Wednesday, October 26, 2005

China perspective on Pacific Time, KQED Public Radio

“Never in the history of mankind have so many been lifted out of poverty in so short of time. This accolade about today’s China has been said so often that I‘ve lost track of who said it first. No matter who said it first, much of the credit for China’s accomplishment should go to America’s consistent policy toward China.

For more than 30 years, America’s worked to cajole China out of isolation and into the world community. Tentative at first, China has since adopted some of the principles that have made America great--principles such as freeing trade, opening markets, welcoming of foreign investments, and unleashing entrepreneurialism. China’s undeniable success should be a cause of celebration because China is a confirmation that the principles we hold dear really do work. China’s success should not be a cause of anxiety nor rueful envy.

Through its productive and low cost labor, China has become the factory for the world. The benefit to American consumers is consistent quality goods at low and constant prices. China has taken most of its trade surplus and invested in U.S. treasury bills. Both factors keep inflation at bay in America.
China can’t be blamed for not buying from America. Even as China’s global trade increases by leaps and bounds, its imports and exports are in relative overall balance. China buys roughly twice as much from Japan and from EU than they buy from America. The question should be why are we not selling more, not why are they not buying from us.

China should not be blamed for our deficit either. Year in and year out, China has accounted for roughly 25% of our total trade deficit. Sure, our trade deficit with China has been growing at a phenomenal rate, but so has our total national deficit. Again, we should be asking what is wrong with our national policy, not what China is doing to us.

The accusation that makes no sense whatsoever is currency manipulation. China pegged their renminbi to the dollar about a decade ago. The dollar was strong then. Surely the critics are not suggesting that China could have looked long into the future and anticipated the downward slide of the dollar. Today, even if China were to float its currency, the cost differential is so large that it’s not going to bring back jobs that have long gone offshore.

On a recent public television program about China, the spokesman from Wal-mart said that only in China does he see the possibility of replicating their success of another U.S. China’s economy is doubling every 7 to 10 years and there is ample opportunity for the two major powers to develop a win-win relationship. To denigrate China, to accuse China of evil intentions and to drive China toward to a lose-lose arrangement is a tragic outcome we all should avoid. For Pacific Time, this is George Koo.

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