Thomas Wilberding's List: China

• Niall Ferguson of Harvard. China and the U.S., he argued, used to have a  symbiotic relationship and formed a tightly integrated unit that he calls  Chimerica

• In this unit, China did the making, and the United States did the buying.  China did the saving, while the U.S. did the spending. Between 1995 and 2005,  the U.S. savings rate declined from about 5 percent to zero, while the Chinese  savings rate rose from 30 percent to nearly 45 percent.

   

  This savings diversion allowed the Chinese to plow huge amounts of capital  into the U.S. and dollar-denominated assets. Cheap Chinese labor kept American  inflation low. Chinese efforts to keep the renminbi from appreciating against  the dollar kept our currency strong and allowed us to borrow at low interest  rates.

   

  During the first few years of the 21st century, Chimerica worked great. This  unit accounted for about a quarter of the world’s G.D.P. and for about half of  global growth. But a marriage in which one partner does all the saving and the  other partner does all the spending is not going to last.

• Think of China, Ferguson concluded, as Kaiser Wilhelm’s Germany in the years  before World War I: a growing, aggressive, nationalistic power whose ambitions  will tear through pre-existing commercial ties and historic friendships.

   

  James Fallows of The Atlantic has lived in China for the past three years. He  agreed with parts of Ferguson’s take on the economic fundamentals, but seemed to  regard Ferguson’s analysis of the Chinese psychology as airy-fairy academic  theorizing.
• Fallows pointed out that there is no one thing called “China” or “the Chinese,”  and that many of the most anti-American statements from Chinese officials are  made to blunt domestic anxiety and make further integration possible. That  integration, Fallows continued, is deep and will get deeper.

• And I was struck by their agreement about what to do. This conversation, like  many conversations these days, gets back to America’s debt. Until the U.S. gets  its fiscal house in order, relations with countries like China will be  fundamentally insecure.

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• Call it the 10:10 deal: the Chinese get 10 percent growth; America gets 10  percent unemployment.