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By Ian Williams
GUANGZHOU, China – The biggest trade show on the planet, the Canton Fair, opened here Friday.
It covers a floor space equal to five times that of the Empire State Building, attracts tens of thousands of Chinese companies, and up to a quarter of a million buyers are expected from every corner of the globe.
Strolling though the cavernous pavilions can leave you a little dazed. There's everything from bikes to mosquito traps to phones, TVs and tires. What don't they make here?
Electric chauffeur-driven cars ferry the buyers down long walkways between frantic rounds of deal-making.
On a stage between two of the pavilions, I watched several robotic vacuum cleaners "dance" to a Lady Gaga song. "Isn't this the most memorable show you have ever seen," said a woman overseeing the performance. "Exports are increasing, going up. It's good. To the U.S., to Europe."
‘Currency manipulation’?
China's exporters are doing rather well, buoyed by what critics call China's "currency manipulation" – a policy of keeping the yuan undervalued in order to make China's exports cheap, and imports expensive. It’s brought the U.S. and China to the brink of a currency and trade war.
The latest trade figures (for August) show China's exports to the U.S. have reached $35 billion dollars, compared with U.S. exports to China of $7.3 billion. That's opened up a record trade deficit.
Not surprisingly, the buyers here are in a good mood: "The price is good," said one from Chicago, as he examined a mosquito trap. "It's excellent, it couldn't be better. That's why we are here."
And most of the exhibitors said sales were rising sharply, although they expressed concern that if the yuan rises further it could hurt their business.
"If the yuan goes higher, it will be a problem for us," conceded one woman, who was selling tires.
The Chinese currency already has appreciated slightly – two to three percent – since the early summer. But as the dollar has tumbled, most other major currencies have appreciated far faster.
Most countries allow their currencies to fluctuate relatively freely, but the Chinese authorities set the rate.
This has rankled Washington, but also other emerging economies which compete directly with China for exports. Several are now looking at ways of stemming the rise of their currencies – hence the rumblings of a looming currency war.
On Friday, the U.S. Treasury delayed a report that was expected to label China as a country that keeps its currency artificially low to gain an unfair trade advantage. The report, which would have been like throwing lighter fluid on an already volatile trade dispute, is now expected to come out in November, after a G-20 summit and long after the U.S. election. China’s currency has become a hot-button issue in U.S. domestic politics, with some blaming China for lost jobs in the U.S.
‘Next move for me is India, not Indiana’
But even if China did allow its currency to strengthen sharply tomorrow, would that help the U.S. deficit or bring more jobs to the U.S.? Not necessarily.
It could boost U.S. exports, but apart from aircraft, there are not that many U.S. goods in big demand in China. And it wouldn't bring back lost manufacturing jobs.
"I don't think the U.S. will ever produce low-end manufacturing goods again," said Dong Tao, Managing Director, Non-Japan Asia Economics at Credit Suisse in Hong Kong.
He told me the looming currency war is the result of the dollar "falling off a cliff" not Chinese manipulation. "The problems in the U.S. will not be fixed by the Chinese exchange rate," he said, blaming loose U.S. monetary policies.
"It’s U.S. deleveraging of debt, and the need to increase savings and competitiveness that will matter."
Ben Schwall was even blunter: "Even if all the factories here burned down tomorrow, it’s not going to bring the lighting industry back to America."
Schwall is veteran import-export broker, who knows southern China well. He sources light fittings for U.S. retailers, but is always on the lookout for business opportunities. He says costs are already rising in China because of sharp wage rises. "If the yuan appreciates and China loses its competitiveness then the next move for me is India, not Indiana."
That is the reality of a cost-sensitive business surviving on low margins, which covers a good deal of the products on display at the Canton Fair.
Walking the pavilions here does leave you rather in awe of China Inc.
Yes, they are helped by a distorted exchange rate. And that does makes an easy target in the run-up to the U.S. election. But finding a realistic rate for the yuan alone would not solve America's economic problems.
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I think we could easily be in a better position globally if we pulled together but we seem to be diverted blaming politicians, other companies and especially China. The party in power tries to do something while the other party tries to block anything because what matters here is who makes it happen, not how good is it for the country. No matter which party is in power, the struggle is always the same.
If they spent all their energy finding what is good for the country instead of attacking each other things might be different. I don't care if it is Republicans or Democrats who make it happen. When did the political system became a popularity contest? It never is any more about who can get the job done. If you know how to slander and twist the news, you are good to be a politician.
I guess the problem is to educate the populous to truly read and understand the Declaration of Independence. We have almost reached a point where we need a revolution. The only thing that will allow these 'evils' to continue is for good people to remain silent because they have something to lose if threatened by the perpetrators of these evils.
WTF? Read the Declaration of Independence? Huh? What a pantload. Get real.
Better yet, get serious about looking past your backyard and out into the real world of today.
Americans need to invent, develop, design, sell, distribute and engage a global marketplace.
And stop trying to make Obama the reason for your personal failures, and a grab-yer-gun mentality will only get your A55 blown away or locked up. You are now officially part of the problem.
Prickly Pixel-1557122
And that is why Democracy cannot compete with Autocracy.
BeauBenn What he means, I believe, is that we must visit the boardrooms of America, invite the inhabitants outside, and hang them, although I would much prefer the guillotine. And we don't 'drop' them, we lower them slowly so they can feel some of the slow death they have contributed to America. Rob-2715084 is more polite than I am or has not carried the thought out as far as is necessary. Our elite is out of control and they will suck us dry unless we ask them nicely to stop. But being essentially perfect sociopaths and regarding us much as Marie Antoinette regarded the French peasants, Cake time, Bro! And we feed their heads to the pigs. Their families we turn over to white slavers in Africa and the more primitive areas of Asia for reeducation. The sooner we do this, the sooner America begins to heal and be restored to some measure of what the Founding Fathers intended and not this lopsided, purposely split Lord and peasant mess we have now.
They have given our productivity away to steal a few extra shekels and have destroyed our economy in the process, stealing anything left with fraudulent financial practices. If you don't have the feeling of being prey, then you are either one of them, one of their treasonous wormtongues, or are already living in China. Remember the most pertinent quotation here: "Give me control of a nation's money, and I care not who makes its laws." Kill the person who said this and every last one of his descendants and their sycophants and Voila! the Fed will disappear and a great parasitic weight will have been lifted from our heads. But, we have no group level Penicillin, do we? There is not much we can do when we do not really believe that it is US who OWN this country, not the rich. They are just thieves and con men. As you suggest: "Americans need to invent, develop, design, sell, distribute and engage a global marketplace." And after you do, your work will just be stolen from you.
Do you REALLY think that America is 'different' from any other social structure seen in human recorded history? This is how they die, Sir, exactly the elite rat farm we see in America today. It's the most common cause of societal death in our thousands of generations of living in these hierarchical social forms. We are obligate communal mammals (see mole rats) and it is just part of our biology. Alas, the cure is, as well.
Our manufacturing jobs are NOT coming back. How could they? Our productive infrastructure is all but gone and the cost to rebuild it is prohibitive. As Napoleon said of Britain, we have become a nation of shopkeepers, selling foreign made stuff to ourselves. Yes, we will continue to export aircraft and earth moving equipment for a while longer but, sooner or later, that, too, will carry a "made in China" label. Even Paul Volcker said recently that we have reached the point at which our economy cannot be sustained solely through consumerism. It's a sad situation, really.
Already China has gleaned western technology from Boeing and Airbus in licensed manufacturing producing aircraft and plans on starting production of a Chinese regional jet to compete in that segment. China will eventually progress to larger aircraft and compete in the longer haul segments the US and European plane manufacturers lead the world in currently. India is not far behind and has a regional jet on the drawing board.
The last remaining industry the US leads the world in is slowly being reduced, first by the French and the Europeans and now the Asians. The US needs to invest heavily in this industry to keep it number 1. There must be at least one industry the US can lead the world in and command world-wide demand for that expertise.
Don't forget that the manufacturing infrastructure in China was built with mostly foreign investment in China. And it was built in only a couple of decades. If the cost rebuilding that infrastructure is prohibitive, why wasn't it prohibitive in China two decades ago ? And is Made in China goods today of the same quality as the stuff that was made in Germany twenty years ago ?
See? China is the problem, not Mexico.
Mexico is also a problem. Cheap goods from China and cheap labor from Mexico are both cotributing factors to the economic downturn, along with bad real estate policies from the banks.
Right, blame the banks for everything. You didn't suspect that 20 minute mortgage refi's were healthy investment strategies? People give banks money to invest for them.
Instead of begging China to revalue its currency, why Can't America devalue its own currency so that it can export those typical American made BS artists, especially those useless BS artists in the government. Don't tell me that they are not artistic enough and good enough for export.
"Why can't America devalue its own currency"? We can. But we choose not to simply because it would raise the cost of everything we buy.
The US is absolutely doing its uttermost to devalue the dollar by printing 3 trillion dollars of new money in 3 years. It is easy to miss in the news because the Fed action is camouflaged with a euphemism: "Quantitative Easing". Do a google search and you will find that this is pretty much the only thing Bernanke have talked about in recent years.
By the way, this QE thing is a real abuse of the dollar's status as the world currency. The world does not need the US to stuff its own pocket with $3T. In fact, the US takes this cheap way out in order to avoid the pain of structural changes and some deflation (think Greece and Ireland). The dollar depreciation also lessens the real burden of the national debt. But everyone else's currency has to go up as a result, and a scapegoat is needed. This is where China comes in handy...
Good comment
US just did, with QE2.
No matter how you look at it, the current US Recession, a 40 year history of trade deficits, global warming, a failing education system, and an inability to balance the federal budget prove beyond a shadow of a doubt that capitalism ain't workin. China is a successful mix of socialism and capitalism. They also have had the great blessing of not having to deal with the reactionary forces of Republican Party or Monetarist Economics. Bush and Company bankrupted the USA with unneeded wars and an unwillingness to deal with the energy crisis. American Companies have helped make China into an economic super power, just as they helped Hitler build Nazi Germany before the Second World War. With economic power comes military might. An armed confrontation with China may come in the not too distant future. A positive outcome for the USA in light of current circumstances does not look likely.
An armed conflict may be possible and this has me worried. The US cannot defend itself from a power such as China as the US has lost it's industrial base and, as you mentioned, is bankrupt. We cannot ask China if they would lend us money to fight them in a war and this scenario is possible as the world is running out of natural resources and raw materials and China is the biggest consumer of these. The rest of the world needs these resources as well and I fear that one day the war to end all wars will happen for the third time.
skyrider - you seem to have left out the democrats in your equation as well as the american consumer in demanding products at the lowest possible cost and environmentalists demanding clean air and water and unions (both public and private) that want increased wages for their union leaders and benefits for their rank and file at the expense of the taxpaying populace earning their income thru private enterprises ( the real generators of taxable revenue).
Let me recap, the democrats, the american consumer, environmentalists and unions...Any responce as to why you have excluded these factions?
Can you explain which part of the Chinese system is "socialist" ? All I see is state capitalism in an authoritarian state. Zero socialism.
Some of you folks need to settle down and stop all the paranoia. Armed conflict? Sit down.
Try turning off FOX news and Glenn Beck, I'm sure your boatload of BS fears will disappear quickly.
We survived eight years of George Bush, the economy IS getting better - it's a fact by every measure.
You can't fix eight years of Bush in two years. Some of our jobs will never return. Everyone still unemployed better start getting creative and find a niche, fix a problem, invent something or they're gonna be jobless forever. No sale able skills? Get some.
An the moronic notion that Democrats are responsible is another pantload. We left you a surplus, remember?
So we are reduced to blaming China for looking after its own interests as a priority???? So China is supposed to adopt America as some sort of retarded step-child?????? Every time you see the term "yuan" used like this, you can be certain that the author has no idea what they are talking about. The "Yuan" is a unit of account while "Renminbi" is the actual currency. It is the renminbi that is valued in different ways for different reasons. They use one exchange rate when we buy from them, a higher one when they buy from us, a still higher rate when Chinese citizens "buy" dollars, and a still higher rate when foreigners buy reminbi with euros or dollars. It's their currency and they can do anything with it as they damn well please.
They are not holding a gun to our heads to make us buy from them, to make us sell to them, for Chinese citizens to come to this country, or for foreigners to go to China. We all do these things willingly. Even my Chinese friends complain about it because they have to buy dollars at a disadvantageous rate and then buy reminbi for an even more disadvantageous rate when they return to visit.
The actual differences are far, far, far below what American banks charge their own customers (including merchants) for using their credit cards or ATM cards.
If we don't like the rate of exchange (even though it has been slowly rising in our favor) we have two choices: 1) impose equalization tariffs, or 2) don't buy the goods. It would also be easy enough to start inspecting key goods so thoroughly that it took them months, if not years to make it through customs. Other countries have done this in the past. Or we could just inflate our currency so badly that it equalized Chinese currency. Of course, with the latter course every person in the U.S. would take both a pay cut and a tax increase.
Yep. It is their currency and they can do what they damned well please. That's why I think what the Fed Reserve is doing now just the right thing. It is our currency and we do what we damn well please. Currency exchange rates happen to be a relative thing. You don't have to raise yours, but I can lower mine. Same effect, but we are in control. Sure, price of import goods is going to rise. But that's exactly what is needed: rising import prices will reduce amount of import. It also lower export prices to increase exports too. Surely it doesn't help other countries competing with China in exports, but US must help itself first, before it can take care of the rest of the world.
"But finding a realistic rate for the yuan alone would not solve America's economic problems."
But it is an excellent start!
Anyone looking for one single measure to solve America' economic problems is past the best before date.
I said it before and ILL say it again BUY AMERICAN, THE JOB YOU SAVE MAY BE YOUR OWN . This was a common saying years ago , I guess no one was listening , CAN YOU HERE ME NOW ?
Least amount of words but the smartest post here.
I can't "here" you now, but I can hear you now.
Smartest post? WTF?
Can you learn to spell? It's HEAR me now, not here me now.
You wouldn't by chance be unemployed. . .would you?
"If the yuan appreciates and China loses its competitiveness then the next move for me is India, not Indiana"
This sentence explained it all about the Chinese currency issue, which is not an issue at all.
I am fortunate enough to afford the privledge of not buying Made in China as much a I can, and I buy a lot. Chinese made products are almost always junk. Clothes poorly sewn together, motorized tools burning up fast, toys shoddily put together, and the list goes on, I know you've all experienced it. I'm at the point where I refuse to shop at Mega-Marts or the Chain Hardware Stores. If you can afford it and spend a little time looking you can still find many durable American made products. And I don't mind paying extra for quality, saves me in the long run. You can talk all you want about Politicians, the dollars value, world economys and such but what it all boils down to and the only thing thats going to save us is You and I spending and keeping our dollar right here in the USA.
Thank goodness another intelligent individual trying TO DO THE RIGHT THING. I salute you because I try very hard to do the same thing. If only millions did the same we would regain our self respect and our country would prosper again. As long as fly by night shysters continue stealing the wealth of this country and deposit it in China we will be THEIR SLAVES. DO NOT LET THIS CONTINUE!!!!!!!!!!!!!!!!!!!
And I as well, but we must face the fact that there are no American made products out there anymore so I am buying American brands as much as possible which is counter-productive in a way because these companies are the ones who started all this to begin with!
When you see "Made in China", all it meant is "Assembled in China". May be the casing is made in China, and the boxes it came in. But the parts can be made anywhere. Including the US.
But it is always a good idea to buy US, or, at least, buy quality.
You folks are making a BIG mistake thinking that the Chinese cannot make very high quality products. Remember when we said that about the Germans, then the Japaneese, then the Koreans?
The Chinese are already making many VERY high quality products.
Folks, it's 2010. It's not necessarily about factory jobs and a quality argument. Americans lack unity, focus and purpose.
We're too busy pointing the finger at each other while the Asians are saying, screw that, I'm gonna make blenders, or chairs, or solar panels. That thought process eludes Americans.
We've been dumbed down and the real bad news is - we paid for it.
People stunble over the truth from time to time, but most pick themselves up, and hurry off as if nothing happened,...
"Those that live by the sword die by the sword". China is the "big dog" on the block NOW but as soon as their people realize what has been done to their country by communist doctrine and work manipulation only favoring the certain few in autocratic power there will be such a revolution the earth has never seen before. The Chinese communist empire will fall from within just by the sheer hypocrisy of their leaders. We have the same happening here only it is the people against corporate theology, and it has been given the human prerogatives of POLITICAL CONTRIBUTIONS without the responsibility of human feelings, only greed.
Hmmm. Now we have international trade economists here on the vine? LOL. Let me tell you, 30 years ago everyone was saying Japan was going to swallow us. Now, its the Chinese.
Let me give you a perspective. If the American public stopped buying stuff for one week, most of the world would go right in the crapper, China included. We are the consumers of the world, and we control the markets. The problem is, no one has the power to control the American consumer. If anyone ever does, they would be the most powerful person in the world.
The one problem with your comment here is that years ago the US was stronger economically. The US has been "bleeding" money for some time now be it dollars for oil, illegal drugs and consumer goods. I believe in the "pie" explanation, there is only so much wealth in this "pie" and the US has been handing out slices of it to foreigners with much of it never returning. The wealth pool is shrinking here in the US and someday the world's number 1 consumer market will shift from the US to China and they will have this power.
look at the trend of years gone by, made in korea, made in japan, made in taiwan, now made in china.
if we leave china alone, you will see made in india or some other developing country soon enough. they are losing day by day, just not fast enough for those focused on china alone. they are a giant, but with a giant population, how long can they sustain living on consumer spending if consumers have no money?
shear raw material costs and labour costs in the west will keep industry in foreign countries, we just need to stay one step ahead and be in the right developing country ahead of time
Dong Tauo and his remark that "the US will never again produce low-end manufactured goods again" is a factual and scary statement. The US has lost it's industrial base and a superpower cannot be a superpower if it cannot produce products. The tide has changed, Chian and Inida are now the world's manufacturing powers. The US has steadily been losing in this war and jobs have been lost because of it. 300 million citizens in the US and the majority of it's people will now have to get used to working in service related jobs. The major employers will be the WalMarts and McDonalds'es and alot of Americans will have to get used to asking the question "you want fries with that?" as a career statement.
It used to be that student aged people worked at minimum wage service jobs (McD's, Kmart) for spending money, buying their first car, etc. Meanwhile the 30 and older people had careers that paid enough to support their family, pay the mortgage, etc.
Now 30 and older people try to support the family as they work service jobs for minimum wage, and student aged people are mostly unemployed.
Another illustration of how government by the corporations for the corporations has impoverished the citizens. Also points out another way unemployment is understated. All the kids of this generation that do not have a job don't show up because they never had one hence can't claim unemployment.
Do you really need a report to figure out that the Chinese government peg the exchange rate to rig it in their favor? No one doubts the Chinese government determine their foreign exchange rate. Do you really expect them to set it so it harms themselves?!?
I am American. I buy American whenever I have the choice - even if it hurts a bit. Till enough people are willing to do it, all we will do is whine.
common man.....amen
Our government should impose a "fair tariff" and put a tariff on all Chinese products that would compensate the amount they are maniuplating their currency by. We should then take this money to pay off our national debt (money we borrowed from China). We could also use this money to investigate possible human right's violations by companies in China, and any that are found to be in violation we block our trade with.
All the economic power China has is by their abuses in practices that were businessmen in the U.S. to try they'd end up in prison. The U.S. needs to cut off its economic ties to China, we are the source of their money. Honest high-paid American workers with unions will always cost more than slave labor in China.
What is lost in American is desire. Desire to start business. To start anything really. Give me a job. How about I will make me a job then hire someone. It is true large companies do control alot of the consumer market in America. However, you have a choice. Not the government, not Obama, not a political party or a corporation, but you and you alone are the one pulling out the cash and buying chinese products. Products is only what they are. So pull out your cash and buy a different product, one that says made in America. Business is an animal that searches for money. Thats it. If the money is going to American made companies more companies will pop up to get the money. That is how it works. Just stop buying chinese. Also, call or write your favorite businesses and tell them you will no long be buying X-widget and state you reason. Fire china, get a "in the trenches" American mind se about this. The business mindset that only Americans understand and get busy again. Independece, Freedom, self relience, individualism, self. Fire the bumbs, throw them out with your pocketbook and the little game will be over. Buy you sheets at the local shop again. eat at the small local dinner. Go to the independent tire shop. Buy your baby cloths at the shop around the corner. Put the china buying big suck companies on notice. You can do all this even if you are democrate or republican. Imagine that. It might cost a little more now, but it will cost everything if we dont.
Americans needs to start realizing what exactly the cause. 1.Greed! That's it! Wall Streets' greediness caused the factories gone to cheaper countries and jobs losses. As Euro zone getting stonger, we are experiencing 2. weaker dollar in this past decade, where some countries deals more in Euro rather than dollar. 3. Uncontrollable-consumerist making americans more depends on goods that already not being made here. 4. Bankers making faulty decision in housing lending caused massive problems that not just in US, but around the world. 5. Wars! Now ask yourself, Who Is To Blame? I would say, "CHINA"
Just buy American and china problem will go away. It really is that simple. A democrate and a republican can do it. Imagine that.
Where?
From the book "AN AUTISTIC WORLD (1)"
If the meaning of "free trade" amounts to substantially enlarge the capacity of exporting products on international markets, by limiting the fairness of the trade to temporary advantages and dubious conducts, the result would be that time would favor those individuals that have the will and the circumstances on their favor to eliminate the competition, and continue the estate of madness until the buying power of nations around the world is diminished enough to produce social unrest. For example, how can we place in the same estate of fairness two companies when one is saving money by dumping all sorts of pollutants in a river, and the other has to raise the price of its products when its forced to comply to restrictive environmental standards? The answer is that as long as there is a river that can be polluted, the creativity and technology necessary to develop new products and techniques will not make a substantial difference, since those capacities are easily transfer and adapted around the globe. The fundamental aspect of this example is the relaxing attitude that some governments have with their industries in order to benefit themselves by destroying Nature, enlarging in that process the market share of their products, not the ability of some companies to survive the imposition of laws. But isn't it truth that the World Trade Organization is in charged of giving some sort of equality and justice to the international trade?
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