The New York Times today both informs and misleads on China’s role in the American economy. The Times headline warns, “China Slows Purchases of U.S. and Other Bonds.” That may well be true, but it isn’t supported in the story that follows. The story actually cites slower growth in the PRC’s holdings of foreign currency, including dollars. China’s reserves fell $33 billion in January, before rebounding strongly in March. That’s an interesting development but it doesn’t bear directly on the U.S. As an illustration, the PRC’s holdings of Treasuries climbed …
A paper by Chinese central bank chief Zhou Xiaochuan — arguing the world should move off the dollar system — has attracted much attention. Like so many economic stories involving the PRC, there is less here than meets the eye. It is hardly a new thought. Beijing has wistfully imagined for almost a decade a future where the dollar has been replaced, most prominently when it claimed (falsely) to have decoupled from the dollar in July 2005. There are gigantic practical problems Zhou is well aware of. Any sudden move …
Chinese trade minister Chen Deming’s op-ed in the Wall Street Journal today chides the rest of the world on turning toward protectionism. This is remarkable on two counts: (i) that the PRC should lecture any country on protectionism and (ii) that the US has opened itself to being lectured by China. China intervenes in markets to distort trade as much or more than any country. While global consumption is shrinking, the PRC is forcing proportionally more of its goods on everyone else. That’s why China’s trade surplus over the past …
The Financial Times makes a valiant effort to curb wild talk about China dumping U.S. Treasury bonds. Luo Ping of the China Bank Regulatory Commission may use strong language – “we hate you guys” — but he has a better grip on the PRC’s options than much of the American press or, for that matter, Chinese Premier Wen Jiabao. Luo makes explicit that the size of China’s trade surplus with the U.S. and the balance of payments system Beijing has staunchly defended leave it no choice but to buy treasuries. …
Yesterday’s Wall Street Journal had a front-page story on soaring unemployment among China’s rural migrants. While official Chinese employment statistics are spotty, the gigantic figures being thrown around are no surprise. The Journal and other outlets emphasize the Communist Party’s overwhelming fear of political instability caused by job loss. This fear will amplify calls for jobs to be created through more exports, either by devaluing the RMB directly or doing so indirectly via means such as still more tax breaks. Even more, it will reinforce Beijing’s unwillingness to make trade …
The Sino-American trade conflict I wrote on last month has just become more likely. Chinese trade numbers show exports declining and imports collapsing at the end of 2008, the latter plunging 21% in December. The grave weakness in imports puts paid to the once-popular but unfounded notion that China could help fight the global economic contraction. It also means there will be more pressure on Chinese exports in coming months. Chinese exports and imports are tied by the processing trade, where raw materials and unfinished products are brought in and …
In a few weeks, China will claim to have completed its economic survey and announce a growth rate for 2008. The only thing we know for certain is that figure won’t be accurate. Today, the People’s Bank tipped growth of 9.3% for the year. The final official figure could be 9.1% or 9.4% but it will be close to that. Today also brought a reason, courtesy of the official China Electricity Council, to think real economic growth was much lower. It put growth in power demand last year at only …
The wire services have seized on a comment by a Chinese official that the PRC’s official foreign reserves actually fell in October. This is the first drop in almost five years, during which time China’s reserves went from $400 billion to $1.9 trillion. The decline hasn’t been confirmed, much less explained. The October trade surplus stood at $35 billion, making it difficult to understand how reserves might have dipped. Tentative explanations so far refer vaguely to a relatively small amount of money — just $50 billion or so, nothing important …
The realization that China is in no position to be especially helpful in coping with the financial crisis is finally beginning to sink in with the mainstream media. The Washington Post, Wall Street Journal, and Financial Times today ran front-page stories that Chinese exports and imports contracted in November. This follows directly from weak manufacturing data, weak electricity production data released last week, and a spike in personal savings deposits in October. The media emphasis is on a small decline in Chinese exports. Unfortunately, that also seems to be the …
Today’s Wall Street Journal has a story about China’s defense of price fixing with potentially vital implications for American trade policy. A group of PRC vitamin-makers admit illegal price fixing in the United States, but claim they are immune to prosecution because China’s Ministry of Commerce made them do it, which is known as sovereign immunity. The ministry agrees it did order them to fix prices and admits it may do so in other industries. Moreover, its justification is simply that the PRC is in transition from a command economy. …
