Reader Feedback 07/24/2007

 

Here are some comments on our article "U.S.-China Trade: A Secret Standoff?"

The FDA does not need an ulterior motive to take action. It's guilty of procrastination in the case of Chinese goods. Who, in their right mind, would ever think someone capable of putting a substance like melamine in food or pet food? My father worked for the company that invented that stuff and ran the centrifuge to make it. His health was affected by it and 6 of his co-workers died over the course of time he worked there from side effects of its manufacture. Who would even consider it?

We allowed the Chinese this latitude when we granted them "most favored nation" status in the early '90s. No one wanted to rock the boat. After all, they were eating that stuff too! They wouldn't poison their own people, would they? As recent events have shown, they would. The Chinese government is still the most ruthless regime ever to exist on the planet and is undeserving of its trade status. A government that harvests body parts for sale from its citizenry cannot have any scruples about putting toxic chemicals in foodstuffs to boost a protein rating. The end conclusion of this tirade is that we should not be doing business with them at all.

(Bruce B.)

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You wrote: "Given that the problem originates with the U.S. government and the Federal Reserve itself, something the Chinese likely know all too well, the monthly visits by American politicos to Beijing must be greeted by increasing skepticism and behind-the-scenes derision."

It takes two to tango. No one held China's hand to the fire and said "you must buy our treasury bonds or our markets will be closed to you." I take it as given that without the constant recycling of Chinese trade dollars into the US treasury market, thus ensuring low US interest rates and a perpetuation of the credit bubble, none of this would have happened. True, the Fed had the option to raise rates, which is their folly, but likewise the Chinese had the option to invest their profits elsewhere. That they left it so late in the game is their folly, not ours.

The obvious problem facing China is that it needs to follow the path of Japan and Korea in totality. That is to say, first build your global position with cheap trade goods, then develop your internal market and wage scales using higher-quality, value-added products for both internal and external consumption.

The fly in the ointment is of course the State's unwillingness to cede any political control to the masses. Rising wages and living standards lead to rising demands for political and economic participation. The end result is clearly the demise of the Chinese Communist Party, but I wouldn't hold my breath on that one. Every impulse towards reform in that country comes with the implicit condition that the CPC remain in control. This will be their ndoing, sooner or later.

America is in a much better position than China to weather an economic storm. It has the political traditions and institutions (albeit flawed and in need of reform) that China lacks. China's response will be as usual: Repression and a move backwards towards socialism. The real future threat from China is neither economic nor military, but the global impact of millions of Chinese fleeing a failed state.

(Richard B.)

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The renminbi's s-l-o-w rise... Inexorably slow. But they must feel that Chinese civilization has at least another five thousand years to go - so there's no need to hurry.

A view from the "cheap seats": When the Chinese semi-unpegged in mid-'05, they had a rough idea concerning how they thought the appreciation should proceed (with probably a series of intermediate points), all of which can be recalculated as circumstances warrant.

They drew a line between each of the two adjacent points. Nothing to stop a politically motivated mini-spike (followed by a period of stasis) anywhere along the line. The appreciation line still gets to point "B" (and "C", and "D"), as revised, and on schedule.

Schumer comes away satisfied; his aides draw up a "Perot chart" showing the effects their "statesman" has had; the Chinese have their prejudices concerning barbarian foreigners reinforced; the trade deficit continues to worsen; and we don't look in the mirror to find most of the ultimate cause.

Whew. What would Shakespeare have Puck say today?

(Bill S.)





Posted 07-24-2007 12:07 AM by Doug Casey