Chinese Economics Thread

Equation

Lieutenant General
Yup, this is the kind of news that companies see when they think about moving production from China to another country to escape tariffs. Out of the frying pan and into the fire. It's better to stay in China, a country that can actually defend itself against US economic aggression, than move to some small place that gets slapped with cartoonishly high tariffs rates and has nothing to fight back with.
 

Equation

Lieutenant General
Yup, this is the kind of news that companies see when they think about moving production from China to another country to escape tariffs. Out of the frying pan and into the fire. It's better to stay in China, a country that can actually defend itself against US economic aggression, than move to some small place that gets slapped with cartoonishly high tariffs rates and has nothing to fight back with.

Sorry about that. Meant to provide a link to my quote.:confused:

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Hendrik_2000

Lieutenant General
China's H1 trade surplus with U.S. up 12% in yuan terms - customs

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UPDATE 1-China June trade surplus with U.S. rises 11% to $29.92 bln

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Well what do you know the Trump attempt to curtail trade deficit is complete failure day after day, month after month, the deficit get bigger
 

supercat

Major
Michael Hudson, who is the preeminent socialist economist of our time and has given many advices on economical policies to the Chinese government, talks about American and Chinese economics here. You can learn a lot by reading his blog. Some of the subtitles and emphases are added by me.

The problems with the U.S. economy:

...
Bonnie Faulkner: Exactly. What is the point of driving investment into foreign countries, away from the United States?

Michael Hudson: If you’re an investor, you can make more money by dismantling the U.S. economy. You can borrow at 1 percent and buy a bond or a stock that yields 3 or 4 percent. That’s called arbitrage. It’s a financial free lunch. The effect of this free lunch, as you say, is to build up foreign economies or at least their financial markets while undercutting your own. Finance is cosmopolitan, not patriotic. It doesn’t really care where it makes money. Finance goes wherever the rate of return is highest. That’s the dynamic that has been de-industrializing the United States over the past forty years.

Bonnie Faulkner: From what you’re saying, it sounds like Donald Trump’s policies are leading to doing to the United States what the IMF and World Bank have traditionally done to foreign economies.

Michael Hudson: That’s what happens when you devalue. The financial sector will see that interest rates are going down, so the dollar’s exchange rate also will decline. Investors will move their money (or will borrow) into euros, gold or Japanese yen or Swiss francs whose exchange rate is expected to rise. So you’re offering a financial arbitrage and capital gain for investors who speculate in foreign currencies. You’re also hollowing out the economy here, and squeezing real wage levels and living standards.
...

Comparing the U.S. and Chinese economy:

...
Bonnie Faulkner: What is going on with the ruling class in the United States? Does anybody in its ranks know how to run an economy?

Michael Hudson: The problem is that running an economy to help the people and raise living standards, and even to lower the cost of living and doing business, means not running it to help Wall Street. If someone knows how to run an economy, the financial sector wants to keep them out of any public office. High finance is short-term, not long-term. It plays the hit-and-run game, not the much harder task of creating a framework for tangible economic growth.

You can do one of two things: You can help labor or you can help Wall Street. If running the economy means helping labor and improving living standards by giving better medical care, this is going to be at the expense of the financial sector and short-term corporate profits. So the last thing you want to do is have somebody run the economy for its own prosperity instead of for Wall Street’s purpose.

At issue is who’s going to do the planning. Will it be elected public officials in the government, or Wall Street? Wall Street’s public relations office is the University of Chicago. It claims that a free market is one where rich Wall Street investors and the financial class run an economy. But if you let people vote and democratically elect governments to regulate, that’s called “interference” in a free market. This is the fight that Trump has against China. He wants to tell it to let the banks run China and have a free market. He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise. In effect, he wants Chinese to be as threatened and insecure as American workers. They should get rid of their public transportation. They should get rid of their subsidies. They should let a lot of their companies go bankrupt so that Americans can buy them. They should have the same kind of free market that has wrecked the US economy.

China doesn’t want that kind of a free market, of course. It does have a market economy. It is actually much like the United States was in its 19th-century industrial takeoff, with strong government subsidy.
...

Trump is now driving other countries out of the dollar orbit

...
Michael Hudson: This is a huge free ride. You’d think that Donald Trump would want to keep it going. But he claims that China is manipulating its currency by recycling its dollars into loans to the U.S. Treasury. What does he mean by that? China is earning a lot of dollars by exports its goods to the United States. What does it do with these dollars? It tried to do what America did with Europe and South America: It tried to buy American companies. But the United States blocked it from doing this, on specious national security grounds. The government claims that our national security would be threatened if China would buy a chain of filling stations, as it wanted to do in California. The United States thus has a double standard, claiming that it is threatened if China buys any company, but insisting on its right to buy out the commanding heights of foreign economies with its electronic dollar credit.

That leaves China with only one option: It can buy U.S. Treasury bonds, lending its export earnings to the U.S. Treasury.

China now realizes that the U.S. Treasury isn’t going to repay. Even if it wanted to recycle its export earnings into Treasury bonds or U.S. stocks and bonds or real estate, Donald Trump now is saying that he doesn’t want China to support the dollar’s exchange rate (and keep its own exchange rate down) by buying U.S. assets. We’re telling China not to do what we’ve told other countries to do for the past forty years: to buy U.S. securities. Trump accuses countries of artificial currency manipulation if they keep their foreign reserves in dollars. So he’s telling them, and specifically China, to get rid of their dollar holdings, not to buy dollars with their export earnings anymore.

So China is buying gold. Russia also is buying gold and much of the world is now in the process of reverting to the gold-exchange standard (meaning that gold is used to settle international payments imbalances, but is not connected to domestic money creation). Countries realize that there’s a great advantage of the gold-exchange standard: There’s only a limited amount of gold in the world’s central banks. This means that any country that wages war is going to run such a large balance-of-payments deficit that it’s going to lose its gold reserves. So reviving the role of gold may prevent any country, including the United States, from going to war and suffering a military deficit.

The irony is that Trump is breaking up America’s financial free ride – its policy of monetary imperialism – by telling counties to stop recycling their dollar inflows. They’ve got to de-dollarize their economies.

The effect is to make these economies independent of the United States. Trump already has announced that we won’t hire Chinese in our IT sectors or let Chinese study subjects at university that might enable them to rival us. So our economies are going to separate.

In effect, Trump has said that if we can’t win in a trade deal, if we can’t make other countries lose and become more dependent on U.S. suppliers and monopoly pricing, then we’re not going to sign an agreement. This stance is driving not only China but Russia and even Europe and other countries all out of the U.S. orbit. The end result is going to be that the United States is going to be isolated, without being able to manufacture like it used to do. It’s dismantled its manufacturing. So how will it get by?

Some population figures were released a week ago showing the middle of America is emptying out. The population is moving from the Midwestern and mountain states to the East and the West coasts and the Gulf Coast. So Trump’s policies are accelerating the de-industrialization of the United States without doing anything to put new productive powers in place, and not even wanting other countries to invest here. The German car companies see Trump putting tariffs on the imported steel they need to build cars in the United States. It built them here to get around America’s tariff barriers against German and other automobiles. But now Trump is not even letting them import the parts that they need to assemble these cars in the non-unionized plants they’ve built in the South.

What can they do? Perhaps they’ll propose a trade with General Motors and Chrysler. The Europeans will get the factories that American companies own in Europe, and give them their American factories in exchange.

This kind of split is occurring without any attempt to make American labor more competitive by lowering its cost of housing, or the price of its health insurance and medical care, or its transportation costs or the infrastructure costs. So America is being left high and dry as a high-priced economy in a nationalistic world, while running a huge balance-of-payments deficit to support its military spending all over the globe.

to be continued...
 

supercat

Major
...continued from above:

Why the euro is only a satellite currency of the U.S. dollar:

Some Americans worried that the euro might become a rival to the dollar. After all, Europe is not de-industrializing. It is moving forward and producing better cars, airplanes and other exports. So the United States persuaded foreign politicians to cripple the euro by making it an austerity currency, creating so few government bonds that there’s no euro vehicle large enough for foreign countries to keep their foreign reserves in. The United States can create more and more dollar debt by running a budget deficit. We can follow Keynesian policies by running a deficit to employ more labor. But the eurozone refuses to let countries run a budget deficit of more than 3 percent of its GDP. Now running more than 3 percent of their GDP. That level is very marginal compared to the United States. And if you’re trying not to run any deficit at all – and even if you keep it less than 3% – then you’re imposing austerity on your country, keeping your employment down. You’re stifling your internal market, cutting your throat by being unable to create a real rival to the dollar. That’s why Donald Rumsfeld called Europe a dead zone, and why the only alternatives for a rival currency are the Chinese yuan. They’re moving into a gold-based currency area along with Russia, Iran and other members of the Shanghai Cooperation Organization.

Bonnie Faulkner: The European Union not allowing European countries within the eurozone to not run deficits more than 3 percent was basically cutting their own throat. Why would they do such a thing?

Michael Hudson: Because the heads of the (European) Central Bank are fighting a class war. They look at themselves as financial generals in the economic fight against labor, to hurt the working class, lower wages and help their political constituency, the wealthy investing class. Europe always has had a more vicious class war than the United States does. It’s never really emerged from its aristocratic post-feudal system. Its central bankers and universities follow the University of Chicago free-market school, saying that the way to get rich is to make your labor poorer, and to create a government where labor doesn’t have a voice. That’s Europe’s economic philosophy, and it’s why Europe has not matched the growth that China and other countries are experiencing.

Who will plan economies: Financial managers, or democratic governments (or the central government in China)?

Bonnie Faulkner: If there were pressures to create a New International Economic Order in the 1970s, what was this new order looking to achieve?

Michael Hudson: Other countries wanted to do for their economies what the United States has long done for its own economy: to use their governments' deficit spending to build up their infrastructure, raise living standards, create housing and promote progressive taxation that would prevent a rentier class, a landlord and financial class from taking over economic management. In the financial field, they wanted governments to create their own money, to promote their own development, just like the United States does. The role of neoliberalism was the opposite: it was to promote the financial and real estate sector and monopolies to take economic management away from government.

So the real question from the 1980s on was about who would be the basic planning center of society. Would it be the financial sector – the banks and bondholders, whose interest is really the One Percent that own most of the banks’ bonds and stocks? Or, is it going to be governments trying to subsidize the economy to help the 99 Percent grow and prosper? That was the social democratic view opposed by Thatcherism and Reaganism.

What is super imperialism:

Michael Hudson: It’s a higher stage of imperialism. The old imperialism was colonialism. You would come in and use military power to install a client ruling class. But each country would have its own currency. What has made imperialism “super” is that America doesn’t have to colonize another country. It doesn’t have to invade a country or actually go to war with it. All it needs is to have the country invest its savings, its export earnings in loans to the United States Government. This enables the United States to keep its interest rates low and enable American investors to borrow from American banks at a low rate to buy up foreign industry and agriculture that’s yielding 10 percent, 15 percent or more. So American investors realize that despite the balance-of-payments deficit, they can borrow back these dollars at such a low rate from foreign countries – paying only 1 percent to 3 percent on the Treasury bonds they hold – while pumping dollars into foreign economies by buying up their industry and agriculture and infrastructure and public utilities, making large capital gains. The hope is that and soon, we’ll earn our way out of debt by this free ride arrangement.

Imperialism is getting something for nothing. It is a strategy to obtain other countries’ surplus without playing a productive role, but by creating an extractive rentiersystem. An imperialist power obliges other countries to pay tribute. Of course, America doesn’t come right out and tell other countries, “You have to pay us tribute,” like Roman emperors told the provinces they governed. U.S. diplomats simply insist that other countries invest their balance-of-payments inflows and official central-bank savings in US dollars, especially U.S. Treasury IOUs. This Treasury-bill standard turns the global monetary and financial system into a tributary system.

That is what pays the costs of U.S. military spending, including its 800 military bases throughout the world, and its foreign legion of Isis, Al Qaeda fighters and “color revolutions” to destabilize countries that don’t adhere to the dollar-centered global economic system.

to be continued,..
 

supercat

Major
...continued from above:

China's and other countries' drive to de-dollarize:

Bonnie Faulkner: You write: “Today it would be necessary for Europe and Asia to design an artificial, politically created alternative to the dollar as an international store of value. This promises to become the crux of international political tensions for the next generation.” How does the world break out of this double-standard dollar domination?

Michael Hudson: It’s already coming about. And Trump is a great catalyst speeding departing guests. China and Russia are reducing their dollar holdings. They don’t want to hold American Treasury bonds, because if America goes to war with them, it will do to them what it did to Iran. It will just keep all the money, not pay back the investment China has kept in U.S. banks and the Treasury. So they’re getting rid of the dollars that they hold. They’re buying gold, and are moving as quickly as they can to be independent of any reliance on U.S. exports. They are building up their military, so that if the United States tries to threaten them, they can defend themselves. The world is fracturing.

Bonnie Faulkner: What are foreign countries like China and Russia using to buy gold? Are they buying it with dollars?

Michael Hudson: Yes. They earn dollars or euros from what they’re exporting. This money goes into the central bank of China, because Chinese exporters want domestic yuan to pay their own workers and suppliers. So they go to the Bank of China and they exchange their dollars for yuan. The Bank of China, the central bank, then decides what to do with this foreign currency. They may go into the open market and buy gold. Or, they may spend it in foreign countries, on the Belt and Road Initiative to build a railway and steamship infrastructure and port development to help China’s exporters integrate their economy with others and ultimately with Europe, replacing the United States as customer and supplier. They see the United States as a dying economy.

Bonnie Faulkner: Can the Chinese build up their Belt and Road infrastructure projects with dollars?

Michael Hudson: No, they are getting rid of dollars. They already are receiving such a large surplus each year that they only use the dollars to buy gold or some goods, such as Boeing airplanes, but mostly food and raw materials. When China buys iron from Australia, for instance, they sell dollars from their foreign-exchange reserves and buy Australian currency to pay Australians for the iron ore that they import. They use dollars to pay other countries that are still part of the dollar area and still willing to keep adding these dollars to their official monetary reserves instead of holding gold.

Bonnie Faulkner: Well, it is kind of surprising, Michael, that countries haven’t started doing this a lot sooner.

Michael Hudson: There has been political pressure not to withdraw from the dollar-debt system. If countries act independently, they risk being overthrown. It takes a strong government to resist American interference and dirty tricks to put its own country first instead of following the U.S. advisors and agents who pay them to serve the U.S. economy rather than their own, or to resist brainwashing by University of Chicago’s junk economics.

Comparison of U.S. and China’s banking system:

Bonnie Faulkner: China, with its Belt and Road infrastructure project, is now buying gold on the open market, as are a number of other countries. Has the Western banking system penetrated China? And if so, how would you characterize China’s banking system?

Michael Hudson: There’s an attempt by the United States to penetrate China. In the recent trade agreements China did permit U.S. banks to create their own credit. I’m not sure that this is going to really take off, now that Trump is accelerating the trade war. But basically, in America you have private banks extending credit to corporations. In China you have the government banks extending the loans. That saves China from having a financial crisis in the way that the United States does.

About 12 percent of American companies are said to be zombie companies. They’re already insolvent, not able to make a profit after paying their heavy debt service. But banks are still giving them enough credit to stay in business, so they won’t have to go bankrupt and create a crisis. China doesn’t have that problem, because when Chinese industry and factories are not able to pay, the public Bank of China can simply forgive the debt. Its choice is clear: Either it can let companies go bankrupt and be sold at a low price to some buyer, mainly an American; or, it can wipe the bad debts off the books.

If China had been crazy enough to have student loans and leave its graduates impoverished instead of providing free universities, China’s central bank could simply write off the student loans. No investors would lose, because the banks are owned by the government. Its position is, “If you’re a factory, we don’t want you to have to close down and unemploy your labor. We’ll just write down the debt. And if your employees are having a really hard time, we’ll just write down their debts, so that they can spend their money on goods and services to help expand our internal market.”

America’s banks are owned by the stockholders and bondholders, who would never let Chase Manhattan or Citibank or Wells Fargo just forgive their various categories of loans. That’s why public banking is so much more efficient from an economy-wide level than private banks. It’s why banking should be a public utility, not privatized.

Bonnie Faulkner: Can you explain further how writing down debts is good for the economy?

Michael Hudson: Well, think of the alternative to writing down debts. If you don’t write down America’s student debts, the graduates are going to have to pay so much of the student debt service (now to the government) that they’re not going to have enough money to be able to buy a house, they won’t have enough money to get married, they won’t have enough money to buy goods and services. It means that most people who can buy houses are graduates with trust funds – students whose parents are rich enough that they didn’t have to take out a student loan to pay for their children’s education. These hereditary families are rich enough to buy them their own apartment.

That’s why the American economy is polarizing between people who inherit enough money to be able to have their own housing and budgets free of student loans and other debts, compared to families that are debt strapped and running deeper into debt and without much savings. This financial bifurcation is making us poorer. Yet neoliberal economic theory sees this as a competitive advantage. For them, and for employers, poverty is not a problem to be solved; it is the solution to their own aim of profitability.

Bonnie Faulkner: So is this whole privatization scheme, particularly the privatization of the banking system and privatizing a lot of infrastructure what’s bankrupting the United States?

Michael Hudson: Yes, just as it’s bankrupted England and other countries that followed Thatcherism or the neo-liberal philosophy since about 1980.

Michael Hudson’s blog:

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Hendrik_2000

Lieutenant General
Us is cutting their own nose by restricting trade with tariff
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US overtaken by Southeast Asia as China's No. 2 trade partner
American exports plunge 30% as Beijing finds other suppliers

  1. ISSAKU HARADA, Nikkei staff writer JULY 13, 2019 04:36 JST

    BEIJING -- The U.S. is losing importance as a trading partner of China as their tariff war drags on, dropping a notch to third place in the first half of 2019 to trail the European Union and Southeast Asia.

    Sino-American trade in goods declined 14% on the year to $258.3 billion, according to statistics out Friday from Chinese customs authorities. In exports, the U.S. sustained a much harder blow.

    Agricultural and energy products easily sourced from elsewhere account for much of the Chinese imports from the U.S. But big Chinese exports like computers, mobile phones and other electronics have supply chains that take more time to rearrange. While Chinese exports to the U.S. fell 8% to $199.4 billion, American exports to China plunged 30% to $58.9 billion.


    For June alone, Chinese exports to the U.S. fell 8% on the year to $39.2 billion as American exports to China dropped 31% to $9.3 billion.

    "External conditions are complex and difficult, and many challenges stand in the way of stable trade," Chinese customs spokesman Li Kuiwen told reporters Friday.

    China is looking to other major markets to fill the gap. Trade with the EU, which overtook the U.S. as its top trade partner in 2004, increased 5% on the year to $337.9 billion in the first half. Trade with the Association of Southeast Asian Nations grew 4% to $291.8 billion, topping the American tally. Should current tensions continue, the bloc could rank above the U.S. for the full year for the first time on record.

    ASEAN member Vietnam enjoyed a 14% jump in exports from China. Chinese businesses are moving more parts and materials to newly set up production bases there. At least some of this is aimed at skirting American tariffs on products made in China.

    An item-by-item breakdown highlights how the trade war is reshaping the flow of goods. For example, the U.S. imposed a 10% tariff on Chinese furniture last September, raising it to 25% this May. Chinese furniture exports to the U.S. fell 11% on the year to $3.7 billion for the January-May period, while those to ASEAN nations increased 30% to $1 billion.

    "American clients are demanding lower prices to ease the pain of the tariffs," an export manager at a manufacturer in Hebei Province said. "A lot of companies are starting to refuse orders from the U.S."

    U.S.-bound exports of semiconductors, on which Washington slapped a 25% tariff last year, also dropped 29% for January to May. Those to ASEAN jumped 37%.

    Though not subject to U.S. tariffs, $1 billion of Chinese toys were exported to ASEAN in the five-month period, a 52% surge on the year.

    Beijing and Washington resumed working-level trade negotiations for the first time in two months Tuesday, but only by phone. No face-to-face talks have been held, despite speculation that they could this week.

    U.S. President Donald Trump has expressed frustration over the lack of progress. "China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would," he tweeted Thursday. Bilateral trade is expected to shrink even further as negotiations drag on.


 

siegecrossbow

General
Staff member
Super Moderator
Us is cutting their own nose by restricting trade with tariff
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US overtaken by Southeast Asia as China's No. 2 trade partner
American exports plunge 30% as Beijing finds other suppliers

  1. ISSAKU HARADA, Nikkei staff writer JULY 13, 2019 04:36 JST

    BEIJING -- The U.S. is losing importance as a trading partner of China as their tariff war drags on, dropping a notch to third place in the first half of 2019 to trail the European Union and Southeast Asia.

    Sino-American trade in goods declined 14% on the year to $258.3 billion, according to statistics out Friday from Chinese customs authorities. In exports, the U.S. sustained a much harder blow.

    Agricultural and energy products easily sourced from elsewhere account for much of the Chinese imports from the U.S. But big Chinese exports like computers, mobile phones and other electronics have supply chains that take more time to rearrange. While Chinese exports to the U.S. fell 8% to $199.4 billion, American exports to China plunged 30% to $58.9 billion.


    For June alone, Chinese exports to the U.S. fell 8% on the year to $39.2 billion as American exports to China dropped 31% to $9.3 billion.

    "External conditions are complex and difficult, and many challenges stand in the way of stable trade," Chinese customs spokesman Li Kuiwen told reporters Friday.

    China is looking to other major markets to fill the gap. Trade with the EU, which overtook the U.S. as its top trade partner in 2004, increased 5% on the year to $337.9 billion in the first half. Trade with the Association of Southeast Asian Nations grew 4% to $291.8 billion, topping the American tally. Should current tensions continue, the bloc could rank above the U.S. for the full year for the first time on record.

    ASEAN member Vietnam enjoyed a 14% jump in exports from China. Chinese businesses are moving more parts and materials to newly set up production bases there. At least some of this is aimed at skirting American tariffs on products made in China.

    An item-by-item breakdown highlights how the trade war is reshaping the flow of goods. For example, the U.S. imposed a 10% tariff on Chinese furniture last September, raising it to 25% this May. Chinese furniture exports to the U.S. fell 11% on the year to $3.7 billion for the January-May period, while those to ASEAN nations increased 30% to $1 billion.

    "American clients are demanding lower prices to ease the pain of the tariffs," an export manager at a manufacturer in Hebei Province said. "A lot of companies are starting to refuse orders from the U.S."

    U.S.-bound exports of semiconductors, on which Washington slapped a 25% tariff last year, also dropped 29% for January to May. Those to ASEAN jumped 37%.

    Though not subject to U.S. tariffs, $1 billion of Chinese toys were exported to ASEAN in the five-month period, a 52% surge on the year.

    Beijing and Washington resumed working-level trade negotiations for the first time in two months Tuesday, but only by phone. No face-to-face talks have been held, despite speculation that they could this week.

    U.S. President Donald Trump has expressed frustration over the lack of progress. "China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would," he tweeted Thursday. Bilateral trade is expected to shrink even further as negotiations drag on.


I have a suspicion that many of the so-called exports to SEA were rerouted to the U.S.
 
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