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Nov

2010

Robert J. Samuelson - As G-20 summit nears, China is unlikely to budge on currency

Are the global imbalances in trade all China's fault?

www.washingtonpost.com/...AR2010110703841.html

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China trade trade deficit balance of payments current account protectionism

Before the financial crisis, some advanced countries (led by the United States) were overspending, and some poorer countries (led by China) were oversaving. The two offset each other. The big spenders ran large trade deficits, and the big savers ran large trade surpluses.
In practice, it may boil down to this: Will China change?
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- In 2007, China's current account surplus (mainly trade) reached 11 percent of its economy (gross domestic product). But as China has moved up the value chain - from toys to telecommunications equipment - and as the world economy weakened, its surpluses have become more threatening to more countries.
- China embraced an investment-led and export-led economic model, explains economist Eswar Prasad of Cornell University. Manufacturers receive subsidized land and energy; the exchange rate of the renminbi is controlled and kept depressed, making Chinese exports more competitive on world markets and making imports into China more expensive.
- It's not just Americans who resent the unfair export advantage of an undervalued currency; Europeans, Japanese, Mexicans and others are also unhappy.
- Savings normally go toward new factories, machinery and offices. But China's domestic needs for these aren't large enough to absorb all that saving.
- That's why it needs more consumer spending, lest it export more to compensate for lack of domestic demand
- The Chinese know this. They even embrace the goal of stimulating consumer spending and are trying to do so. But until they succeed, they won't relinquish the crutch of an undervalued exchange rate.
- The United States has let the dollar depreciate to cut its trade deficit. Because the renminbi is pegged to the dollar, the depreciation actually improves China's export competitiveness against some countries. All this looks less like rebalancing than a dogfight - among China, the United States and others - for competitive advantage.

Nov

2010

EWG Farm Subsidy Database

farm.ewg.org/region

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subsidies protectionism barriers to trade

Nov

2009

A special report on China and America: : Round and round it goes | The Economist

China and the US have a complicated relationship when it comes to trade. It may be changing in the future due to the recession in America, but for some that change can't come fast enough!

www.economist.com/...displaystory.cfm

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economics current account capital account protectionism exchange rates managed exchange rate China

China, a developing country, lent vast amounts of money to wealthy America to feed its spending habit. Americans spent the money on Chinese-made goods, sending the dollars back to China, which lent them to America again.
for its growth, and on America in particular. By 2007 the value of China’s exports amounted to about 36% of its GDP, up from just over 20% in 2001.
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- American market, overtaking Canada. And by September 2008 China had surpassed Japan as the largest holder of US Treasuries
- China certainly helped its exporters by keeping the value of its currency low, buying dollars that were used to buy US Treasuries.
- e much of the value of Chinese goods consumed in America was created elsewhere. The biggest driver of growth in China was investment, and that has become all the more true as China tries to pump up its economy with nearly $600 billion in stimulus spending.
  - Jason Welker on 2009-11-06
    America might not be as crucial for Chinese growth as previously thought! Domestic investment is biggest factor now!
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- trading system, but it has no desire to pull the rug from under America’s economy. A run on the dollar would be a blow to China itself, slashing the value of its stash of over $800 billion in US Treasuries. Chinese officials also worry openly about a possible resurgence of inflation in America, which would also drive down the value of the dollar.
  - Jason Welker on 2009-11-06
    China is worried about the dollar's value, but is not likely to sell its dollar assets, since this would surely devalue the dollar and harm China too.
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- A recent study by the Peterson Institute says that the yuan remains “significantly undervalued”, by 15-25% against a weighted average of the currencies used by China’s trading partners
- As Americans save more and buy less from China, America’s trade deficit with China—which has been its biggest with any country since 2000—will shrink anyway. But protectionist sentiment in both countries will remain strong.
- Americ
- reject a takeover bid by Coca-Cola for a Chinese juice company as a bad omen. As Chinese businesses look around America for bargains, they will get a mixed reception: sellers are eager for China’s cash, but worried about the survival and security of Brand America
  - Jason Welker on 2009-11-06
    Chinese continue to demand US assets in the capital account, but American businesses are reluctant to sell to Chinese investors...
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