Another Caution on China Bashing

This is the third article I've posted on why we should not stoop to China-bashing as a politically convenient explanation for our economic problems. This is an important issue for economic developers to keep in perspective. Here is what a recent New York Times editorial has to say:

"Unemployment in America is high, and elections are on the horizon. It must be time to look east again for scapegoats. Japan is only starting to recover from its protracted recession, so China will be handed the role of economic villain in the coming election cycle. Expect to hear a chorus of presidential candidates blame unfair Chinese competition for the nation's manufacturing woes."

Should we be concerned about the trafe deficit with China? Yes, we should be. China's trading partners do have legitimate grievances, but it would be irresponsible and inaccurate for American politicians to pin our economic sluggishness on scheming culprits in Beijing.

Bear in mind that short-term fixes can lead to more serious long term problems. China's financial system remains fragile, and sudden currency volatility could lead to a banking crisis that could spell disaster for the world economy. Washington would do better to urge China's leaders to focus on their lack of preparation to assume their proper role in the world's financial order, rather than to demand any supposedly quick fix. Moreover, China's refusal to devalue its currency in the aftermath of the late 1990's crises in East Asia (much appreciated by its neighbors and Washington at a time when the yuan seemed overvalued) adds credence to its leadership's insistence that it prizes stability when it comes to exchange rates, not short-term advantage. With most economists concerned that China's robust growth could fuel inflation and a speculative bubble, there are valid reasons for Beijing to fear a surging currency.

I would encourage U.S. states and communities to increase their efforts to promote trade and cross-investment with Chinese companies. Position your area as a leader in this area. Eventually we will see Chinese companies investing in the U.S. much like the Japanese have been doing for sometime and the Koreans started doing in the 1990's.

Read more here.