Tuesday, September 30, 2003


China observes a national holiday from 1 till 7 October, but things have started already.

Sunday, September 28, 2003

We Had Friends All Over The World
Sunday column at www.c-biz.org

Lausanne (28/9/2003)

By Bill Fischer

In the lobby of the Beijing Hotel, there was always a wonderful portrait of Chairman Mao surrounded by a diverse set of smiling people. Entitled: "We have friends all over the world," it is a legacy of the days when China was the political inspiration for the developing world. Today, there are few places around the world where China is not considered a direct economic threat.

The Managing Director of a well-known European firm says he will spend "the remainder of [his] career closing factories in Europe, and opening new ones in China." The North American customers of a well-respected European engineering firm now require them to manufacture 30% of their output in China, and to benchmark the remainder against Chinese prices. Mexico is reported losing jobs to China, and in the U.S. entire industries are at risk of vanishing, leaving only the unemployable behind. The stark reality of China's becoming "the factory of the world" is that factories elsewhere are closing.

This is a big issue! Unemployment is a tragedy wherever it occurs. In the past few weeks, nearly every manager I have met with has had China on their minds - and it's not good. There are no easy answers here, but as this debate grows, it is key to remember several key points:

Revaluation will not be the solution: Despite political pressure for yuan revaluation, this will not happen, or matter, in the short-run. China will not put its own growth at risk; it is as afraid of unemployment as we are. Furthermore, the magnitude of China's manufacturing cost advantages in many industries are well-beyond what any realistic revaluation could correct.

Floating the yuan is even more unlikely as long as China fears significant capital flight once currency constraints are relaxed. Correcting this is about institutional infrastructure.

Chinese factories are now key players in the global supply chains of "our" multinationals: Their success becomes "our" success. "Our" corporations are the beneficiaries of China's cost-advantages, and so are Western consumers! It is not so much that China is taking our jobs away, as it is that "we" are making different sourcing choices in the value-chains that serve us.

Moving-up the value-chain is no longer assured protection: China is becoming a major source of intellectual property - in science, R&D, design, & entertainment. The reality of 1.3 billion people is that China can and will compete on the basis of low-wage labor and high-impact brains, at the same time.

Much of what we have long-wished for in China has occurred: a market economy is growing and Chinese people are better-off than they have ever been. China is presently the best bet for an Asian growth-engine, and a force for political stability. As China integrates into the global economy, some job relocation is to be expected.

Gradually, the Chinese will certainly import more as growth continues. In the meanwhile, look for a lot of political bluster on all sides, but little effective immediate resolution of the dilemma.

Bill Fischer is professor at the business school IMD in Lausanne, Switzerland

Friday, September 26, 2003

Contradictions – the WTO column
(tomorrow at www.c-biz.org

27 September 2003

Shanghai – What I love about China is that it is often governed by labeling. By just giving it a name, or a different name, suddenly things become better – or worse of course depending on how you look at a situation. In the past the number of unemployed was defined away, for example by calling them “waiting for work”. Those murky categories have gone away and today Shanghai has 290,000 registered unemployed, Mayor Han Zheng told this week. He still called it a ‘contradiction’ he was working on, although I found the number rather low for a city as Shanghai, given the changes it is facing.
Probably many unemployed do no register, solving at least the statistical problem.
Similarly in the 1990s private companies were first defined away as ‘collective enterprises’ and massively emerged at the end of that century and, hurray, suddenly the private enterprises occupied a top-position in the statistics, for a large part by re-labeling.

I was not really amazed when the renowned economist Wu Jinglian this week again ignored all political conventions. Some years ago he told an audience their money would be safer in a casino than in the Chinese stock markets, since in the casino’s you have rules, raising the ire of the domestic financial community. Yesterday he said China’s economy grew the first half of this year more than 10 percent, in stead of the official 8.2 percent.
The official figure is artificially kept low to hide that the economy is seriously overheating. Wu warned against those dangers.
Making predictions on what is going to happen in this country is tough even though both US lawmakers and money traders kept on pretending this week they can influence or at least predict upcoming changes in China’s way of dealing with its currency. The money traders forced the Japanese yen to give in but – slightly amazed – they see they cannot move the Chinese policy. It is not the Chinese way of changing policies.
The only way China can give in at this stage is by re-labeling its currency and that seems too much for this situation. I cannot image the scenario where China would basically launch a new currency, but it would be an ideal solution that would make everybody happy, especially the printers of money of course.

Some changes might be easier obtainable. Shanghai mayor Han Zheng was portrayed by some of my colleagues as an old-style communist when he used the qualification “contradictions” for the problems he faced. He should call them “challenges”, just like all the managers learn at business school. It does not change the problem, but it sound much better, doesn’t it?

Fons Tuinstra

Thursday, September 25, 2003

NAM prepares for legal steps

The National Association of Manufacturers goes ahead with the preparation of legal action against China, AP reports. “Officials of the National Association of Manufacturers told reporters they planned to support a novel trade case on the issue under Section 301 of U.S. trade law. If successful, such an effort would trigger penalty tariffs on billions of dollars in Chinese imports coming into the country.
The manufacturers are seeking a WTO-ruling in favor of the US, because China is manipulating its currency, a practice banned by the WTO. But it will be a novelty for the WTO, and is most likely not going to be an easy way, especially now China will said it will not give in.
“Chinese factories are now key players in the global supply chains of “our” multinationals,” argues professor Bill Fischer of the IMD business school in Lausanne. “Their success becomes “our” success. “Our” corporations are the beneficiaries of China’s cost-advantages, and so are Western consumers! It is not so much that China is taking our jobs away, as it is that “we” are making different sourcing choices in the value-chains that serve us.”
Bill Fischer will address the issue in the upcoming Sunday Column at www.c-biz.org

Wednesday, September 24, 2003

The economic pressure sours, but

In the past few days I have spend much time with financial specialists here in Shanghai and of course the currency issue came up. Financial pressure on the renminbi has gone up so much that a revaluation would be appropriate for those financial reasons. The market keeps on speculating that China’s currency will go up very soon, increasing the pressure even more.
But because the issue has been so much politicized that giving in to that pressure has now become impossible. While all experts agree that the value of the currency go up, they also acknowledge it is not going to happen for political reasons. The American pressure might have bitten in its own tail.

Sunday, September 21, 2003

No support for US at G7

Efforts of the US to get the support of the ministers of finance of the seven most industrialized countries during the G7 meeting in Dubai this weekend for putting pressure on China to liberate its currency have failed.
We reaffirm that exchange rates should reflect economic fundamentals� We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas,'' a statement said according to the newswire Bloomberg.
Li Ruogo, assistant governor of the People�s Bank of China � China�s central bank � repeated China would gradually liberalize its currency, but at its own terms at its own speed. He said he simply did not see the logic of doing it now.

Saturday, September 20, 2003

China Talks Tough

For the first time China has directly told the US to back off on the currency issue, writes Reuters, based on a report in the China Daily I must have missed. Good we still have the newswires around.

Friday, September 19, 2003

The currency issue – the WTO column
tomorrow at www.c-biz.org

20 September 2003

Shanghai – China seems to be a convenient subject during the campaigns for American presidential elections and at least two days afterwards. Especially in the upcoming campaign, since there are so many real issues politicians want to avoid – Iraq, taxation - China has become an issue very early in the struggle.
Unfortunately this time a real non-issue has the honor of becoming the epicenter of public attention in the US: the question whether China treats the world unfairly by pegging its renminbi to the US dollar. Even a Wall Street Journal commentator – not really a medium for China fellow travelers – sighted yesterday that since it is politics, arguments do not make a difference anymore. China has already sent US Treasury Secretary John Snow home, polite but empty-handed. Snow will have another go at this weekend’s G7 meeting, but that will not make much of a difference.
It is comparable to the Japan discussion the US in the 1980s when US manufacturers campaigned against Japanese cars. Now half of the Americans drive a Japanese car.

The US manufacturers, followed by lawmakers and the US administration accuse China of stealing American jobs in an unfair way. Other countries like Mexico and Italy loose many more jobs to China, but they have been less vocal on this issue. On the contrary, it is remarkable how many experts, countries and institutions agree with China that says it first has to make its banking system healthy before it can give the renminbi in the hands of the free market.
Almost everybody agrees with China. The European Bank. The IMF. Nobel-prize winner Stiglitz. The Japanese Prime Minister. Mister Forbes. Almost nobody with a basic knowledge of economics thinks it is a good idea for China to float it currency, as it might even hurt the world economy.
It is obvious that only a good alternative subject is going to take the heat off China. What advice can we give the American politicians? I think first they should turn away from the economy. It is very hard to blame anybody else for the fact you are unable to compete on a global market. Better forget about the economy as an issue unless you would really have a very smart idea to save it.

Just pick a little country with loads of nasty anti-American habits, and bomb the hell out of them – verbally please, not like in Iraq. If you promise not to send your marines, I can give you some really good arguments why you should take on Holland, my home country. We despise the US policy toward Iraq. We let homosexual marry! You need more arguments? We condone soft drugs and legalized prostitution (although we liked it more when it was still illegal). We attract loads of American tourists who do not spend their money doing things that are banned at home. We facilitate abortion. We support safe sex.

Economy is anyway such a boring subject is you have no really smart solutions. How can you keep up momentum for the next 14 months, especially if you still need a lot of favors from China? Go for the small countries and juicy subjects: that is much more convenient.

Fons Tuinstra

Thursday, September 18, 2003

European banker supports China policy

It is getting boring by now, but also Ernst Welteke, a prominent member of the European Bank Council, has rejected US pleas to a floating renminbi. ‘‘It makes no sense to pressure the Chinese government because China must first develop its banking system,’’ Welteke said Tuesday. ‘‘One has to be careful to avoid abrupt changes,’’ according to Bloomberg.
US manufacturers will file complaint against China

The president of the National Association of Manufacturers, Jerry Jasinowski, has announced on Wednesday his organization will file a complaint with the American administration to put pressure on China to release the peg of the renminbi to the US dollar, Reuters reports.
"The fact that they are taking the step is simply another signal, I think, to the Chinese about the seriousness with which people are taking the issue," he told reporters. "It will become, even as they are developing a case, one of the facts that the Chinese and we are going to have to look at," writes the news agency.
For me, I fail to understand how action under US law can change China's - or any country's - policies. For starters, I'm not very impressed.

Wednesday, September 17, 2003

Free renminbi can destabilize world economy - Stiglitz

Nobel-prize winner and economist Joseph Stiglitz has warned that a free-floating Chinese currency might do more harm than good, Dow Jones reports from Shanghai. He does advice China to link their renminbi to a basket of currencies, not only the US dollar.
While more experts speak out in favor of the Chinese policy, the US adminstration is looking for new juicy subject that might go well with the electorate.

The economists of Bush

Rumors from both side of the political spectrum said US president Bush did not have any economic advisors, but according to Reuters he broke up with one, so those rumors must have been untrue.
"Glenn Hubbard, who served as chairman of the White House Council of Economic Advisers until March, and other economists argued it made little economic sense and that a sudden revaluation of the yuan currency could trigger a banking crisis in China, according to the sources," writes Reuters.

Tuesday, September 16, 2003

US turns to 'unfair' practises

The US administration moves away from the currency issue while focusing more on the 'unfair' practises, AP writes.
Commerce Secretary Donald Evans now can have a go with a "Unfair trade practises Team" in his Commerce Department, he announced on Monday in the Economic Club in Detroit.
China is again in the center of the interest and Evans will spend a week in November in Beijing.
"Manufacturers complained about rampant piracy of intellectual property, forced transfer of technology from firms launching joint ventures in China, trade barriers and capital markets that are largely insulated from free-market pressures," Evans said, according to AP.

Hmm, very little news here.
"Don't do it" - S&P

The rating agent Standard and Poor has joined the army of experts, countries and institution advising China not to float their currency as it would jeopardize its banking system, write multiple media, for example the Financial Times.
US Treasury Secretary John Snow, pushed by American manufacturers, tried unsuccessfully to push China into a revaluation of the renminbi.
S&P considers that lifting of exchange controls at the moment could be risky as Chinese banks are ill-equipped to handle volatility in the exchange rate," said Ping Chew, the rating agency's China analyst, according to the FT.

Monday, September 15, 2003

Anti-dumping cases against China grow

Export from China is severely hurt by a growing number of dumping cases, an official of the Chinese Ministry of Commerce says today in the China Daily. By the end of 2002 over 500 cases were filed against China, costing the country billions in lost export revenue.
At the end of 2001 only 55 had been filed, also a record number at the time.
China itself has filed 25 cases.
In the past China would merely ignore those claims but has developed a counter-strategy as the damage has increased. Chinese firm won recently a dumping claim by European manufacturers of lighthers.
Complaints about dumping - rightfully or wrongfully - have been used as a strategy to reduce Chinese imports.
Chinese media on the Currency issue

Chinese media keep on reporting on the US pressure on China to revaluate its currency to 'save' American jobs in manufacturing. While international support is fading away, the issue might come up dat the G7 meeting coming weekend. Chinese media follow the issue closely.
The China Daily today quotes Robert Mundell, 1999 winner of the Nobel prize for economics, who encourages China to stick to its policies. The Columbia professor spoke this weekend in Beijing.
The Shanghai Daily reports about the European defection from the US camp.

Sunday, September 14, 2003

US support for Rmb-issue at G7 slipping

European financial bigshots like ECB-head Wim Duisenberg and German deputy minister of finance Caio Koch-Weser have broadend the currency problem to a pan-Asian issue. Duisenberg stressed that the issue of a fixed currency rate regime involves almost all economic growth centers in Asia, reason why he had in earlier statements not singled out China, like US-officials have been doing.
At the meeting of European ministers of finance and European central bankers on Saturday also other countries warned against isolating China on this issue.

Saturday, September 13, 2003

Trade deficit and logic

A rising trade deficit in July puts pressure on the Bush administration to act against the Chinese currency, US media including the Wall Street Journal reported on Friday.
The question whether is all makes sense seems to be more an academic discussion, as Yale Global Online questions whether the calls for revalution of the renminbi makes sense.
The article does not bring new insights, but gives a solid overview of the arguments against a revalution of the Chinese currency.
Professor Linda Lim of MBS, the Michigan Business School, warns that "political and financial instability in China resulting from a yuan revaluation at this time would surely undermine the main remaining engine of growth for the world economy - which is China."
She is joined today also by the managing director of the International Monetary Fund (IMF), Horst Koehler, writes the Financial Times.
In a recent meeting with the Chinese authorities, Mr Köhler said according to the FT: "I strongly advised them not to rush in opening the capital account without knowing that they have full control, or recognition of where they stand, related to their financial sector and the regulatory and supervisory framework."

Thursday, September 11, 2003

Dubai G7 perhaps on Renminbi - Japan

The meeting of ministers of finance at the end of this month might also focus on the issue of the Chinese currency, a Japanse official suggested in the media.

China itself does as if it shows flexibility by suggesting a freer currency might be possible in the future, NPC-chairman Wu Bangguo also said in Japan, in a published article. "
"We hope to nurture structural mechanisms for the yuan based on market principles," Wu told Thursday's business daily Nihon Keizai Shimbun, according to AFP. But then, China has been saying this for already ten years, so that is not much of a promise.

Wednesday, September 10, 2003

China's production and export up

New figures on China's industrial performance show a relentless growth of industrial output and export, writes Bloomberg.
Factory production in August rose 17.1 percent year-on-year to USD 42 bilion, compared to 16.5 percent in Juy the National Bureau of Statistics announced at its website.
Export in August rose a paltry 27 percent to USD 37.4 billion, after it grew 31 percent in July, according to the Ministry of Commerce.
Senators ask for anti-Chinese tariffs

Democratic and Republican senators push for a special tariff on China imports unless China agreed to float its currency, AP reports. The senators contempate a 27.5 duty and want to undo China's special trading status (that is rather a normal trading status, since it is granted to almost all other countries.
"The Chinese are using currency manipulation as a lethal loophole for America's manufacturing jobs," Senator Richard Durbin (Dem-Ill) said. "It is tantamount to imposing a tariff on American products because of their manipulation of their currency."
That argument has been countered by both China and a wide variety of experts.
Other media report that the senators want to give China 180 days to comply with their demands for a floating currency.

Tuesday, September 09, 2003

Bush-advisor refutes currency argument

On of the strongest condemnations of blaming the way China is dealing with its currency as the cause for job losses in the USA comes from a former Bush advisor, today in the Wall Street Journal.
"This argument is both unpersuasive (it does not survive careful scrutiny) and unfortunate (it detracts from steps policy makers could take to address concerns of U.S. workers), writes Columbia professor of finance and economic Hubbard. Hubbard was until March the chairman of the Council of Economic Advisers of US-president Bush. "The decline in manufacturing employment resembles that in agriculture in the last century, in which robust productivity growth characterized American performance, and millions of workers exited agriculture for other segments of the economy."
And: "While scapegoating China for job loss in American manufacturing is unpersuasive, the deeper worry is that such quixotic policy will divert attention from policies that would actually help U.S. workers."

Monday, September 08, 2003

World divided on currency issue

While experts still wonder whether the way China manages its currency is really the cause for the US manufacturers to shed jobs, the rest of the world is taking sides. Europe decided to go along with the US, writes the Financial Times. EU finance ministers are expected to join the American request to let the renminbi float; a request that will be most likely be ignored.
But Mexico, on of the countries most severely hurted by Chinese competition - about 200,000 jobs media write - joins the Chinese side, writes Bloomberg, its finance minister said during the APEC meeting in Thailand.
Chinese companies are still speculating the renminbi will still move, despite all denials from Beijing, and they focus on US Treasury bonds, writes newswire Dow Jones today.
"How China's holding of U.S. Treasurys comes into the picture emerged Sunday in data published by the Bank for International Settlements. The Basel, Switzerland, organization monitors international capital movements and said that earlier this year it saw the second-biggest expansion of dollar borrowing in Asia since 1997, and most of the activity was traced to Chinese banks."

Sunday, September 07, 2003

China hits again out at 'trade-war rethoric'

Chinese authorities seem to worry about the upsurge in what it considers to be unfair accusations that China is manipulating its currency. Changing the way China deals with the renminbi is not going to help the Americans to regain jobs, says yet another editorial in the China Daily
The editorial is a direct reaction on the interview US-president George Bush gave yesterday (see our previous entry).
"We expect our trading partners to treat our people fairly - our producers and workers and farmers and manufacturers,'' Bush said.
Angering Washington might result in trade sanctions, but China's bigger priority is fending off expectations that the yuan might be revalued - rumors that could impact China's economy even more than action by the United States, the China Daily writes.

Saturday, September 06, 2003

Bush backs off in revaluation-issue

US president George Bush has admitted in a TV-interview with CNBC China will not give in to American pressure to change its currency policy very soon, Reuters reports.
"The best thing to do with these countries, however, is not to ... scream and shout and thump the table here at home. It's to send a clear message to them so that they know our position so they can digest what we've told them and that we can work together as friends to resolve any problems we have," Bush said according to the newswire.

Now, does this mean China will not be an issue in the upcoming American elections? I might as well close down this blog then. :-)

Here a transcript of the whole interview.
Worker productivity

The Wall Street Journal of today gives an interesting twist on the new unemploymency figures in August. The loss of 93,000 jobs came as a surprise, as analysts had been expecting 12,000 more jobs based on the recovering of the economy. The WSJ adds the two up and concludes that this is the effect of an increased workers productivity that increased 6.8 percent in the second quarter.
"That rise has let companies hold off on new hires until profits improve and the recovery has truly taken hold. It's also produced the strange spectacle of a "jobless recovery" -- one in which analysts and investors alike can't ever be quite sure what the next report will bring," the paper writes.

Friday, September 05, 2003

Chinese internet censor stops US news

The news about US president George Bush going around in his mid-west to rally financial support for his upcoming election campaign did get the attention of the Chinese internet censors. During these rallies Bush also spoke out against China and the way it is managing its currency, to gain support from the hard-hit region.
That means that AP-reports in local papers, like The Beacon Journal from Ohio, censored in China, a very special honor! The same goes for dispatches in the Porterville Recorder and the Santa Maria Times. Somebody at the censorship department must be very bored.
World Bank supports China's slow Rmb reform

After APEC, also the World Bank today sided with the cautious Chinese approach to change its currency management, writes AFP.

"We agree with an incremental approach to most things," Deepak Bhattasali, lead economist for the World Bank in China, told AFP. "An incremental approach in most development processes is better."

World Bank Senior Economist Dominique van der Mensbrugghe blamed the US itself at a briefing in Beijing. "The trade deficit in the United States is a macroeconomic phenomenon and it's not a phenomenon that is related to the trade deficit it has with China," he said. "The focus should be on the financial imbalances in the United States and not on this trade deficit," he said.

US economy more standstill than progress

The US economy is far from recovering and we only see a standstill, reports MSNBC.
It’s clear that businesses have stopped cutting, but there is as yet no evidence that they have started to hire,” said Mark Zandi, chief economist at Economy.com, a forecasting firm at their website.
Even economist who see a mild recovery of the economy say it does not translate into more jobs. "Usually you would have had lots of job growth by this time,” said Ed McKelvey, senior economist at Goldman Sachs.
Bush will 'deal' with China

Tough talking about China has now reached a presidential level, report Reuters.
At a CNBC interview President Bush said he would "deliver a strong message from the administration that we expect our trading partners to treat our people fairly -- our producers and workers and farmers and manufacturers -- and we don't think we're being treated fairly when a currency is controlled by the government."
The presidents of China and the US will meet each other in October in Thailand and then the currency issue might be on the agenda again.

APEC (Asia Pacific Economic Cooperation) saw 21 heavily divided ministers of finance on the currency issue, writes the Shanghai Daily

Paul Krugman attacks the Bush administration in a yet again very strong column.

Wednesday, September 03, 2003

More manufacturers head to China

Reports the NWI-Times on their site.

"According to Bill Cermak, a Pro Mold executive and founder of Save American Manufacturing, a small-manufacturers lobbying group, more than 100 plastic molders in the Chicago area have gone out of business," the paper writes. "To avoid being next on line, Pro Mold & Die is buying about 20 percent of its components from China."
Is Google cheating? - OT

I bet they do. I have picked blogger.com to host this blog, because I estimated that it would get listed very soon, since Google owns Blogger.com. And guess: it took them less than three days to find and note this blog. It still is a nuisance it is being blocked in China, but it is worth it. To compare: my other service www.c-biz.org is around for much more than three days, and not listed.
US groups turn to WTO - FT

The Coalition for a Sound Dollar will ask action from the US Trade representative under the WTO-regulations, the Financial Times reports today.

The coalition represents 85 manufacturing associations in the US, and they want to take action when US Treasury Secretary Snow comes home from Beijing empty-handed. "If he doesn't come home with much, it will reinforce the perception that more leverage is needed," said Frank Vargo, international vice-president of the National Association of Manufacturers according to the FT.

The piece in the FT also suggest that China will remain on the agenda for the weeks to come and president Bush is expected to bring up the issue during upcoming visits in the country.

While I'm not familiar with this specific procedure, WTO-procedures in general are perceived to be rather tedious, unpractical and not very efficient. Any procedure might easy take up to two years when things go smooth, so that would not be a quick fix needed during an upcoming election.
"Let's discuss"

US Treasury Secretary John Snow has met yesterday and today many patient Chinese officials, but no sign the renminbi is going to move very soon, as he had urged China on the request of US manufacturers. China is willing to discuss how in the future a care floating of the currency could be possible. Since that discussion is already going on for ten years, it is really no sign things are going to change very fast.

Snow is addressing the wrong problem, said PBOC-governor Zhou Xiaochuan. "It's not a problem with the yuan... Under the current economic and trade structure, even if China balanced its trade policy or monetary policy, the U.S. would still likely have a rather large trade deficit with China.''

Snow himself tried to look at his failure to get any concessions from an optimistic angle, noted the Washington Post. "We've had a series of very good meetings, very important meetings and to me very encouraging meetings. . . . I was encouraged to hear the reaffirmation of China's long-standing goal to move toward currency flexibility." But Snow declined to discuss when such a move would actually be implemented, saying "I don't think it's helpful for us to talk about a timetable."
Ask the American consumer, talk to Walmart

"I don't quite understand what Bush/Snow/AFL/CIO - whatever alphabet soup you'd like to name - are on about," reacts Gerd Heinz from Shanghai. "Sure, China loves to export - needs to, as well. But without the very keen interest of the American importers - and those in all the other countries as well - the Chinese would not only sit on their goods but also on their hands, not knowing what to do and how to improve their products, lives and opportunities."

So: "Why doesn't the American government talk to Walmart et al.? And to the consumers who are happy to buy ever more imports from China? No Chinese company would turn down a proposal of higher prices for their goods! Why, some might even improve the sweat-shop conditions and stop children working or at least pay those slaves a bit better."

And the real losers are: Mexico, Italy...

While the US manufacturers are up in arms because their work disappears to China, other countries might have real problems, write both the New York Times today on Mexico and the NRC Handelsblad (in Dutch) yesterday on Italy.
The other Asian countries of course also belong in this row.
Both good stories, of countries that in different periods after the Second Worldwar took away low-paid jobs from the United States, but are now in the same position the USA were in the second half of last century.

Tuesday, September 02, 2003

Rescue American jobs!

I stumbled over the site "Rescue American Jobs" almost by accident; but then: what is an accident on the internet?
This is the American anti-global movement! Since this is going to take more than five minutes to explore, I will requote for starters some of the quotes they use at their home page. Expect more in the days to come.

"The question is whether America can remain a great power or a dominant power if it becomes a primarily service economy. I doubt that. A country must have an industrial base to play a significant role in the world. I am concerned." - Henry Kissenger July-2003.
Not only a great quote: it hits the core issue: what kind of economy does the USA need?

"When my colleagues get a letter from a constituent who has been displaced by foreign workers, they should write back to them & say, 'It is the policy of this government to displace you, to move you into a lower economic income category, because we believe in cheap labor & we believe the politics of open borders helps our party." - Congressman Tom Tancredo.
Not really a pansy, it he, Tom Tancredo. Will have to check him out too.

Here you find some of their China-quotes. Looks really like the first key policy statement with more concrete proposals than the columnists could come up with.
An interesting site, but I noticed they have one problem: very few visitors. They have a well-done Forum I visited the site during working hours in the US, but there was the only visitor: me. Their records show that they never had more than five visitors at the same moment getting together to discuss things. That does not sound like a heated discussion, does it?

The situation is getting worse. I had a look at their registered members: about 75, but only two are regular posters. Top-writer is DawnMcTeo of Mesa, Arizona, who had posted 48 messages or almost 40 percent of the total at the forum today. Hmm, have to revise my verdict: not much movement here. Maybe I should give them a hand?
China Readies for Snow with Tough Talk

Writes Reuters and offers more of the same.
"Trade war"

Hey, ho! The tone of the report of the new Beijing correspondent of The Guardian is rather surprising when he writes about Snow's visit.
"In what could prove the opening salvo in a full-blown trade dispute between the world's richest and most populous nations, Mr Snow has promised to raise the sensitive issue of the Chinese currency's peg to the dollar, writes Jonathan Watts from Beijing. It is certainly a rather different style compared to his rather subdue colleague John Gittings, who retired this summer.
Watts is the new kid in the block, so he has to prove to his editors how important China is. A bit war is always good for the journalistic turnover, but it seems rather overdone at this stage of the developments.
Bush supports manufacturers

Back in the US President George Bush came on Labor Day out in support of the embattled manufacturers.
"One way to make sure the manufacturing sector does well is to send the message overseas ... We expect there to be a fair playing field when it comes to trade. See, we in America believe we can compete with anybody just so long as the rules are fair, and we intend to keep the rules fair," he said according to Reuters.
During his presidency began in January 2001 3 million jobs have been lost, 2.5 million of them in the manufacturing industry, Reuters added.
Democratic opponents attacked Bush. "What is President Bush's response to this unprecedented job loss? More tax cuts for the most privileged people in our society," Sherrod Brown (dem- Ohio) said.

Do not meddle with our Renminbi

In a rather strong-worded commentary the official China Daily sets the stage for the visit of US treasury secretary John Snow later today. It notes that the peg of the Chinese renminbi to the US dollar has become an item in the upcoming presidential elections.
An interesting argument the paper uses when it compares the competitive power of manufacturers in the US and in China. It refers to a report of the World Labor Organization (and I have to look that up) that shows that China's labor costs in manufactering are 2.2 percent of those in the United States.
"Even if the renminbi appreciates by 100 per cent against the US dollar, the Chinese goods' competitiveness relative to their American equivalent is still there. But products from other places in the world, whose labour costs used to be a bit higher than China's, may replace Chinese exports to the United States," the China Daily writes.

China is most likely going to do a set of other concessions, writes the New York Times, but will remain strong regarding the peg.

Monday, September 01, 2003

Senator Elizabeth Dole

Why do I get mainly funny websites about viagra when I google senator Dole(rep- North Carolina)? Too much a newbie in American politics, I guess.
Ms Dole seems a solid woman, who even refrains from developing more than a basic official site. And on Google the fun about Liz just goes on. Guess she also lost the struggle for a link at this site.

At least she has some internet friends, but still not enough to qualify as a China-player.

Senator Charles Schumer

Also senator Chuck Schumer (dem - New York) came out in defense of the US-based manufacturers, although he does not mention the C-word on his official site at all. (At least: I could not find it and his search engine failed when I tried to look up the C-word), so I have not added his site here.
"If you ask the experts, they'll tell you that China has been intentionally undervaluing its currency so that everything they sell to other countries is the cheapest thing going. That plays a big role in causing our businesses to suffer and our workers to lose jobs. The Treasury Department ought to examine the situation before it gets even more out of hand" the senator said in July.
Apart from pressure on China to revalue the renminbi, Chuck did not ask for any other measure or issued new ideas on what the manufacturers in New York could do to improve their competitiveness otherwise.

Correction: his site does mention China. Google worked better than his search engine. This guy is very busy is pushing out press releases, no wonder the search engine got overworked.

Congressman Don Manzullo

Now were are getting into business. Congressman Don Manzullo (rep - Illinois) "proudly serving the People of Northern Illinois" has introduced firm legislative measure to protect jobs in the US, his site says.
"We are hemorrhaging manufacturing jobs in this country, and not enough of our political leaders understand the ramifications of losing our industrial base," Manzullo said at a meeting with some of his colleagues in July of this year. He is a free-trader, the site says, and he proposes measures against China, Japan, Taiwan and Korea, whom he all blames for keeping their currencies artificially low.
Hmm, that is an argument concerning China, maybe even an invalid argument, but I fail to see what the problem with the other countries is. So he wants tax incentives for American firms to survive the competition. Free trade, huh? At least they are good with children.


I have added the trade union movement, the AFL-CIO as an obvious player in this game in the link-column, but it was damned hard to find the C-word on their website. Their president did not mention China in his speech for Labor Day. After much slicking it wrote:

"China is now the top contributor to our trade deficit. We buy more than $5 worth of goods from China for every $1 we sell, and we ran an $83 billion deficit with China last year. Since Congress granted China Permanent Normal Trade Relations (PNTR) status and China joined the WTO, the U.S. deficit with China has grown more than 20 percent, by more than $14 billion."

That is basically it. Boring statistics. I'm a bit surprised.
National Association of Manufacturers

Let's look at the message of the NAM for Labor Day, the largest association of producers in the US.

"Unfair international trade practices, particularly by China, plus an overvalued dollar, make it impossible for manufacturers to raise prices to meet escalating domestic costs associated with health care, pensions, regulations, asbestos litigation and rising energy costs, especially for natural gas. Over the last decade, the prices of manufactured products declined by 4 percent while other business prices rose 18 percent, said its president Jerry Jasinowski a few days ago. "China’s commitments to open its internal market and abide by international trade rules must be enforced. China must also allow its currency to be set by the marketplace and end its practice of keeping its exchange rate hugely undervalued. It is time for the Administration to get tough with the Chinese."

Hmm, would the US-based manufacturers be saved by China opening up its internal market faster? That might in theory be a valid argument for the financial sector or telecommunication, but what about other industries? Import duties are diminishing, as far as I can see according to the agreements.
Jasinowski also mentions that costs in the US have to go down - he picks litigation as an example - but that seems a less important message.
Snow in Asia

US treasure secretary John Snow is for sure celebrating his Labor Day in a special way: by visiting Asia.
He is on a mission impossible, the Financial Times writes. China has not moved the peg between de US Dollar and the Chinese Renminbi over the past ten years and will not do this substantially now. Changing the rates is not going to have an impact on the real problem: the problems the US has in competing with China.
"Some US politicians and industrialists, meanwhile, are wilfully ignoring economic realities," writes the FT. "Low-cost Chinese manufacturing is not a new threat to US business and in many industries China has simply taken over from other Asian producers as the prime assembler and exporter to the US."
Reuters writes that Snow is going to move very carefully regarding China, it said after his press conference in Tokyo. "Publicly, though, Snow avoided comment on either the yen or the yuan. The United States lacks leverage to persuade China to alter its currency policy, especially when it needs China's support at the United Nations and in efforts to deal with North Korea."

Tomorrow Snow will arrive in Beijing.
More than teddy bears only

Daniel T. Griswold of the Center for Trade Policy Studies at the Cato Institute argues in a column in the Washington Times against an earlier essay by Paul Craig Roberts who said that because of the internet and connectivity the China (and India) threat is no longer limited to manufacturing, but would increasingly also put jobs in the service sector at stage.
While Griswold cones with decent macro-economic arguments against Roberts, I agree with Roberts on the wide ranger of industries where China is going to compete.
Last month I organized for the Shanghai Foreign Correspondents' Club a meeting with representatives of Xinhua Financial Newswire who are going to hit the traditional newswires like Reuters and Bloomberg where it hurts most: the wallet.
The question is what to do. For the media-discussion I will pursue this discussion at another blog, but for sure China will expand to the service industry too.

Paul Craig Roberts obvious disagrees with Griswold, he wrote a few days ago. Again some strong arguments:
"Without doubt, some U.S. job losses are due to the recession. But the decline in manufacturing's share of U.S. GDP from 19.2 percent in 1988 to 14.1 percent in 2001, a decline of 27 percent, is inaccurately described by Griswold as "the passing pain of a recession."

I fail to detect what his solutions are, though: I have seen them up to now only in the quoted piece of Bernie Sanders.
The Bernie quote

Bernie Sanders (rep - Vermont) has set the stage best after his visit to China in January 2003, when he wrote:

"But one thing we should not do. We should not let the CEOs of corporate America continue to lower the standard of living of millions of American workers by shifting our manufacturing capabilities to China. We should not perpetuate “the race to the bottom.” While it is no secret that most of the giant multi-national corporations in our country no longer see themselves as having allegiance to the United States, and will provide support to any country that allows them to make large profits, the Congress must do better. We must have the courage to stand-up to the hundreds of millions in corporate campaign contributions that flood the Capitol, and uphold our constitutional responsibilities to protect the American people. "

He targets more the CEO of American companies that leave his country, while he is rather careful in his approach of China. "There are enormous opportunities in front of us that should be utilized to develop a closer and more positive relationship with China," he adds.
Labor Day

It is the first Monday of September in 2003, Labor Day in the United States. What better day to start a blob on the question whether China is destroying American jobs. I had missed the importance of that issue here in Shanghai, since we are sitting on the good side of the development.
Wm Patrick Cranley set off my thinking with a piece for Amcham Shanghai, obvious siding against the China-bashers. I called Patrick to see whether he could lead me to some of those people at the other side: the issue seemed good enough for some debate, but debates are always better when people have different opinions.
Patrick did not have a lot of China-bashers among his friends, so I decided to investigate, and let you know about my progress as things move on.
US-based colleague Wim Roefs tells me it should not be a problem to locate some op-ed articles on the issue: I have missed a whole debate on China, while being in China! On both sides debaters seem to prefer their own constituency to get their message out.

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