China Begins to Question Whether It’s Ready for a Trade War
bloomberg.com
bloomberg.com
If you cant build your product because a component you relied upon is now 25% more expensive, you're continued existence is predicated on having deep reserves. Many smaller companies don't and even the larger ones will have to implement deep layoffs relatively quickly to conserve resources as they won't know how long the trade war will last.
This in turn will have an effect on the political situations in both countries although primarily America as its the democracy. Globalization and the economic relationships amongst nations now has a direct effect on the internal politics of those same states.
The poster child recently for this sort of thing was the US pumping out hundreds of thousands of bbl of oil to create a glut and push prices down. This hurt some of our middle eastern allies but it hurt Russia much harder. It is sort of a sanction without a sanction, rather than tell people they can't buy Russian oil, push the price of oil down with your own supply so that the Russians can't use it to prop up their economy.
The article talks about how this action undermines the Chinese leadership by taking money out of the pockets of people who are needed to support the status quo. It also puts pressure on their economy for which they have limited options for correcting. They mention adjusting the exchange rate, which might work but that percolates through the economy in hard to control ways.
And, in fact, oil's lowest prices were met because OPEC, with Saudi Arabia leading I think, continued massive production even as global supply increased, to drive the price down to the point that shale oil is no longer profitable and put shale oil companies out of business.
Yes. See: http://money.cnn.com/2016/01/29/investing/us-oil-exports-beg...
Look at the date of the article. And it worked.
You don't have to compel companies to do things, you can arrange the world such that they want to on their own.
> you can arrange the world such that they want to on their own
The US government didn't arrange for the oil to be in the shale. I don't know if it funded research into cheaper extraction from shale or if the companies figured that out on their own but even if they did, there are much better reasons to do so than hoping to screw with Russia at some point in the future.
[0] https://en.wikipedia.org/wiki/Renminbi_currency_value#Histor...
You don’t have to be a conspiracy theorist to see that we’ve been sold out. At the very least, “Made in China” is a curse that the general conspiracy of corruption has put on us. In my opinion though, all the major world leaders are puppets who’ve been bought and paid for and are easily controlled.
I know HN hates conspiracy talk but IMO the unity of opposites dictates that if there are altruistic groups of people, there are evil groups of people and it’s not that far-fetched to believe that some rich and powerful people might get together and try to rule the world once in a while.
However, one can deduce that the dictator is running scared. The stock market has fallen 25% this year. Yuan has fallen 10%. There's a 400 billion tariff coming his way, and because of 'saving face', there's no way he will back down. He has to prop up the real estate bubble:
"price rose 31 percent to nearly $202 per square foot. That's 38 percent higher than the median price per square foot in the U.S., where per-capita income is more than 700 percent higher than in China." https://www.bloomberg.com/view/articles/2018-06-24/why-china...
and he has to also unwind China's 12-18T shadow banking, China's version of subprime loans similar to 2008 crisis (but way bigger). He has to figure out how to steal IP to move up the chain when US and the rest of the world has upped their defense, restricting Chinese tech investments and resisting hacking attempts. He also needs to deal with the tariffs encouraging manufacturers to leave China and go to southeast asia or back home via reshoring or automation. There is also the matter of a lack of consumer market in China, after it gets shut out of US and europe. Not much Chinese consumers can buy after $800/month income, after paying most of it to mortgage and inflated food prices.
I think they could get what they want out of these deals and human rights would remain the same or worse and they wouldn't care.
Honestly, I think he's just a troll, nothing more complex than that. They don't represent what Trump will actually do but I'm certain they do represent what he thinks, and what he wants to do.
The U.S. debt to China is $1.19 trillion as of March 2018. That's 19 percent of the $6.29 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $21 trillion national debt is owned by either the American people or by the U.S. government itself.
https://www.thebalance.com/u-s-debt-to-china-how-much-does-i...
Also:
China held around $1.17 trillion of Treasuries as of the end of January, making it the largest of America's foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve.
from https://www.reuters.com/article/us-usa-trade-china-treasurie...
Of course that analysis leaves out the skills, experience, and intellectual property they also got. That's more significant than dollars.
Both nations are tied pretty tightly together in trade.
Put another way: one way, the easiest for the US, to reduce the deficit is to reduce consumption. This will happen more or less automatically with increased prices.
Another way is for the dollar to tank, which will also reduce consumption and increase exports.
The ideal situation (for Trump I assume) is to keep a strong dollar, increase exports, keep consumtion high and get the financing the US wants. It is difficult to see how this can be achieved, or whether this is fair for 95% of the planet's population, most of which are poorer and work as hard or harder than americans.
1) The Fed won't simply buy them all up, then unwind their position over the next few years.
2) China won't be subject to extraordinary DPRK-like secondary sanctions, minimizing China's ability to trade with those dollars and thus limiting the inflationary effect of those newly-printed proceeds.
3) The US will not retaliate with other coercive measures, like sector-wide sanctions on strategic Chinese market sectors, elimination of MFN status, removal from WTO, military pressure in the South China Sea, etc., which combined are likely more than enough to dissuade China.
It would certainly be an escalation and the US would respond but its pernicious in its attack of the free market values of the US. Any response would be tacit admission that there are flaws in the capitalist system and as a result it would be more subdued than otherwise.
Any attack would not be motivated by money. It would be a striking blow at a weak US to knock it down from its super power perch.
I also don't see how a US response is somehow an attack on free market values. Dumping $1.2T of Treasuries onto the open market is not normal market activity. It's an attempt to manipulate and distort the market.
China wants to surpass the US, but while such a stunt might harm the US, it would do immense damage to China. I think it would be more like a striking blow alienating China from much of the global economy and financial system for a long time to come. That is surely not the route to surpassing the US as the preeminent world power.
So China has some disincentive to pushing down the value of the U.S. dollar lest that debt be worth less in the future, in addition to its desire to keep it up so we can afford to keep buying Chinese products.
Complex interrelationship. I think it’s safe to say there are no important issues that don’t play a role in this calculation, except human rights and environmental issues since there’s no indication that Trump would push on those anyway.
http://ticdata.treasury.gov/Publish/mfh.txt
China has $1.2 trillion, as of April 2018. Total foreign ownership is $6.2 trillion (this includes individuals, companies, countries, though it may miss some). Total debt is $21 trillion.
That's a fairly large caveat. Zimbabwe tried it and it didn't work out too well. The Weimar Republic also tried it to similar effect.
Zimbabwe has destroyed its farming output, Weimar had its industrial region occupied by France.
The US and EU have been running quantitative easing programmes for nearly 10 years and inflation is low.
It’s not pure cause and effect.
Also inflation does not just happen if you print money. The increased demand has to meet a lack of supply. Most historical cases of hyper inflation involved disruptions to supply capacity. America is not really in that position, and I suspect this is one of the reasons we see few signs of inflation these days in America.
Doesn't Bloomberg identify that their users can click on play, when it's needed.
It's annoying and it's wasting my data.
Since Reagan, maybe before, the blue collar worker of America has seen their government give in and cower in the face of unfair trade saying, "we'll make it up in services" or "your goods will be cheaper". But what good does cheap do you when you have no job and no money? They never saw their lot get better. People wonder why people are now "working poor".
When I was in middle and HS, my bus drivers and janitors (they were not "cleaning engineers" just yet), were able to raise a family with decency. No way that happens now.
As Michael Moore poignantly, albeit ironically, said, finally, someone stood up to the corporations and said, "no more". I'll stop the hemorrhaging. One AFL-CIO in PA, the other day, endorsed a Repub. As an atheist, I have to say, Good God, what happened to the Dems? They sold out the American worker in favor of the multinational, transnational capitalists. If they don't watch out, they will lose labor to Repubs.
[1]Just look at how China manages its advantage in Africa, LatAM, etc. Japan in SEAsia, Russia with Former SU repubs., etc.
I assume that you are in favour for a rebalancing in services trade too?
What about unfair IP rules due to overwhelming control of international organizations and standards?
What about unfair tax dodging by US multinationals, not paying tax on profits in the corresponding countries by abusing an international tax system made by the US for the US?
It is not that the Euro was not a threat to the dollar, it is simply that the threat was minor then, and that it was plain and simple the right thing to do: renounce to unfair advantages in order to move to a more just world.
The US continues to unfairly abuse the dollar as world currency, and dismissing this fact can be a costly misjudgment: fair for the world, but painful for the US.
[1]http://www.dw.com/en/german-companies-avoid-billions-in-taxe...
Enforced trade, fair trade, it's all the same thing really.
[1] https://en.wikipedia.org/wiki/Perry_Expedition
[2] https://www.economist.com/special-report/2003/07/10/japanese...
I'm not an anti-capitalist, but I am for protecting your own workers in the face of international shenanigans.
Also, no maternity leave, no paternity leave, no social safety net, no unions, no paid vacations, etc, etc, etc. How did it happen? It's not really that of a mystery, they just had a very long strip-tease on the workers, removing protection piece-by-piece, for the 'job creators'! you may not be anti-capitalist, but capitalism is anti-you. Anyway, I'm an anti-capitalist so that's my point of view.
To be frank, I like seeing the government doing something to protect against unfair trade practices. At the same time, I wish unions would go back to their roots and work to protect workers rather than their current raison d'etre which is to perpetuate itself.
When was the last time Unions demanded their reps push back on unfair trade?
Maybe the US led capitalism needs a rethink.
And blamimg the world for this ideology is quite astounding: the US has pushed for it for over 60 years.
And more: what do you have against 95% of the world"s blue collar workforce?
Nothing. But they are not mine. As they don't care about my blue collar sisters and brothers, nor do I care about theirs.
People think redundant blue collar workers should retrain, get new skills. That's nice. Usually the service jobs don't pay as well and it's naïve to think 50 and 60 yos have the bandwidth to retrain and achieve similar status in a new career.
EU and Japan enforce IP just as much as we do. They may be even be more stringent.
If Trump is successful in this, he has a decent chance at making it possible for blue collar whites and blacks to achieve the potential Bruce Springsteen saw in them.
Well, trade war it is then. And it might not be so easy to win against 95% of the world. Specially seeing how unfairly the US has been acting internationally: trade disputes are minor issues compared to the military and monetary abuses done by the US.
In trade, we've acted too fairly with the other developed nations.
[1]https://www.theguardian.com/business/2016/oct/09/the-world-b...
And it is quite rich to say "we have reduced military affairs": the EU is suffering a massive migration crisis caused by the lie-based military intervention in Irak over 15 years ago, while the US refuses to take any of those migrants.
Most migrants come from Siria. And little matters which american polititian is to blame for this crisis: the US is mainly responsible, and unfairly does not play any role in mitigating the consequences by taking refugees.
Germany has taken close to 1 million, Turkey 3, Libanon has a 50% population increase. How is the US stepping up to the plate?
Europe contributes to the drug trade in Mexico whose instability leads to illegal crossings into the US. Over the years we’ve taken more millions. We don’t ask the EU to “do its part.”
Extremely unfair.
This approach mirrors what the US and Soviet Union pursued during the cold war by winning favors through a mix of economic assistance and direct foreign investment. It's a parallel game whose fruits will pay off in the long term, when China reaches its post-industrial stage, and has to use its network of connections to ensure continued prosperity for its people.
However, China has been playing behind the US back for too long. Tech espionage, hacking, trade to a certain extent as well. China is not a developing economy as most think. It is already a superpower.
This is actually pre-emptive war. No weapons, but at some point the US had to act while the odds were still in its favor.
IF you played Civilization, any strategy game - then you know what I am talking about (or history books).
>> Loans - But China has tons us US debt!?!?
-Yes they do - do you know the best part about an IOU? you guessed it I - O - U. its paper debt. So better not upset me.
-Both nations are interlocked in a dance. US spends China Makes. But China also has stolen tons of tech. Nuclear weapons, ballistic missiles. Hacking.
-Talk to anyone in the armed forces. The sentiment is bad. There is more going on in the background than we all know.
-Talk to anyone over beers in the armed forces. They will say its long over do.
What do I think? who cares what I think.
cheers.
(TPP)