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Posted at 1:39 PM ET, 01/13/2011

Ahead of Chinese president's visit, U.S. and China trade criticism on economic issues

By Ariana Eunjung Cha

geithnerchina.jpg

U.S. Treasury Secretary Timothy Geithner walks to a basketball court prior to playing basketball with students in Beijing in May 2010. (Photo Credit: Nelson Ching/Bloomberg)

With Chinese President Hu Jintao's state visit with President Obama less than a week away, officials from both countries have been making carefully crafted remarks apparently intended to put pressure on the other side.

So far, the comments have avoided sensitive topics such as the military tension on the Korean Peninsula and human rights, which are usually discussed behind closed doors, and have focused mostly on economic issues.

The "debate" began on Wednesday when Treasury Secretary Timothy F. Geithner, speaking at Johns Hopkins School of Advanced International Studies in Washington, said that the undervaluation of the renminbi, also known as the yuan, "is not a tenable policy for China or for the world economy." The Washington Post's Brady Dennis reported that "despite the firm words on China's currency policies, Geithner offered a largely diplomatic assessment of economic relations between the two countries. He mentioned the debate that is unfolding within China about the pace of economic reforms, and he said that despite American concerns over currency issues, China's explosive economy creates enormous opportunities for the United States."

"We believe it is in China's interest to allow the currency to appreciate more rapidly in response to market forces. And we believe China will do so because the alternative will be too costly - both for China and for China's relations with the rest of the world."

U.S. Commerce Secretary Gary Locke said in a speech Thursday at a meeting of the U.S.-China Business Council that China's trade policy and its lax adherence to intellectual property laws is threatening global stability, The Washington Post's Michael Birnbaum reported. Locke noted China's growth in the world economy and its increasing openness over the last 20 years, but said that old policies of protecting domestic industries would no longer suffice.

"The gross trade imbalances between our countries... threaten global stability and prosperity"... "China's lax intellectual property protection and enforcement" and government decisions that lack transparency discourage foreign investment in the country. China and the United States should "pursue cooperation over confrontation in the economic sphere."

Chinese Vice-Foreign Minister Cui Tiankai, at a press conference in Beijing Wednesday, shifted worries about economic policies to Washington, saying that China wants "Washington to assure the security of its financial assets in the country," according to a summary of his remarks in the state-run People's Daily. China is the largest foreign holder of U.S. debt; as of October it held $907 billion of U.S. Treasuries, according to U.S. figures.

"Regarding the security of China's assets in the U.S., if the U.S. side can offer a positive statement on that then of course we'd welcome that. It's an issue we're paying attention to."

Chinese Foreign Ministry Spokesman Hong Lei, speaking at a news conference in Beijing Thursday, indirectly responded to Geithner by saying that revaluing the yuan will not solve the trade deficit with the U.S. According to Bloomberg News:

Trade imbalances between China and the U.S. are caused by many factors, including the structure of global commerce and U.S. restrictions on technology exports to China, Hong said. "We are willing to work with the U.S. in a comprehensive way to consider implementing measures to solve the problem of the imbalances between China and the U.S."

By Ariana Eunjung Cha  | January 13, 2011; 1:39 PM ET
Categories:  China, U.S. Commerce Dept., U.S. Treasury  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: White House seeks to avoid 2006 mistakes in upcoming state visit by Chinese President Hu Jintao
Next: Chinese state media sees Geithner speech in a different light than U.S. press

Comments

China is using their Trade profits to invest in the Renewable Energy Jobs and Industries of the future and grab Trillions in contracts, oil, and minerals in Iraq and Afghanistan. Forget about China’s $800 million in US currency reserves as we will print up an extra $16 Trillion out of thin air because American millionaires and billionaires are too cheap to pay enough in taxes to pay for America’s military and war sacrifices. China’s trade imbalance and hoarding of US dollars has already been paid for with the arms, legs, eyes and lives of American military men and women in the Middle East.

American men and women soldiers are dying so China can swoop in and snap up the Jobs and Resources. China gains Trillions in mineral rights in Afghanistan and Iraq Oil, while getting American tax breaks and subsidies and blocking American access to markets in China.

China's quiet power grab

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/27/AR2010092704658.html

“Look at Afghanistan, for example, where American troops have been fighting for nearly a decade, where billions of dollars of American aid money has been spent -- and where a Chinese company has won the rights to exploit one of the world's largest copper deposits. Though American troops don't protect the miners directly, Afghan troops, trained and armed by Americans, do……Chinese businessmen and engineers -- wearing civilian clothes, offering jobs -- are already more popular with the locals than the U.S. troops, who carry guns and talk security….our war against the Taliban might someday be remembered as the war that paved the way for Chinese domination of Afghanistan.”

“America fights…while China does business, and not only in Afghanistan. In Iraq, where American troops brought down a dictator and are still fighting an insurgency, Chinese oil companies have acquired bigger stakes in the oil business…In Pakistan, where billions in American military aid helps the government keep the Taliban at bay, China has set up a free-trade area and is investing heavily in energy and ports.”

Posted by: Airborne82 | January 13, 2011 5:21 PM | Report abuse

Lets not forget that in behind the huge economy is a huge army. Its been in the construction since Mao opened his mouth back in the early 1960s and said that any day he wants to he can foot 200 million soldiers. Maos 200 million lines up with Revelation 9:16s 200 million soldiers. Wikipedia says that the Peoples Liberation Army has over 300 million fighting age men available to them. The Shanghai Co-operation Organisation likewise has the looks of the military confederacy spoken about in Revelation 16:12 and called the KINGS OF THE EAST. Our fear Down Under is that all of the coal and iron ore we sell to China will one day come back as guns and aircraft. Many a solid Christian visions and prophecy speaks about asian soldiers on Australian soil. Guess who has been mentioned in some of these prophecies? What happened to America that Australia gets invaded...we just dont know.

Posted by: ChristiansOfAustraliaResistChina | January 13, 2011 5:22 PM | Report abuse

Chinese government subsidies and currency manipulation has cost Americans millions of manufacturing Jobs:

http://www.huffingtonpost.com/dave-johnson/chinese-currency-manipula_b_518951.html


1) Currency manipulation. China "pegs" its currency at a very low, or "weak" rate, so goods from China cost up to 40% less than they otherwise should.
2) Labor-rights suppression has lowered manufacturing wages of Chinese workers by 47% to 86%.
3) There is massive direct government subsidization of export production in many key industries.
4) China allows environmental degradation that ends up affecting all of us.
5) Intellectual property theft and piracy mean that American products that could be sold are stolen instead.
6) China has a number of policies that block U.S. firms from market access.

This costs American Industries millions of Jobs. Not the Walmart and dollar store product Jobs, but the big industrial multi-million dollar steel, carbon fiber and technology (Nuclear, Aviation, Transportation etc.,) products. The USA must immediately enact a gradual tariff on all goods imported from China up to 40% within 12~24 months in response to their currency manipulation that keeps the Yuan/Renminbi 40% below value.

Foreign companies in China sound off on business policies

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/21/AR2010072106001.html?hpid=sec-business

“(China) policies known as "indigenous innovation," which essentially requires firms operating here (in China) to transfer their latest technology to China; it also favors homegrown Chinese companies for government business and contracts.

A foreign company here (in China) "has to register its technology in China, innovate in China and, in some cases, make it in China." Without… safeguards of intellectual property, some foreign business leaders are worried that Chinese companies will copy their technology and use it to compete against the foreign firms in the global marketplace.

Technology-based multinational firms -- particularly those involved in telecommunications, aerospace, semiconductors, pharmaceuticals and alternative energy -- are finding China increasingly assertive and more interested than ever in acquiring their know-how. "”

Posted by: Airborne82 | January 13, 2011 5:31 PM | Report abuse

By John Pomfret
Washington Post Staff Writer

More Western nations match China's financing strategy to win contracts

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/11/AR2011011107893.html

When General Electric approached the U.S. Export-Import Bank in 2009 wanting to sell 150 locomotives for $477 million to Pakistan, there was a sense of futility. GE had already lost an earlier bid to a Chinese firm. Why would Pakistan buy American-made locomotives this time? After all, China was a powerful competitor that routinely offered low-cost financing - below-market interest rates, easy repayment terms - that cut tens of millions of dollars off the bottom line of its international deals.

But in a case that underscores a significant shift in how the United States and the rest of the developed world are dealing with the challenge of China's economic might, the U.S. Ex-Im Bank decided to fight back. In February of last year, U.S. Ex-Im informed Pakistan's Ministry of Railways that it would take the unprecedented step of matching China's below-market-rate financing terms. And on Dec. 9, the executive committee of Pakistan's National Economic Council approved the purchase of the locomotives. While the case remains caught up in Pakistan's famously Byzantine court system, thanks to a lawsuit brought by a Chinese-backed plaintiff, the Ex-Im decision underscores an evolving new view on China.

"There's a new willingness to take on China, to compete toe-to-toe with China on financial terms," said Fred Hochberg, the chairman of the Ex-Im Bank. "This is a policy change that we will compete with anyone who's not compliant."

Posted by: Airborne82 | January 13, 2011 5:54 PM | Report abuse

With President Hu's upcoming visit to America next week, the topic is certainly timely.

A.  Equitable Trade Should Mean Equal Profits

It is indeed 100% true that the trade between America and China is HIGHLY INEQUITABLE. There should definitely be a BALANCE OF PROFITS, by edict if necessary.

By June, 2009, the total number of U.S. investment projects in China had exceeded 57,000 and the value of accumulated U.S. investment in China reached 61 billion dollars. These U.S. companies operating in China REPORT annual profits of at least 80 BILLION U.S. dollars. The actual profits are of course much higher, as they are hidden with transfer pricing moves. According to the American Chamber of Commerce in China’s 2009 White Paper, about 74 percent of American businesses in China made profits and 91 percent chose to stay in China to expand their business. Many of these businesses are enjoying not only whatever industrial policies promulgated by Beijing, but they are also enjoying preferred status, advantaged over the locals.

On the other hand, cumulated Chinese direct investments in the U.S., due to the hostility shown by the American Congress, has been only US$3.1 Billion by June 2009. The $80 Billion in American profits from China is MANY TIMES that of the profits on China’s exports to America ($300 Billion, with profits averaging 1-5%).

More equitable trade means equal profits.

Posted by: Anonymous | January 13, 2011 7:25 PM | Report abuse

B.  Outright IP Theft Should Be Addressed

Another area of outright inequity in the trade between America and China is IP THEFT.

IT IS AN UNEQUAL TREATY IMPOSED ON HUNDREDS OF THOUSANDS OF CHINESE EXPORTERS YEAR IN AND YEAR OUT. American behemoths, with the blessings of Washington, TALK protection of IP, yet PRACTICE predatory “what’s mine remains mine, but what’s yours is also mine.”

Just look at the typical TOC (Terms and Conditions) that the major American importers demanded of their vendors, and you will find similar provisions everywhere:

"CONFIDENTIAL INFORMATION; NONDISCLOSURE

Supplier shall not at any time, during or after the Term of this Agreement, disclose to others, take or use for its own purposes or the purpose of others, any of Company’s confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Company. Supplier understands, agrees and recognizes that this obligation applies, but is not limited to, technical information, designs, marketing and financial information, and any business information that Company treats as confidential. Any confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Supplier which the Supplier shall have disclosed or may hereafter disclose to the Company and which in any way relates to the goods or services covered by this order, agreement or contract, shall, unless otherwise specifically agreed to in writing by the Company be deemed to be confidential or proprietary information and further shall be acquired by the Company free from any restrictions (other than a claim for patent infringement) as part of the consideration for this order, agreement or contract. No cause of action will arise on Supplier’s behalf for Company’s use of any confidential information disclosed to Company, and no damages whatsoever shall accrue to Supplier for Company’s use thereof. Supplier shall keep confidential any and all technical processes and information, economic and financial information, designs, data, marketing information, and any other business information that Company treats as confidential furnished to Supplier in connection with this order, agreement or contract and Supplier shall not divulge, export or use directly or indirectly, such information for the benefit of any other party without obtaining Company’s written permission. Supplier shall return all items belonging to Company and all copies of documents containing such confidential information in Supplier’s possession or under Supplier’s control upon request by the Company or termination of this Agreement."

Posted by: Anonymous | January 13, 2011 7:27 PM | Report abuse

If you think that was bad, try this zinger, again found in similar form in most of the major American buyers' "standard" contracts:


"INTELLECTUAL PROPERTY

Absent a separate express agreement between Supplier and Company and after one year from date of importation of Merchandise into the United States which in any way relates to the goods or services covered by an Order, , Supplier will irrevocably grant to Company a full paid up, royalty free license to make, use, sell and offer for sale any such Merchandise free of any claim of infringement or misappropriation of any intellectual property of Supplier. The aforementioned paid up license will remain in effect until the expiration of any intellectual property relating in any way to the Merchandise."
__________________

Can you imagine clauses like that imposed on Microsoft, or Intel, etc., by any Chinese entity without causing a fire and brimstone response?? Yet this sort of chicanery is imposed by major American companies in contracts of adhesion on hundreds of thousands of Chinese exporters year in and year out.  The typical Chinese company simply is not in a position to bargain.   As a result, China had been ROBBED of hundreds of billions of dollars of valuable IP over the decades.

What is good must be universal. If IP is to be protected, everyone’s IP should be protected.

Posted by: Anonymous | January 13, 2011 7:29 PM | Report abuse

I would surmise that some of the posters above do not understand how currency transactions work. There is no CHOICE. When the goods are sold for U.S. dollars, the collected dollars cannot be used in China.

There is NO buying of U.S. Dollars by the Chinese central banks on the world market - any "buying" was just the natural exchange as the exporters are given back RMB so they can continue their operations (the importers literally cannot eat or drink or use the US Dollars in China, e.g. even to pay their rents or their workers' salaries). So that's how the Chinese central bank ends up with all that foreign currency reserves. The U.S. dollar reserves have to be "used" where the US Dollar is accepted. In the usual scheme of things, much of that would be invested in hard assets (such as Main Street businesses). But the xenophobic Washington has prevented much of the proposed acquisitions. So a big part of the dollars are parked in the "safe" (or not so safe) U.S. treasuries and GSEs.

If today the RMB is floated, it risks huge gyrations as currency speculators and hot money rush in and out of the market - not creating any real economic value, but trying to reap quick profits on the backs of the rest of society. The chance of the RMB going down is just as great, as there is a pent up demand for investing overseas.

Posted by: Anonymous | January 13, 2011 7:44 PM | Report abuse

Again, can anyone explain what "manipulation" is allegedly involved? Exactly HOW is Beijing MANIPULATING the exchange rate of the RMB?? The evidence seems rather clear that there is no manipulation.

There is NO buying of U.S. Dollars by the Chinese central banks on the world market, for the simple reason that the RMB is NOT traded. Any "buying" was just the natural exchange as the exporters are given back RMB so they can continue their operations (to pay their rents or their workers' salaries) The Chinese central bank ends up with, as foreign currency reserves, the NET difference between Chinese exports and imports in the US$. These U.S. dollar reserves have to be "used" where the US Dollar is accepted. In the usual scheme of things, much of that would be invested in hard assets (such as Main Street businesses). But the xenophobic Washington has prevented much of the proposed acquisitions. So a big part of the dollars are parked in the "safe" (or not so safe) U.S. treasuries and GSEs.

As there is no open market purchases of the US$ possible (using RMB), the amount of US$ in the reserves are pretty much controlled largely by HOW MUCH AMERICANS CHOOSE TO BUY CHINA MADE GOODS. Beijing has no ability to "manipulate" that.

Posted by: Anonymous | January 13, 2011 7:45 PM | Report abuse

Again, America is in trouble today not because of trade with China. The entire Chinese export to America is only about $300 Billion, on which the Chinese companies make a measly 1-5% margins. That is a drop in the bucket compared against the $14.5 TRILLION American GDP.

It was the fraud of the banksters that caused the loss of 8 million jobs - something on which the Chinese have no input whatsoever. After that bout of criminal activity, not a single one of the perpetrators was prosecuted, let alone thrown in jail. Instead, Washington decides to gift them another $3.3 Trillion, so the banksters can pay themselves record bonuses 2 years in a row. How can you blame that on the Chinese?

Posted by: Anonymous | January 13, 2011 7:49 PM | Report abuse


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Posted by: addjian16 | January 13, 2011 7:55 PM | Report abuse

The problem of America is that it is manufacturing way too many BS artists/kwok heads/jealous freaks.

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Posted by: zhengee01 | January 13, 2011 11:01 PM | Report abuse

http://napoleonlive.info/2010/11/21/democracy-in-china-delayed/

Posted by: ThreeQuarterCadillac | January 14, 2011 2:52 AM | Report abuse

Trade is never one sided. If China is manipulating its currency, what is preventing the US to do the same? And if the US is doing the same, why complain about China? China is doing what is right for China, the US should do what is right for the US.

Posted by: Benkgee | January 16, 2011 3:59 AM | Report abuse

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