Stop Blaming China for America's Woes

Stop Blaming China for America's Woes

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After the Sept 11 attack on the United States, all fingers pointed at Al-Qaida and Osama bin Laden. But the US leadership under George W. Bush convinced most Americans that Iraq was part of the violent plot. Worse, the US said Iraq possessed weapons of mass destruction and began a tragic war that has yet to end.

The US met its economic 9/11 in 2008, when its banking system collapsed, big names disappeared from the corporate landscape and the job market went into a tizzy. The causes were obvious: lax control, greed and speculation in the corporate world, bubbles in the property and stock markets, and the very high rate of consumption of the American public with little or no savings.

But the US administration seems to be trying to convince its public of another untruth: that China is the true cause of America’s economic woes — and that China possesses “weapons of mass economic destruction”. What is that weapon of mass economic destruction? The humble yuan, which the US says has been manipulated to hurt the American economy. So, according to many US officials, an economic war against China is justified. In fact, China has already gotten a taste of America’s first “shock and awe” in the shape of massive tariffs on its goods imported to the US.

The US Treasury’s 2009 report did not identify China as a currency manipulator. Yet now there appears to be strong political pressure, encouraged by some American economists, to do so.

China’s exports dropped because of the weak world economy, but it didn’t seek to offset the loss so suffered by devaluating the yuan. Its currency has remained stable against the US dollar, though it has risen against European currencies. Its exports may have rebounded in February, but the corresponding rise in its imports took the monthly trade surplus to a one-year low.

China already runs a trade deficit with South Korea and Japan and many other countries. In fact, seeking a trade surplus is not its motive, it has said, promising to increase imports to maintain its economic growth.

Of course, the US allegations are related to the “dollar issue” — they are not a global issue. But then the dollar deserves special treatment. The greenback is still the de facto international reserve currency despite being undisciplined in trade and fiscal deficits. But the dollar has not faced the kind of economic fallout that has hampered a country like Greece. The problem is countries that oblige the US by holding large amounts of its denominated debt and reserves have a right to demand that the dollar remains stable against their currencies. And since China is the biggest holder of US assets, it has that right.

Economist Paul Krugman recently said China’s trade surplus with the US had grown in the past decade even without the yuan rising sufficiently against the dollar. Before America’s economic 9/11, however, its consumers seemed happy to get affordable Chinese goods year after year and its businesspeople were busy making profits from lucrative partnerships with Chinese companies. Don’t the American entrepreneurs and intellectuals know that was made possible only because the yuan didn’t rise against the greenback “sufficiently”?

The last two years have been full of economic woes for people in the land of plenty. The US is still struggling to come out of its economic recession. No wonder then that the American public is desperate to identify the problems and find solutions. But how can their leaders blame China for all their ills, which despite being a developing country helped maintain about half the world’s economic growth last year? Why does China have to be made a scapegoat for America’s domestic woes?

The international community, but for the obvious exceptions, has praised China’s economic stimulus package and the importance of its robust economic growth. China’s stimulus for its economy has created opportunities for Western countries’ exports, too. The 2010 Shanghai World Expo will allow well over 200 countries and international organizations to showcase their products and technologies for sustainable living to 70 million visitors, a large majority of them Chinese. China would readily buy more advanced technologies from America, but Washington is reluctant to sell them.

We need to be clear that China’s rise is good for the world economy. And we need to be clear that China does not possess any “weapons of mass economic destruction”. Americans, no doubt, still remember the song, “Won’t get fooled again.” Hopefully, they will see through their politicians’ desperate attempt to shift the blame for the country’s problems to China in order to cover their own failures. And let’s hope they will realize that peaceful and respectful cooperation between the US and China is the only way to mutual economic progress — and the world is counting on it.

The author is an economist and director of China Programs at the American Institute for Foreign Study, a US-based organization that has exchange programs with Nanjing University and the American Institute for Foreign Study.