Consumption Junkies?

By Candyce Torres and Suzia Van Swol, University of New Mexico-Talk Radio News Service.

"In terms of diagnosing what's happened to the Chinese economy, it
doesn't take a rocket scientist to figure out what's going on. Of all
the major sectors of the Chinese GDP, the one sector that has by far
increased the most since the turn of the century is exports. (from 20%
in 2001-36% in 2007)" said Stephen S. Roach, Chairman of Morgan
Stanley Asia at a hearing on "China's Role in the Origins of and
Response to the Global Recession".

U.S. consumption is the main driver of the external demand that China
faces, and if the U.S. is amidst a consolidation, it raises challenges
for Chinese policy makers. If China experiences slow consumption and
their export drive doesn't come back, it creates tough challenges for
the bilateral trade and financing relationships between the two
countries. "You have to be very careful about pointing the finger at
China in causing problems in the United States, whether its through
trade or funding America's consumption binge. No one forced American
consumers to live beyond their means. The Chinese certainly didn't,"
said Roach.

Roach warns that America ran trade deficits with a hundred countries
last year, so if China is held responsible for currency manipulation,
the Chinese part of our trade will just go somewhere else, and it will
most likely be a higher cost producer which taxes the middle class
Americans.

Also present at the hearing was International Trade and Services Professional
Mr. Robert Cassidy. He indicated that there are some distortions in trade.
Cassidy stated that what we need to do from a policy perspective is to focus on
aspects such as the continuation of China appreciating its currency. He expressed
that there should be no diversions from the US dollar holdings to others because this would
cause the dollar to depreciate further resulting in greater foreign
exchange reserves. "We tend to look at things in a short term
perspective when i think that it would improve us to look at a some
what longer term perspective and I think this is where China's role
comes in." concluded Cassidy

Secretary Paulson discusses U.S.-China dialogue

Secretary of Treasury Henry Paulson made remarks about the U.S.-China Strategic Economic Dialogue (S.E.D.) at an event hosted by the World Affairs Council in Washington, DC.

“We have learned that engagement works,” said Paulson, “engagement can help achieve meaningful tangible results that would not have been possible otherwise.” Paulson said that the S.E.D. has yielded results from economics and trade to product safety and transportation.

Paulson stressed the importance of the U.S.-China talks in helping to solve the current financials crisis. “It is critical that the United States, China and other major economies continue our vigorous efforts and take whatever further actions are necessary to stabilize the financial system,” said Paulson.

Paulson also discussed China’s increasing energy needs. “China is...the second largest consumer of oil behind the United States. Building cooperation and trust between our countries can help prevent competition over scarce energy resources.”

CATO experts forecast the future of an empowered China

Dr. Ted Galen Carpenter and Justin Logan, CATO Institute experts on U.S. / Chinese relations, today spoke at a briefing entitled “China’s Rise: Is Conflict Unavoidable?” The briefing examined the different political and economic ramifications a Chinese superpower would bring about across the world.

Carpenter, home after a recent trip to Beijing, said that the relationship our nation has with China is the most important foreign policy relationship we have. He stressed the difficult nature “reunifying” a politically divided China brought with it, and noted that bringing the Chinese together might not even come about should they continue to sustain their economic success.

Both Carpenter and Logan described the immense pressure the incoming U.S. President will have to both oppose the human rights violations the Chinese have demonstrated over recent years, and forge a healthy relationship with their nation for economic purposes and political stability. Dr. Carpenter worried that Republican presidential hopeful John McCain (R-Ariz) would cause animosity to arise between Washington lawmakers and the Chinese government.

Logan noted that natural disasters, massive pollution problems, and economic disparity have highlighted Chinese infrastructure problems. He said it is “not necessarily a good thing” that their country will owe ours money in the future, but that with good statesmanship a future U.S./Chinese relationship will not necessarily turn out to be entirely detrimental for our country or theirs.