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Evans-Pritchard on China
Howard Richman, 1/24/2011
Ambrose Evans-Pritchard has a great commentary in the London Telegraph today (Appeasment is the proper policy towards Confucian China). He comes to a different conclusion than we do, but faces the facts squarely. He writes:
The political reality is that China’s export of manufacturing over-capacity is hollowing out the US industrial core, and a plethora of tricks to stop Western firms competing in the Chinese market rubs salt in the wound. It is preventing full recovery in the US, where half the population is falling out of the bottom of the Affluent Society. Some 43.2m people are now on food stamps. The US labour force participation rate has fallen to 64.3pc, worse than a year ago. Only the richer half is recovering.
The roots of this imbalance lie in the structure of globalisation and East-West capital flows – and no doubt the deficiencies of US school education – but China plays a central role, and this will not tolerated for much longer if Beijing is also perceived to be a strategic enemy. China’s economic and military goals are in conflict. One defeats the other.
The undervalued yuan is merely the visible tip of the mercantilist iceberg, and is a diminishing factor in any case as leaked dollar stimulus from the Fed’s QE drives up Chinese wage inflation. What matters is that China’s entire credit, tax, and regulatory system is geared towards subsidised capital for exporters.
In his article he argues against military actions that are deliberately taken to provoke China. He doesn't discuss what we advocate, economic actions that will stop China from growing at our expense so that we grow along with China.