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FT: China export surge stirs US anger


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http://www.ft.com/cms/s/0/b19e7036-748b-11df-b3f1-00144feabdc0.html

China export surge stirs US anger

A surge in Chinese exports and rising anger in the US Congress will put renewed pressure on China to allow its currency to rise against the US dollar.

Chinese trade figures showed exports leaping by 48.5 per cent in May over the year before, way ahead of analysts’ forecasts. Data released in the US showed America’s trade deficit widening slightly in April, with some economists arguing that the improvement in net trade and its contribution to US growth appeared to have stalled.

The data gave more ammunition to China’s critics in Congress, who have said they will proceed with legislation to restrict Chinese imports to correct the perceived misalignment of the country’s currency.

Thursday, Tim Geithner, Treasury secretary, warned China that congressional anger could result in rapid action. “I think the strength of the sentiment in Congress is overwhelmingly strong, it’s bipartisan and it reflects how important this is to the United States,” he told the Senate finance committee.

Charles Schumer of New York, the Senate’s third most senior Democrat, said he would seek to have his bill made into law within two weeks unless he saw signs of action from Beijing.

The Treasury has been pursuing quiet diplomacy with Beijing to allow the renminbi to appreciate, but Mr Geithner on Thursday told the committee that he had no idea when that might happen. In what appeared to be a shift in tone, the Treasury secretary on Thursday signalled that he shared much of Congress’s frustration and suggested that China needed to recognise how close the US was to legislation.

However, Mr Geithner argued that China’s trade surplus had fallen by around half as a share of its gross domestic product over the past two years, and said US exports to China had been rising sharply. “As we emerge from the global financial crisis, US exports to China have rebounded much more rapidly than overall US exports, and are now running 20 percent above their pre-crisis levels,” he said.

Earlier in the year, many investors expected that the renminbi might be allowed to resume its upward movement against the dollar as early as mid-June. But that predicted date has been pushed back as the Greek crisis and the fall in the euro have left Beijing unwilling to see an appreciation against the currencies of both its major export markets.

The increase in Chinese exports announced on Thursday meant that China recorded a trade surplus in May of $19.5bn, significantly larger than the $1.7bn surplus reported in April and March’s modest trade deficit. The US data showed a trade deficit of $40bn, similar to the two previous months. Some analysts believe China’s May export numbers could give Beijing political cover to begin changing currency policy.

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Stop buying crap from China, problem solved.

The problem is consumer have very little ability to determine where the goods they purchase come from. Even if you wanted to stop purchasing goods from China, they are so prevelent you have no ability to do so....

One possible solution to this problem is going back to a time where the origins of products had to be posted where the products were displayed. If we did that today however we would be in violation of trade agreements designed to end that practice.

Which is one significant problem with our trade agreements, they unempower the consumer rather than empower them..

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One possible solution to this problem is going back to a time where the origins of products had to be posted where the products were displayed. If we did that today however we would be in violation of trade agreements designed to end that practice.

Which is one significant problem with our trade agreements, they unempower the consumer rather than empower them..

The problem there is components made all over and assembled in another.

Who made it,the assemblers or the component manufacturer?

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Unfortunately it's more complicated than that. US corporations have to stop manufacturing everything over there first.

Until you can pay workers $200 a month here in the US it's just much cheaper to operate factories in China or India or any SE Asian country.

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Until you can pay workers $200 a month here in the US it's just much cheaper to operate factories in China or India or any SE Asian country.
But folks in the USA can't afford an SUV and 3000+ square foot house on $200 a month!
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Granted, my expertise in the field of international trade is that, in the 70's, I once got a D in Econ 101.

Every time I see something like this, I wonder what the other possible consequences would be.

One admittedly imaginary scenario that's popping into my head right now:

If
China were to allow their currency to float,

Then
China would instantly take a big financial hit on all of the dollar-based securities they've been buying over the years.

This would make such securities much less attractive as investments. (Especially considering that they're paying like 1% interest.)

The effects on the US if China stops buying (or, worse, starts selling) US securities are . . .

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But folks in the USA can't afford an SUV and 3000+ square foot house on $200 a month!

Kids drop out of school and then wonder why they can't ever get a $100K per year job. They are finding out that there's a billion people in China who are smarter than they are, work harder than they do, and are willing to work for $2 per hour. Oops.

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Kids drop out of school and then wonder why they can't ever get a $100K per year job. They are finding out that there's a billion people in China who are smarter than they are, work harder than they do, and are willing to work for $2 per hour. Oops.

I don't think many dropouts wonder why they aren't making 6 figures. More likely a lot of them feel like making that kind of money was never within their reach in the first place.

On the Chinese side, I would bet that intelligence and work ethic have relatively little to do with it. A willingness stemming from a lack of other options is all you need.

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Granted, my expertise in the field of international trade is that, in the 70's, I once got a D in Econ 101.

Every time I see something like this, I wonder what the other possible consequences would be.

One admittedly imaginary scenario that's popping into my head right now:

If
China were to allow their currency to float,

Then
China would instantly take a big financial hit on all of the dollar-based securities they've been buying over the years.

This would make such securities much less attractive as investments. (Especially considering that they're paying like 1% interest.)

The effects on the US if China stops buying (or, worse, starts selling) US securities are . . .

on the securities? or on the dollar?

The direct effect of the scenario you outline is that the price of USG securities goes down (so the implied interest rate goes up). it gets more expensive for the USG to borrow money, and the US interest rate rises. However, inthe global finanancial marketplace, nothing is direct! particularly when it comes to USG securities when the world is jittery about a possible second dip recession.

i suppose the more relevent question is the effect on teh dollar... the decreased demand for US securities decreases demand for dollars which SHOULD push down the value of dollar vis the yuan.. however that is the crux of the dispute, the yuan is pegged to the dollar. this will amount to the yuan effectively depreciating relative to all of the other currencies in teh world that aren't pegged to the dollar, and to even more US imports shifting AWAY FROM other countries and coming from China instead.

rinse, wash, repeat.

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Do nothing and less money for America, more for China. Limit trade and further impact our already struggling economy. Hmmmmmm... I dunno.

Actually that is incorrect. We do nothing and their assets decline while except for some cloth, we don't really lose anything.

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Granted, my expertise in the field of international trade is that, in the 70's, I once got a D in Econ 101.

Every time I see something like this, I wonder what the other possible consequences would be.

One admittedly imaginary scenario that's popping into my head right now:

If
China were to allow their currency to float,

Then
China would instantly take a big financial hit on all of the dollar-based securities they've been buying over the years.

This would make such securities much less attractive as investments. (Especially considering that they're paying like 1% interest.)

The effects on the US if China stops buying (or, worse, starts selling) US securities are . . .

Our government would lose much of its ability to create inflation so much of the reason for capture would go away. If we don't do something stupid, maybe we'd get back to a market-based economy instead of the corporatism with fascist leanings we have now. The current Chinese government and its cronies would have to declare war on the US or face the firing squad.

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Our government would lose much of its ability to create inflation so much of the reason for capture would go away. If we don't do something stupid, maybe we'd get back to a market-based economy instead of the corporatism with fascist leanings we have now. The current Chinese government and its cronies would have to declare war on the US or face the firing squad.

uh.... what?

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I've read that paragraph four times and I still have absolutely no idea what it said.

It's not that hard. More or less, he's saying:

Twas brillig, and the slithy toves

Did gyre and gimble in the wabe;

All mimsy were the borogoves,

And the mome raths outgrabe.

Clear it up?

:pfft:

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