Ford Is Fined in China
nytimes.com
nytimes.com
I don't think this is very related to the trade war, as it is hurting a Chinese company just as badly as an American one.
so other than the current administration's idiotic approach to anything, what was the impetus of all of this?
Specifically, they're worried that the dollars we're buying Chinese products with are being used to purchase liquid American assets, instead of re-investing in America by purchasing commodity items. The Trump administration believes that China is using these funds to slowly "buy up America" [1]
One thing he's missing out on is the fact that the Chinese government has devalued their own currency for about as long as they've been buying America specifically to keep the dollar strong. There is no way to convert Chinese currency into many other international currencies. For example, for a long time there was no way to turn Chinese money into Japanese money. To accomplish this investors would buy American dollars with Chinese currency, then use the American dollars to buy Japanese currency. This has held the dollar higher in value compared to other, less compatible currencies. Devaluing also helps keep Chinese buying power out of the hands of the Chinese public and into the hands of Chinese billionaire class, who strictly deal in American cash. Hurting the Chinese dollar doesn't impact the Chinese economy nearly as much as hurting the American dollar does.
So our trade war is doing two things. 1) It's pushing China to the table. 2) It's making China reconsider it's reliance on the status quo (The American dollar). If China were to correct the value of their currency; almost overnight the Chinese population would be sipping Starbucks and typing on MacBook Pro's while American's slave away at factories with suicide netting before going home to sleep in dog kennel's.
1. https://en.wikipedia.org/wiki/China%E2%80%93United_States_tr...
How much of the US economy is Wall Street and real estate? Does that really deserve to be 'GDP' as nothing is actually made?
Some say that a large finance sector and a rentier class is a burden to the main economy. It is hard to deny even if there is the 'trickledown' effect from the 1%.
What about militarism?
The trillions spent on war is supposed to be good for the economy but I don't see it myself. If all those bullets had been batteries for electric cars then the USA could have sold those electric cars to places like Libya, Iraq and elsewhere blown off the map or crippled with sanctions.
In China, regardless of whether they have stolen IP or not, they do actually make stuff. Making stuff definitely counts as GDP. Chinese folk are industrious and 'lazy' is not a word uttered in the context of China, even by the haters. I don't get the feeling that the Chinese economy has developed to the late capitalist stage where everyone who works is paying off rentseekers, monopolists and usurers. For this reason I think the Chinese economy is a lot stronger than the American one even if the GDP metric would lead one to believe otherwise.
I also think China are leapfrogging the USA when it comes to education. STEM subjects rule in China, they don't in the USA. When it comes to the fundamentals China is on to something. I am not sure USA Inc has a plan for the future.
(Edit added another source) https://www.citylab.com/equity/2019/02/china-vacant-apartmen...
https://www.afr.com/news/world/asia/chinas-ghost-cities-and-...
(Edit 2 there are a variety of articles from different institutions which claim the exact opposite of your point. Searching “China currency manipulation” will bring up a wealth of articles actually claiming that they are propping up their currency. Here’s one: https://www.google.com/amp/s/amp.ft.com/content/b6a93d28-60b... https://www.google.com/amp/s/markets.businessinsider.com/amp...)
if i am understanding correctly, you are saying china is basically keeping the yuan quiet while they get their economy in the shape they want, benefiting from a strong u.s. dollar. then when the time is right, they'll switch to promoting their own concurrency over the u.s. dollar.
One has to wonder why the U.S refuses to brand China a currency manipulator [1]. You have already stated the answer, but it's worth repeating: it is in the best interest of U.S corporations importing goods from China for the Yuan to be artificially weak. As always, the truth depends on whether one stands to benefit from it or not.
Rest assured that the moment this is not longer the case, the U.S won't hesitate to point the finger and dole out punishment accordingly.
[1] https://www.nytimes.com/2019/05/28/us/politics/treasury-decl...
No, no, no, the opposite is true: China has spent a lot of effort, ever since the Asian Financial Crisis, in keeping their currency strong and appreciating, the exact opposite of devaluation. They are currently in a huge struggle to prevent the yuan from crossing the 7RMB/dollar threshold, which many think will cause a panic when crossed.
> There is no way to convert Chinese currency into many other international currencies.
There surely is a way! I converted most of my earning from RMB to dollars before I left China (just show them my tax receipts as a foreigner), my wife had a $50k/year limit as well as a Chinese citizen.
There are many reasons why this is screwed up, but mostly the opposite from what you are claiming. The yuan is stronger, not weaker, than it ought to be, which leads to a lot of opposing distortions in their economy (not ours).
> If China were to correct the value of their currency...
If it falls above 7 and even back to 8, then we will be back to the early 2000s.
This is nothing to say of their ‘ghost cities’ and fallacious gdp numbers:
https://www.google.com/amp/amp.abc.net.au/article/9912186
Oh and don’t forget the complete lies some Chinese companies try to propagate onto the us market in valuations terms using reverse stock listings:
http://bassiounigroup.com/reverse-takeover-how-fraudulent-ch...
The admin is doing something the Busch admin should have done, or at least the first Obama, but neither did because it would be too upsetting to multinationals and would also “upset” China.
Now we have someone who says times up, do what you signed up for or deal with the consequences of ignoring the rule set out.
And, to a great degree, I agree with this. Blue collar labor was thrown under the bus. That little Texan was right. A giant sucking sound did take the jobs, but not Mexico but rather China chiefly, among other labor outsourcing, to our detriment (their own too) and environmental degradation.
Now, I’m glad and it’s great China took this opportunity to lift its people from abject poverty but we took too much of a hit. It should have been more measured and more fair.
i have a friend in a u.s. technology company, and they simply cannot beat the chinese version of their product in both price and features despite being the creator of the product category decades ahead of others. the chinese companies copied the design but have now exceeded it, so the u.s. product does very poorly in china.
so what it sounds like to me is that the u.s. sees the writing on the wall, which is all due to their own actions and corporate greed over the past few decades, and so now is making a hail mary in a trade war. it doesn't seem like a good idea when it likely won't be long until china has the upper hand.
so it seems it basically comes down to trump taking his poor understanding of dynamics and abusing the u.s. government's and people's need for a "war".
Should they throw their hand up and say, guys and gals of the world, we can’t keep up with you in all areas, please, come take our IP!
I think the answer is obvious.
i was saying that it seems to me that the u.s. can't always rely on the argument and stance that "oh, it's just china making cheap copies". it seems that china has directly stolen and continues to do so, which is a major problem of course, but they will eventually have no need to. so the problem is worse than just needing to stop china from stealing. the problem is that it's possible the u.s. will be left behind because of our unconcentrated effort versus the chinese's highly concentrated economic approach.
my simple understanding is that u.s. corporation's greed and other u.s. economic factors caused a move of nearly all manufacturing to china and now everyone's saying "hey, wait a minute".
The answer to our losing leadership to them isn’t to capitulate and continue allowing undeterred advantage, it’s, as you imply, to on-shore some of those lost skills. It’s not impossible, but it takes concerted effort by government, industry and citizens (who care about environmental impact, working conditions, fellow citizens).
China now has all the capital & knowledge required to become the worldwide leader in innovation. However, their entire industrial culture was built to the specifications of "making cheap copies". It will be interesting to see what the side effects of those origins will be for China in the long run.
Currently the “trade war” just attacks Chinese companies that have done exactly what I described above (Huawei being a primary example) - claiming cybercrimes, arresting executives, slamming lawsuits, barring imports, etc.
Manufacturing is not a switch that can be turned back. America had severe oversight when allowing our manufacturing capacity to head south to Mexico and east to China. We are pretending the trade war is the US “sticking it” to China. But in reality China has all the cards in this war - the US is bluffing to its citizens; the economy of the coming decades will be on China’s terms.
it's very disappointing that the u.s. took this turn.
Look at DJI, Huawei 5G and phones, even pure-software like WeChat.
As for quality, buy something as simple as a geniune arduino and buy a Chinese knockoff. Which is more reliable. I have a ton of knockoffs and i'd say about 50% fail in a few months (plus they arrive with flux coating the bottom, some wont even work until it is cleaned). The few geniune ones i have purchased are still rolling along. I find this with a lot of their cheap knockoffs (yet i still buy them.......).
Correct me if I am wrong, but you are purchasing items which you know to be knockoffs because they are cheap. You don't want to pay the full amount for the genuine article and yet you (rightfully) criticize the low quality and longevity of the knockoffs. Aren't you getting exactly what you paid for?
Also, on-shoring and automation would make our workers more productive and thus be compensated better and reverse the decline in real earnings since the 80s.
- a path to higher earnings for those without college-level education, slowing if not eliminating the hollowing out of a lot of traditional "middle class" jobs
- said workers will also result in additional money flowing through the economy. Lower earning workers spend more of their income on goods and services as opposed to savings, boosting the economy. It's why Ford paid his workers enough to be able to afford his cars, a crazy idea at the time; a healthy middle class is one that can spend money on further things. The increasing economic inequality in America has mostly resulted in lower-earning workers using credit to try and replace middle-class earning power, and we saw how well that turned out the last recession.
In reality relative productivity and pay have diverged wildly since 1973: https://www.epi.org/productivity-pay-gap/
It seems like increases in productivity would only increase employment and pay if there are laws in place to make those things happen.
> Also, on-shoring and automation would make our workers more productive and thus be compensated better and reverse the decline in real earnings since the 80s.
Productivity would go up for sure, it isn't clear that the workers would realize those gains, however, as the productivity increase is largely coming from capital (in a purely capitalistic society, capital reaps the benefits of capital). Additionally, far fewer of those workers are needed to make the same amount of product.
A far more straightforward explanation is that Trump's trade policy is a) protectionist and b) a means of imposing regressive tax increases by stealth.
However, some people didn't win out, and in fact lost out significantly because of all this globalization: American blue collar workers. These people became disgruntled, elected a rightist populist nationalist to the presidency, and now they want change. In reality, it wasn't just China doing them in, but China (and Mexico and immigrants) make great scapegoats for those rightists, ATM.
It's unsustainable. Trump's broader trade policy is protectionist. But the reason his China policy finds firmer footing than e.g. his Mexico tariffs come from China's abuse of several good-faith measures over the past 30 years (e.g. early accession to the WTO). It was plausible to assume the next leader would be another Deng. But when Xi ensconced himself as a "leader for life" [1], the timing calculus changed.
How so? It wasn't fake money being passed around, there was real production and real demand for trade with China.
> But when Xi ensconced himself as a "leader for life" [1], the timing calculus changed.
Xi is messed up for a lot of reasons, but this isn't really one of them.
It's unsustainable. Trump's broader trade policy is protectionist.
The US has become overly reliant on China, add on their Belt and Road Initiative, and we should be taking a more aggressive stance. Trade wont last forever with us and we will not have any industrial infrastructure left. this is trying to protect ourselves.
I find it funny half the US wants higher minimum wages and better standards of living here, but complain when prices go up for cheap stuff from China being made by near slave labor in oppressed conditions. I guess out of sight, out of mind.
Photographic film was making real money in the 1980s. Doesn't mean it was a sustainable business.
Sometimes, short-term tactical pain is necessary for strategic gain.
> Xi is messed up for a lot of reasons, but this isn't really one of them
Dictatorships, like it or not, are common in our world. So I agree, it's tough to objectively call it messed up. There are, however, patterns in dictatorships' behaviors. Common incentive structures priorities their mortal leader's interests over the immortal country's.
Before China was a dictatorship, it didn't make sense to treat it like one. One's strategy, however, must adapt when the board changes.
Democrats up until the 80s were on the side of the workers, so these were traditionally democratic constituencies, but the Dems and Repubs earlier, sold them out to big business and the promise of globalization.
To call them rightists is short sighted. If these were Brazilians in Brazil or Mexicans in Mexico being sold out en masse, they too would have voted for someone who would take up their cause because the traditional parties had long ago abandoned them except for some pro forma pandering (we like unions, we stand behind unions, etc.)
Right now only likes of Trump and Sanders have the desire to actually do things for them, albeit perhaps very differently.
Long term nothing gets worse. Yes, China perhaps becomes Japan eventually, but look where that has gone after the paranoia of the 1980s. Completely survivable and for the most part a net positive.
Never the less, as it regards China, we should bring up and address the issue of unfair trade, theft and other practices detrimental to our economy. Detrimental to our workforce, detrimental to their ecology and world ecology, even their own workers. Being a “good guy” unilaterally (in trade, whatever) only works when others are willing to reciprocate. This hasn’t been the case so far.
It may be disagreeable to this administration's approach but there is bipartisan and foreign support for addressing China. Personally, I agree and rather see tariffs implemented now rather than continuing the status quo.
As if America doesn't do all of that and more
This white paper [1] from a large private equity / investment banking firm can at least partially provide a glimpse into what is going on right now. The current situation has its roots in the financial crisis of 08-09, the repercussions of which nearly brought China to its knees.
The key takeaways are that China’s reliance on global trade has been declining consistently since the financial crisis. The GFC made them realize the systemic risk posed by the reliance on external demand and ever since then, the central government has made a conscious decision to shift towards insourcing goods and services.
Pre-2007, there existed a symbiotic relationship between China and the US whereby China exported goods to America in return for US dollars, which it then in turn used to buy hundreds of billions of dollars worth of US Bonds. It was a win-win situation: China benefits by profiting off of exports, America benefits with cheap goods, access to cheap and highly available credit and a very strong dollar. Now that China is focused on recycling surpluses into its own economy (for example, by moving up the supply chain into higher value-added exports previously dominated by American corporations), this symbiotic relationship is being tested.
The fact is, the trade deficit (that has been characterized by Trump as "stealing" from America, a laughable notion), actually shrinks to almost nothing when adjusted for services and goods manufactured and sold by US firms in China [1, ex.16]. This is comparing four categories of goods and services exchanged between the US and China (1: services sold through subsidiaries, 2: services imports, 3: goods through subsidiaries and 4: goods through trade), which is a much more complete and honest comparison than simply focusing on goods sold through trade alone.
When adjusted for U.S sales of goods and services within China, the trade deficit actually amounts to a US _surplus_ of something in the ballpark 20B a year [1, ex.17]. The problem is, this headline is not nearly as polarizing as the headline “China has taken advantage of the United States and cheated the American people for far too long”. It also shifts the blame for the current wealth disparity in America from where it belongs (American corporate greed) squarely onto the shoulders of China, the convenient scapegoat and whipping boy du jour.
All this is not to say China is without fault and completely innocent of certain accusations. There are many other factors also involved. However, I believe what I've mentioned above can explain the lion's share of it.
[1] https://www.kkr.com/sites/default/files/KKR_White_Paper_51-1...
Do you think China had an open market before the trade war?
This is incorrect. Peter Navarro is the main driver for addressing China's practices. He wrote the book on it.
"it is also morally unjustified: the US has spent the last 100 years or more preaching open markets."
China's markets are not open? How many foreign companies had to do 51/49 split ventures to access Chinese markets? Do you think they wanted do that? Do you honestly think that is 'open'?
https://m.dw.com/en/trump-forces-brussels-hand-on-trade-desp...
There are very real and material issues between the US and China with respect to governmental intervention, externalization of costs, theft of IP, anti-competitive acts, capital controls, state-sponsored espionage, politicization of monetary policy - etc..
It's a wide and expansive set of issues that were essentially ignored for 30 years because it didn't so much matter, moreover, it was probably beneficial for everyone anyhow for China to have done what it did (except obviously the environmental and humanitarian externalizations).
But China wants to play in the advanced league now, so a different set of rules is going to have to apply, or there'll have to be permanent tariffs.
Trump is playing mostly 'big stick' and not nuance on this, but it seems to actually be working, and many of his would-be detractors (me included?), particularly the Dems are quiet on the issue because everyone has wanted to take up this issue for some time, but nobody has the power to.
Every foreign office in the West right now has a big 'China file' of issue to contend with, and they're all happy this is happening on some level.
I'm not hugely hopeful there will be big reforms anywhere, I think we're going to see tariffs on a bunch of things, but that won't be so bad.
In the grand-grand scheme of things I don't think the end result will be hugely noticeable to most people.
Nuclear weapons and MAD?
Endless, nebulous, low-intensity wars in third-world nations, or proxy wars like Korea and Vietnam, sure. Those feed jingoism without endangering the ruling class or their interests. What you're talking about is very different. Even the most callous leader really doesn't want to find out what happens if they start World War III.