The U.S.-China Business Council is busy distracting Washington from our massive problems with China trade. “Nothing to see here, please move along… oh, look at that shiny thing over there!”
They just produced a report stating that nothing is wrong with our China relationship.
US exports to China continue to grow. China is the United States’ third-largest export market, behind only Canada and Mexico. We need to build on our success by pushing for further market openings for American companies doing business with China.
It’s the “export only” view, and the refusal of the “net export” reality, that keeps getting us underwater. Before the Great Recession, China was about one-third of our trade deficit. Today, they are almost 50% of our trade deficit. Imports grow much faster than exports. Its the “net” that matters. Because net imports are a drag on GDP while net exports increase GDP. Any economist that tells you otherwise is either stupid or paid off.
Then they say China’s currency manipulation is not an issue. “Time to move on.”
China’s currency: Time to move on. Yes, an exchange rate that better reflects trade flows is important. Yes, a multilateral, comprehensive look at global imbalances is necessary. But China’s exchange rate is not the significant factor in the US trade deficit or US employment that many make it out to be. The renminbi (RMB) has appreciated over 30 percent against the dollar since 2005. Let’s move on to issues that do matter.
China cut its currency valuation by 40% in 1994, held it low for a decade, their economy grew by double digits during that time (supercharged by exports resulting from the policy), and the US China Business Council thinks a 30% appreciation 20 years later fixes it? Economic malpractice. Nobody, and I mean nobody, believes China’s currency is fairly valued. And the Peterson Institute for International Economics, hardly a populist or aggressive nationalist organization, say that currency manipulation by China and others is the biggest threat to the international monetary system. Indeed they advocate fighting back in an actual currency war by the U.S. Federal Reserve and by other aggrieved nation’s central banks.
The U.S. China Business Council is a club of U.S. corporations offshoring to China, making money from buying predatory priced Chinese inputs, and don’t want any change to their game. That organization is a part of the problem. Believing the opposite of what they say is generally the best practice.