Posted on 03/02/2007 6:25:08 AM PST by pissant
WASHINGTON – Republican presidential candidate Duncan Hunter's insistent warnings about China's threatening military buildup have stamped him as the Paul Revere of the fast-developing 2008 campaign.
China is picking America's pocket and using its ill-gotten gains to acquire ships, planes and missiles in a challenge to U.S. national interests, Hunter says. By cheating at trade, the 14-term congressman adds, China has also been able to pirate many American industries and high-paying manufacturing jobs.
Advertisement
But some experts say that the Alpine, Calif., Republican's relentless focus on Beijing's trade tactics is overwrought and ignores important economic benefits to the United States, including hundreds of billions of dollars worth of Chinese investments that help the United States finance its deficit. Campaigning for the Republican presidential nomination over the past three months, Hunter has espoused a view on China that is far more confrontational and alarmist than the one taken by the Bush administration.
For example, Hunter has accused China of illegal currency manipulation that, he says, is seriously damaging the U.S. economy. Federal Reserve Chairman Ben Bernanke, a Bush appointee, is guilty of “appeasement” for failing to challenge China's currency policy, Hunter says. Nicholas Lardy, an expert on the Chinese economy at the Peter G. Peterson Institute for International Economics, is one of several economists who say that Hunter has it backward.
In fact, Lardy and others argue, China's success last year at banking a surplus of over $230 billion in its two-way trade in goods with the United States has enabled the Chinese to bankroll the U.S. Treasury to the tune of hundreds of billions of dollars to finance the budget deficit. As a side effect, China's loans have kept both U.S. taxes and interest rates lower than they might otherwise have been, some economists argue.
“We are financing a government deficit and a savings shortfall by borrowing from abroad, including to a significant degree from the Chinese,” said Lardy. “So it is probably more accurate to say that China's trade surplus is financing our military expenditures than it is their military expenditures.”
Barry Bosworth of the Brookings Institution also disputes Hunter's assertion that China is financing its own military buildup out of its trade surplus.
“They are accumulating foreign currencies which they hold in dollars. But they don't spend the surplus,” Bosworth argued. “If they used it to finance their defense buildup, they would have spent it. Then they wouldn't have a trade surplus any more.” Lardy cites statistics indicating that China only spends about $2 billion a year on military imports, mainly from Russia. Some military experts are dubious about Hunter's alarm over the nature of the emerging Chinese military threat. They argue Beijing's strategy, at least for the time being, is aimed at raising the stakes for the United States in any future decision to intervene in an armed conflict over Taiwan, the breakaway island state that China is intent on recovering.
“Whether or not this would be a broader threat on the shape of where it could turn into a new cold war, man, we are nowhere near that yet,” said Robert Work, vice president for strategic studies at the Center for Strategic and Budgetary Assessments. Hunter's fans, including many with impressive economic credentials, counter that China is not simply being a good neighbor when it recycles its trade surplus by purchasing U.S. government debt. Instead, they say, it is part of a strategy of devaluing its own currency to make American products more expensive in global markets compared with Chinese goods.
Part of this strategy involves maintaining a fixed exchange rate – or “peg” – between the Chinese renminbi and the U.S. dollar. “They can't maintain a fixed peg – unless they recycle dollars back into the U.S. That's why they do that,” said Peter Navarro, a business professor at University of California Irvine and author of “The Coming China Wars.”
“They do fund our budget deficit – by doing so, they are helping essentially to increase our military budget – (But) I think an armed and dangerous Chinese military capable of projecting power throughout the world is far more dangerous than the U.S. military in terms of destabilization.” Navarro argues that the real significance of China's unfair trade policies lies in their success in fueling the country's overall economic growth, which provides the wherewithal to finance a significant increase in military spending.
Some studies say that China over the last decade has boosted its defense budget from 1 percent of its gross domestic product to 1.5 percent. The comparable figure for the United States is 4 percent. “The economic weapon – is translating into a military weapon because the faster China grows economically, the more resources it has to devote to the military budget,” Navarro said. “The key point is that it is devoting a disproportionate share of its new growth to fueling its military expansion.”
Dan Ikenson, associate director of the Center for Trade Policy Studies, at the libertarian CATO Institute, argued that Hunter's attacks on China overlook that nation's advances in becoming a member of the global trading system. Ikenson added that its recent entry into the World Trade Organization offers a forum for reconciling complaints about its objectionable trading practices. Arguing that the United States has benefited along with China from the trading relationship, Ikenson said, “We need to keep our eye on them, and like Ronald Reagan said, 'Trust but verify.' I think that is what we need to do with China and not treat them like an enemy – just keep an eye on what they're doing and prosper along with them.”
HUNTER/TANCREDO
You are not addressing Bosworth's point.
You need a little review of Chinese history it has never been an expansionist military power when under a native dynasty. The period of the Mongels was one controlled by NON-Chinese.
Hunter needs to lay off the bogus economic argument and stick to the political ones wrt China. He undermines his credibility with nonsensical claims.
They cannot. See #60.
Dear justshutupandtakeit,
Without getting into Chinese history, the CURRENT Chinese regime is hegemonist (which isn't quite the same thing as expansionist).
sitetest
I'll go with mine, this guys and Hunter's knowledge of economics over yours, thankyouverymuch:
Bernanke Again Raises China Currency Policy
Fed Chairman Ben Bernanke has again given ammunition to critics of China’s trade policies.
In testimony to Congress Thursday, Bernanke said he was worried about the size of the U.S. current account deficit, and a higher Chinese currency would help redress that.
Bernanke
It’s the second time Bernanke has cited the impact of China’s currency policy on trade imbalances. In the text of a speech in China in December, he called China’s policy of pegging the yuan to the dollar an “effective subsidy” which aids Chinese exports. He omitted the word “subsidy” when he delivered the speech, but said this week he stands by the text.
By contrast, both the White House and the Treasury Department, in urging China to let the yuan float, have avoided tying that to the enormous trade surplus China runs with the U.S. Instead, they have emphasized that letting the yuan rise would be in China’s best interest. The White House Economic Report of the President, released Monday, even suggested that China’s heavily managed exchange rate has had no impact on trade flows. “Chinese intervention does not systematically change the relative real prices between the United States and China,” the report said. If prices are unaffected, then neither would imports or exports.
To be sure, Bernanke told Congress that the principal benefits of loosening the exchange rate would be enabling China to have an independent monetary policy, and to reorient its economy towards domestic consumption and away from exports. But in addition, he said, “yuan appreciation and flexibility would make some contribution to helping us to rebalance the current account deficit we currently have.”
http://blogs.wsj.com/washwire/2007/02/16/bernanke-again-raises-china-currency-policy/
Yep. can't trust a communist. Ever.
see post 67
China does have national security concerns like any nation. It also would like maximum influence like any nation. It has some policies not in agreement with those of the US and some worries which are the same.
Could Hunter possibly be surging the way Kerry did for the Dems? Kerry was well behind (granted, not as much as Hunter) and Dean was the "certain" nominee this time in 2003 IIRC.
Pegging the yuan to the dollar means that its value rises and falls with that of the dollar. You are aware of that?
"The White House Economic Report of the President, released Monday, even suggested that China’s heavily managed exchange rate has had no impact on trade flows. 'Chinese intervention does not systematically change the relative real prices between the United States and China,' the report said. If prices are unaffected, then neither would imports or exports." Did you even READ this part of your quote? If so you didn't understand what it says. Try it again.
The last part of Benanke's statement makes no sense something has been cut or left out by the editor or reporter. China cannot "reorient" (no pun intended) its economy toward domestic consumption without lowering its growth rate. Export multipliers are far larger and much more stimulative to growth.
If you cannot personally address what I am saying you shouldn't even bother. Posting quotes which are ill-understood or incomplete are just distractions which rarely address the specific points raised. They are the lazy man's way to trying to bullshit his way through.
I gave you the alternatives for China in trying to undervalue the yuan you didn't address them at all.
There is a great divide. One group actually understands economics and finance the other does not.
Now between Kudlow and Laura which one would you go to for ecnomic advice or analysis? I do love Laura though.
"important economic benefits to the United States, including hundreds of billions of dollars worth of Chinese investments that help the United States finance its deficit."
That one sentence should give Americans pause. The Chinese OWN OUR ASSES! Unlike our current President and ones before, Duncan Hunter is NO Globalists. He's a Realist. He's the only Repub candidate who is Conservative and realizes the direct this country is headed if things don't change.
If you summarily ignore Bernanke, why would you listen to me?
If China unpegged its currency, it would rise in relation to the dollar, just like the Yen or Pound has. Is that really hard to understand?
That is what Bernanke is saying. The treasury Dept is downplaying that.
You are trying to make something simple, complicated. Better known as tapdancing.
If you believe international monetary relations are simple you have never studied the subject. I have.
I didn't say I disagreed with Benanke merely that the REPORT of his statement was not complete. That is typical of media treatments of economics and finance it is even MORE superficial and incorrect than its reporting of politics. Most reporters don't even know there is such a concept as a Export Multiplier.
Exchange rates are determined by supply and demand in the market and those are determined principally by tastes of consumers, the trade balance, the differential between domestic and international interest rates, the rate of domestic monetary growth, the growth rate of the domestic economy and the differential between domestic and foreign inflation rates.
Since China's trade is primarily with the US it makes sense for it to peg its currency to the US dollar. No one seriously expects it to accommodate US wishes if doing so would damage China's growth. We paid no attention when Europe was demanding that we raise taxes in order to strengthen the weakening dollar.
In criticising other nations one must not be hypocritical and ignore our doing the same thing. Europe would like us to strengthen the dollar, too. So what?
"Dean was the "certain" nominee this time in 2003 IIRC." That is false. Anyone knowing anything about politics knew Dean would not get the nomination. He won Moveon.org's poll and temporarily had a small lead in financing and did well in the polls. But the smart money was not on Dean.
Kerry was put in by the major media when it realized that a Dean nomination would be certain defeat. So representatives met in NYC in December to plan his removal.
It used the "scream", a triviality, to do it.
There is no similiar power or wish to do that for Hunter.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.