Posted on 02/10/2010 5:51:10 AM PST by TigerLikesRooster
Andy Xie: China Better Open Up Its Economy Fast, Else An Obama Trade War Will Crush It
Vincent Fernando | Feb. 10, 2010, 5:12 AM | 531 | comment 4
Andy Xie issues a stark warning for China in a latest Caing opinion piece.
Essentially, America's major hope for recovery and job growth right now lies in growing its exports since the Fed can't slash rates much lower, and American government is completely grid-locked by politics (thus can't do much for the domestic economy).
Thus he expects an increasingly aggressive stance from the Obama administration on U.S. - China trade.
While China has gotten away with pretty favorable trade terms for years, via a relatively more closed domestic market plus an under-valued yaun, this time the U.S. won't simply roll over, according to Mr. Xie.
This time the U.S. will be very aggressive, and if China doesn't start opening up in order to help balance U.S. - China trade, then a nasty trade war will erupt, which will be economically disastrous for both sides.
(Excerpt) Read more at businessinsider.com ...
P!
I’m trying to see where the US has any leverage whatsoever in this dispute. The only possible element has to be threats to default, but I’d think that would have far worse consequences for us than for the Chinese. Guess I’ll have to wait for an adult to write an opinion piece on this topic (someone like Thomas Sowell or Walter Williams, for instance).
>> This time the U.S. will be very aggressive
No, Uncle Hu will threaten to cut off Uncle Sam’s sugar supply and Bambi will back off.
Bingo.
and American government is completely grid-locked by politics (thus can’t do much for the domestic economy).
He means can’t do much TO the domestic economy.
We are not defeated exactly, but we do not have a lot of leverage to demand anything of the Chinese. All they have to do is sell the paper they hold all of a sudden and its gonna hurt.
In the past, it was China. Now, it is U.S.. Speaking in financial and economic terms.
If we could do it I am all for throwing a scare into the ChiComs by making it clear that on any given day we could decide that they’ve just made their last shipment to WalMart.
It would also no doubt earn Obama a lot of populist brownie points from people who have lost jobs in manufacturing.
Unfortunately you need to do some strategic planning if you are going to cut off a specific source country at the knees, and we are woefully unprepared for that. We should have been encouraging retailers to diversify their supply lines for years, and preparing to at least save some of the infrastructure needed for domestic manufacturing. We have not done this, and hence I think the ChiComs know that we would be bluffing.
Considering what we're not allowed to produce (coal, natural gas, oil, refined products, etc...) what do they suggest we export, Community Organization?
Bingo.
In order to fix ourselves, among other things, we need to:
a. Fix a broken regulatory and legal system
b. Establish a policy of sound money so that real investments will return more than flimflammery paper chase scams.
c. Stop bailouts of the big boys spending even more rotten money to bail out rotten loans.
d. Pare back government to providing services for the common good (real defense and security, not DHS, schools, roads, public health, etc. but not endless sprawling bureaucratic outposts with no real mission).
e. Liquidate 30 years of malinvestment. Return unproductive real estate (malls, florida condo's, sprawling housing developments, NY highrises) to the asset pool for productive us.
But the good 'ol boys who have been profiting from the way things have been for 30 years are the ones with their hands on the levers of power and will do everything they can to resist change. What is happening is unsustainable and therefore collapse seems inevitable. It is very sad. Really. But I don't see how we get there from here without rough times.
Here is an example of how bad it is. I live in an HOA with lots of lawyers and petty government officials. It is a public street, but the powers that be are happy assessing dues to pay for private snow removal (DC actually does a pretty decent job these days, ever since the Feds took the city away from Marion Barry because he shut the city down because his brother's snow plows were all broken). It is not legal, but they think they have the right to spend other people's money, even their friends and neighbors, to asssure their own convenience.
The refreshing this is that a couple of block away here in NW DC, neighbors get together shoveling parties and shovel their own streets. In the old days that is how America used to get things done. In the new days, you get a petty tyrant in charge who has no clue, he takes money from everyone else, and tells someone else who barely has a clue to do the hard labor. Of course it is all collapsing.
Smoot-Hawley anyone?
My Sentiments exactly. The way I see it, and I do not pretend I know all the complexities to this, but I think China is holding all or most the cards in this.
China may just take their lumps now, whatever it is.
RIP Captain Phil
If Zero is foolish enuff to start a trade war with China WE will be crushed.
Just from the title - uhm, NO.
China will cash in the TRILLIONS of debt the US owes, and we’re all spending Mandarin.
Obama ain’t got a dog in that hunt - he WANTS us to speak Mandarin.
“If we could do it I am all for throwing a scare into the ChiComs by making it clear that on any given day we could decide that they’ve just made their last shipment to WalMart.”
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No. No. No. Too much talking. Just do it.
Have the US Coast Guard start turning back container ships. Don’t talk about it. Do it.
When negotiating one does not talk about walking out of the store if the price doesn’t come down. That’s the most unlikely tactic to succeed.
One instead heads firmly, and some small degree of just plain apathy, for the exit.
It is then, and (only) then, that the price comes down...
Or if it doesn’t, it never was going to.
Either way, walking out is the best approach. Always.
>>>China will cash in the TRILLIONS of debt the US owe
China to Sell their Treasuries? To whom?
Wouldn’t a dropping U.S. exchange rate shrink the value of their remaining U.S. assets?
Turn them in to use demanding payment - sort of like when you try to sell short on the market, if you don’t have the money right then, they confiscate your stuff.
(at least, that’s what Dan Akroid and Eddie Murphy taught me)
Perhaps what we need is a 40% tariff on all Chinese goods, with legislation that if they allow their yuan to rise 40% the tariff would drop to zero.
It is this pretense at free trade that has been killing our productive capacity. The balance of power has been toward consumers and against producers in the US, just as it has been against consumers and toward producers in China.
Of course the productive capacity is something that the Chinese military prefers. It was America’s productive capacity that won WW2.
You see the problem clearly.
There’s an old saw that illustrates the bind that China finds itself in. If you owe someone a million dollars they own you. But if you owe someone a billion dollars you own them. China’s fate is too intertwined with ours for them to make good on their threats without seriously harming themselves.
We can threaten to limit their access to our markets and make it stick if we choose. China is running an export-dependent model. Controlling access to our market is a trump card.
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