China's Trade Position

  

A. Five Reasons China Isn't Backing Down K. Rudd

1.       Trump’s trade war confirms China's belief that Barack Obama’s “pivot to Asia,”
       was an expansion into China’s sphere of influence.

2.       Recent actions means trade talks must be delayed at least until after US midterm elections.

3.       Xi Jinping's ability to consolidated more power is partially based on  fulfilling a  “China Dream.” He can’t back down.

4.       China’s economy will suffer little, much less than 0.5 percent of GDP.

5.       China believes she has less near-term political vulnerability but greater long-term economic vulnerability as
       China’s authoritarian state-dominated capitalism better absorbs economic shocks. Coronavirus will test this belief.
    The bottom line: Trump and Xi believe near-term fallout can be managed
        so this trade war will probably last longer and inflict damage.

Kevin thinks keeping Chinese students in America is very important to long-term political security.
Australia has relatively many more Chinese students.

 Editor's Note: Historically, not listening to our allies, has not worked out well.
Think Vietnam and Iraq/Afghanistan/Syrian wars.

B. Kevin Rudd: China will not over react to Trump's trade policy
1. She will lower trade balance.
2 . Her relatively low tariffs of about 9% will be lowered.
3. China could propose zero tariffs in both countries and could make same offer to others.
 

C. Relations With Russia Bremmer video

See 21st Century Free Trade Analysis

   Necessary style='font-size:18.0pt;font-family:"Arial Narrow","sans-serif";mso-fareast-font-family: "Times New Roman"'>
    1. Intellectual Property
    2. Forced Intellectual Property Transfer from US Companies to Chinese Companies
    3. Competition Requirements requires of US companies but not Chinese state owned Companies
Exaggerated: China's 5% tariffs on US auto imports is not a serious problem.
     General Motors profits from China sales saved stopped GM bankruptcy. Buicks are everywhere.
     Japan and South Korea buy few US car
Trade Deficit with China
     Because China is assembling parts from all over Asia, she receives the total US dollars then distributes it.
     We could move the assembly to other Asian countries to make it look better.
     Editor's Notes: Product profit ends up at Apple or some Taiwanese manufacturer.
     Years ago Japan and others moved mfgt to US w which provided good but not 1950's wages.
 

D. Trade Thoughts from China Crisis of Success video  by Dr. William Overholt

  

 

 

 

Three Categories of US Desires
Necessary
Exaggerated
Crazy


China's Attitude toward U.S. Trade War
Chinese Elite love pressure on Xi Jinping
Chinese Average citizen, because of nationalistic indoctrination, dislike US policy.
United States Average citizen, because of nationalistic indoctrination, dislike US policy.
United States Elite love pressure on Trump
 


 

Affect of Trade War on China's Trade Policy
China will continue to liberalize trade and intellectual property and services policies
Major Structural changes will not happen
Larger problem: China fears a new Cold War which will take a long time to alleviate.

 

 

Updates

 

 

1. Trump's 90-day Tariff Deal 12/18/19


2. Three small numbers are making big waves in China. The digits 9-9-6, a shorthand for 9am to 9pm, six days a week,
    have become a rallying cry for tech workers frustrated with their bruising work schedules 4/17/19 Source
 

3. From Bloomberg's New Economy Forum 4/19/19

    China has no desire to scale back its winner-take-all industrial ambitions
    or to make fundamental changes to its authoritarian capitalism.

    A mix that includes subsidies for state industrial champions and economic
    policy favoring local over foreign players, has succeeded.

    Any final agreement will have Chinese pledges to buy more U.S. products
    but few promises to restructure the economy.

    A trade deal won’t end China-U.S. frictions. In fact, the conflict has only just begun.

A 2018 report from Freedom House, a democracy watchdog, noted that 18 countries (so far)
now use Chinese-made intelligent monitoring systems and 36 have received training in topics
like "public opinion guidance," a euphemism for censorship. The list of countries includes
the UAE, Zimbabwe, Uzbekistan, Pakistan, Kenya, and Germany.

 

The worldwide infrastructure-building project "has pushed China’s huge construction, telecommunications and
shipping companies to go global at a time when a cooling domestic economy means less business at home."

Editor's Note: One common problem in centrally planned economies is
data on the cost of misadventures China's overbuilding housing at home.
Japan rushed into HDTV while US, very profit dependent, waited for digital technology.

Interesting Points from Bloomberg
Source

1. China is pursuing “debt trap diplomacy"

But the idea that China deliberately forces debt onto poor countries, then grabs physical assets when they can’t repay the loans, isn’t supported by the facts, writes Deborah Brautigam. Hambantota Port in Sri Lanka is an exception.  But, from Simon Rabinovitch in The Economist: Chinese loans can be “ruinously expensive” with little regard for risk. Rabinovitch among others thinks Chinese lending is merely clumsy, not malevolent.

Editor's Note:
 Economic Success of projects will determine success of program.

2: It’s another Marshall Plan

The U.S. Marshall Plan didn’t rebuild Western Europe after World War II. Infrastructure had been largely fixed by the time U.S. loans and grants kicked in, according to the economist Barry Eichengreen. The Marshall Plan’s introduced  free market ideas, and habits of cooperation that underpinned democracy in postwar Europe. To the extent the Belt and Road promotes state capitalism and authoritarian governance, the initiative has goals the opposite of the Marshall Plan.

3: The project is Xi Jinping’s “Grand Strategy"
Sweeping global vision, in contrast to Donald Trump’s narrow “America First” view of the world. But it evokes one of Communist China's raucous “mass mobilization” campaigns. Multiple Chinese local governments, state enterprises, and banks are swept up in a state-funded investment free-for-all, one that enriches these groups but often neglects the interests of poor countries desperate for infrastructure.  "The Belt and Road isn’t a master plan: It needs one," writes Yuen Yuen Ang, of University of Michigan writes in a Bloomberg Opinion. 

4: The astronomical price-tag 
It’s hard to put a realistic dollar figure on a project that is so spectacularly ill-defined: China has never published a total that is roughly $340 billion during the period 2014–2017. The cumulative spending will be less than what the U.S. recently squandered on futile wars in the Middle East and Asia. The U.S. hasn’t been able to come up with a real counter because Washington doesn’t have the money. 

5: It will promote “yuan internationalization"

The majority of Belt and Road projects are financed in dollars because yuan held outside China remain relatively scarce. The Belt and Road will dwindle over time as its trade surpluses inevitably disappear. Printing yuan to finance projects, capacity would be virtually limitless.

Bloomberg 5/1/19

By and large, China’s Belt & Road Initiative gets a bad press in the U.S., much of Europe, Japan and India.

But,  it’s a “debt trap," or China’s bid for empire" is way overblown.

At 2nd Belt & Road gathering in Beijing, President Xi Jinping went out of his way to address international concerns.

Whether this represents a reset, a course correction, or simply a rhetorical gesture remains to be seen.

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The Impact of Chinese Trade on U.S. Employment:
The Good, The Bad, and The Apocryphal by

Chinese competition on US manufacturing had a striking regional variation from 2000-2015.

In high-human capital areas like West Coast or New England,  manufacturing job losses saw industry switching to services. Companies changed to research, design, management or wholesale. Hence, redistributed of jobs went from manufacturing in lower income locations to services in higher income locations.

In the low human-capital South and mid-West,  manufacturing plants closed without much increased service employment.

Offshoring appears to drive these manufacturing job losses.

This employment impacts was strongest between from 2000 to 2007

Ling Chen: New Insights on the 'Made in China' Model
1. Began with Top Down Trade which succeeded using cheap labor
2. Success cause companies to move to other Asian companies
3. Bottom up home grown Gorilla Investors will contribute to Made in China_2025
4. Ling Chen's analysis supports the Beijing Model. See Washington Consensus vs. Beijing Consensus/

 

3 History of China

History of China: What is China, Anyway?

Modern Western Civilization Economic History

China was part of the Colonial Empire of Great Britain

Opium Trade was a Big Money Maker for England.