China Economy

[Luke_Wilbur]

Is anyone worried about the U.S. China trade deficit hit a record $617 billion, about 5.3 percent of the total value of all goods and services produced in the United States, known as gross domestic product. The gap has continued to expand in the first two months of this year, up to $119.5 billion from $91.7 billion a year before.

[Guest Human]

Let me just say that in Hong Kong, the amount of money flowing is staggering. The stories that I'm hearing about from my friends are like "Oh My God".

 

They have so much that they don’t know where to spend it all. My firends "some of them" are sending their kids to study in asia. Forget the United States.

 

I will leave the politics of it all to the next generation.

 

Oh!!! by the way, it's nice to be back in here.

[Luke_Wilbur]

It is nice to see you human. I have heard that Shanghai has become the Paris of Asia. I am just worried for the younger Americans. It is going to be alot tougher to compete.

 

One of my friends is excited that China is going away from the US Dollar. Then again, he makes his money in the currency market.

[Guest Human]

Well!!! we use to be in the tech cycle, and now it's the business cycle, and after 2010 a new cycle will begin. As to what that cycle will be? I have no clue

 

Those of us that watch the net, have seen a major consolidation of the internet with in the business cycle.

 

Not to mention that there's also been a major consolidation within the Government.

I think that the rest of this year is going to be rough, in terms of out looks.

 

At least I can watch the new star wars movie. (that will be a welcomed distraction).

 

That's why I always liked "not just scifi", but the science stuff? It's always been a welcomed relief in terms of the daily grind.

[Guest Free Trade]

You might want to review Alan Greenspan's report to the Senate Finance Committee.

 

**********************************************************************

 

Mr. Chairman and members of the Committee, I am pleased to be here today to offer my views on China's trade and exchange rate regime. I would emphasize that the views I will express are my own and do not necessarily represent those of the Federal Reserve Board.

 

Some observers mistakenly believe that a marked increase in the exchange value of the Chinese renminbi (RMB) relative to the U.S. dollar would significantly increase manufacturing activity and jobs in the United States. I am aware of no credible evidence that supports such a conclusion.

 

The enhanced integration of China into the world trading system is having a notable effect on Asia's trade with the rest of the world and on trade within Asia. After having risen rapidly through the 1990s, U.S. imports from Asia excluding China have flattened since 2000. This has occurred as production within Asia has evolved, with the final stages of assembly and exporting to the United States and elsewhere becoming increasingly concentrated in China. As a consequence, because exports by country are recorded on a gross basis rather than as value added, the widening of the United States' bilateral trade deficit with China, measured gross, has largely been in lieu of wider deficits with other Asian economies, including Japan. Measured by value added, our bilateral deficits with China would have been far less, and our bilateral deficits with other Asian exporters would have been far more.

 

Accordingly, an increase in the exchange rate of the RMB, relative to the dollar, would likely redirect trade within Asia, reversing to some extent the patterns that have emerged during the past half decade. However, a revaluation of the RMB would have limited consequences for overall U.S. imports as well as for U.S. exports that compete with Chinese products in third markets. Such a revaluation would affect Chinese value added but not the dollar cost of intermediate goods imported into China from the rest of Asia, which represents a significant share of the gross value of Chinese exports to the United States and elsewhere. (To the extent that exporters to China revalued as well, of course, the impact on overall Asian exports would be somewhat greater.)

 

The broad tariff on Chinese goods that has recently been proposed, should it be implemented, would significantly lower U.S. imports from China but would comparably raise U.S. imports from other low-cost sources of supply. At only slightly higher prices than prevail at present, U.S. imports of textiles, light manufactures, assembled computers, toys, and similar products would in part shift from China as the final assembler to other emerging-market economies in Asia and, perhaps, in Latin America as well. Few, if any, American jobs would be protected.

 

More generally, any significant elevation of tariffs that substantially reduces our overall imports, by keeping out competitively priced goods, would materially lower our standard of living. A return to protectionism would threaten the continuation of much of the extraordinary growth in living standards worldwide, but especially in the United States, that is due importantly to the post-World War II opening of global markets. Such an initiative would send the adverse message to our trading partners that the United States, while accepting the benefits of broadened world trade, is not willing to absorb the structural adjustments that are often necessary.

 

To maintain a rising standard of living, a dynamic economy such as ours requires a continual shifting of resources toward the most up-to-date technologies, financed not only by savings but also importantly by the depreciation of increasingly obsolescent facilities.

 

This highly dynamic process is mirrored in our labor markets, where jobs are constantly being created and destroyed at a rapid pace. New hires in the United States currently average more than a million per week, half resulting from voluntary job change. At the same time, during a typical recent week, about 150,000 workers are temporarily laid off and another 225,000 are subject to permanent job loss. Any effect of trade with China on U.S. employment is likely to be very small relative to the scale of job creation and job loss in our economy.

 

A policy to dismantle the global trading system in a misguided effort to protect jobs from competition would redound to the eventual detriment of all U.S. job seekers, as well as of millions of American consumers. Policy should aim to bolster the well-being of job losers through retraining and unemployment insurance, not to stave off job loss through counterproductive efforts to impede the process of income-enhancing international trade and globalization.

 

***

 

While the presumption that a revaluation of the RMB will notably increase jobs in the United States by constraining imports or expanding exports is without statistical or analytical support, it is nonetheless the case that a more flexible RMB would be helpful to China's economic stability and, hence, to world and U.S. economic growth. Rapid accumulation of foreign, largely dollar, reserve holdings by the People's Bank of China, China's central bank, as a consequence of support for the RMB could boost the growth of the money stock, with the accompanying risk of triggering upward pressure on inflation and a general overheating of the Chinese economy.

 

The Chinese central bank's issuance of liquidity management bonds to lessen potential increases in the money supply created by foreign asset accumulation has accelerated since regular issuance began in April 2003. Nonetheless, only about one-half of the increase in reserves over the past two years has been offset, with the remainder showing through as money growth.

 

Because the Chinese financial system has considerable distance to go before achieving a satisfactory degree of soundness and flexibility, sterilization of continuing inflows of speculative funds will presumably become more difficult as the scale of these operations, already large, increases over time. In spite of its recent improvements, the financial system of China is still inordinately governed by administrative command and control. Market pricing of financial instruments is still accorded only a minor role.

 

Financial markets, if left free to continuously reprice interest rates and asset values, will identify and respond to imbalances far sooner than a system based on administrative edict. In market-based financial pricing systems, automatic adjustments are inherent. But in a highly administered system, supervisors can identify emerging imbalances only when these imbalances become visibly large and are already troublesome. Adjustment in a system requiring human intervention is accordingly far less flexible than in a system based on the automaticity of markets. Given this vulnerability to emerging imbalances, the buildup of ever-larger holdings of bonds resulting from sterilization of foreign exchange purchases poses threats to China's financial stability. Hence, the sooner the Chinese, in their own self-interest, move to a more flexible currency regime, perhaps leading other Asian currencies to become more flexible as well, the better for all participants in the global trading system.

 

***

 

In the decades ahead, it is in our interest and that of the global economy that China continue to progress toward becoming a more market-based, productive, and dynamic economy in which individual initiative, not government decisionmaking, is the fundamental strength behind economic activity. For our part, it is essential that we not put that outcome, or our future, at risk with a step back into protectionism.

[Guest Senator Charles E. Schumer]

The true free trade position is to make sure that China is playing fair in global trade. Those who are apologizing for China’s intransigence on currency manipulation and other unfair trade practices are the real protectionists in this debate.

 

The Yuan has been tightly pegged to the dollar since 1994 (approximately 8.28 Yuan to the dollar). During that period of time, China’s economy has grown dramatically, averaging over 8% per year. If China’s currency freely floated in the market, as is the case with virtually all major world currencies, it would have appreciated substantially. The result is that many economists estimate that the yuan is now undervalued from 15% to 40%. In order to hold the value of the Yuan within its tight and artificial trading band, the Chinese government has intervened in its foreign exchange markets. The practice of “currency manipulation” to gain a trade or competitive advantage violates World Trade Organization and International Monetary Fund agreements, of which China is now party.

 

A symptom of currency manipulation has been record trade deficits with China. Last November it was reported that our trade deficit with China grew by 25%. This number represents one quarter of our national trade deficit. Since 2000, the U.S. trade deficit with China is up over 94% to $162 billion dollars. In one year from 2004 to 2005, the trade imbalance increased 30%. In computer manufacturing the deficit is up over 300%. In apparel manufacturing the deficit is up 50% over 4 years, but textile manufacturing alone is up 100% in the first four months of this year alone. In tool and dye, and heavy metal imports, Chinese imports are up almost $3 billion in four years.

 

The bipartisan Schumer-Graham China Free Trade bill allows for a 180-day negotiation period between the U.S. and China, after which China must revalue its currency. If the negotiations are not successful, the tariff would be applied to all Chinese products entering the United States. If the President certifies to Congress within 180 days of enactment that China has made a good-faith effort to revalue its currency upward, he may delay the imposition of the tariffs for an additional 180 days. If at the end of that 180-day period the President determines that China has developed and started actual implementation of a plan to revalue its currency, the President may delay imposition of the tariffs for an additional 12 months.

[Guest Fu Mingzi]

The American economy expanded from $2.2 trillion in 1979 to $11 trillion in 2003, while that of the Chinese economy rose from $200 billion to $1.2 trillion correspondingly. The growth rate of the Chinese economy in the same period is two-three times that of the United States, but the economic aggregate of both nations increased by almost five times. In this sense both economies were expanding simultaneously, vigorously boosting the world economy and Sino-U.S. bilateral economic and trade relations.

[Guest Fu Mingzi]

The Sino-U.S. trade imbalance will exist for the foreseeable future, because of the macroeconomic situation in the two countries, export control of the United States against China and a reshuffle of international division of labor.

 

It is common sense that if a country’s domestic savings deposits are larger than investment, it will have trade surplus; and vice versa. China’s huge trade surplus is a result of its huge savings deposits at home, while the large U.S. trade deficit is attributable to its low domestic savings deposit rate.

 

China and the United States have complementary economies, the comparative advantages on the U.S. side are mainly in hi-tech, knowledge-intensive equipment and products, while China’s comparative advantages lie in labor-intensive products. The U.S. export control against China represses full play of its comparative advantages, thus leading to trade imbalance between the two countries.

 

China has a high-quality, low-cost labor force. Developed economies and emerging markets move their factories to China and sell their products through their original channels. Thus, the increase of trade surplus on the Chinese side results from transfer of trade surplus with the United States from other economies to China.

 

Trade deficit of the United States with China is not a big problem. However, it may be maneuvered by politicians. The Chinese Government is still seeking to resolve the imbalance in the process of development. China’s capability to import from the United States will further grow with China’s economic development.

 

China is in the biggest developing country and the United States is the biggest developed country in the world. They both should fully employ their own comparative advantages. Sino-U.S. economic cooperation is helpful, not only to a sound economic performance of the two countries, but also to stability and development of the world economy. The most serious ongoing problem in Sino-U.S. economic relations is trade friction. The United States should give the matter further thought, easing its export control and bringing bilateral economic and trade relations back to normal. Meanwhile, China should consider using trade surplus with the United States to purchase U.S. treasury bonds, which can balance their international payments, offset the U.S. fiscal deficit, and support and guarantee the international position of the U.S. dollar at a strategic level.

[Guest Mister X]

You might want to read this:

 

http://online.wsj.com/article/BT-CO-20100105-704479.html

 

BEIJING (Dow Jones) -- China faces appreciation pressure on the yuan and may attract a lot of "hot money," or speculative funds, given the U.S. dollar's weakening and aggressive loosening of monetary policy in advanced nations, a deputy chairman of the country's economic planning agency said.

 

National Development and Reform Commission Vice Chairman Zhang Xiaoqiang's remarks, carried in a speech posted Tuesday on the commission's Web site, come as international pressure for a stronger yuan has intensified in recent months.

 

But China has defended its policy of keeping the yuan exchange rate stable, saying the policy helps the world cope with the financial crisis.

 

"Due to the quantitative easing of monetary policy in developed nations, the dollar's weakening, China's leading the way in economic recovery and other factors, the yuan faces a new round of appreciation pressures, and may ignite huge inflows of 'hot money,' and increase China's difficulties in managing liquidity," he said.

 

Zhang's remarks demonstrate the difficulties Beijing faces in setting its exchange-rate policy: Its vast trade surpluses exert pressure on the yuan to appreciate, but any hint that China will let the yuan rise could lead to massive fund inflows, as analysts say happened in the first half of 2008.

 

China will also encourage local companies to take part in the overseas oil and mineral sectors, including investing in processing the resources abroad, and come up with rules to encourage outward investments, said Zhang, who oversees foreign and outward investments at the economic planning agency.

 

China has encouraged overseas investments partly to get resources and advanced technologies, help local companies expand through acquiring brands, for instance, and stem an influx of liquidity brought about by its trade surpluses and foreign fund inflows that add to Beijing's foreign-exchange reserves, the world's biggest at $2.3 trillion at the end of September.

 

Even as the foreign exchange reserves mount, "companies find it hard to gain financing" as they expand overseas, said Zhang.

 

China will urge Chinese banks to extend loans to support the outward investments. It will also allow some companies to borrow from abroad to take advantage of lower international borrowing costs, and allow qualified companies to issue bonds abroad, Zhang said.

 

China's gross domestic product is estimated to have expanded 8.5% in 2009, he said, in a forecast that is broadly in line with market expectations that GDP growth exceeded 8% last year.

 

On encouraging foreign investment in China, Zhang said China needs to keep the local market open, but must ensure its economic security, citing foreign purchases of local agricultural companies as posing potential risks to the nation's development.

 

Foreign investment in China is estimated to have fallen slightly last year, while outward investment is likely to have grown, he said.

 

China will continue to support qualified local companies to issue shares abroad, while encouraging foreign companies to enter the local private-equity and venture capital sector, he said.

 

He added China will step up its management of foreign debt.

[Guest Cranium]

Latest official statistics show China's gross domestic product has grown by 8.7% in 2009, overtaking Japan as the world's second largest economy.

 

According to China's GDP figures announced Thursday by Ma Jiantang, head of the National Bureau of Statistics, the country's GDP in the fourth quarter of 2009 has expanded by 10.7 percent when compared year-on-year, exceeding most predictions.

 

"It reminds us to be fully aware of following the trend of price changes," he said at a press conference to announce the economic data.

 

“Despite the increase in GDP and economic strength, we must see even more clearly that we remain a developing country,” said Ma.

 

China's economy continues to recover after it was hit by the economic downturn during 2008 with the help of a 585 billion dollar stimulus package.

 

China is growing while many other nations, including the US, remained challenged by the global financial crisis.

[Guest Jon]

Put China on the open market, currency and all, do away with the suppressvie and cruel regime... and then we will see who rules!

[Guest x]

Chinese officials have said that their country's exports surged last December to edge out Germany as the world's biggest exporter.

 

The official Xinhua news agency reported today that figures from the General Administration for Customs showed that exports jumped 17.7% in December from a year earlier. Over the whole of 2009 total Chinese exports reached US$1.2 trillion, above Germany's forecast $1.17 trillion.

 

Huang Guohua, a statistics official with the customs administration, said the December exports rebound was an important turning point for China's export sector. He commented that the jump was an indication that exporters have emerged from their downslide.

 

"We can say that China's export enterprises have completely emerged from their all-time low in exports," he said.

 

However, although China overtook Germany in exports, China's total foreign trade -- both exports and imports -- fell 13.9% last year.

[Guest Widow's Son]

The severe recession has fast-forwarded history, catapulting an unprepared world into a period of uneasy cohabitation between the United States, the No. 1 economy, and its eventual successor.

[Guest James Petras Ph.D.]

Established empires in decline, like the US today, have a repertoire of levers designed to discredit, seduce, isolate and contain rising world powers like China and put it on the defensive.

 

One of the longest standing political ploys is Washington’s human rights propaganda campaign, highlighting China’s human rights violations, while ignoring its own massive offenses and downplaying those of its allies like the Jewish state of Israel. By discrediting China internal politics, the State Department hopes to inflate US moral authority, deflect attention from its worldwide long term and large scale violation of human rights accompanying its global empire building and build an anti-China coalition.

 

While human rights propaganda serves as the stick to beat back China’s economic advance, Washington also attempts to induce China’s cooperation in slowing down its decline. US diplomats frame this approach by emphasizing “treating China as an equal”, recognizing it as a “world power” which has to “share responsibilities” . Behind this diplomatic rhetoric is an effort to harness China to a policy of collaborating and following US empire building strategies as a junior partner, at the expense of China’s economic interests. For example, while China has invested billions in joint ventures with Iran and has developed a growing lucrative trading relation, Washington demands China support sanctions to weaken and degrade Iran to enhance US military power in the Gulf . In other words, China should give up its market driven economic expansion to share “responsibility” in policing the world in which the US is supreme. Likewise, if we translate the meaning of the White House’s demand for China to “assume responsibility” for “rebalancing the world economy” it boils down to telling Beijing to reduce its dynamic growth, to allow the US to gain trade advantages to reduce (“rebalance”) its trade deficit.

 

Alternating between positive symbolic gestures, such as references to the US and China as the (G-2), the two determining powers in the world, the White House has promoted a “united front” with the EU against China’s supposedly “protectionism”, “currency manipulation” and other “unfair” economic practices .

 

At international gatherings like the recent Copenhagen Conference on climate warming, the GATT meeting on trade liberalization and the UN meeting on Iran, Washington attempts to satanize China as the main obstacle in reaching global accords, deflecting attention from the facts of Chinese compliance in setting standards superior to the US , on climate, opposing protectionism and seeking a negotiated settlement with Iran.

 

Over time this imperial offensive to slow its decline has provoked an increasingly aggressive response as China gains confidence in its capacity to project power.

[Guest Tony]

For the first time since 2007, the People's Bank of China, the Chinese version of our Federal Reserve Bank, raised its key lending and deposit rates by 25 basis points. Why? To cool property speculation and curb a budding inflation problem.

 

The reaction was swift and painful for markets around the globe. The Dow Jones plunged by 165 points. Gold ... oil ... cotton ... copper ... the Australian and Canadian dollar ... as well as stock markets around the globe felt the effects.