Kudos to the Chinese. For more reasons than one. Not even if the first reason is the Chinese Trade Surplus of US $ 202 billion every year. China has a China Trade Surplus with developed countries such as the US and with developing countries such as India. If there is an example of a small Chinese trade deficit with some small island nation somewhere, the writer is as much in the dark about it as most of you out there are.
In fact so overwhelming is the extent of US China Trade Surplus in favor of China that despite its lack of glamor, it clamors for center stage from the more newsworthy issues of freedom of speech and human rights.
The United States of America and China in fact share the most imbalanced Chinese trade balance in the world. In China Trade Surplus, the currency exchange rate operates with an artificially strong dollar gives foreign consumers and businesses more purchasing power than they would have in a free market economy and an artificially weak Yuan that makes foreign goods more expensive for Chinese consumers.
In China Trade Surplus, the winners are a rapidly expanding Chinese economy, many vested interests are fat and happy, consumers get goods cheaply, foreign companies have access to cheap labor and Chinese workers have jobs. Select Chinese domestic industries also benefit since they face less competition in markets for more expensive foreign products like computers and washing machines. The poor in the United States and other developed countries too win as goods such as cheap electronics and clothing, frightfully expensive earlier are now sold at very low prices, something that would not have been possible without relocating production to developing countries like China. AND to beat it all, the Chinese government -harvests- political capital from the economic windfalls.
In China Trade Surplus, the losers are US based and other nations based manufacturers who have not relocated to China, and their workers. High end foreign businesses and higher end products like computers and home appliances are priced out of the Chinese market.
The trade imbalance with China makes the United States highly vulnerable as they give the Chinese tremendous leverage over the United States as a quick sell-off of these securities would send interest rates spiraling up. The Chinese would not wish to do so as the US can retaliate by blocking Chinese imports (recall something-), but also because low interest rates help the Americans buy cheap credit which enables the US to fervently buy Chinese products.
In the current scenario, save for collecting back some toys, China calls the shots. In which China gets a lot of political mileage and maybe makes it a winner again.
For more on China trade log onto chinatradinghub.com
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