Great Hall of the People, VIII

Because there should always be a troll-free open thread.

I’m also going to move the three-day-old Tibet thread up a few notches, because it’s still humming.

The Discussion: 13 Comments

I hope you don’t mind if I go first.

Thinking of opening a Chinese restaurant in Baghdad? After this rather amazing article, you’ll definitely want to think again.

The link is from Gordon, who also has an interesting post on what may be a sign of growing CCP transparency. Pardon me if I reserve judgment until I actually see it in operation.

August 11, 2005 @ 6:11 pm | Comment

I continue to be confused about why floating the Yuan would not stimulate American export sales to China. As it is, the pegged (it still is) Yuan is arguably undervalued by 20 to 40%. In the last 18 months the Chinese central bank has purchased a net of more than $300 Billion in U.S. dollar denominated securities to keep the Yuan cheap in terms of Dollars. Its net foreign trade surplus with the U.S. over the same period is $230 Billion. Would it be logical that if I were selling an equivalent machine tool to a Chinese customer, as that offered by a Chinese manufacturer, that having a 30% subsidy to purchase the Chinese built tool would probably overwhelm the American manufacturer? As a director of an international public manufacturing company, I can assure you that we are contemplating sending advanced manufacturing to China to have the benefit, in part, of this enormous advantage. So why isn’t this an example of why the pegged Yuan hurts American industry and jobs? There is no question that floating the Yuan would “hurt” China by a loss of value of its $600 Billion dollar denominated holdings, but I’m not certain the Chinese central bank, an arm of its very aggressive government, cares; so long as jobs for Chinese workers are increasing at the cost of lost American jobs. This just sounds like good government policy. At the same time, the Chinese central bank is becoming a powerful force in manipulation of the dollar, and our domestic interest rates; not a position Americans should be enthusiastic about.

At the end of the day, I am not certain why very large (greater than those necessary for short term currency volatility suppression) Asian central bank purchases of our Treasuries and agency securities should be tolerated, if the result is to manipulate the forex rate. We would not tolerate a 30% tariff on our exports to China without retaliation, yet this has exactly the same result. Of course, I do not deny the benefit to Dr. Greenspan of the claim that he has kept the economy growing. But at the loss of American jobs and industry? Sounds like bad policy to me.

August 11, 2005 @ 7:05 pm | Comment

I am not certain why very large Asian central bank purchases of our Treasuries and agency securities should be tolerated

Well, if the US government is not running a deficit, then they won’t need the Asian central banks to buy up all those treasury notes. Right now, with the huge government budget deficits, Asian nations buying US government bonds is actually helping the US economy by keeping interest rates low.

August 11, 2005 @ 8:24 pm | Comment

Comment removed.

[Richard: My apologies, PHS, but I won’t host comments that link to the Madge’s CD article, which includes very personal information that can harm my career. Please email me if you seek additional information. Thanks for visiting.]

August 11, 2005 @ 8:48 pm | Comment

…Which low interest rates are fuelling a mortgage and debt-financed consumer-spending boom that is, in turn, driving America’s trade deficit. But that’s an accident that seems to have worked out well for the Chinese.

I don’t think the Chinese government is interested in doing anything at the expense of American jobs. They certainly have no interest in bottoming out our economy and killing the goose that is laying their golden egg. But they do have an interest in propelling their own economy, and don’t seem averse to a few casualties along the way.

Hui Mao is bang on about the debt. If we need to sell it, we can’t be choosy about who buys it or the price will drop and it will cost us more to finance our profligate spending. Plus, debt trades on secondary markets anyway. It seems to me that the only way to control securitized debt would be not to sell it.

August 11, 2005 @ 11:28 pm | Comment

Okay, I’ve posted about BASEBALL tonight! Because baseball is good.

August 12, 2005 @ 1:59 am | Comment

Richard- I read that article you linked in the opening comment- incredible! For me, the punch line was when he finally blurts out “I’m afraid of these crazy people!” What in hell did he expect?! Is his need to open “the best chinese restaurant in Iraq” that great that by some divine commandment he has no choice?
Who’s crazy?

August 12, 2005 @ 2:25 am | Comment


I took just the opposite view. I thought it was perfect example of someone with an unchained spirit and a lot of heart.

He is indeed a perfect example of Chinese spirit. They have been capitalizing (with a 40 year break) since long before the West jumped on the wagon.

August 12, 2005 @ 2:31 am | Comment

(Putting on my Frankenstein mask and saying to Lisa):
“Baseball GOOD! Beer GOOD!”
(“American economy, BAD! Fire BAD!”)

August 12, 2005 @ 2:59 am | Comment

Agree with you Gordon about his ‘free spirit’, but can’t see how you can credit China with its history of ‘capitalisation’ (?).
Weren’t they the ones who kicked out all us barbarians because they were happy with everything within their borders, thank you very much, and didn’t require anything from abroad?
Compare that voluntary isolationism with that little island called Britain which left its mark on every corner of the globe.

August 12, 2005 @ 9:59 am | Comment


August 12, 2005 @ 11:36 am | Comment

There is a big bug in the system:

“Flyers passing through U.S. have few rights, Arar judge told.

If passengers are deemed to be inadmissible, they have no constitutional rights even if later taken to an American prison. Mason told Judge David Trager that’s because they are deemed to be still outside the U.S., from a legal point of view. …
Mason said the interpretation means travellers can be detained without charge, denied the right to consult a lawyer, and even refused necessities such as food and sleep.”

Maybe next time fly over Cuba, that might be safer (sorry I’m in a polemic mood today)

August 12, 2005 @ 11:44 am | Comment

The dollar is the reserve currency of the world, as roughly 60-70% or more of global central bank reserves are denominated in dollars. There will always be both large foreign central bank purchases of dollars (and perhaps a built-in trade deficit), and built in credit subsidies to the United States from this advantage (because of the downward pressure on interest rates created from global demand for dollar-denominated assets).

Is China’s currency undervalued? Absolutely. By how much is a different question, and estimates range, depending upon the indicators used (see a discussion of REER and BEER methodologies for more) from 7% to around 40%. Adjusting it, however, creates difficulties. Adjust too little, and speculators bet on more appreciations, compounding the problem (this is what happened July 21). Adjust too much, and all of a sudden there is downward pressure on the currency and China has to defend it with reserves.

The other point that’s not discussed much, but that Jonathan Anderson of UBS makes frequently, is that the US and China don’t actually compete in that many industries. Much of the competition comes in electronics and electronics components. Many of the jobs that China is concerned about losing would go to other Southeast Asian countries, not back to the United States. In addition, many American imports to China come in two varieties: high-technology products (things like airplanes and computers) or components that are processed and manufactured into higher-value export products. American imports from China are these same manufactured goods, and other labor-intensive products. For this reason, revaluing the yuan significantly might actually make the trade deficit with the United States rise, believe it or not. Supply chains won’t adjust right away, so Chinese exports will be more expensive in US markets, but consumers will still buy them, because there are no cheaper manufacturers elsewhere. Chinese imports of components will probably fall, because the revaluation will trigger declines in exporters’ purchases in attempts to cut costs. Chinese exporting manufacturers often run on profit margins in the 7-10% range, so a significant revaluation will create significant pressure on these enterprises.

Also, what’s not mentioned frequently is that many of these export manufacturing industries are foreign-invested or foreign-owned. It was a study of the aggregate effects of a revaluation that caused Japan to drop its own pressure on China to appreciate the yuan in late 2003 and early 2004. There’s much more about this at the link below.

August 12, 2005 @ 3:02 pm | Comment

RSS feed for comments on this post. TrackBack URL

Sorry, the comment form is closed at this time.