Re: [TNF] Re: [A-List] US Imperialism: Scapegoating China

["Gary Santos" <evs@xxxxxxxxxxxx>]

Henry and Melvin,

My understanding of what happened and what is happening differs, it appears.
I'm not sure of the dates and the exact numbers but I believe Yuan 5 to Yuan
8 occurred in 1995. In the aftermath of dollar flight of the region, a
second round of competitive devaluations in the region came about as US
imports from China accelerated to the detriment of other countries. For
example, the Philippine peso initially went to 38-40 from 26 then to the
50's from 38-40 starting in 1999. The same could be said for other regional
currencies.

And, the displacement was not only felt in the export sector. It was also
felt in the domestic economy. The effect on Philippine manufacturing was
plain to see with batteries coming in selling for 60 pcs for a dollar,
underwear at 3 for $0.30, tools and gadgets for $1, China decor etc. I was
tempted
once to take a digital photo of the shelves of goods coming in from China to
show the three egroups what was happening in Manila.  Nice delft china for
$2! I have not visited ASEAN for years but I dare say that cheap China
made manufactures not only flood New York sidewalks but that of other
countries. A sock manufacturer catering to the domestic and export market
recently closed as it could not keep up with
Chinese socks. I understand the EU has made moves to protect its domestic
market from Chinese imports. China's growth is certainly not coming from its
domestic market wages increases notwithstanding.

The matter is not as simple as an exchange rate issue and I will be the
first one to say that China should not be used as a scapegoat. Each country
pursues its self-interest. It is in China's interest to maintain its
competitive edge and has done so utilizing exchange rate policy. China has
learned well from the U.S. The US wants its exports more competitive so it
wants some give from the market leader.

Melvin P./Waistline made a comment on the A-list on this same thread, "The
lower and lowering standard of living in America is the result of government
policy that protects the economic interest of capital in the hands of
private individuals." I certainly can see why he said so as government
policies internationally appear to be in favor of Capital. And, is this not
the same case in China? I have no figures to present but my Chinese friends
who travel back and forth tell me that China is no different from any
capitalist state -- there are those in power, they are rich and getting
richer and the minimum wage over there is approximately one half of the
minimum wage in the Philippines given current exchange rates. Indeed, the
30% increase that was mentioned by Henry was sorely needed. The person who
told me this, in fact, went to China to put up a steel cabinet business
there and added that one advantage is that one could hire and fire as
needed.

But, I'm not here to bash China, Melvin. To cite a need to adjust the Yuan
is one thing. To say it will solve poverty is quite another. The causes of
poverty are legion and even if the Yuan was made to appreciate, a point you
make also, the poverty situation would nevertheless continue. But, I submit
that there is a connection between the US cost of living and China's
exchange rate.

Lastly, a refocusing on domestic development is probably what East Asia
should do. I doubt if FDI of significant amounts like the 1990's are there
waiting in the sideline with overcapacity in the world as it is. There is
one problem though. "Refocusing on domestic development" has so far taken
the form of deficit spending. I'm not sure if that implementation can be
sustained for long.

Gary


----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <TheNewForum@xxxxxxxxxxxxxxx>
Sent: Friday, September 19, 2003 10:52 AM
Subject: Re: [TNF] Re: [A-List] US Imperialism: Scapegoating China


> For years after the Asian Crises of 1997, the RMB was overvalued and
> stayed overvalued for the good of the regional and golbal economy. Yet
> Chinese export did not fall.  The Japanese yen rose from 350 to 115
> without any impact of Japanese export.  The export sector of China is
> 60% or more controlled by foreign capital.  China raised domestic wages
> by 30% a year in the past three years, but was powerless to raise wages
> in the export sector.
>
> The market cannot and does not determine exchange rates which are all
> determined by government policy.  The main reason the euro is rising
> against the the dollar is the interest rate spread between the two
> currencies, over 100 basis points.  The spread is the result of the Fed
> and the ECB interest rate policies.  The job loss in the other economies
> of Asia is the result of the free flow of international capital, not
> Chinese policy. Malaysia and Thailand with its capital control fared
> quite well.  Beside, intra Asia currency swaps are developing rapidly.
>
> Even if the RMB is revalued 40%, its impact on the wage differential of
> several thousand per cent is negligible.  Jobs in the Chinese export
> sector will pay 60 cents and hour rather than 50 cents.
>
> The current scapegoating of China is good if it ends with China (and the
> rest of Asia) re-evaluating the wisdom of its dependence on export to
> re-focus on domestic development.
>
> See:
> America's selective strong dollar policy
> By Henry C K Liu
>
> http://www.atimes.com/atimes/Global_Economy/EH14Dj02.html
>
> Gary Santos wrote:
> >>The solution is rather simple.  Pass a US law to rewuire US companies
> >>which manufacture in China to adopt a minimum wage policy matching the
> >>purchasing power parity equivalent of US minimum wage.
> >>
> >>Jobs that pay 50 cents an hour are not going to come back to the US, nor
> >>would the US want them back.  The US labor unions are barking up the
> >>wrong tree.
> >>
> >>>The latest economic battle between the two countries concerns the U.S.
> >>>federal government's displeasure with China's currency, the Yuan or
> >>>Renminbi, being pegged to the U.S. dollar. Treasury Secretary John
> >
> > Snow's
> >
> >>>visit to Beijing earlier this month boosted the hope of many furious at
> >
> > the
> >
> >>>Chinese for what they see as an artificially cheap Yuan. Snow's subtle
> >>>admonitions that the Chinese float, or at the least widen the band
> >
> > within
> >
> >>>which their currency can float, went largely unheeded.
> >
> > -----------------------------------------
> > Henry,
> >
> > But, the yuan is indeed undervalued and is held there by policy. The
> > ramifications of an undervalued yuan, before reaching America, first
affect
> > China's near by neighbors in East Asia. Jobs are lost to China and a
much
> > lower standard of living resluts as currency exchange rates compete with
one
> > another.
> >
> > No one has the moral high ground. Jobs at $0.50 an hour can be argued as
> > exploitative. One can even conjure up some rhetorics: China should raise
> > their minimum wage. The families that control China are merely enriching
> > themselves, exploiting their working class. Income and wealth disparity
in
> > China is comparable and may even exceed that of other countries.
> >
> > Gary
> >
> >
> >
> >
> >
> >
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