us as much as we need China.
Mull that over for a moment.
China already owns a huge portion of our debt. Are our promises of repayment with interest based on reality? Should they buy more? And why should they?
Trying to get China to put the yuan on par with the dollar or at least pegged to the dollar hasn’t worked out so well.
China is no longer Mao’s China. it is not just another Third World nation with a huge army and nukes.
China today is a far cry from the China of “Sand Pebbles” and missionaries and exploitative imperialists. Well past a traditional society to be exploited.
It is a far cry from Mao’s China…the transitional revolutionary era…relying on heavy industry, iron, steel, in order to grow from an agrarian society to an industrial society.
The 1980-90′s saw China’s taking off…making a true economic leap forward and hitting the global economy firing on all cylinders, driving into the future, speed limit be damned.
China today is driving to maturity, and well into domestic high mass consumption.
China is a modern state. China has an identifiable and very large and rapidly growing middle class. And the Chinese middle class has wants, where at one time they only had needs. Their middle class is as large as our entire population.
The days of China spending enormous amounts to copy Western technology have long since passed. They can now independently develop what they need. Copy-cat capitalism is long since passed.
So, what exactly do they need to buy from the United States to make their lives better or satisfy their domestic consumerism? And what will they demand from us in order to get that declining portion?
The reality of it all is that China produces what we need…and just about all of what we want.
If one is looking at realities, as the Obama Administration claims, why would China incur added costs for these wonderful modern consumer items by buying them from the United States? They can produce what they want and need at home, and don’t have to pay the shipping charges…or American union-scale wages. And China is less dependent on our shopping at Wal-Mart than ever before.
The top-level US-China talks are to cover a range of issues, but the economy is at the top of the list.
Before this Administration gets all hopey and changey and has tingles running up and down their legs, perhaps they really need to ask that really dumb question, “What can China get from us that they don’t already produce at home?”
The only economic spur the Chinese are interested in is at home…and the only job creation they are concerned about is at home.
If I were a Chinese leader I’d be looking to making China self-sufficient across the board, like the United States was back in the 1950′s and 1960′s…and grow from there. if I were a Chinese leader, I’d be worried about the United States being able to pay me back. And if I were a Chinese leader, I’d be playing hardball. They not only have us over a barrel…they built the barrel…and we bought it from them.
That is a reality that the Obama Administration hopes changes.
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Theworldisnotenough on July 28, 2009 at 9:29 AM
FINALLY! A little common sense on China.
China is most likely in the process of an exit strategy from dependence on the dollar. The biggest problem we have is that we do not control our money supply. China can today sign long term contracts in dollars and feed a steady stream of those dollars into the market place over the next 10-20 years. In this case commodity prices in dollars must rise.
Theworldisnotenough on July 27, 2009 at 11:33 AM
Theworldisnotenough on July 28, 2009 at 9:31 AM
Ths short answer is that this administration has no idea what to do and is looking for easy answers.
Their idiotic leftist ideas have tanked the economy, so ironically enough, they have to turn to a communist country to bail them out.
They have such incredible liberal innocence, that they can’t grasp the fact that China would love to see our economy tank for a vast array of reasons and they aren’t going to bail us out.
Our country will not get back on track as long as we have complete jackasses in charge of the White House and Congress, it just won’t. And Hillary Clinton is a worthless clown as well.
NoDonkey on July 28, 2009 at 9:32 AM
China does need American Consumers or find somewhere else in the world to replace those consumers.
Often missed, though Nail Ferguson wrote on it before I beleive, is the role China’s monetary policy and investment in the United States played in the Real Estate bubble.
jp on July 28, 2009 at 9:32 AM
That is a reality that the Obama Administration hopes changes.
“Hope” is what you do when you have no real plan.
elderberry on July 28, 2009 at 9:33 AM
Read an article a few months back showing how China has aggressively been buying gold for the past 5 years. They are hedging their bets against the US. At some point, they will be perfectly hedged, and will no longer be adversely affect by a rapid deterioration of the US dollar. When they reach that point, watch out.
BPD on July 28, 2009 at 9:33 AM
It’s about time CW made the front page…
Nice article CW. What you have written has been of great concern to my family. Our government is simply out of control with the direction they have been taking us for far too long now. We, the people, must take back control of our country. Protests must get louder, larger, and more meaningful. The world should witness the rise of the American people. Far too long now, our government has separated our people with the use of racism and pitting religious folks against non religious folks. Together we are a mighty force, separated we are weakened.
Keemo on July 28, 2009 at 9:33 AM
Great piece CW. If one of those massive bond auctions fails…gird your loins.
elduende on July 28, 2009 at 9:34 AM
John Howard mentioned in the interview he did with NRO earlier this year, he though Bush’s policy with China was very good. Wonder what he thinks about this talk of “realism”
jp on July 28, 2009 at 9:34 AM
great piece
and might i add so easy to read!
i have a problem reading paragraphs, i can’t focus (idk if thats a problem, maybe an eye doctor appt is on order), but i like how yours is broken into pieces
thanks
blatantblue on July 28, 2009 at 9:35 AM
Wow! This is truly brilliant analysis. You even slapped that darling untouchable of all conservatives, Wal-Mart. I have been saying for years that Wal-Mart was selling America to China and that a reckoning would come. Well, it’s here. Also, every major American company has given away its technology to the Chinese in order to “gain access” to the Chinese market. The latest is Apple, which is right now selling its soul to Unicom. Wait until Unicom comes out with a cheaper, smaller, better iPhone. The Chinese are smart; they have a plan; and they are winning.
fleiter on July 28, 2009 at 9:37 AM
still though, their GDP is a fraction of America’s GDP.
jp on July 28, 2009 at 9:37 AM
Next they will be basing it on various versions of the truth.
Wasn’t it Howard Dean that said we have got to get our version of the truth out there?
tarpon on July 28, 2009 at 9:37 AM
From another thread, but this is the 4th month in a row that either Geithner or Clinton has shown up in Beijing. The occasion? Bond auctions. $200+ billion auctioning this week.
genso on July 28, 2009 at 9:37 AM
Not at all. The world is flooded with dollars at some point they have to be spent (http://www.youtube.com/watch?v=vWQscIZUMDA). Foreign central banks will follow China’s lead and start spending a wasting asset. The rest of Obama’s term is going to have enormous defecits, this will prompt our debt holders to try and maximize their reserves. They will have no confidence in this President to contain inflation.
Theworldisnotenough on July 28, 2009 at 9:37 AM
Anyone ever read
Year of the Rat
about clit-ton and the chicoms?
blatantblue on July 28, 2009 at 9:39 AM
Good article, coldwarrior.
You left out one thing, though.
World of Warcraft gold farmers.
MadisonConservative on July 28, 2009 at 9:43 AM
China is the worlds largest gold producer, they are using said gold to increase their currency to gold ratio to that of Western nations. This will help the yuan as an international currency. http://news.bbc.co.uk/2/hi/business/8020721.stm
I wish Hotair would let me post more than one link
Theworldisnotenough on July 28, 2009 at 9:43 AM
Here are two pieces of reality:
1. We are outsourcing jobs at an increasing pace to China, and receiving inferior quality goods in return. This not only exacerbates our unemployment problem, but makes it harder to find quality goods.
2. We have government officials begging the Chinese to buy our bonds on a regular basis, because if they stop, we have to either dramatically cut federal spending, or go off of a cliff.
Those are the only two realities to consider.
Vashta.Nerada on July 28, 2009 at 9:44 AM
What could go wrong?
sonnyspats1 on July 28, 2009 at 9:45 AM
China is a modern nation in its cities but the rural areas are still very poor. The chinese middle class may be more then our total population but that still leaves about 900 million poor and middle class wanna be’s.
China has a problem and they know it. They are just one serious econmic downturn from a revolt. They have hundreds of mini revolts every year.
They need us and the west to buy there goods, they have to appease the 900 million future wal mart shoppers they have on deck.
The american buisness class is seriously pro china. Almost every american buisness wants a piece of that pie.
If you go to one of the major cities you notice something, American cars all over the place, american DVD’s american fast food chains, american retail chains(wal mart is f77cking everywhere’.
They are our friends like it or not. They need us and they know it
kangjie on July 28, 2009 at 9:48 AM
China: “SHOW ME THE MONEY!!!”
I’m sure that for China it’s not necessarily politics – it’s BUSINESS.
When China’s profit motive disappears, then where does that leave the US?
Up sh1t’s creek without a paddle or a hope.
rockbend on July 28, 2009 at 9:49 AM
China, like so many other nations, is heading for disaster: not producing enough kids to support an aging population. They’re now weighing whether to abandon or modify their one-child policy.
jgapinoy on July 28, 2009 at 9:51 AM
C’mon, people don’t feel so depressed! There’s still one area where America holds a considerable comparative advantage: medical technology. The Chinese can build cars and, sooner or later, passenger planes, but they’re not remotely close to having our capacity when it comes in development of new drugs, surgical techniques, and diagnostic equipment… Wait, what did you say? That’s the industry that Obama now wants to strangle to death? Okay, now I feel depressed as well.
year_of_the_dingo on July 28, 2009 at 9:52 AM
Is China an example of successful Communism?
ballz2wallz on July 28, 2009 at 9:55 AM
Realism in obamas world is not only relative to who he’s standing next to and how much money they have to slip into his back pocket, it also depends on what country he’s standing in.
If he’s in America his reality grinds down to quiet destruction of our country from the top down. If he’s in China for instance, it comes down to promising to gut the country from the middle class up, then down, while swearing fealty to the communists and promising for force Americans to do the same.
Because of course, all Americans hate America and should be working to destroy it at all costs. That’s what this indonesian-kenyan bases his reality on….hatred of the United States.
Spiritk9 on July 28, 2009 at 9:56 AM
Have you guys read Spengler’s plan? He is all about the US-China partnership…
ninjapirate on July 28, 2009 at 9:59 AM
So the alternative would be having a relationship between China and the US based on UNrealism?
If companies would shift their manufacturing to India or Mexico (or other low cost nation), would all that lost manufacturing in China (and huge unemployment) be too unrealistic for the US/China relationship?
Shouldn´t the US be trying to expand the base of manufacturing around the world so that not all our money and dependence goes into one country? Wouldn`t it be better to have all that manufacturing in Mexico rather than in Asia? It would be Good bye illegal Mexican aliens looking for work in the US.
Or even better – move the manufacturing back to the US by giving companies more incentives to open plants in America.
albill on July 28, 2009 at 10:00 AM
That photo reminds me of the one with Obama and Medvedev, only slightly more inscrutable.
SKYFOX on July 28, 2009 at 10:05 AM
One more thing Coldwarrior could’ve mentioned: Which will come first, the Chinese invasion of Taiwan, or the border skirmish with India?
jgapinoy on July 28, 2009 at 10:05 AM
Coldwarrior, Bravo!
Obama’s the ostrich with his head up his @ss.
“BECOME CHINA” has been his mantra.
The Socialist Democrats along with progressive RINOs are selling us all down the river.
Will Malkin’s new book “Culture of Corruption” advance combat against this new slave trade?
maverick muse on July 28, 2009 at 10:06 AM
It’s an example of ditching the economic tenets of communism but keeping the oppression & tyranny.
jgapinoy on July 28, 2009 at 10:06 AM
Taiwan will vote themselves into China in the next decade. There’s no reason for China to invade.
genso on July 28, 2009 at 10:07 AM
Coldwarrior, this post is a rant, without any direction.
So much misinformation on this post, just take furniture design and manufacturing. They don’t have an inkling, all the design comes from us, as well as the technology for production.
They have succeeded because we have allowed the lobbyist to get into our officials pockets, and line them.
China is where they are because we allowed them to prosper, at our expense…we did not enforce international trade laws.
We force our manufacturers to follow strict guidelines, levy taxes and fees, govt. red tape….and we don’t force China to do any of that.
We “handcuffed” our manufacturing, while loosening the reigns of the Chinese international restrictions.
We allowed predatory pricing, where if we tried that, our FTC would shut the compainies down.
The shame is we allowed China, and others to steal our production, giving them advantages, while enforcing penalties on our companies.
The way to stop China, to make our economy healthy is by promoting our businesses here at home…give them incentives and a reason to manufacture here…not there.
right2bright on July 28, 2009 at 10:07 AM
Does the Obama administration even understand what the word realism means when used in an international relations setting? Or what the implications for using such a word in regards to China are? Realism: where great powers vie for power or security, and security is the only thing that matters. Where rising great powers are seen as a threat to established great powers’ security and prominence, and whose rise in power inherently implies a decrease in the current hegemon’s power. Realism is a word that China understands, but Obama doesn’t.
chinotex on July 28, 2009 at 10:08 AM
Say what?
More like an example of a successful marriage of War Lords and Railroad Barons who are baking our cake and eating it too.
Limerick on July 28, 2009 at 10:10 AM
Surrender, capitulation, groveling…I didn’t know “realism” meant all those things. So many new definitions in Obamerica.
SKYFOX on July 28, 2009 at 10:13 AM
jgapinoy on July 28, 2009 at 10:05 AM
Precedence, Russia usurps Georgian territory.
Given China’s numbers and government’s wealth, perhaps a simultaneous blitzkrieg. “Shock and Awe” is the new vogue. To prove superiority, China would have to out-do GWBush and Putin. Don’t put it past Putin to have already negotiated a Russia-China alliance. If not yet, then now in progress.
First things first, decimate communications, and achieve enemy’s destruction before allies respond. Given Obama’s administration and Gates’ strangle hold on our military, there will be no American response beyond words, just words. Given the UN, there is never a military response unless an international front painted over American forces, as with Bosnian Christians bombed by Wesley Clark/Bill Clinton so the tail could wag the corrupt dog.
maverick muse on July 28, 2009 at 10:15 AM
Jim Rogers gave an interview yesterday (video here)in which he said, among other things, that Geithner was a total moron for asking the Chinese to compel their own people to go into debt to buy consumer products. He said that’s what took us down here, and that the Chinese economy has been managed better than the American economy. Geithner really, really hopes that China can pull itself out of this global recession/depression and somehow reignite the world’s economy, because he knows that the US so far is going nowhere, and that China’s stimulus seems to be working (they have 2 TRILLION in reserves to use which they SAVED,) while ours is going nowhere and is paid for with debt.
JiangxiDad on July 28, 2009 at 10:18 AM
Yes, especially along the coast, but they call it capitalism.
JiangxiDad on July 28, 2009 at 10:19 AM
It ain’t just us baked into the Obama Pie for China’s consumption, it is also the masses in China below the middle class.
Successful Socialism is ALWAYS punitive and a severe tyranny, whether NAZI Germany, Fascist Italy, Cuba, or Communist China.
maverick muse on July 28, 2009 at 10:20 AM
While I agree the outsourcing exacerbates our unemployment problem, I think it would put it in better perspective is it was viewed as outsourcing our purchases, not our jobs. Pointing out “jobs” doesn’t explain fully the problem, ie, that China is providing similar quality goods at much lower prices. Those goods may have been much inferior years ago, but the Chinese, like the Japanese in the 60′s, sold us crappy radios for next to nothing, are now offering comparable quality products for prices still cheaper than are manufactured here.
Which brings me to
While that is important in one respect — there will always be the allure to like something foreign as opposed to domestic — the majority of the “American products” are fungible in the sense that the Chinese can make and sell them, too.
Which, in fact they are, with for example cars. GM and Ford make the cars in China, not here, so all that they have is an American name. Same with soft drinks, fast food, etc. The point is, it may be an American brand, such that HQ’s claim the profit, which at most, represents 5% of the product, the 95% of the work implied in the total cost is claimed by the people in China.
Which do you want to brag about having, the 95% or the 5%?
As for their billion needing our 300 million, I don’t think Adam Smith would entirely agree with you. But on the whole our prosperity is somewhat entwined, as long as they hold our debt.
Dusty on July 28, 2009 at 10:22 AM
Actually, just a small correction to make here. It’s stated that
In truth, China has been sourcing much of it’s manufacturing out to Vietnam and South East Asia for the last several years. Ironically, they are so far along in their prosperity, that they are actually outsourcing to true third world countries to satisfy their demand for consumables. Which only makes your point that much more poignant.
KMC1 on July 28, 2009 at 10:25 AM
Marx simply fabricated propaganda to enable a new vogue of feudalism that dishonors liberty.
Marxism denies the existence of unalienable rights.
Even the elites lack liberty since to question the Marxist propaganda is to consign oneself to destruction by the Marxist state. Never rock Marx’ boat.
Promise the ignorant masses the pie in the sky. Entice them into prison and grind their bones for mortar to strengthen the statist elitists.
maverick muse on July 28, 2009 at 10:27 AM
Right Obama . . . in other words communism is OK and we just need to learn to live with it. Sorry, that doesn’t sell.
rplat on July 28, 2009 at 10:29 AM
KMC1 on July 28, 2009 at 10:25 AM
But in China’s outsourcing, they have not closed their own mfg. plants, but simply “spread the wealth” via capitalism. Your point well taken.
maverick muse on July 28, 2009 at 10:30 AM
How much of that is based upon their artificially low valuation of the Yuan? Anyone know?
TinMan13 on July 28, 2009 at 10:33 AM
Cool – the bridge in the picture looks to be Nanpu Daqiao that I commute across everyday.
DarkCurrent on July 28, 2009 at 10:35 AM
And they are playing hardball.They continually tell Geitner
and Obama that our policies are counter productive and we are incurring to much debt.
When Geitner tried to reassure the Chines that their money was safe with us, they laughed in his face and told him:
“Some numbers would help”
Unlike the Obama campaign workers that make up the press here in America,foreign investors are not signed up for “hope and change” and rely on facts and data.
Two things our tax cheat Treasury head felt like he did not need to bring for some reason.
“smart power” indeed.
The Chinese know that we are vulnerable and that our current policies are following a marxist theme which will destroy our economy:
China News: Obama’s Economic Reform Is In Conformity With Marxist Doctrine
http://gatewaypundit.blogspot.com/2009/07/china-news-obamas-economic-reform-is-in.html
But remember,Obama is not a socialist right.
Except the Russians,Europeans,Latin America,and the Chinese pretty much say so.Our own press some how can’t see this.
The Chinese have their own domestic goals and many there are not interested in taking on more Foreign debt from America.They want that money invested in their own country.
This is one of many reasons why the Chinese are slowly and carefully pulling their money and risky business ventures from us:
The Chinese are moving what they can when they can out of risky investments and debt that they have with us:
A ‘Copper Standard’ for the world’s currency system?
Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
The Chinese are certainly tied to us and can’t do anything rash for fear of markets crashing and losing their a$$.
They are doing what they can behind the scenes to gain the upper hand and put themselves in the drivers seat economically:
This $17 Trillion Divorce Won’t Be a Pretty One: William Pesek
http://www.bloomberg.com/apps/news?pid=20601039&sid=aKLGZEc7qoqA#
IMF Solution
Obama’s socialist policies are not going to make us any stronger,they are going to weaken our job market,foreign investments,and economic growth.
This partnership has become one sided and as the Chinese advance militarily, it will become even more one sided.
It is also interesting to watch the super moral liberals who constantly are telling everybody how much more human rights and justice are more important than power and greed
stay so silent while Mr. Hope and Change snuggles up to one of the chief countries that has allowed Darfur to become a genocidal snake pit.
I guess we won’t be hearing anymore speeches from George Clooney anytime soon.
This quote from the Chinese sums up our situation well:
Jim McGregor, who runs the JL McGregor research company in Beijing and used to head the American Chamber of Commerce in China, said that where US leaders once came to Beijing to hand out lectures, now they came to “kiss up”.
Baxter Greene on July 28, 2009 at 10:37 AM
Last year China sold more cars globally than the USA.
China’s middle class equals the entire US population.
China has as many internet users as the entire US population.
China produces embedded chips sold to the US, used in all our computer applications, including our military craft for national defense.
China already shot down one of our communications satellites.
China imprisons all political opponents.
China tortures their prisoners.
China sells body parts from prisoners.
Obama wants us to become the new China.
There are no unalienable rights. That was a myth fabricated and promoted by white wigged out of style, irrelevant white men in outdated 18th Century America. Forget it.
maverick muse on July 28, 2009 at 10:38 AM
Well done, coldwarrior.
myrenovations on July 28, 2009 at 10:38 AM
They are still vastly inferior – you just are finding it hard to locate anything to compare them to anymore.
Vashta.Nerada on July 28, 2009 at 10:39 AM
Interesting video saying the opposite–that China is poised to fail.
JiangxiDad on July 28, 2009 at 10:41 AM
We spent decades trying to destroy the USSR and communism, and now, not only are we helping build the next superpower, but a communist superpower at that, and we are their beeches.
We are seriously setting ourselves up to lose a war if anyone wants to own our azz. Last years high steel prices emptied most junkyards, backyards and fields of idle metal scrap, which was quickly shipped to China so we could help build a manufacturing industry, so we could buy stuff from it.
Now we have a ‘Cash for Clunkers’ program which is pulling working cars off the road so they can be smashed and most likely sent to China to be melted and rebuilt into tiny cars by GM to build the Obama fleet we will all be begging for when gas prices go to $5/gal.
I don’t know why anyone should be surprised by all of this. This is a liberal wet dream. Since America is the cause of all the world’s ills, making us dependent on anyone and everyone, fits their world view just fine.
Sadly, it is going to take a World War to pull us out of this.
Elections have consequences, ya know.
cntrlfrk on July 28, 2009 at 10:42 AM
New standard for ignorance that ain’t bliss: American press.
Spoiled rotten socialists. They want to deny the relevance of the Constitution that MUST live and breath to function properly, so revise the first amendment to require PROOF of publications’ veracity.
That the press won’t say it lends substance to a story, given reverse discrimination.
maverick muse on July 28, 2009 at 10:45 AM
Do you see any evidence to support the notions that China is inflating it’s RE and stock markets (like we did) with too much easy money? That’s what I’ve been hearing.
Also, do you see evidence of growing #’s unemployed migrant workers?
JiangxiDad on July 28, 2009 at 10:45 AM
True. I commute from downtown Shanghai to the suburbs every day. You don’t have to go very far outside the big cities to see a rapid drop-off in prosperity and wealth. China isn’t all poor, but the poor are still the vast majority.
China is still in fact hugely dependent on the US market and will be for the foreseeable future.
DarkCurrent on July 28, 2009 at 10:48 AM
JiangxiDad on July 28, 2009 at 10:41 AM
Fail, not likely, though speculation always precedes burst bubbles.
Just because a bubble pops doesn’t mean that the bubble machine is broken.
Case in point: American free enterprise prior to socialism.
It’s the sand of socialism that breaks down the machine, regardless of what the machine produces, whether industry or mere bubbles.
maverick muse on July 28, 2009 at 10:49 AM
Hm.
maverick muse on July 28, 2009 at 10:52 AM
Makes you wonder when they (this administration) meet with the Chinese, do they crawl?
All this humiliation can be done away with if our TAX CODE was done away with.
Effing idiots.
moonsbreath on July 28, 2009 at 10:53 AM
Words, just words
Numbers, just numbers
trillions, just trillions
maverick muse on July 28, 2009 at 10:54 AM
Ur correct, wrong choice of words. I read an interesting book which tries to predict future geo-political events. In the China section, the author says that China always has a rich coast and poor interior, like today as well. And for that reason, the coast is always more tied economically and politically to the rest of the world, and that the central gov’ts control is usually more confined to the interior. He says this is typical in China, and always causes political dissolution or weakened central gov’t. Anyway, it’s a provocative thesis. There are others in the book. It’s a fun read.
JiangxiDad on July 28, 2009 at 10:54 AM
We would have to borrow money from the Chinese to go to war with the Chinese.
moonsbreath on July 28, 2009 at 10:56 AM
It seems in Shanghai at least the real estate markets have been slowing in recent years, though I don’t follow it closely.
I haven’t seen any evidence of growing number of unemployed migrant workers here . There have been quite a few in Shanghai for many years, I don’t notice any particular difference now. It may be a different story in smaller cities that are more easily accessible to the rural poor.
DarkCurrent on July 28, 2009 at 11:00 AM
Superb post.
But to make it here you’ll need more cowbell.. more ‘Nirther talk & Palin bashing.
Kidding aside I’m checking Coldwarrior regularly from now on.
Stephen M on July 28, 2009 at 11:04 AM
JiangxiDad on July 28, 2009 at 10:41 AM
way too much China bullishness here based on PR and photos, as opposed to #s in context: such as demographics, export-dependency, “dollar trap,” etc.
US-China Ponzi scheme: http://articles.moneycentral.msn.com/Investing/SuperModels/mad-world-chinas-bind-is-ours-too.aspx
China exports crashed: http://hotair.com/greenroom/archives/2009/06/20/note-this-chart-and-stop-telling-me-that-the-future-belongs-to-china/
China needs a booming worldwide economy for its current model to work – among other things, for coastal China to continue to prosper while using the massive “reserve army of the unemployed” (interior China) as wage slaves. A transition to an alternative model, under immense demographic and political pressure, would be very difficult, and probably would NOT include general prosperity – it never has before in China. There is, however, ample precedent for political instability and fragmentation in China, combatted through harsh authoritarian measures.
It’s more likely that the US and others will be struggling to prop China up in 10 – 20 years, while still others seek to chop up its exploitable portions, than that China will be a superpower.
CK MacLeod on July 28, 2009 at 11:06 AM
Also, do you see evidence of growing #’s unemployed migrant workers?
JiangxiDad on July 28, 2009 at 10:45 AM
They ship ‘em home when there’s nothing for them to do, by the 10s of millions.
CK MacLeod on July 28, 2009 at 11:08 AM
Just two points I disagree with:
Middle class:
China doesn’t have a middle class equal to the entire US population if you define middle class as something close to US standards. I’d estimate it’s at most 100 million by our standards.
Internet usage:
China internet users include a huge number of people who use the internet on computers installed at ‘net bars’, not their own personal machines. The internet is readily available in China, but not nearly as much a part of everyday life as in the US.
Otherwise good observations.
DarkCurrent on July 28, 2009 at 11:10 AM
Thanks. But I am wondering what happened to the laid-off factory workers when factories shut because exports are way down. Maybe Shanghai isn’t the best place to witness that.
Also, fyi, I think Shanghai property market is BOOMING again. And with stock market up, gov’t is worried that the money they forced the banks to lend is going into creating a bubble that won’t help the economy at large.
I sold half of my china stock in the past week or so. I was getting worried about too rapid a rise in their market, and whether Chinese consumer is at a point yet to rescue Chinese economy without a vibrant US econ.
JiangxiDad on July 28, 2009 at 11:12 AM
JiangxiDad on July 28, 2009 at 10:54 AM
I read that book, too! http://hotair.com/greenroom/archives/2009/06/03/the-next-100-years-why-the-21st-century-will-be-an-american-century/
Friedman sums up the China bear case smoothly, imaginatively, and succinctly, but in some respects hardly even scratches the surface.
That China is trying to do something about its predicament – i.e., arrange resource and trade deals – is all well and good, but doesn’t tell you whether the math really works.
CK MacLeod on July 28, 2009 at 11:13 AM
Yeah, I’ve heard this thesis before. Could be. I don’t know if I’d bet money on it, but I have taken some money off the table when it comes to China’s more immed. future. (But I’m far from batting 1000 on my investments, so take it fwiw.)
JiangxiDad on July 28, 2009 at 11:15 AM
Yeah, it was fun to read, and has colored my opinions about things. Hope I’m not giving it too much credence.
JiangxiDad on July 28, 2009 at 11:16 AM
What? You’re not convinced that Obama has rescued the US economy, that his program makes sense, and that an economic boom is ahead for us and everyone else? That we’re going to re-inflate the bubble, but this time fill it with hope and change instead of easy credit?
CK MacLeod on July 28, 2009 at 11:16 AM
LOL! I’m such a schmuck! I read it because of you.( I am getting too old)
JiangxiDad on July 28, 2009 at 11:17 AM
I own some WalMart stock. Other than that, I’m out of the US market until Obama is gone, at the earliest. No trust, no how.
JiangxiDad on July 28, 2009 at 11:19 AM
JiangxiDad on July 28, 2009 at 11:16 AM
There are whole shelves of neo-declinist, “Post-American World” books out there right now, each one more pretentious and incoherent than the last one. The virtue of Friedman’s approach is that it’s based on the systematic application of criticizeable, tested hypotheses about how the world really works beneath the PR. Doesn’t mean that he’ll get everything right or that his book really is a map of the future, but his approach is a lot more concrete than the mix of impressions, anecdotes, and received wisdom that a lot of other people are throwing around.
CK MacLeod on July 28, 2009 at 11:21 AM
A bigger economy doesn’t mean a better financial situation. For example, who is in a better financial situation? A person with $1M of income with outlays of $1.5M, or a person with a $50,000 income and $30,000 of outlays?
scrub_oak on July 28, 2009 at 11:37 AM
The key point is still whether China have bootstrapped themselves to where their internal consumers can support their manufacturing base.
If they have reached “critical mass”, then their only reason to continue buying U.S. debt is to use monetary policy rather than military strength to get what they want.
Ironically, while the Chinese are playing the long game economically, their leadership is in something of a race against time as American culture is bringing serious changes to traditional Chinese culture.
Who wins in this game of competing “long” strategies is, at this point, anybody’s guess.
Mew
acat on July 28, 2009 at 12:01 PM
Yeah. Don’t panic yet.
I’ve had some long conversations with Chinese nationals over here to learn English. China is no joke … but they’re not even close yet.
You’d be better off worrying about what they plan on doing with 20+ million dudes who can’t get married because they’re male to female ratios are so screwed up.
TheUnrepentantGeek on July 28, 2009 at 12:18 PM
*their. Curse you homonyms.
TheUnrepentantGeek on July 28, 2009 at 12:19 PM
According to Mark Steyn, urban couples don’t even want one child anymore. The Communists, who have always been good at exterminating people post-birth, have brought great efficiences by eliminating people before they are even born.
Good thing the neo-malthusians in this country failed miserably.
NoDonkey on July 28, 2009 at 12:23 PM
Spoken like one of those “Green Zone” reporters, who don’t move more than a couple of miles outside the city.
Their poor and exploited lower class is far larger than their middle class, which, if we are to believe your statistics, also makes it far larger than the population of our country.
Just because the exploiters are native doesn’t mean there isn’t a traditional society to be exploited.
Ever been to Toy Shan village?
unclesmrgol on July 28, 2009 at 12:25 PM
That’s only partly true. The false part is that many of the higher price products sold are as of comparable quality.
The lower price goods are often of lesser quality, but they are also dirt cheap, and for those, people don’t care ’cause they just buy another one. In those circumstances, something made in the US may cost $10 and last two years is competing with something that costs $6 and lasts a year.
Of course there are other eccentricities of the market, competition, and buyer’s perceptions that affect product marketability, but just declaring they are vastly inferior, even though they do brisk sales, is nothing more than saying Americans are big bozos, so if you want to say that go right ahead, but it won’t change Americans’ decision-making.
Dusty on July 28, 2009 at 12:30 PM
China is making a concerted effort to address rural development…and it is paying off.
The World Bank and the Rural Development Institute, among others, have been looking at China and the rural segment for quite some time.
So has the Chinese leadership.
New biotechnologies are being applied as well as some major and fundamental reforms in China’s land-use and “land holding” policies. While not yet granting full ownership across the board to all farmers in China, the Chinese government has expanded their former short term, at times annual land holding policies to an expanded “one-generation” land holding so as to spur Chinese farmers to make improvements on the land they occupy and invest in new technologies…and garner profit.
Sure, they’ve a long way to go…but given their incentive to feed their own, and gain foreign currency from exports…just as their business and modern industrial sectors have jumped beyond the wildest projections of the 1990′s, the rural segment of the population is certainly no longer that mass peasant population for most of China’s history which Mao exploited to usher in the Communist regime.
Eradicating poverty in China will be a major failing of the Beijing leadership for at least the next few generations…but China has shown a single-mindedness when it comes to seeking solutions to its problems.
Perhaps a subject for a future posting.
coldwarrior on July 28, 2009 at 12:48 PM
B.S. If we stopped buying Chinese goods, we’d switch to Indonesia, Taiwan, Vietnam, Cambodia, Mexico, Brazil, Costa Rica, and many, many other countries, some of which are now undercutting China’s prices. There are more than enough suppliers for us. However, if China stopped selling to us, whom do you think would buy? Protectionist Europe? The volatile Middle East? India, most of which is still dirt poor? Sure, they’d all by some, but nothing like us.
Likewise, if they stopped lending us money, there are plenty of others who would be willing to use us as their piggy bank, considering our centuries of viability. (Heck, less easy money might be a long-term good for us, forcing us to reduce spending and debt if we have any brains about it.) And where’s China going to put its money if America is off the table?
China might like to pretend they’re the ones who have more leverage over us, but I see the following: Without them, trinkets would cost a little more. Without us, they’d be in the dark ages. Maybe that will change, but that’s the way it is now. We’re both dependent on each other — a trade freeze would be a huge economic shock to both — but they’re more dependent on us than vice versa. We just have transparency that makes our dependence more visible.
calbear on July 28, 2009 at 1:13 PM
An excellent post.
Unfortunately, the subject of China, ‘in toto’, is so wide and complex that only a organized narrative of many ‘bullet points’ could begin to weave all the threads into an intelligible tapestry.
The outward face of China may changing [as the photos above clearly show], but the framework it’s all built on remains constant: family ties, corruption, bureaucracy, and the ‘mandate of heaven’.
As strong, and as ‘rich’ as China may be [as it's always been, too varying degrees...], their internal ‘power’ structure has always remained brittle when [repeatedly] struck by forces beyond their ability to control.
Why? IMO, ‘the mandate of heaven’ factor: their strength [when everything's running smoothly] and their greatest weakness [when things go 'south', it does so with a bang].
The current ‘power elite’ know that; that’s why China is moving rapidly to expand it’s ‘external’ power base was widely as possible [...pillars may fall, but pyramids abide...].
For China, America was part of that ‘pyramid’; unfortunately for us, the ‘ideal’ America of Dear Leader’s dream is NOT. ‘Buying’ the Clintons put China on the world stage. Obama, OTOH, was not part of their calculus; somebody else put that turtle on the fence post [if they did have a hand in it...boy did they get screwed].
No my friends, our current political dynamic is forcing the Chinese to revise their plans, in all probability forcing them to accelerate them. For me, that means a more dangerous world, especially for China’s ‘immediate’ neighbors [hence Russia's renewed efforts to 'cozy up' to them].
Given China’s internal ‘issues’: an extreme version of ‘haves vs have-nots’, pollution, demographics, economic growth, etc. For the current leaders, China has to maintain forward [economic] momentum, it’s their ‘mandate of heaven’.
If they lose that, they’re history, and they know it. I suspect the ‘reality’ Obama got fed wasn’t very tasty. Small wonder the ‘details’ of this meeting are TBA.
CPT. Charles on July 28, 2009 at 1:14 PM
Do you actually drive a car in china ? There is no way in hell I would drive a car in china. Absolute chaos, I could barely deal with riding in a taxi. Stops signs, red lights and yellow lines are more like mild suggestions than a rule.
Waiting in line is another unheard of thing in china
I will be making my third trip over there this winter. I have only been in(Guandong) HK, shenzhen and an hour or so outside of shenzhen.
One of the biggest obstacle they have to overcome is the pollution. I did not see the sky for two weeks on one trip.
kangjie on July 28, 2009 at 1:42 PM
Well there is so much wrong here so I’m only going to hit a few points.
1) China is not enterring mass consumerism on any scale, consumer spending has been driven down over the last 10 years to near global lows and any transition will be painful for an economy dependant on exports.
2) Said transition is not at this time occurring (see below).
3) China has massive internal problems which will only grow over the next 20 years. I suppose I could say “This isn’t Mao’s China”, but it is true here. A couple such problems, China is rapidly aging and will grow old before it grows rich enough to support its elderly. It has massive disparities in income between coast and interior which are growing worse with growth in coastal areas and the reported loss of 30 million migrant jobs.
4) China needs us more than we need them economically. As the saying goes, owe the bank a little money and they own you, owe the bank a lot of money and you owe them. Although Washington is fighting it, the US economy is transitioning from the unnatural post-1998 East Asia meltdown system into a more natural savings/consumer mix. In that system we traded jobs to East Asia for wealth from East Asia, we can switch back a lot easier since it affected a smaller share of our economy (and also if push comes to shove the bank takes the hit on non-payment). China especially will have trouble given exports are 30-35% of GDP and account for most of the good job growth in the coastal areas.
5) China is no more dependant on the dollar than it wants to be. As such it was never dependant on the dollar as a favor to us, it did so because it benefited the post-East Asian model to do so. The Chinese are free at any time to stop running massive trade surpluses and stockpiling dollars. The moment they do so the Renminbi will appreciate against the dollar making Chinese exports more expensive and encouraging imports from the US.
6) As said, the Chinese cannot just “go self-sufficient”. They need to for the global economy to function correctly, but they won’t, too much economic dislocation. They do not have us over a barrel, neither of us really have much leverage but to the extent one side does it is us. Any major fight between us will hurt China much much more than it hurst us, but it will hurt us as well so we won’t use that to our advantage. China would in a heartbeat but that is why they are all talk. For example, they know where Obama is going, they’ve known for 6 months, yet they still buy treasuries and they still complain loudly about it. In 4 years they will still be complaining loudly about it. They cannot get off of treasuries if they are going to continue stockpiling dollars to keep the renminbi weak. Only the US treasury market is large and liquid enough to absorb China’s trade surplus. They recently tried commodities but that didn’t work out well.
7) Not necessarily in the story, but the US-India relationship will be far more important to the 21st Century than the US-China one. India is growing far more naturally, will overtake China in population soon, and doesn’t have the massive imbalances demographically, politically, and economically of China. India will decide how the 21st Century goes.
Yes, lots of evidence that is what is happening. Beijing is flooding the country with 3 times the loans that were issued last year. Stocks and real estate are soaring into another bubble, investment which is already overweighted is becoming even more so, and consumer demand is limping along but internally and externally (most reports of massive increase in consumer purchases stem from local govt mandates, like with autos). This is not a great recipe for future growth.
jarodea on July 28, 2009 at 2:20 PM
Another point, everyone is so scared of the Chinese dollar reserves and treasury holdings. China is very limited in how it can use them. The moment they start a major sell off the dollar would weaken considerably against the renminbi. The end result would be to destroy the local value of those holdings in exchange for making Chinese exports much more expensive, making competing imports much cheaper, and damaging China’s main export market. Not a win situation for China any way it is looked at. Which again is why despite bluster China has only attempted to slow down the growth of the reserve and not to reverse it.
jarodea on July 28, 2009 at 2:30 PM
Tks. interesting stuff. You paint a good picture of one road china may be going down.
JiangxiDad on July 28, 2009 at 2:47 PM
jarodea, thanks for your comments, which I find persuasive (though maybe in part because I was already persuaded ;)). The article I linked above on the US-China “Ponzi scheme” goes into some detail on China’s difficulties doing anything with its US debt holdings.
Also a nice comment at TWS today on Chinese naval investments – especially the last comment from a US submariner: “Thanks for the targets!” http://www.weeklystandard.com/weblogs/TWSFP/2009/07/chicom_carrier_fleet.asp
CK MacLeod on July 28, 2009 at 2:55 PM
A “reality-based relationship”, eh?
Does this mean that all the libs with their “Free Tibet” bumper stickers are actually going to try to free Tibet?
Damn; I’m a funny guy!
commenter on July 28, 2009 at 3:11 PM
Actually. it’s worse. One report I’ve read stated that over 54% of their groundwater is no longer potable without treatment. Considering the average ‘tech-level’ away from the coastal zone, that’s VERY bad. Add to that ‘thirstiness’ of those same urban centers, the rural portion of China gets the short end of the stick [and the people in the interior know it].
It’s just one more multiplier in the ‘have/have-not’ equation.
CPT. Charles on July 28, 2009 at 3:19 PM
Ahh, sorry I missed that, I can only take so much “Great Yellow Hope/Scare” mongerring so I skipped half the comments. Well that sounds like an interesting book, and one which I’m obviously inclined to agree with :).
As for the PLAN, I don’t think we should be so cocky. True if China started a war with us soon, all those expensive new ships would just be practise targets for the USN. They can be used for other things though, like giving China the ability to seize the various oil rich areas of the South China Sea or support uncooperative regimes, that would cause lots of headaches here. Also, a baby doesn’t win the New York Marathon, they have to walk first. In 20 years the humble blue water beginnings of the PLAN may not look so benign or laughable.
jarodea on July 28, 2009 at 3:52 PM
Heh, and a good article CK MacLeod. I should have checked all comments before replying.
jarodea on July 28, 2009 at 4:00 PM
You’d be better off worrying about what they plan on doing with 20+ million dudes who can’t get married because their male to female ratios are so screwed up.
TheUnrepentantGeek on July 28, 2009 at 12:18 PM
—-
One option is to use these “broken branches” as “grafts” to extend their reach. One obvious scenario is to use them as boots on the ground, providing security around a natural resource in, say, South America or Africa. Encourage the boots to marry the local girls, see what happens.
Mew
acat on July 28, 2009 at 5:25 PM
Great,since our problems and massive debt with China is blown way out of proportion,we can stop kissing their a$$.
Please let the Obama administration aware of this because they have been on their knees over there for months.
Baxter Greene on July 28, 2009 at 5:30 PM
Useful idiots are both useful and idiotic, can’t help you there Baxter. Especially since Obama seems to be on the side of the those dreaming of the Great Yellow Hope knocking these upstart inbred provincial Americans from the top of the world’s totem pole.
jarodea on July 28, 2009 at 7:23 PM
Well he could use your help.
Your posting (as well as others) was a lot more informative than anything Geitner has said.
Baxter Greene on July 28, 2009 at 11:36 PM