Even though the Chinese economy is growing at a 10% pace while the United States economy is growing at a 2% pace, Federal Reserve Chairman Ben Bernanke could not resist telling the Chinese government how to run its economy. His remarks appeared in his November 17 2010 speech in Frankfurt Germany. He lectured China:
(C)ountries that maintain undervalued currencies may themselves face important costs at the national level, including a reduced ability to use independent monetary policies to stabilize their economies and the risks associated with excessive or volatile capital inflows.... Perhaps most important, the ultimate purpose of economic growth is to deliver higher living standards at home; thus, eventually, the benefits of shifting productive resources to satisfying domestic needs must outweigh the development benefits of continued reliance on export-led growth.
The trouble is that it is the United States which is having difficulty in stabilizing its economy, not China, and the "ultimate purpose of economic growth" may not be higher living standards at home." Nations have other goals like dominating their neighbors, as Japan, the USSR and the Nazis had before WWII. Even the U.S. had dominating the Americas as an obective during the late nineteenth and twentieth centuries.
China is running huge trade surpluses (about 5% of GDP) because it is concentrating on growing its national power. And it has the help of hundreds if not thousands of multinational corporations. Her trade surplus is largely made up of the products produced by multinationals in China, including high tech products like computers, televisions, cell phones, and automobile parts. The list of companies looks likes the Who's Who of the industrial world! And make no mistake, their factories -- really co-factories -- are Chinese. The Chinese have learned from Stalin's mistakes and understand, as Lenin did, that the capitalists in their greed will provide the rope to hang them with! Recently, Andrew Grove, a founder of Intel, warned his fellow high-tech companies, like Apple, HP, Dell, and many others, that their outsourcing in China foretold a coming disaster for the U.S., noting that most had ten times as many employees producing their products in China as they did in the United States.
Although Bernanke thinks that China is sacrificing higher living standards through its present policies, he is incorrect. While hundreds of millions in the provinces have not participated in its economic growth, millions of Chinese workers have reaped substantial benefits. China has a significant middle class. It is the United States that is seeing its living standards decline and its distribution of income worsen as a result of the loss of factory jobs, all because Bernanke and America's other economic leaders don't understand the negative effects of our chronic and escalating trade deficits