Hypocrites who blame China for American troubles need to address fundamental productivity and structural problems

This columnist succinctly sums up the fallacies behind US politicians who blame China for its economic woes. William Pesek's Commentary in Bloomberg : `Made in China’ Tag Makes Hypocrites of Us All


Let the truth be told. Many of us should be aware that the blame game masks quick-fixes to satisfy personal vested interests which could be disastrous to citizens led astray in the long run. I won't chastise some American workers who have no interest or do not have a good grasp of economics being misled by rightists. However, I was really surprised to have met a couple of highly educated Americans were chanting the same mantra. They were studying international economics no less. Hopefully, the course and some of us who are widely read would have tempered their radical thinking. So work out the pros and cons and calibrate our responses before more of Americans join the bandwagon of hypocrisy to blame those who have succeeded under the very framework, terms and rules of the game established by the advanced economies. 

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Hypocrisy is the defining element in all the wrangling over China’s currency.

October 11, 2011

The debate seems deceptively simple: As China booms and America implodes, how much blame does Beijing’s undervalued currency get for chronic U.S. unemployment? China says none -- it’s a developing nation and needs to create the hundreds of millions of jobs to keep the peace and satisfy its citizens. A vocal chorus in Washington says China’s trade advantage hogs all the growth.

The trouble with these disparate views is that they are both partly correct. The yuan does hinder growth, as Federal Reserve Chairman Ben Bernanke points out. It’s “blocking what might be a more normal recovery process in the global economy,” he said last week. Meanwhile, the risks of social upheaval in China are rising. Subsidizing exports is an obvious way to avoid it.

The real question is: What can Americans do? Three things: Blame the Jon Huntsmans in their midst, focus on trade access and rediscover their entrepreneurial soul.

The doublespeak from Corporate America is breathtaking, and few personify it better than Huntsman, the Republican presidential candidate. As Huntsman pledges to create millions of American jobs and touts his business acumen as proof he’ll deliver, the namesake Huntsman Corp. (HUN), a chemical maker, downplays the central role that cheap Chinese labor played in building a fortune partly “Made in China.” After the U.S., China is Huntsman’s biggest market.

Naming and Shaming

Sure, Congress can slap tariffs on Chinese goods. More success may come from naming and shaming the politicians, business leaders and companies making piles of money by moving jobs to China and, out of the other side of their mouths, demanding lower taxes and denouncing President Barack Obama as an economic simpleton. The U.S. long championed the globalization model that it now blames for its woes.

Hypocrisy is also at play in how Bernanke and his Chinese counterparts are embroiled in a race to the bottom.

“It’s pretty evident that a weaker dollar is part of U.S. policy, so they are hardly in a position to throw the first stone,” says Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore. “Even though China overtly manages its currency, a stronger yuan isn’t going to bring back the jobs American companies willingly exported.”

Perhaps the real indignity for Washington is that, as it ponders a trade war with its biggest creditor, China is winning the currency war. Lawmakers facing re-election next year will find China a convenient scapegoat for bad economic data. For all its growth, China’s model isn’t benefiting the world as some had anticipated.

Market Access

Market access, not exchange rates, is the critical issue. If the yuan jumped 30 percent tomorrow, Germans would sell more cars, French more wine and cheese, Italians more shoes and handbags, Australians and Canadians more raw materials. The U.S. would sell China more soy, corn, cotton and apples. What kind of wealth does this trade create as companies move jobs to China?

Apple Inc. (AAPL) would love to sell more iPads and iPhones in China. But then, much of the content in these products is made by low-wage workers there who can’t afford the finished goods. And Americans would lose it if the cheap wares they gorge on suddenly shot higher in price. Corporate America will just shift jobs to India and Vietnam if costs in China go up.

Here, it’s worth noting a recent report from the San Francisco Federal Reserve Bank. Economists Galina Hale and Bart Hobijn argue that “Made in China” isn’t taking over U.S. consumption as much as believed. Of every dollar U.S. consumers spend on a Chinese-made product, about 55 cents pays for services in the U.S. Think about it, when you spend $90 for a pair of Nike sneakers, only a fraction of it flows to China and even less to workers there.

Valid Concerns

The real issue is U.S. companies creating jobs at home and gaining access to Chinese markets. It’s challenging for U.S. corporations to compete in China, bid for contracts and protect intellectual property. China lavishes advantages and subsidies on national champions and limits access of foreign financial firms. Corruption complicates business.

Valid concerns all around and none of them hinge on the dollar-yuan rate. If the U.S. could compete on even terms, there would be ample money to be made in China and jobs would be created back home. Sadly, Congress is more obsessed with exchange rates than trade talks that might actually boost job growth.

China’s ascent should spur and motivate the West. Earlier this year, Obama called China’s rise another “Sputnik moment,” recalling how the Soviet Union’s 1957 space launch unnerved America. The U.S. needs to relocate the entrepreneurial passion that made it the biggest economy and created some of the best companies.

The extraordinary reaction to the death of Apple’s Steve Jobs reminds us how America loves its innovators. China’s growing influence should be a call to arms to do what the U.S. has typically done best. Rather than being inspired to think big or forced to reconsider their unreflective policy stands, many U.S. lawmakers are pointing fingers eastward.

It’s hypocritical to blame China for what ails America’s economy. If you think currency rates alone are going to restore U.S. prosperity, think again.

(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the writer of this article: William Pesek in Tokyo at wpesek@bloomberg.net

US moves to punish Chinese yuan will increase cost of living for average Americans and has not effect on job creation

Some US senators are bulldozing for the Currency Exchange Rate Oversight Act. This bill, however, has limited support among the House of Representatives and the White House who know better not to risk more hardships for ordinary Americans, antagonise a major trade partner, without achieving the said objective of effectively reducing the trade deficit and creating more jobs. 


Some economists said they understood the politics of the debate but questioned whether the bill would bring back American jobs or prod China to move faster on currency reform.

"We consume a lot. The Chinese save a lot. We're going to run a trade imbalance with them," said Derek Scissors of the Heritage Foundation.   

An editorial from the  Washington Post claims the bill is counter-productive and does more harm than good. It is mere political rhetorical to project a "symbolism" with limited practical impact.


"But would it really create hundreds of thousands of jobs in the United States, as the bill’s advocates suggest? The verdict from an April briefing paper from the Federal Reserve Bank of St. Louis is: “probably not to any meaningful degree.” Overall U.S. employment is indeed a function of the U.S. balance of trade. While it’s true that the United States has been running a trade deficit for decades and that its deficit with China is a growing share of it, ending the trade deficit with China would not necessarily cure the overall U.S. trade imbalance. That’s because other low-wage countries that do not artificially depress their currencies could easily take China’s place. The components of many “Chinese” goods are already made elsewhere, imported by China for assembly and then reexported to the United States. Only 20 to 30 percent of the value of Chinese goods in the United States would be affected by a stronger currency.



Why risk costly Chinese retaliation for the sake of a measure whose practical impact could be so easily nullified anyway?

If Congress really wants to help American workers, it will end the stalemate and move these growth-enhancing pacts to final passage. The world economy has enough problems without adding a US-China trade rift to the list," 

"According to a US Treasury Department report, China made its exchange rate flexible last June due to its high inflation rates. On an inflation-adjusted basis, the appreciation is rising at an annual rate of more than 10 percent."

Strong opposition to the Bill from American business interests backed by the  powerful US-China Business Council will be a major stumbling block. With their profits and long-term interests to protect, corporations will ensure that their lobbyists get the message across to the majority of representatives not to vote


Nobel prize winning economist  Paul Krugman's contention has softened somewhat despite continuing to join in the xenophobic chorus as a clever diversion tactic to focus attention on a foreign bogeyman instead of addressing urgent and vital economic reforms in the USA.

"Holding China accountable won’t solve our economic problems on its own, but it can contribute to a solution — and it’s an action that’s long overdue."

More attention should be paid on  promoting US niche businesses and cooperation with Chinese state enterprises for mutual benefits which Americans will get to enjoy. 

First things first.  Get the house in order before criticising and pressuring others when one has limited leverage and effective solutions.  

Selective support and condemnation of cultural genocide - examining beyond the face value of claims by Tibetan Chinese locals and emigres

Many western press, governments and ordinary people choose to believe in the stories spun by the exiled Tibetans than to view the improvements to the lives of Tibetans objectively.

The Dalai Lama and his exiled Tibetan supporters have become westernised and lost much of their Tibetan culture even though religious practices are retained from theocratic days.  By the same argument, even the Dalai Lama could not prevent cultural genocide among his supporters. This is inspite of reports that the exiled government is autocratic, discriminatory against other Tibetan sects and practises nepotism.

In contrast, Tibetans living in China are free to learn their own language in elementary and high school level.  However, practical reasons necessitate that they become fluent in Chinese Mandarin language which is the medium of instruction for tertiary education throughout China. Many non-Anglo Saxon ethnicities in the western world have to learn English as the official language for education and work. There is nothing so abhorent and fearsome about it.

German scholar Ingo Nentwig refutes Dalai Lama's "cultural genocide" allegations :   http://www.german-foreign-policy.com/en/fulltext/56150/print

Unfair and Disproportionate China bashing

Where was the world when the Indonesian government committed cultural genocide against ethnic Chinese  citizens in the 1950s and 1960s? Discrimination was carried out to the extreme to undermine Chinese businesses and erase all traces of Chinese identity. It was unfortunate that it happened during the Cold War and the free world tacitly applauded these human rights violations. Similarly, the racially motivated riots in the 1990s despite in a less hostile international environment, also only received scant mention in the press, without much criticism or condemnation from western governments.

Reflecting on oneself, the atrocities committed against native Americans and Australian aboriginals that have yet to be fully vindicated compose another thesis for critics to ponder before jumping on random petty incidents that cloud the bigger picture.

Unlike these marginalised groups, affirmative action is shown towards ethnic minorities, more favourably towards Tibetans, in the form of scholarships with lower selection criteria and enjoy various forms of subsidies not available to majority of the Chinese population. Critics either do not know, or not bother to find out, or simply have the audacity to brush aside pertinent facts.

It is only logical that a caring government would create wealth to distribute wealth. Without doubt, every society has tensions between the very rich and bottom of the social ladder who have fallen between the cracks. Honestly, how many of us buy the arguments of looting during the London riots recently. Envy and getting back at unethcial capitalists are lame excuses to plunder and kill innocent people, many of whom are middle class people trying to make a honest living.  Are the value of Chinese Han and Hui Muslim lives worth less than the victims of the London riots?

Like some of the "spontaneous" revolutions in other parts of the world, they would not have been ignited or spread without the instigation of exiles and their western clandestine sponsors. From hindsight, most Chinese and world citizens would appreciate the need for firm security when self interested rebels overstep their privileges, rights and responsibilites to harm the interests of the majority regardless of religion, social status and ethnicity.

Arab Spring bug : better pray that China summer will pass, as no one will be wiser or better when revolution and misfortunate strike

At this time of the year, it is confirmed that there won't be a spring revolution in China.

http://chinainformzen.blogspot.com/2011/02/china-blooms-warding-off-jasmine.html

But speculators are putting forth ingredients for a China summer.
http://the-diplomat.com/2011/08/20/china%e2%80%99s-summer-of-discontent/

Questions must be asked. But to what extent should opposition forment revolution to topple the government and then what? The scene will be ugly and disastrous.

The international economic environment and spate of natural disasters are unfavourable to most countries. Social tensions would be multiplied many times over when government incompetence and irregularities trigger unhappiness and unrest. Could any other governments have done a better job? That is for the people to weigh the balance of probabilities and assess if it is worthwhile to risk discarding whatever gains made so far for some elusive goals.

The next wave of unrest is more likely to happen in the US and Europe if UK is an example to follow. Spain and Greece are experiencing much worse economic woes and unemployment problems than most countries in Asia.

Reports contrary to the relatively smooth and "bloodless" overthrow of the Gaddafi regime by Libyan rebels supported by NATO forces showed human rights violations and bloodshed. Note that Libya is a small country. Those who wish for China summer or whatever season uprisings were to take place are sadistic. Will the Libyan people be better off. We don't need to wait much longer to see the outcome.

London Riots - the case for strong family values, security forces, leadership, but no time for social excuses to dodge problems

In the absence of effective policing and clear guideline of when and how to intervene, the mobs which were ignited by an apparent vendetta crossed the acceptable threshold and all hell broke loose. It had never crossed their mind to call in the military for backup as it is inconsistent with democratic practices. Affording human rights to those who dare has deprive basic rights to the majority who abided by the law. Where is fairness?

No matter what humanistic socialists argue and seem bought over by lame excuses by rioters of the social and economic causes and citing similar stealing by filthy rich bankers in the subprime crisis, the bottomline is that violence is unjustifiable. Two wrongs will not make one right.

Have sympathy for the middle class being squeezed and has to bear the brunt of societal problems.  Many were innocent victims of unscrupulous capitalists and greedy looters. The rights and safety of the majority of good people ought to be protected by the state.

Consequently, the horrors have led some to call for a review of unchecked and ill-disciplined "liberalism".  Prior to the London riots, no one has acknowledged or taken notice of the continuing decay in western society decades.  While religious studies have taken a back seat in the name of secularism, it was moral hollowness with tacit support from government and society that should be blamed.

The decline of family education and imparting ethics and values is the foremost and primary cause for the decline in reason and decency. Families have become utterly dysfunctional. Though not all single parents are non-chalant about educating their young, many struggle with jobs to make ends meet and family support from spouses (whether former or current partners) is sorely lacking.  Is it better to have "tiger mums" than no control at all? People are now paying for the price of freedom.

A handful of middle class individuals who partook in the looting were not poor but driven by greed, self conceit and malice.  There is no fostering of ethics or morality at home as parents are too busy trying to make ends meet or are cursed as single parent families.  Who would provide the guidance when politicians, big businesses and military did not live by social norms, ethics, incorruptibility and public good.

Two generations ago, many in our extended family lived in poverty but it never crossed their mind to enrich by dishonest means or steal from those who have more, even if they possess are ill-gotten wealth. The stories of seizure of lands by landlords and hard-hearted factory owners are familiar and had at one time formented pressure for socialist revolution. These were averted because conditions improved. Majority of the poor were able to climb the social ladder through education, apprenticeship, small business and working overseas.  What we are certain is that tsituation for the have-nots will worsen if they harbour negative thoughts, get addicted to drugs and live socially irresponsible lifestyle.
As concerns surface over the security of Olympics complex in the wake of the riots, notice that China did not do the ungentlemanly act of criticising London's incapability in hosting the Olympics 2012. This is a stark contrast to western media and official jeering and support for riots and killings in Tibet in the runup to the 2008 Beijing Olympics.

Events similar to the London riots could happen anywhere in the world's big cities where social tensions, dysfunctional families and ineffective state protection.  Some cities in the US, such as Philadelphia, are on high alert to avoid similar disorder and damage to the infrastructure. According to recent BBC news reports, curfew has been imposed on youths entering the historic part of Philadelphia. But is that too little too late to overhaul societal ills?

Bo Xilai : red revolution China necessary to counter excessive capitalism, plutocracy and inequality

How do analysts reconcile the fact that Bo Xilai and his family who were victims of Mao's purges during the Cultural Revolution has now become a fan of borrowing from Maoist ideas for good governance.

They don't and simply assume that communism is in the blood of Chinese leaders. Indeed, many articles published in the English language media has created more confusion than offered answers to understanding this fast rising next generation leader.

Bo Xilai and other leaders who had survived the Cultural Revolution know well that Maoist tactics are effective in mobilising people to do what is morally right to override the poorly developed and corrupt ridden legal system and mafia controls. Of course when misused for personal power enhancement and glorification, it had caused social upheavals, personal suffering and immense economic damage to the nation.

Perhaps it is timely to reintroduce some elements of desirable socialist traits into the highly successful albeit skewed economy. When the ills of capitalism are creeping in causing wide disparity in the social and economic (between the rich and poor and coastal and provincial areas), socialist campaigns are necessary to steer a balance and fairness.

China has learned from painful history lessons that excessive indulgence in one model and the neglect people welfare would bring about the downfall of the country rapidly.

Of course, no one is naive not to recognise that the communist party leaders have an interest to continue exerting power. There is no doubt that the communist party is not ready to give up power and let the people run amok. That is wishful thinking of scholars who wish the Chinese people ill.  Look at it positively, in fact stronger central control would effectively get rid of deviant and corrupt provincial officials. Hence there is a growing assymetry between what is good for the country, government and people.

This is a great contrast to the campaigns organised by the American Tea Party which had been manipulated by Republicans to pursue their selfish agenda and protected vested interests of the rich at the expense of the poor and working class who could not appreciate the need for belt-tightening and tax policies to serve their long term good.  
QUOTE :

Bo defended the red culture campaign, saying, “We aim to encourage people’s spirits.”

Bo said his campaign has four aspects — reading Chinese and foreign classics, including the theories of Mao and other Marxist leaders; telling popular stories; circulating inspiring mottos (such as, “Serve the people with a full heart!”); and group-singing of revolutionary anthems. “We should spread these things more,” Bo said.

Many here, including Communist Party adherents, agree that this revival of revolutionary fervor is needed to instill a new sense of pride and common purpose, adding that they feared China’s decades-long rush to get rich has eroded the country’s moral bearings and created an ethos of unchecked materialism.

http://www.washingtonpost.com/world/southwestern-chinese-city-leading-red-revival/2011/06/25/AGkh8JnH_story.html?wprss=rss_world

Curry War on Chinese Nationals in Singapore who could not assimilate pronto

A belated news article spiced with self righteous innuendoes and inaccuracies sparked off an appeal to launch an international curry protests known as "Cook a Pot of Curry" and distribute by those who claim to be patriotic and food loving Singaporeans. That the world already knows this is their favourite obsession but the intention of this event is to make a strong statement.

Even as the organisers reassured that to showcase their culture and it was not targeted at any particular race or nationality, they are unconvincing.  Within a few days, Facebook has garnered a significant following of more than 50,000 (for a tiny country) and internet discussions are redolent with racist and xenophobic rants. Some remarks calling for migrants to return to their own countries echo the lines of white supremacists since imperial times.

People are entitled to food preferences. Pushing a product you like but knowing that the audience may not like it marks of insensitivity. To say that no offence was intended because this is the way life is here and get used to it is a poorly disguised insolence.

Well, at least they had the decency not cook in front of the people they didn't like in an enclosed area.  Unlike landscarce Singapore, in most countries where houses are separated by fences, yards and garden space, aroma drifting across boundaries that could give rise to unhappiness.

After all the outcry and mobilisation, would this be a redundant exercise that shows the infantile behaviour of its organisers and participants? Since the incident happened seven years ago, it was stale news and the parties concerned might no longer be neighbours or could have become good friends. The galant proposal by the Indian family not to cook overpowering curries when the Chinese neighbour was at home was commendable. Living together in high density housing is about give-and-take. Apparently in cases involving a first and second generation Singaporean, the outcome has to be a win-lose in favour of the longer stayer.

To understand why Singapore Chinese which compose a majority of the population in the country and yet are so different from mainland Chinese despite their common ancestry, one has to look at historical developments.

There is a segment of peranakan Chinese who are fourth generation or more Chinese; some are of mixed have Malay or indigenous blood but predominantly they are considered "straits Chinese". The only "Chinese" lingo they speak is adulterated Hokkien (Fujian, southern coastal provincial dialect) mixed with colloquial Malay and English. Most do not have have any understanding of Confucianst teaching.  Though some peranakan have incoporated ancestral worship, many are Christians, having been educated in English mission schools. Unlike the first generation Chinese who could "eat bitterness" and work hard, the peranakans are well-to-do and could afford to be more laid back, a bit like the Malay attitude.

Then, there are other non-peranakan Singaporeans who opted to enrol in English schools that taught Malay as the national language and omitted Chinese language altogether in the curriculum. For decades since independence before the China dragon awakened, many Chinese Singaporeans looked down on the Chinese educated who could not command half the salaries of the English educated counterparts.  Chinese medium schools had closed down one after another had it not been government's contrived effort in promoting them as bilingual special schools. It is well known that Chinese educated command lower pay and are looked upon with some disdain by their English educated counterparts.

Despite having a world recognised education system in churning out technical and exam scoring experts, even educated people sometimes come across as snobbish and indiscreet (as everywhere else in varying degrees).  Nevertheless, the well heeled are more subtle than the uncouth and crude ways of the lesser educated (not in terms of qualifications but intellectual maturity and perceptiveness). To common knowledge, a favourite past-time of ordinary folks is watching TV and complaining against the neighbours and government if it is free of charge and have no consequences.

There are, of course, some understanding and reasonable Singaporeans (excluding the apathetic, indifferent and disinterested ones) who do not partake in such trivial fanfares. Some including Indians have taken a stand to reject exclusionist posturing and not to let one person or incident spoil all the apples and overturn the cart.

The Singapore government has adopted a pragmatic open door policy to import foreign low cost labour as well as attract talented skilled professionals to work and settle in the country in order to maintain a critical mass for continuous economic growth.  However, many citizens have criticised the government for pushing immigration policy too quickly and indiscriminately, at the expense of the citizens' job security and stake in national resources. It is well documented throughout world history that during an economic downturn, locals tend to become more xenophobic and less tolerant. 

Such gestures of disrespect for individual preferences and minority rights would not go down well with majority of first generation Chinese nationals who may well love curry or have tried hard to integrate.

To any Chinese or Asian in the world, these hot vapours of one-up - manship will evaporate. There are bigger and better things in life to care about.