A few days ago, Paul Krugman from The New York Times made an important observation that affects the U.S. economy as well as other mature economies throughout the world. It's the Year of The Tiger in China, and it seems that it's gone to their head. Last month and since 2004 I have reiterated the national security issues with China's escalating cyber-espionage aimed at the United States, their continual industrial espionage and over three-thousand Chinese "front-companies" that operate in the United States with the sole intent of siphoning-off American know-how and technology. In spite of knowing how China treats their own people, which isn't properly documented and televised, and their continual military/industrial espionage most American and multi-national corporations continue to do business with a country that violates every concept of decency and humane treatment that is the great dividing factor between East and West. To the western World, life has some value, but in China, power, authority, and achieving their goals trumps any vestiges of humanity that most Westerner's take for granted and they often turn a blind eye to their own citizenry on issues that if they occurred in any western country would immediately result in shutting a corporation down or fining them out of existence. When China's industry sickens their own people, they actually punish the people seeking medical attention and turn a blind-eye to the perpetrator of the crime(s) and American, multi-national, and Chinese corporations reap extremely high profits from human suffering and the poisoning of entire communities.
Taking On China
By PAUL KRUGMANPublished: March 14, 2010Tensions are rising over Chinese economic policy, and rightly so: China's policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done.
To give you a sense of the problem: Widespread complaints that China was manipulating its currency -- selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China's exports artificially competitive -- began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account -- a broad measure of the trade balance -- of $46 billion.
Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion -- 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.
And it's a policy that seriously damages the rest of the world. Most of the world's large economies are stuck in a liquidity trap -- deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can't offset. MUCH MORE- Advertisement -
As noted above, it is not only the United States that is bearing the brunt of China's continuing currency manipulation, but economies throughout the world. Paul Krugman is not the first to point out this disparagement, nor will he be the last; several well known economists have written about China and how undervaluing their currency is affecting economies on a global basis:
WASHINGTON -- President Barack Obama faced growing congressional pressure on Monday to get tough with China over its currency practices, one day after Chinese Premier Wen Jiabao brushed off accusations that Beijing was undervaluing its currency for an unfair trade advantage.- Advertisement -
"The impact of China's currency manipulation on the U.S. economy cannot be overstated. Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors," 130 lawmakers said in a letter to U.S. Secretary Timothy Geithner and Commerce Secretary Gary Locke.
Many economists estimate China's currency is undervalued by 25% to 40%, giving it a huge trade advantage by effectively subsidizing its exports and taxing its imports. LINK
In the last few years we have witnessed a constant barrage of unsafe products and even food items that have been manufactured in China that have caused, and have/had the potential to cause pain and suffering to our children and even the death of our pets in the United States. Chinese industrialists have not targeted the United States in particular, and greedy companies operating in China have harmed their own citizens as well as those throughout the global community. In November of 2009, many people should remember this story, but Chinese "justice," if there is such a thing, apparently is lopsided and it depends on "who" is harmed whether or not the leaders in China choose to prosecute individual companies that cause harm to their own citizens:
China executes two over tainted milk powder scandal
China has executed two people for their role in a scandal involving tainted milk powder that resulted in six children dying, officials have said.
More than 300,000 other infants were made ill from milk powder contaminated with melamine, an industrial chemical used to make plastics and fertilizer.
Zhang Yujun and Geng Jinping are the only people to have been executed over the scandal, court officials said.