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China Welcoming, Warning United States on Trade, Currency

Written by SuperUser2.

In one breath, Chinese officials seem to be telling the United States that it would welcome more American products into the nation, but in another, an economic expert at a state-run think tank warns the United States would making a serious mistake by starting a "trade war" over currency valuation and the rising trade divide between the powerhouse nations. Either way, trade relations between the nations appear increasingly strained, perhaps in part from increased political posturing in the national election run-up and the newfound harder stance from U.S. Treasury Department officials on China's currency flap efforts.

National Development and Reform Commission Vice-Chairman Zhang Xiaoquiang said this week that China would welcome an increase in imports from the United States. The news followed a recently renewed anger among Washington policy-makers of the undervalued yuan giving the Chinese a decisive trade advantage and news that the nation's trade surplus hit its second highest level on record in August.

 

However, as the Conference Board's Ken Goldstein pointed out, Chinese officials never said whether there is actual Chinese consumer demand for the products that would be allowed in at a greater rate or if they'd actually be "allowed" to purchase them. Goldstein chalked up Xiaoquiang's attempt to extend the olive branch as yet another example of Chinese officials "blowing smoke." Moreover, Xiaobing Shuai questioned whether or not the eased importing would affect many sectors of U.S. production in the first place.

 

"China has traditionally used its purchasing power to make a statement---but those are mostly one-time deals and only benefit a small set of industries, such as airplanes or advanced machineries," said Shuai. "They need to purchase those products anyway, and they normally shift between U.S. and Europe depending on the political environment. I wouldn't count on it to accelerating the recovery."

 

Meanwhile, Chinese policy expert Ding Yifan, of China's Development Research Center, warned that China could initiate a selloff of its U.S. Treasury holdings, causing a surge in domestic interest rates, as the result of a American-initiate "trade war." Yifan admitted the move would be drastic, but increasingly likely if U.S. lawmakers make a hard push to enact sanctions against the Chinese government over the currency. Though such a move by the Chinese would have a significant impact, most believe the predictions and warnings are more likely a thinly veiled economic bluff.

 

"I think it is just rhetoric [and] posturing," said Shuai of the expert's prediction/warning. "I actually think China relies on U.S. consumer markets more than they admit. If the U.S. started to add taxes on China's imported goods, millions will lose jobs in China. Eventually some compromise will be made."

 

Brian Shappell, NACM staff writer

 

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