Posts Tagged ‘China-US Relationship’

China, U.S. plan new open investment treaty

March 24, 2016

The U.S. and Chinese governments have nearly completed negotiations on a Chinese Bilateral Investment Treaty, which will make it easier for American companies to invest in China, and vice versa.

Such a treaty would serve the interests of the Chinese government and American corporations, but not necessarily the interests of American citizens and workers.

us-chinaAt the same time, the U.S. government is confronting China militarily in the South China Sea.  And President Obama is trying to sell the Trans Pacific Partnership Agreement on the basis that it will enable the United States and not China to write the rules of international trade.

But this new treaty, based on what has been reported about it, will make the U.S. and Chinese economies even more interlocked than before.

The problem from my standpoint as an American citizen is the difference between the status of Chinese corporations and U.S.-based corporations in their home countries.  Chinese corporations serve the goals of Chinese government policy.  U.S.-based corporations serve the interests of their executives and stockholders, and them alone.

A U.S. investment in China could take the form of buying shares in Chinese companies, or it could take the form building factories or even retail stores in China.  The same would be true of Chinese investments in the United States.

Currently Chinese investment in the United States is greater than U.S. investment in China.  That is a natural result of the Chinese trade surplus.   Dollars that Chinese earn through exports have to go somewhere.  Some of them are used to buy Treasury bonds to help finance the federal government.   Others go to buy American assets.

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China overtakes US as world’s biggest economy

October 9, 2015

panda eagleThe World Bank has noted that China has quietly overtaken the United States as the world’s largest economy.

Washington is responding to this in exactly the wrong way—by trying to checkmate China’s power rather than rebuilding the sources of American power.

China already led the United States in a number of important respects.  According to the CIA World Factbook, it exceeds the United States in industrial output, in agricultural output and in electricity production.

While China had a $260 billion trade surplus in 2013, the USA has a $698 billion trade deficit.

It is true that while the Chinese nation is rich, the Chinese people are still poor compared to Americans—not just in the amount of stuff they own, but in terms of infant mortality, life expectancy, literacy and access to public water and sewerage systems.

Inequality and concentration of wealth are just as great in China as they are in the United States.  China is the world’s largest polluter overall, although the USA is the largest on a per-capita basis.  Interestingly China has a lower birth rate and population growth rate than the USA.

But life has been getting better on average for the average Chinese person, while the earning power of the average American has been slipping behind.

The United States has the world’s largest and most expensive military, but the Chinese may be a match for the USA in their own backyard—the South China Sea.

Joseph Stiglitz, former chief economist for the World Bank and former chairman of the President’s Council of Economic Advisers, argued in a recent article that the USA still has great residual strength, but American leaders are letting it slip away by concentrating on military dominance and corporate profits at the expense of everything else.

In a full-fledged Cold War between the USA and China, China is in an economic position to do the USA great damage.  China could stop buying U.S. Treasury bonds, for example.

It’s not in the interest of China to wage economic war against the United States.  Both sides would suffer.  American leaders should not push China into a corner and put its leaders in a position in which they think they have no choice.   Instead American leaders should concentrate in reducing US economic vulnerability.

China does have big problems—inequality, pollution, corruption, unrest among workers and among minorities in Xinjiang, Tibet and elsewhere.

Maybe these problems will be fatal, although I doubt it.  But these are not issues the United States can affect one way or the other, or should try to affect.

And if China should start to collapse, history has many examples of declining empires that try to restore internal unity by going to war.  This is not something we Americans should hope for.  Our problems originate at home, not in China.

LINKS

China Has Overtaken the United States as the World’s Largest Economy by Joseph Stiglitz for Vanity Fair.

China vs. United States from the CIA World Factbook.

G-Zero: US-China Relations in the Age of Xi by Peter Lee for China Matters.

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China, the USA and the world’s oil and gas

July 30, 2014
us energy independence jones map

China’s oil imports. Click to enlarge.

The other day I read that China has overtaken the USA as the world’s largest oil importer.  Earlier I read that China has overtaken the USA as the world’s largest market for automobiles.  As the world uses up easy-to-get oil, there will be conflict between the USA and China to get what’s left.

Notice this is just OPEC oil, not total oil importsChina needs access to the world’s oil and gas if it is to raise the material standard of living of its people.  But the USA needs access to the world’s oil and gas if it is to maintain what we call the American standard of living.

What this means is that, unlike with the situation between the USA and Russia, there is a real conflict of interest between the Chinese people and the American people.  The world may not have enough fossil fuels to satisfy the desires of both.

China has one of the world’s largest reserves of coal and one of the world’s largest coal industries.  It is a leader in developing solar energy technology, although this as yet serves only a tiny fraction of its energy needs.  China has extended pipelines into central Asia, and recently signed an agreement to build a new oil and gas pipeline into Russia.

0912ChinaSeaTerritory2The quest for energy explains China’s disputes with Japan, the Philippines, Vietnam, Malaysia and other countries over control of islands in the East China Sea and South China Sea.  Control of these islands not only gives China control over offshore oil and gas.  It enables China to protect its shipping from the Persian Gulf.

Access to oil is a vital interest of the USA.  The Carter Doctrine, back in 1980, said that access to the Persian Gulf was a vital interest of the United States, meaning the U.S. would go to war if necessary to protect it.  The first President Bush said in 1991 was the Gulf War was about “jobs, jobs, jobs,” which meant “oil, oil, oil.”

In recent years, the United States has increased domestic energy production, with fracking and offshore oil drilling (both of which President Obama strongly supports).   But this doesn’t mean the USA doesn’t need imports.  Seeming inconsistencies in current U.S. policy in the Middle East make sense if you think of U.S. policy as a quest for oil rather than a quest for democracy.

The world’s easy-to-get oil and gas have been used up and competition for the rest of the world’s oil is bound to become more intense.  The European Union, in its need for oil and gas, may find itself in conflict with both the USA and China.

I don’t see any obvious way to resolve this.  It would be good if the world’s energy-importing countries could reach an agreement based on compromise.  It would be good if the world could switch to renewable energy.  But I don’t see either one happening anytime soon, and to the extent that either compromise or renewables are feasible, it might entail a more frugal way of life than most North Americans (myself included) would be willing to accept.

LINK

 Whose Oil Will Quench China’s Thirst? by Chris Dalby for Oil Price and Naked Capitalism.

Foxconn: the face of world manufacturing

April 8, 2013

Foxconn, the giant Chinese manufacturing company, is expanding worldwide, not only into poorer regions of China but also into Brazil, India, Mexico, Malaysia, central Europe and, in the not-too-distant future, the United States.   With 1.4 million workers in China alone, it is the world’s second largest employer, behind Walmart.

Foxconn suicide nets

Foxconn suicide nets (Bloomberg News)

The company, whose headquarters are in Taiwan and largest operations are in China, is famous for asking its stressed-out workers to sign pledges to not commit suicide and for putting up suicide nets to catch workers jump out of the windows of its tall dormitories.

Ross Perlin, writing in the current issue of Dissent magazine, says there are good reasons for this.   Work schedules of 12 hours a day and 50 hours a week are common, he said, with up to 100 hours a week during peak production.  He said that wages average $1 to $2 an hour.

Although the company continues to be plagued by wildcat strikes and suicide threats, working conditions have improved slightly, as a result of audits by Apple Computer, a major customer, and a tight labor market in China, Perlin wrote.

   But there is a limit to possible improvement.  He quoted an analysis that said only 1.8 percent of the price of an iPhone goes to manufacturers in China, while Apple gets 58.5 percent and the rest goes to manufacturers of high-end components.  He didn’t quote the source of these figures, and I suspect they are exaggerated, but I agree with his overall point.  Profit margins of companies such as Foxconn and other Chinese suppliers are razor-thin, and they can succeed only by operating on a huge scale while keeping costs, including wages, to a minimum.

Perlin said that Foxconn and Apple symbolize the long-standing relationship between the United States and the economies of eastern Asia, including Japan and South Korea as well as China.

[It is based on] a series of dyads: American consumption and Asian labor, American innovation and Asian manufacturing, American debt and Asian savings, American power and Asian acquiescence. In its latest form—the co-evolution of Silicon Valley and China’s Special Economic Zones, particularly in information technology and alternative energy—it can be summed up in the words, engraved on nearly every Apple product: “Designed by Apple in California, Assembled in China.”

via Dissent Magazine.

chinese-iphone-5-production-factoryThis economic relationship has existed for a long time, but it can’t go on forever.  It depends on us Americans being relatively rich, and over time it makes us relatively poorer.

There are at least two ways it can come to an end.  One is that the United States government stands up for U.S. workers and does what the Japanese, South Korean, Chinese and many other governments do, which is to allow access to the nation’s market only on condition that the company make a positive contribution to the nation’s productivity.  Currently the U.S. government is on the opposite course.   From Reagan through Clinton to Obama, successive administrations have sought to lock the United States into international trade treaties precisely intended to prevent member governments from asserting national interests against global corporations.

The most likely ending is that we Americans eventually cease to be able to earn enough or borrow enough to be a worthwhile market for Chinese goods.  If and when that happens, the question becomes whether the USA will take down the economies of eastern Asia with us.  Maybe by that time they will have developed a middle class large enough to be a market for their own goods, after having moved their manufacturing operations to Africa or some other poorer part of the world.   Or maybe they or we will have found a better path, in a way I can’t presently imagine.

Click on Chinese Workers Foxconned for Ross Perlin’s full article in Dissent Magazine, which has other articles on China in the Spring 2013 issue.