China Needs Us To Buy Their Cheap Goods... Not! (Op/Ed)

The delusional thinking of some people leads to the conclusion that somehow a borrower is in the driver's seat with respect to their bank's business and that the bank can't survive without them. That somehow, being a consumer economy is a better position to be in than a being producer economy. This is total nonsense and failure to realise that will lead to a painful fall from economic grace for the "West". After all, which is better? Consuming wealth on credit margin or producing wealth?

China.

Some people (including many on these boards) look at the US-China trade deficit as something that somehow places the US in the driver's seat over the Chinese economy. This could not be further from the truth.

Type in "China" into any search engine along with any economic parameter you choose and you will see what I mean when I say that soon China will not need any stinkin' American consumer.

The Chinese economy has been growing by annual double digits for at least the last decade. They already buy more phones, televisions and many other products than are sold in the haven of consumerism known as North America. They now buy about 7 million cars a year compared to about 16 million in North America with that number increasing at the rate of 25% per year! At that rate, in a few short years they will be buying more cars than we do in the automobile centric culture of North America.

Most of the goods they buy of course are produced at home where rapid industrialisation has resulted in a large proportion of the manufacturing capacity of the world being based there, along with the jobs that go with it.

China has a rapidly growing middle class. Roughly speaking, someone in China earning $10,000/year is about equivalent to someone earning $40,000/year in the US when measuring purchasing power and the resulting quality of life it buys.

It has been estimated that less than 30% of the Chinese population earns at this level (with over half the population - mostly rural - still living below the national poverty line) but this new middle class is growing rapidly. Also note that 30% of the Chinese population already surpasses the US population. It has been estimated that China will lead world consumption of goods by 2014 - seven years from now.

So we have a new middle class in China that is already bigger than the US middle class but China needs us to buy their goods to keep the "world" economy going? Bovine Feces!

They are approaching an economic critical mass in my opinion whereby their own internal consumption will make up for any decrease in consumption levels in the "West" caused by our bursting credit bubble. Think of China as being at the same economic stage as the US was at the turn of the last century. Only, they are doing it much faster and with modern technology applied to the process.

It's the new frontier for the merchant class who have always followed the money. Make no mistake, the moneyed class have no allegiance except to themselves and will not hesitate to leave the rest of us behind to fight for table scraps.

The sooner you personally grasp what is going on outside your borders in the global economy (and stop with the stupid patriotism/nationalism), the sooner you can start to prepare yourself.
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[edit on 12/20/2006 by Gools]

Prepare ourselves for what exactly? A recession?

This is not an atsn article, this is your own one sided view. Why don't you mention the Western investment in China? And yes...US and EU business does matter to China. If you think China can just go on growing at 10% annually with the West "fallen" as some people put it. Then you are mistaken.

If the US falls, it will be a domino affect. It wouldn't have been so bad in the 1700's if that happened, but in the 21st century it is a bad thing. Because we are a global economy. If one big block falls, we all are affected.

Unless China solves it problems with the EU and other Asian states, like India, it will stay very dependent on the American economy and its consumers.

but, of course, China is starting to move its economy away from America and that will be the downfall.

You people are absolutely ridiculous. If America falls, infinite (the wannabe macro-economist), what will happen to the EU and India? They are just as dependent on the US economy as China is! Just like the US economy is equally dependent on China, India and the EU. Don't you get it? One bloc in this global economy won't just "fall". It isn't like Roman times, where empires just fell and rose again. We are all interdependent.

I have been working with the Chinese for 10 years.

They would complain to the world about their people living in poverty. The world would pour in Billions of Dollars to help. The Chinese would take the Money and politely thank the givers, turn around and laugh all the way to the bank. Most of the people who were living in poverty chose that lifestyle. They do things the way their ancestors did them.

Most of the things that other countries did to help the Chinese, lays in ruins, after the money gravy train dried up.

They don't need us and they never did. They will continue to be what they are. They will take over the world economy and if you are young enough, you will see it. All we did was show them another lifestyle choice.

I think that at this point we need China, if we want to keep our way of life.

Originally posted by win 52


They don't need us and they never did.

If this is the case, they wouldn't be investing and buying deficits and treasury bonds. We all need each other. And for you to say the Chinese never needed the West is at best laughable. And for you to say that there are 700 million impoverished Chinese because they choose to be, is again, laughable.

[edit on 20-12-2006 by RetinoidReceptor]

I think you're trying to portray U.S. - China trade as a zero sum game. If China wins, the U.S. loses.

I don't think that's true.

I'm more of the "a rising tide lifts all boats" kind of person and think that a successful, wealthy China willi be good for America, just as the economic rise of Europe from the ashes of WWII was and continues to be.

You do all realize that the US population only makes up about 8% of China's possible market? I think in a few years they could buy and sell us without a second thought.

I know that China has more wealth than the rest of the world understands.

Only a small portion of Monies, World Bank Projects in China spent, actually went to help poverty. It was and is just a big Money grab by the people doing the project and the Chinese Government people involved. There was Millions of Dollars up for grabs.

If you gave the people freedom, not a Communist Government, they would be far ahead of us. They have caught and passed us because their government has lost the Communist clout. The sheer mass of humanity has drowned it out.

If you built them nice houses in the country, they would share it with the chickens, but they would gladly accept any hand out.

China has been smart ever since Richard Nixon first went on that historic visit they have been working to better their economy.Unlike us they are very quiet in their dealings or actions in other countries. They are not trying to be international Police and they are concentrating on basically themselves. Each time we drop the ball they are their to pick it up and grab another unsatisfied customer away from us. If we fall and they lose out on their investment will it hurt them in the long run? I doubt it very much. They will have the EU , The Mid-East and South America still to trade and invest with.

Originally posted by RetinoidReceptor

This is not an atsn article, this is your own one sided view.

Strange that, considering it's an OP/ED.

Anyhoo..

Checked official chinese Stats and it seems the EU is China's biggest trade partner, totalling some 15% of their total foreign trade, with the US coming in second. So, from that point of view, one could summise that they could take the hit if the US bottomed out.

What would be a problem in that situation is that the EU's largest trading partner is the US. So, if the US bottoms out, then so does the EU, if that happens, so will China, losing some 30+% of it's foreign trade...

Thank you stumason, at least you understand what a global economy means. People on here like saying that if the US falls, China will have India, EU, etc. But helllooo, they also are large trading partners with the US.

Yeah thats one of the reasons i belive america has tried to stretch our trades with as many countries as possible.Making economic destruction almost impossible without affecting the other's.Making me think of the old statement "Take me down i'll take everyone down with me" kinda make's you think twice about something like that.

The most common mistake made by economic prognosticators is predicting black and white outcomes; it's doom and gloom for A, and a rose-petal-carpeted future for B. Unfortunately economics is never so simple, nor - as stated by previous posters - does any nation's economy exist in a vacuum. The collapse or decline of the US economy would have enormous and unpredictable repercussions across the globe, as would the collapse of the EU's economy, China's, or that of any other major player. And there is no way that China would be unaffected by the US buying its goods elsewhere - the US may not be China's single largest customer, but at No. 2 that's still a huge chunk that China's manufacturing-based economy could by no means easily afford to lose.

And if you think that the future of China is all candy mountains and gumdrop sun-showers, then you need to dig further. Yes, they have had amazing growth, but this is to be expected from a nation that was, by the hand of its own government, isolated economically and retarded developmentally for 40 years. When you're 40 years behind, catching up the first 30 years is easy. However, there is a reason why many Western governments deliberately restrict their own economic growth. In their desperation to grow and to prove to the Chinese people that the future is bright under their solitary rule, the ChiComms are letting the economy grow unchecked, and covering up the negative consequences by "cooking the books" and only printing good news in the state controlled media. I'm no economics expert, but I can list a number of China's problems and future problems off the top of my head...

• The undervalued Yuan: China is fighting tooth and nail to keep the RMB undervalued. Why? Because if the rest of the world gets pissed off enough and forces them to value it honestly, suddenly Chinese goods aint so cheap after all.
  Suddenly SE Asian suppliers who value their currency honestly become real competitors with China. Suddenly China's already inflated production capacity becomes even more inflated and thousands of shoe and toy factories sit idle.
  
  
• Energy crisis: All of that growth means more energy being used, factories need electricity to run machines, trucks need fuel to carry the goods, middle-class people need power to run plasma TV screens and kitchen gadgets. But if you don't have the energy to sustain that growth, suddenly your tower of Babel comes crashing down. China is already facing a mild energy crisis, and this will only increase exponentially as China grows. That's why China is looking about desperately for oil. If the growth is allowed to continue unchecked, China's high-revving engine may well splutter and die.
  
  
• Imminent banking crisis: China's banks are all state-owned and are managed run like bottomless money pits to keep the economy and state-owned enterprises afloat. The ChiComms keep instructing the banks to sign off on non-performing loans given out to these SOE's, and when those loans fail to perform, they sign off more loans to pay for the earlier loans in a never-ending spiral. As a result, the Chinese banking system is completely insolvent...read that again...completely insolvent. It's a mahogany table shown proudly to the world, totally infested with termites chewing away at rotten wood just beneath the shiny surface.
  
  
• Social welfare and aging population: I forget the actual figures, but in about 10 years, China is going to have a massive aged population, and they are not planning for it. In the 80's when all this growth started under Deng Xiao Ping's reforms, 5% of the population was over 65. By 2040 that will rise to 20+%. There is no viable social security program in place to support them, and it is the workers who will have to bear the aged on their proverbial backs.

And that's just for starters - growing environmental problems unheeded by an incompetent government dealing with real development for the first time, devoid of political competition and answering only to itself; increasing rural unrest and violence due to govt land grabs and disparity of wealth; increasing unemployment for university graduates who don't quite fit into China's model of getting rich off the backs of cheap labour; rampant corruption and siphoning off of public funds by provincial-level and upper-tier ChiComm party officials; and on and on it goes... China's economy is a raging bull let loose out of the stadium and running wild; it may calm down and turn into a hard-working, efficient ox, or it may crash headlong into the river and drown. The US turning elsewhere for goods may well be the least of China's problems. And if the US did so, I think the US economy could handle it after an adjustment period. It would mean having to accept a slight decrease in standard of living and buying power for the average citizen, but would not necessarily mean economic doom like some predict - although again I'm no expert so that is merely my opinion.






[edit on 2006-12-21 by wecomeinpeace]

Even without China, the transition from being manufacturing countries to countries that export raw resource and live on credit debt is enough to destabilize the 'amero'.

Manufacturers can now just move to any country that is cheapest to manufacture in and ignore any laws governing pollution and human rights.

It's reminiscent of the Ford car boom. Ford was making money until there was a crash in sales. He had to raise the pay of his workers, then he started selling cars again.

This time it's on a global scale and manufacturers can depend on any market where consumer money happens to be.

That money is dwindling here. Even high tech jobs are being exported and although North America doesn't recognize many Foreign universities, they're education is top rate in many places.

We're not an intellectual bastion of resource, nor a manufacturing boom town - We're a Fast Food Nation living on credit and the dwindling wealth in the baby boomer's coffers.

Specialized artisan craft and high quality goods could make a comeback. On a personalized rather than corporate level. Appealing to a small elite consumer. But then that's hardly enough to support a nation.

With global weather changes in the future, lumber etc. may not be as plentiful. The vital resouces like water and oil are being sold into private industry that has no regional preference other than what's cheapest and most easily exploited.

Originally posted by wecomeinpeace
China's economy is a raging bull let loose out of the stadium and running wild; it may calm down and turn into a hard-working, efficient ox, or it may crash.....

well, you cant say they haven't been building stuff. like, lots and lots of infrastructure.

after the fast run up, there will be a period of slow, or even pull back.
after the shake out happens, wouldn't you say, that puts them in a great position to begin real, and slow growth?

Originally posted by JSR
after the fast run up, there will be a period of slow, or even pull back.
after the shake out happens, wouldn't you say, that puts them in a great position to begin real, and slow growth?

Sure, a good point, but that's all assuming they are able reign it in. If economies were so easily controlled, then every developed nation would be a paradise, no? And if the damage is already done (q.v the banking "system", etc) then it may well be too late by that stage. Only time will tell, I guess, but for certain China will be the most interesting nation to observe this century.

posted by Gools

The delusional thinking of some people leads to the conclusion that somehow a borrower is in the driver's seat with respect to their bank's business and that the bank can't survive without them. [Edited by Don W]

I’m not sure if you are serious, Mr G, but there is a banker’s adage, “Do not loan you borrower so much you cannot collect it back - then you have become a partner.” People who follow the numbers say fully 50% of the state loans to new manufacturing facilities along the East Coast of China, are in default. Beijing has lost control. Fraud and corruption are rampant. Ideology has been replaced by greed and opportunism. Although I do believe China is currently the single largest “buyer” of new US debt, I am not sure if it is the largest “holder” of US debt.

In any case it is true the lenders of large debt are in no better position then the borrower. If China “dumped” its US bonds on the world market, the market price would plummet, and China would do well to get 25% on the dollar. In a few months, the US bond would recover because, as bad as it is, it is still the best of the big time sellers of debt. If you have large sums of surplus money, like the Persian Gulf princes, then the US bond market is made for you! It is as close to “no risk” as humans can get in this life.

That being a consumer economy is better than being producer economy. This is total nonsense . . After all, which is better? Consuming wealth on credit margin or producing wealth?

In micro theory, yes, but in macro theory, I’m not so sure. Wal-Mart and China are symbiotic. The one needs the other. The one sustains the other. China has no retail distribution network for its very high quality goods. Wal-Mart cannot manufacture goods, its forte is retailing. Were it not for Taiwan, I’d predict a 100 years of closely intertwined relations between the PRC and the US of A. I am convinced Taiwan will ultimately become a Hong Kong style of PRC takeover. There is no other way.

Some people look at the US-China trade deficit as something that somehow places the US in the driver's seat over the Chinese economy. This could not be further from the truth . . you will see what I mean when I say that soon China will not need any American consumer.

Well, look at it like this. Who would buy the oil the producers sell to the US if we suddenly stopped buying the 14 million barrels a day from foreign producers? Talk about $5 a bbl crude oil! We still produce 7 mbd and we could survive for about 2 months on the US Strategic Reserve. But could the world’s economy survive? If we copied WW2 and rationed gasoline, say 20 gallons a month [to the poor, 50 gallons to the rich], we could survive indefinitely. Short of a nuclear winter, no American politician could survive the next election if that was his proposal. Borrowers and lenders are about equal in the overall scheme of things. IMO.

Most of the goods they [Chinese] buy are produced at home where rapid industrialization has resulted in a large proportion of the manufacturing capacity of the world being based there, along with the jobs that go with it. [I date this from 1977 and the 6th Communist Party Congress] China has a rapidly growing [blue collar] middle class. Someone in China earning $10,000 a year is equivalent to someone earning $40,000 a year in the US . . It’s estimated 30% of the Chinese population earns at this level . . over half the population [700 million] - mostly rural - still live below the poverty line but this new middle class is growing rapidly . . already surpasses the [total] US population. It’s estimated China will lead world consumption of goods by 2014 - seven years from now. So we have a new middle class in China that is already bigger than the US middle class but China needs [America] to buy their goods to keep the "world" economy going?

They [China] are approaching an economic critical mass IMO where their own internal consumption will make up for any decrease in consumption by the West . . It's the new frontier for the merchant class who have always followed the money. The moneyed class have no allegiance except to themselves and will not hesitate to leave the rest of us behind to fight for table scraps. The sooner you grasp what is going on outside your borders in the global economy and stop the stupid patriotism nationalism, the sooner you can start to prepare yourself. [Edited by Don W]

Much of what you say is well received but others have warned that the internal problems facing China over the next 7 years are much greater than ever faced in the US, the only economy even close to being similar. China is so far ahead of India, the only thing they share in common is a continent. China’s GDP is already 5X that of Russia. And 40% of the US, but #2 in the world. On a per capita basis, however, the US is about 10X that of the average Chinese.

I am opposed to the unforseen and unpredicted outcome of globalization, especially the loss or 30,000,000 good paying blue collar mostly unionized jobs in the US since 1975. Union busting on a cosmic scale! Robert Alphonso Taft, co-author of the Taft-Hartley Act of 1947, never dreamed his law would mark the end of favorable pro-worker legislation out of the US Congress. That gave the union movement a cold, Nixon’s unholy alliance with Jimmy Hoffa and the Teamsters gave the movement pneumonia, and Ronnie Reagan’s knife-in-the-back to the PATCO workers was the coup de grace to American unions.

I believe if we could find American leaders who where not beholden to the Big Money Guys around the World, we could bring back the good old days! But, that is about as likely as the Second Coming of Jesus. Which is zero to none.


[edit on 12/21/2006 by donwhite]

Many good posts in this thread. Kudos.

This op/ed was a knee jerk reaction (on my part) to the often cited phrase in the title which I saw again here on ATS -twice- yesterday.

I do realise the complexity of the situation and WCIP has done a great job of pointing out some of China's problems. Does China want the dollar to devalue? of course not, for all the reasons cited by donwhite and others.

I do still hold the opinion that China's internal economic activity/consumption cannot be discounted from reaching "critical mass" and that any economic decline in the "west" may hurt them in the short term (as it will all others) but that it will have them coming out on top in the long run.

However, I'm sick and tired by some people's attitude the somehow the USA is the "end all and be all" of world history. To think that any part of the machine is irreplaceable is the height of hubris.

I believe that what the future holds for us is a much reduced standard of living in North America and Europe and an increased standard of living in places like China and India. More of an equalisation of wealth distribution than a "rising tide lifting all boats" (AKA Reagan voodoo economics).

The absolute key ingredient for economic activity to even take place is energy and the resources it allows us to recover and transform. In the long term and globally speaking this is a zero sum game. There is simply not enough resources on this planet to sustain the "Western" way of life for several billion people. See "Where's the Conspircay?" for more thoughts on this point.

The rise of China as an economic power does not mean "the end" for the rest of us. It simply means that we will have to get used to the idea and adapt to it. That starts with the realisation that we are not superior over others in any sense of the word.
.

edit: my keyboard is working against me I tells'ya!

[edit on 12/21/2006 by Gools]

posted by Gools

Many good posts in this thread. However, I'm sick and tired by some people's attitude the somehow the USA is the "end all and be all" of world history. To think that any part of the machine is irreplaceable is the height of hubris. [Edited by Don W]

I do not want to contribute to anyone's illness or weariness at this special time of the year! But I do also confess to guilt, as one of my posts was entitled about the US of A being No. 1. Economically speaking. OTOH, anyone will have to look hard to find a more steadfast critic of the US of A. Because I was born here, I claim the right to do so with impunity! Sure, anyone can ignore me, but I need offer no apology when I speak the truth! Maybe I’m a descendant of the ancients, like Isaiah or Jeremiah?

I was after all, born in the Jewish Hospital in Louisville, Ky. Born of Protestant parents and attend by a Catholic doctor. Hmm? Yes, I was “treated” to the Jewish custom for male infants. Done without anaesthetic to such 7 day old infants. Or so I was told. Which always reminds me of Voltaire and his reporting of the arguments High Churchmen had over the Holy Foreskin. Some argued it was impossible to violate the body of God in Man, others claimed it would grow back, and etc. Voltaire said it was part of the dowery the bride’s parents offered to Charlemagne when he wedded Eleanor. Her parents were smarter than Charles’s. But I digress.

The Imperial Valley in California is unequaled anywhere in the world. It feeds 3/4ths of the US in the winter, with fruits and vegetables. Wheat fields in the upper Midwest of the US produce 2 crops. Corn - maize - in the lower Midwest. More grain per acre, more grain per man hour, than anywhere else on the planet. We have to deal with surpluses, not shortages. We grow enough rice in Louisiana and Texas to be one of the world's largest exporters of that staple crop. Cotton, the magic cloth, aplenty. All of that is because we have the best 3 million square miles on earth. That does not make us smarter, it means we were luckier. We had enough wood to put us through the early industrial revolution and into the age of coal. All but 2 states in the US have commercially mineable coal deposits, although currently over 50% of the coal mined in the US comes from Wyoming; huge deep open pits. Destruction of the earth on a scale never before possible. Home of VP Cheney.

Iron, copper, silver, gold, lead, and etc. There are only about a half dozen elements that are needed by an industrialized society that are not found in the US. We have 300 million energetic people. People who self selected to come here, which may well mean the most adventurous, most risk-taking, most resourceful of the populations from whence they came? Discounting our conflicts with the Native Peoples, we have endured only one great internal war, which is officially called the War of the Rebellion but commonly called the Civil War. 1861-1865. I have called the War of 1775-1783 a coup d’etat whereas it is most often called by others the Revolutionary War.

So I’ve said a lot to overcome the unflattering accusation of showing excessive hubris. China and India have too many people. Russia is too cold. Europe has too many variations on a theme. Japan is still 4 islands. South America is vexed by the remnants of the Spanish Conquest. It rains too much in Central America. Canada does not have as many people as California. And less GDP. Which leaves only Africa. Above the Sahara, Bedouins are more interested in fast horses. Below the Sahara, it's one giant cauldron of an ongoing human disaster! As in computers, the US of A wins by default.

Happy Holidays to all who have read this far!


[edit on 12/21/2006 by donwhite]