The Senate is today considering a bill to punish China for its currency policy. The bill requires the U.S. to place duties on Chinese goods if the exchange rate of the yuan against the dollar isn’t brought to a level Congress finds suitable. It is vague on that level, on timing, and on basic logic. There are serious issues in our economic relationship with the Chinese, but the Senate bill won’t address any of them. China’s currency policy doesn’t cost American jobs. In fact, 20 years of figures appear to …
There continues to be a great deal of talk about “the China Model.” It is supposed to be a way to organize an economy, especially a developing economy, that is superior to the American or Western model of competitive capitalism. This debate has many important parts, but it has largely missed one critical point: There are two China models, not one. The first model brought China remarkable economic success and should be emulated in development. It is now largely being ignored. The second model has actually weakened China’s economy and …
The debt standoff in D.C. is first and foremost about irresponsible government—not just right now but for a decade by both parties, both houses of Congress, and two Presidents. There are also a number of secondary issues, including the impact on America’s biggest foreign creditor: China. Hang on—this is going to get a bit complicated. First, there’s the idea that China can just stop buying foreign currency assets. False. The PRC’s own balance of payments rules mean they have to keep buying, and they know they have to. The situation …
Sometimes things don’t work out the way we expect. New York Mayor Michael Bloomberg today announced a $50 million gift to the Sierra Club. His motive? “Coal is a self-inflicted public health risk…and the leading cause of climate disruption.” But what will actually come out of the Bloomberg gift? 1) The Sierra Club is likely to be more effective in attacking the U.S. coal industry; 2) U.S. coal production will therefore not reach the level it might have without the gift; 3) U.S. coal exports are then unlikely to reach …
Is open trade and investment good for China but bad for the U.S.? The Heritage Foundation’s China Global Investment Tracker has just been updated. Through June 30, it shows over $60 billion in Chinese investment in Latin America. This worries some people. They think that China is gaining economic benefits and cementing strategic ties in our backyard. At the same time, the U.S. has had a clear and powerful opportunity for years to expand our own links to the region through free trade agreements (FTAs) with Colombia and Panama. Those …
There’s a very old political rule getting a new twist in the House of Representatives right now: When your policies fail, blame someone else. The new twist is: When unemployment is above the level you said would be a catastrophe, and you’re on the road to bankrupting the country in the meantime, start talking about Chinese currency. This is apparently the plan for congressional protectionists in 2011. There will always be Members and interest groups demanding that government restrict the ability of American consumers and firms to make their own …
The United States and the People’s Republic of China will hold the 2011 version of the Strategic and Economic Dialogue (S&ED) this coming Monday and Tuesday in Washington. Many distinguished people will participate, many well-crafted speeches will be given, many valuable topics will be discussed, and little of long-term economic value is likely to be achieved. Again. This is especially unfortunate because next year could be very difficult for Sino-American relations. By far the most important economic issue for America and China is the related imbalances in our economies. The …
China announced its economic results for the first quarter this morning. GDP was said to grow a strong 9.7 percent, while consumer inflation reached a worrisome 5 percent. Frankly, most Americans shouldn’t care that much. China’s economic importance is being overstated now, and even its considerable economic potential is sometimes overstated. The PRC is much poorer than the U.S., and its economic problems are considerable. The average American made more than 12 times as much as the average Chinese in 2009.
America’s trade deficit rose in January. Many times an expanding trade deficit indicates an expanding economy and more American jobs. In January, this may not have been true. The single biggest factor in pushing the trade deficit higher in January was higher oil prices. Unfortunately, these may also push the trade deficit higher in February, March, and perhaps beyond. Protectionists who don’t want to let Americans freely make their own choices are already vocal in denouncing the higher trade deficit. This is actually a bit strange, since the January deficit …
This year’s meetings of China’s National People’s Congress, which started March 5, roll out the 12th five-year plan covering 2011–2015. A flock of freshly minted experts assure us that five-year plans are sacrosanct: If the PRC makes a commitment in the plan, it will be met. Hardly. The PRC’s five-year plans give a general sense of the direction, whether new or old, that Beijing wants to go. But China often does not end up there five years later. Headlining plan 12 is the new, lower target for annual GDP growth …
