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Where is the spillover? China’s stimulus isn’t doing much to support Japanese demand

by Brad Setser
June 24, 2009

Japan’s exports to China are still way down on a y/y basis in May, despite China’s stimulus.

Shipments to China, Japan’s biggest trading partner, fell 29.7 percent, more than April’s 25.9 percent. Exports to Asia slid 35.5 percent from 33.4 percent a month earlier.

hat tip, Yves Smith of Naked Capitalism.

That isn’t good news. US exports to China are also down (15.6% y/y, through in the first four months of 2009, though a bit less in April itself). The eurozone’s exports to China are also down — though the 8% or so fall y/y fall in the eurozone’s exports to China seems a bit more modest than the fall in Japan’s exports to China.

China’s economy may have expanded over the last year, but that expansion clearly hasn’t fed through into more Chinese demand for US, European or Japanese goods.
Not yet at least. Pick your explanation. China’s stimulus may have been directed at domestic producers. The process of substituting Chinese components for Japanese components in China’s exports may be accelerating. Or China’s recovery just may not be quite as robust as some believe.

The best that can be said of Japan’s May trade data is that Japan’s exports to China aren’t down as much as Japan’s exports to the US and Europe.

Shipments to the U.S. fell 45.4 percent in May after dropping 46.3 percent in April, the ministry said. Exports to Europe slid 45.4 percent from 45.3 percent.

The y/y comparison will get more favorable soon. But there is now real way to put all that positive gloss on Japan’s 41% year over year fall in exports. It is an epic fall.

Japan’s May 2009 exports were even a bit lower than its April 2009 exports. There may be some benign explanation for the slight dip in May, but I don’t think there is any way to suggest that the Japan’s May trade data suggests a robust global recovery.

38 Comments

  • Posted by DOR

    I can die happy, now.
    Apologies for the topical divergence, but I never thought I’d live to see the day the US and EU filed complaints with the WTO over China’s restrictions on exports.

    Oh, my.

    Bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc have done what kitchen tinsels and automobile tires could not.

    Stay tuned for the counter-suit, in which China files complaints against the US and Europe over passenger aircraft.

  • Posted by Rien Huizer

    Three easy explanations:
    1. fewer exports from China-based Japanese firms require fewer component imports from Japan
    2. substitution of Japanese components by locally made (or elsewhere outside China and Japan, to lessen JPY rise impact)
    3. Increasing Chinese self-sufficiency in both components and production machinery for production not related to Japanese parents/outsourcers and undertaken by both locally and foreign-owned firms.

    There may also be an impact of the KMT “takeover”. Trade with Taiwan (which produces many substitutes for Japanese and Korean products but not always available for export to China or local production in China by Taiwanese firms. Taiwan’s trade is much less affected by the crisis than Japan’s it seems (Taiwan also widened FX gap with Japan, like SEA countries and Korea). Not easy to investigate let alone quantify though.

  • Posted by purple

    What’s a little trade war between friends…

  • Posted by DJC

    When you are talking about trade declines in the order of 40%, we are dioscussing a global depression as a result of the collapsed US credit bubble. It is far from over with the commercial real estate collapse yet to come, corporate junk bond defaults soaring, and hundreds of billions of Option ARM mortgages that will collapse the US banking system once again. I have always maintained that the Chinese economy could withstand a US recession, but notwithstanding the recent speculative US stock market rally, it appears from trends that we are headed towards a protracted US depression. Until corporations and consumers rebuild their balance sheets by eliminating debt through repayment bor default, an economic recovery fueled by more Federal Reserve induced debt is most likely to fail.

    On a side note, how ironic that the US government is concerned about Chinese government export restrictions on Coking coal. Yet billions of dollars of US high-tech exports are prohibited for export to China on the grounds of National Security threat. THe Chinese have complained about those “Cold War” restrictions for decades. Every Boeing Aircraft requires the signature of the US President to waive export restrictions to China.

  • Posted by DJC

    A brother in-law of mine just purchase a new apartment in Guangzhou, not for speculation but to live in. He is employed by China Minshing Banking Corporation. From my perspective, I think the domestic Chinese economy, still largely self-contained, is still moving forward but at a slower pace.

    The Chinese banking system has almost no exposure to the financial problems in Western countries. The only Chinese bank with some operations overseas is the state-owned Bank of China with a small community banking operation in New York and San Francisco Chinatowns. The strategic core state-owned industries are still domestically focused. For instance, state-owned China Mobile has only ventured into Hong Kong and Pakistan.

  • Posted by Brick

    The important statistic for me was that export fell slightly from last month, not the comparison with last year. My first thought was that the reduction in Chinese export tariffs is giving china a price advantage, but the trade overlap might not be large enough for this to play a part. My second thought was that Japan’s export might be more susceptible to a discretionary spending downturn, but again I am not so sure since Japan tends to have local production in many markets. Another prime candidate reason may be the strength of the yen relative to the likes of sterling and the euro, yet the fall in both the US and European exports is not consistent with this reason either. My final thought would be that higher quality electronic components made in Japan are losing out to their cheaper brethren from the likes of Taiwan which would be consistent with firms trying to cut their costs.
    On the allegations of protectionism perhaps we should note that US Steel suppliers amongst other industries receive subsidies themselves which could be seen as protectionist. Pot calling the kettle black comes to mind in the case of the US, but Europe and India might have a valid point even though they have some of their own protectionist policies in different areas.

  • Posted by DJC

    If Harry Schultz is correct, it doesn’t look like the US will be upping its imports from China any time soon:

    “One of the most respected financial newsletter in the country is predicting that the federal government may have to call a “bank holiday” like the one that FDR mandated during the Depression.

    According to MarketWatch, The Harry Schultz Letter is sayiing that balance sheet problems at banks are getting worse and not better which could cause and ”widespread nationalization could result.”

    Most analysts think that the threat of the failure of large banks is over, especially due to government funds being punped into financial firms. But, there are several reasons that conventional wisdom could be wrong.

    Banks still hold huge amounts of real estate debt, both mortages and commercial real estate. Housing prices could correct another 10% to 15% leaving more and more home loans underwater which will almost certainly cause rising default rates. Large commercial office building and malls are losing tenants pushing the ability to pay bank real estate loans down. Banks may end up owning large amounts of commercial property that cannot be sold.

    Banks also hold almost $1 trillion in credit card debt. The rule of them is that credit card defaults track unemployment, which means banks could face 11% or 12% write-offs on credit card portfolios. That could drive tens of billions of dollars in unanticipated losses.

  • Posted by rj

    “On a side note, how ironic that the US government is concerned about Chinese government export restrictions on Coking coal. Yet billions of dollars of US high-tech exports are prohibited for export to China on the grounds of National Security threat. THe Chinese have complained about those “Cold War” restrictions for decades. Every Boeing Aircraft requires the signature of the US President to waive export restrictions to China.”

    That’s perfectly acceptable in my opinion. Do you forget the aircraft incident in 2001 where the U.S. plane crashed on Chinese soil and they were able to have access to all of our avionics technology? You been paying attention to the stuff going on in the South China Sea off the coast of the Phillipines in the last month?

    If the Chinese don’t like it, they can always go buy an Airbus.

  • Posted by Yoda

    damn the dollar and treasury! market rally! feel sorry for China, Japan, and Russia now.

  • Posted by jonathan

    I read your posts these days and try to imagine when we’ll be able to know the answers – and in some cases, if.

    “Epic fall” indeed. Hope it doesn’t become “tragic fall.”

  • Posted by Glen M

    Brad, before asking where the stimulus spillover is, I think that we should establish if there is a real stimulus.

    From Caijing….

    China May Processed Crude Volume Record 31.2 Mln Tons
    » The volume of crude oil processed in May rose 10.7 percent year-on-year to a record 31.2 million tons, with gasoline, diesel and kerosene output totaling 19.3 million tons, up 16.7 percent year-on-year, the China Petroleum and Chemical Industry Association said on June 22.
    » China’s crude output and sales are expected to keep rising to reflect increased industrial demand, said Jiang Xinmin, an expert with the National Development and Reform Commission, as quoted by the official Xinhua news agency.
    » Oil product sales in May reached 18.3 million tons, down 0.2 percent from a year earlier.
    From wires
    http://english.caijing.com.cn/2009-06-22/110187834.html
    ———–

    So we have increase refining that reflects ‘increased industrial demand’ and sales down .2 percent from a year earlier. These figures represent an over capacity of 5.5% per month.

  • Posted by DJC.

    RJ: That’s perfectly acceptable in my opinion. Do you forget the aircraft incident in 2001 where the U.S. plane crashed on Chinese soil and they were able to have access to all of our avionics technology? You been paying attention to the stuff going on in the South China Sea off the coast of the Phillipines in the last month?

    DJC: It is the US miltary that patrols off the Chinese coastline and South China Seas territorial waters; the China PLA Navy has never patrolled the California coastline. Nevertheless, it is perfectly acceptable for the US government to prohibit most US high-tech exports to China on National Security Threat grounds. That is fine with the Chinese. The last Chinese order from Boeing was in 2005. Now Chinese aircraft orders are all awarded to Airbus which is assembling A320 aircraft in Tianjin, China. LOL.

  • Posted by DJC.

    TORONTO (AP) — China’s Sinopec will acquire oil explorer Addax Petroleum for $7.2 billion, flexing some of the country’s economic clout in what would be the largest overseas takeover ever by a Chinese company.

    Sinopec, a refiner, would gain access to substantial reserves in West Africa and the Middle East if the deal is approved.

    Four years ago, China National Offshore Oil Company Ltd. withdrew an $18.5 billion bid for the Unocal Oil Company because of a tremendous backlash in Washington.

    http://finance.yahoo.com/news/Chinas-Sinopec-makes-72B-grab-apf-686609340.html?x=0&sec=topStories&pos=main&asset=&ccode=

  • Posted by Lemmiwinks

    It can occur, that the Chinese investment boom is now being shaped more and more by government spending vs private export related spending as much as 6 month ago.
    Government induced investment goes into concrete and requires little electric power, export induced investment goes into machinery (imported from Japan and Germany) and requires a lot of extra electical capacity to spin the machines.

  • Posted by DJC.

    Surprise!

    According to the Financial Times, the top 5 financial institutions by market capitalisation in 2009 are:

    1. Industrial & Commercial Bank of China,
    2. China Construction Bank,
    3. Bank of China,
    4. HSBC (UK and Hong Kong),
    5. JPMorgan Chase (US)

    Now 3:1 for China, now officially the world’s second largest economy after the US – a rout.

  • Posted by FollowTheMoney

    in my view the problem is China still has not built the infostructure and ‘middle class’ needed for drivers to support the domestic consumption cycle analysts are predicting.

    @DJC

    don’t rule out short and severe, instead of long and protracted. despite general consensus that things have stopped “falling off a cliff”, alot could still go wrong. what could set this off? in my view there’s still some pretty serious issues regarding the possibility of a derivatives crisis, or a chance U.S. will have to raise long term rates on the 10/20/30 higher than most expect.

    I’d rather get to Dow4000 (~Book Value) in 2009 than Dow4000 in 2011-2012. And i think Obama may conclude that taking the pain now instead of in 2 years will make his chances much greater for re-election….

  • Posted by Rien Huizer

    DJC,

    How remarkable! Any idea why they are on top of that list. And look at what happened to banks that topped the list in the past. Whoever is on top of that list, unfortunately, seems to be on the road to ruin..

    As to large economies, your list should be EU. US , China.

    In nominal terms (I do not care for that PPP hocus pocus) the EU is about as large as the US and China or Japan combined.

    Or if you believe in PPP, you may want to look at the IMF list of per capita GDP: The OECD average is around 38k, the world is around 10K and China is around 6k. Add to that that China’s employment share is about 2/3 of the OECD’s and then you see that there is still work to do: Your average Chinese employee makes around 10% of his OECD colleague (simplistically, of course).

    A much more entertaining list: per capita PPP GDPs: Qatar (86k), Luxembourg (85k), Norway(50k). Singapore and HK are also above the OECD average, Japan, Korea, Taiwan just below.

    These seemingly irrelevant statistics (and your list is also not quite relevant although it may fill you with pride that you would want to share with your pen pals) tell a simple message: the average Chinese is many times cheaper than his counterpart in surrounding countries (who all rely heavily on finished product trade flow into Nafta and EU).

    For similar levels of GDP/capita, the international (=nominal) cost of being a resident (and hence the international cost of the labor component in output) in Korea and Taiwan is half or less Japan’s, while these countries have similar levels of urbanization, human capital and (not quite) technology. Japan must make that up with it superior accumulated capital stock, intellectual property and “brand equity”. China is not comparable given the huge differences of industrial development in the country. The most developed parts are also the most expensive but probably still cheaper that Korea and possibly not less productive.

    Japan and Korea face an inevitable squeeze since Chinese surplus labor is not yet exhausted and Chinese high end human capital is fast catching up with Japan (which Taiwan already has). All it takes for China’s capital stock to increase and businesses to mature into clones of Hitachi or LG. Growing a Toyota or Samsung is not even necessary to be lethally competitive to Japan’s or Korea’s industrial ecosystems. What we se here may be an early sign that China is becoming less dependent on its FDI donors from the North East. I am very curious what will happen next, especially if the OECD takes three years (not impossible) to get back to consumption per capita levels of 2007/8. Korea may well manipulate its exchange rate and is capable of squeezing its population. For Japan that is a little more complicated. No doubt someone there will be poring over Japan’s economic history in the 1920s.

  • Posted by DOR

    I finally got around to looking at Japan’s trade data. It seems that the main reason Japan’s exports are off 44.3% (in yen terms) in the first five months are (a) falling sales to non-China Asia, to the US, to Europe and to China . . . in that order.

    Non-China export markets took 44.5% less in Jan-May this year as compared to the same 2008 period, accounting for more than one-third of the entire decline in Japan’s overseas sales. American demand, down 51.3%, was responsible for just over one-fifth of the total contraction; Europe (-48.2%) carries 16.5% of the responsibility and China (-33.2%) just 11.4%.

  • Posted by Twofish

    Rien: How remarkable! Any idea why they are on top of that list. And look at what happened to banks that topped the list in the past. Whoever is on top of that list, unfortunately, seems to be on the road to ruin..

  • Posted by Twofish

    DJC: According to the Financial Times, the top 5 financial institutions by market capitalisation in 2009.

    Market capitalization is an awful statistic for financial firm health, since in many cases a high stock price simply means a stock market bubble. Using stock price as a proxy for financial firm health is what got the US banks in a mess in the first place.

  • Posted by Twofish

    DJC: It is far from over with the commercial real estate collapse yet to come, corporate junk bond defaults soaring, and hundreds of billions of Option ARM mortgages that will collapse the US banking system once again

    Probably not. The last few sets of option ARM resets haven’t produced any unexpectedly large defaults, and the projected default rates from commercial real estate look both realistic and have been priced in current share prices.

    DJC: The last Chinese order from Boeing was in 2005. Now Chinese aircraft orders are all awarded to Airbus which is assembling A320 aircraft in Tianjin, China. LOL.

    Not true. Chinese airlines have been ordering aircraft from Boeing continuously over the last years, and a quick google has orders from this year. Also Boeing has as many joint ventures as Airbus does

    http://www.boeing.com/companyoffices/aboutus/boechina.html

    The other thing is that Europe and the US coordinate national security restrictions, so that’s hardly a reason to choose Europe over the US.

    Finally, it’s just bad politics for China to permanently favor Europe/Airbus over US/Boeing. The problem is that if you are permanently on the side of Europe and Airbus, then Europe and Airbus have no reason to be nice to you. All of this stuff is just business, and if you start waging holy wars, then you will eventually find yourself alone.

  • Posted by Twofish

    FollowTheMoney: in my view the problem is China still has not built the infostructure and ‘middle class’ needed for drivers to support the domestic consumption cycle analysts are predicting.

    I think it has. One thing that is lost from a lot of the commentary about China is that Chinese consumption and consumer spending has grown massively over the last few years. It’s just that the rest of the economy has grown even faster.

  • Posted by Twofish

    The other thing is that things can change quickly. Chinese banks are in good shape now, but they were disaster areas a decade ago, and they are in good shape now *because* they were disaster areas a decade ago. Success breeds failure, and failure breeds success.

    Right now, if I were working for a Chinese banks, I’d put away the champagne, and look very closely at the massive amount of new loans to make sure that NPL’s don’t become a huge problem in five years.

    One point about Japan is the fact that Japanese recovery has to be based on exports, and they don’t have enough bullets to afford an internal stimulus is a big problem.

  • Posted by Twofish

    DOR: Bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus and zinc have done what kitchen tinsels and automobile tires could not.

    Hardly surprising. If you win a trade complaint over kitchen tinsels, then the kitchen tinsels move to another exporter. Zinc deposits don’t move.

    DOR: Stay tuned for the counter-suit, in which China files complaints against the US and Europe over passenger aircraft.

    The counter suit looks like it is going to be over poultry products. The trouble with suing over passenger aircraft is that Chinese companies have joint ventures with Boeing and Airbus, so suing over that can be self-defeating.

    It’s a really huge chess game that is quite fascinating to watch.

  • Posted by rj

    DJC: “It is the US miltary that patrols off the Chinese coastline and South China Seas territorial waters; the China PLA Navy has never patrolled the California coastline.”

    First off, the U.S. was not patrolling the Chinese coastline. They were patrolling the Filipino coastline which has large U.S. military interest a la Japan and Germany, and got wind that a sub was near them. So they dropped their sub sonar into the water and either the sonar hit a Chinese submarine or the Chinese submarine hit the sonar.

    “Nevertheless, it is perfectly acceptable for the US government to prohibit most US high-tech exports to China on National Security Threat grounds. That is fine with the Chinese. The last Chinese order from Boeing was in 2005. Now Chinese aircraft orders are all awarded to Airbus which is assembling A320 aircraft in Tianjin, China. LOL.”

    As a person that works for a large American corporation where the Chinese openly and willingly copy our engine and sell it at a discount rate, I’ll say again, it is perfectly understandable. Aircraft technology after submarines is probably the most important technology in the world. We all know that the Chinese will copy it every chance they get, so why should we allow them to buy our technology if we know they’ll copy it?

  • Posted by Twofish

    One reason that I find trade disputes fun to watch is because of the historical context. It was only thirteen years ago, that we had major saber rattling in the Taiwan straits, and it is within my lifetime, that the US and China were saber rattling with nukes.

    Getting to the point where people are screaming at each other over bauxite and poultry parts is a major improvement.

    Anyway I’ve been travelling on the Asian side of the Pacific, and the interesting thing is that it doesn’t *feel* like a recession. Unemployment has ticked upward somewhat, but there isn’t the gloom and doom that one feels in the United States. This also isn’t merely hidden gloom. During the Asian crisis and again after the dot-com bust, you could feel that you were having major economic problems, but I don’t get that feeling now.

  • Posted by Twofish

    rj: We all know that the Chinese will copy it every chance they get, so why should we allow them to buy our technology if we know they’ll copy it?

    Because you get cash money out of the deal.

    It’s probably better to sell something in which you get cash money out of it, rather than let the designs just leak out in which case you get nothing.

    Also, I know someone that is involved in IP law, and he says that the stereotypes of Chinese copycats is changing. Increasing his clients are Chinese companies, who want him to go after Western companies that are buying counterfeit goods which their competitors make. One curious thing is that he says that his experience has been that the Chinese legal system is quite effective at dealing with IP issues if you know how to use it.

  • Posted by rj

    rj: “We all know that the Chinese will copy it every chance they get, so why should we allow them to buy our technology if we know they’ll copy it?”

    Twofish: “Because you get cash money out of the deal.”

    Temporarily, yes. But 10 years from now? Not when the Chinese took all the technology they stole and then design their own airplane to sell to everyone.

    To give an idea of how blatant this is, my company has a joint venture there with a Chinese company. We had one of our (German) suppliers that was complaining about this copying of their items going on in Chinese-made products. So they went to the Chinese facility and saw copies of their items being made at the plant. When the people at the facility noticed she was from the other company they were copying, they asked her how they manufactured this particular piece of the item because they could not figure it out. She was a bit beside herself.

  • Posted by rj

    “One curious thing is that he says that his experience has been that the Chinese legal system is quite effective at dealing with IP issues if you know how to use it.”

    As I stated in my post above, my personal experience in the matter, which happened all of 3 months ago, is completely the opposite of everything you just stated. And it’s not like we’re talking small Chinese mom-and-pop outfits, we’re talking big companies.

    But I’m curious, does “know how to use it” a pseudonym for bribery?

  • Posted by Glen M

    I’m with rj on this. I know of a number of companies that have had there IP blatantly ripped of. The Government itself does it, see Solid Oak Software code in the Green Dam Youth Escort software.

  • Posted by Too Much Fed

    Title: Where is the spillover? China’s stimulus isn’t doing much to support Japanese demand

    Are you assuming it is supposed to help?

    IMO, the chinese have NO INTENTION of helping the high wage countries/geographies, especailly Europe, the USA, and Japan.

    The only high wage place would be Australia, only because they want the resources.

  • Posted by DOR

    TwoFish,
    We’re playing chess.
    The Japanese are playing go.
    The Chinese are playing xiangqi.

    No wonder we can’t settle anything!

  • Posted by Twofish

    rj: Temporarily, yes. But 10 years from now? Not when the Chinese took all the technology they stole and then design their own airplane to sell to everyone.

    At which point Boeing and Airbus will have enough joint ventures and cross-licensing agreements with local manufacturers to keep the Chinese equivalent from taking the whole game. Also the Chinese equivalent of Boeing is going to also buy into US companies.

    rj: But I’m curious, does “know how to use it” a pseudonym for bribery?

    No. What you do is to use private investigators to track down suppliers and the chain of counterfeiting, and once you have done your homework you get a judge to issue a court order to seize the counterfeit goods. The other thing that is very effective is to go over Western consumers of counterfeit products. You hire private nvestigators and do undercover work. Once you get purchaser lists, you then write nasty letters to those companies.

    What they have found is that once you’ve done your homework and you have locations of goods to be seized, then the courts, police, and customs are very cooperative. The problem is that most companies just show up in court and expect people to “do something” without any clear instructions to the judge on what they are supposed to do.

  • Posted by Twofish

    rj: We had one of our (German) suppliers that was complaining about this copying of their items going on in Chinese-made products. So they went to the Chinese facility and saw copies of their items being made at the plant.

    Did you at this point start videotaping, getting names, and then going to get a court order to shut the plant down?

    The consultant that gave the talk says that they’ve never had a problem getting cooperation from the Chinese legal system to shut things down, once they have done their homework. The problem is that most companies assume the Chinese legal system is less effective than it actually is, and don’t even try, or else they are unfamilar with Chinese law and they end up filing the wrong papers.

  • Posted by Twofish

    Also, what the consultant has found is that people blame China for IP violations and conveniently forget that there wouldn’t be much of an incentive for IP violations if Western companies didn’t buy counterfeit products. One thing that they find is useful is getting vendors lists. Once they have those, then they go after the people that buy products. Once they get names, they usually find that a few nasty letters causes the profits to dry up. The important thing is to be specific. If you just show up in at court and say “do something” nothing is going to happen. You have to go up to a judge and say that you want X goods seized at Y factory under Z law.

    Also Western companies are forming joint ventures with Chinese companies so that they have political and business allies in the Chinese economy. The Chinese government is trying to create aviation companies headquartered in China, but if you look at how it has structured telecommunications and oil, it has no interest in having a single state monopoly, since those companies just don’t work. It’s in China’s interest to have an internally competitive market, and if Western companies can find dance partners, then they can play in the game.

    You can see this in the way that China has responded to the WTO complaints. China isn’t complaining about US auto parts or aviation restrictions because they don’t want to jeprodize US joint ventures with Chinese companies.

  • Posted by Rien Huizer

    Too much fed,

    “IMO, the chinese have NO INTENTION of helping the high wage countries/geographies, especailly Europe, the USA, and Japan.

    The only high wage place would be Australia, only because they want the resources.”

    You seem to imply that “the chinese” do not understand their self interest in increasing international trade. Or they believe in a different kind of economics than most of us do.

  • Posted by plschwartz

    The global economy now not inflated by the US consumption bubble, is nearly a zero-sum situation. As we have seen, as China has gotten wealthier, its share has had to be taken away from the first world.
    Why should we continue to allow China to expand at our expense?
    I pose that as a question in all honesty. There is little indication that as China has grown it also has grown more willing to “play fair”. That is to accept that cooperation will in the long run be most beneficial.
    The way the two sets of growth rates are going we will continue to decrease our share of global wealth.
    I suggest that we seriously consider redrawing the Bamboo curtain. That is cut China completely out of the economic loop.
    It may be a painful dislocation. But so is the death by a thousand cuts that is in progress now.

  • Posted by Twofish

    plschwartz asks: Why should we continue to allow China to expand at our expense?

    Who is “we”? The reason that corporations act in the way that they do with respect to China is that they make a lot of money doing so. The reason that governments act in the way that they do with respect to China is that the political process has come up with the decision that Chinese growth isn’t at the expense of the West.

    If it was obvious to everyone that Chinese growth is happening at the expense of the West, then there would be more vigorous efforts to stop that growth. It’s not.

    The other thing is that suppose you were to conclude that Chinese growth is a bad thing. What’s the policy? Bomb Beijing?

    plschwartz: There is little indication that as China has grown it also has grown more willing to “play fair.”

    China like every other nation in the world include the United States and European states does whatever it thinks it is in its interests. “Fairness” is just a marketing term, and if you can define “fair” you’ve basically won, since in international politics “fair” means whatever is good for me.

    There’s no reason to believe that China does anything out of altruism, but if you think that the US or Europe does anything out of atruism or anything in the Chinese interest, you are deluding yourself.

    plschwartz: That is to accept that cooperation will in the long run be most beneficial.

    Except that it may not be. There are some areas in which China, the US, or the EU would benefit by being assertive and increasing conflict. But this doesn’t have to a bad thing. It’s possible in both business and politics to shake one set of hands, and then try to stab someone in the back with the other set. China, the US, the EU can cooperating in some areas and at the same time fight each other in others.

    plschwartz: The way the two sets of growth rates are going we will continue to decrease our share of global wealth.

    Who is “we”? If you mean “we Americans” or “we Westerners” then you have a problem then I’m as American or a Westerner than you are.

    And short of nuking China, you aren’t going to stop China and India from having a higher share of global wealth.

    plschwartz: I suggest that we seriously consider redrawing the Bamboo curtain. That is cut China completely out of the economic loop.

    Who is “we”?

    Also, you show this to any CEO of any multinational and they will say “are you freaking nuts? If China grows, I will make money.”

    You can try to appeal to nationalism, but talking about American self-interest isn’t going to get you far if the CEO is German, and if the CEO is Chinese-American, then you really have problems.

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