About Me

Nov 18, 2011

Obama’s Secret Business: Why America Can (Can’t) Win Over China

He recently said China needed to behave like a grown up. It may be the toughest rhetoric he made to China. I’ve been followed that development for a while too.  There was somewhat strong backlash from China. It invited unnecessary anti-Chinese sentiment in the States.
I read articles and analyses on Renmibi undervaluation. Very, very few articles impressed me. Some are misleading, some are biased. From economic viewpoint, they are partially right. But from the political point of view, they are totally wrong.  I don’t disagree Chinese currency has been kept undervalued.
China uses trade surpluses getting from trading with US to buy US’ debt to keep Yuan undervalued. It’s back and forth. That’s a point that most of them get it right.  Senator Obama spoke out loud about China’s currency manipulation and President Obama softened the tone on that. No, I’m not criticizing him.
Bush and Obama didn’t take hard action against China. This is not to say that they fear China. It’s because the large trade deficits is a self-inflicted wound. Punishing China would hurt them the most. The problem is about their expensive lifestyle.
It’s well known China is manipulating it currency. Thus, there’s no coincidence costs of Chinese goods are lower that those of other developing countries. Supposed that the Yuan is now not kept undervalued, the costs the goods and services imported will rise. Yes, they can buy from other countries, but the prices should be higher. Inflation is also low because of that. The most effective way to punish China is to change the level of their consumption.
Make no mistake; America is not facing a dilemma over China’s currency manipulation. But I think I found two mistakes American leaders made. Some GOP presidential candidates are talking about bringing jobs back to America. They are wrong.
Jobs that lost to China, in particular and developing economies, in general, will never come back to America. What they need to do is to educate their workforce and to invent sophisticated jobs here. Chinese can’t do or steal those kinds of jobs. An America that could win over China is an American that possesses of high-tech manufacturing jobs.
Some are still dreaming of bringing jobs back. No need, they can’t win. Investing new jobs in the United States is far better than trying to bring jobs back from China. Second, they are still not thinking about it (or they have been thinking about it.) It’s a real win-win solution for both countries.
What should America do? I already offered solutions. Leave the How Question to Americans. I’m sure that are much more solutions. But I’ still stick to the view America can’t bring those jobs back and they needs to invent new ones.
China is not the real problem for American deficits. But Mr. Obama needs to attack to gather votes. Chinese people need to know about this and American media also needs not to add fuel to the fire.
America will never win over China unless they are able to change the pattern of their consumption and are able to invest new jobs here.