China, U.S. Jobs, Wal-Mart, and American Manufacturers

How is that for the title of an article focused on whether China is America's leading silent job killer?

If you are interested in the China situation, this is an article you will want to read, and read carefully. As a preface, I will say this--we live in an increasingly complex economic, business and political world. It is not easy to sort through this complexity to find the truth about issues like China and its pluses and minuses as an emerging world economic power. The world of local economic development has had its attention turned "inward" for too long. It is time we seriously paid attention to what's happening "outside" that impacts what happens "inside" our communities.

Is China the major reason why we have a jobless recovery? According to a recent Business Week article, "the truth is, the major reasons for U.S. job loses lie elsewhere and are far more complex, so a revalued yuan isn't the answer."

China bashing is all the rage. With millions of manufacturing jobs evaporating from the U.S. while China's trade surplus soars, politicians of all stripes are under pressure to show the folks back home that they're doing something, anything, to stem the losses. The swelling federal budget gap means that further stimulative tax cuts are out of the question. So many politicians, manufacturers, and labor representatives have pounced on China, accusing it of keeping its currency artificially low to boost exports and snatch jobs from American workers. Americans are not the only ones in the world concerned about their sad state of economic affairs. Similar concerns exist across Europe and even in the Asia-Pacific Basin.

What's our take on the China siuation here in America? In Congress, moves are afoot to impose punishing tariffs on U.S. imports from China if Beijing doesn't mend its ways. Separately, a coalition of business groups, led by the 14,000-strong National Association of Manufacturers (NAM), is planning to file an anti-China trade case with the government, alleging that it rigs its currency to gain unfair advantage.

Regional debates about good, bad and the ugly of global production and its impact on local jobs are common everywhere, from Cleveland to Birmingham to Austin to Tacoma. According to Business Week, U.S. companies from Intel to General Motors face a simple imperative: invest in China to take advantage of the country's cheap labor and its fast-growing economy or lose out to rivals from Europe, Japan, and elsewhere. "It's hard to serve Chinese customers in a lot of our businesses unless we manufacture there," says W. James McNerney Jr., chairman and CEO of 3M. "We don't do it just to eviscerate U.S. jobs. We do it to be competitive." But--the net impact of this shift of production offshore is--the loss of jobs in American communities like Lorain, Ohio, Danville, Kentucky, Tupelo, Mississippi, and Tulare, California.

As a result of that shift in production, some 65% of the rise in Chinese exports since 1994 have come not from Chinese companies but from foreign companies, including many U.S. corporate giants. Did you hear that statistic? That is two-thirds of the growth of Chinese imports into the United States!

This increased interconnectedness is making it a lot harder for Washington to get beyond anti-China rhetoric. Of China's top 40 exporters, 10 are U.S. companies, including Motorola and Dell. What's more, retailers Wal-Mart and Target count on low-priced goods from China to help meet U.S. consumer demand for affordable products. Attention "Blue-Light Shoppers," the next time you save $6.89 on that new clock radio at Wal-Mart, you're contributing to China's ascent as a world production giant. Don't get me wrong. Imports are essential to our economic health. Raed on.

Wal-Mart alone has doubled its imports from China over the last five years, to $12 billion. It now accounts for nearly 10% of all Chinese exports to the U.S. That has helped keep U.S. inflation down, allowing the Federal Reserve to cut interest rates to their lowest level in four decades. Moreover, China is helping to keep U.S. interest rates down by investing bundles of money in U.S. Treasury securities -- some $126 billion, up from $60 billion in 2000.

Business Week says that the moral of all this is that China is not another Japan, bent on grabbing global share for home-grown companies with mercantilist trade policies and stiff barriers to keep foreigners out of its own markets. While Beijing often talks about industrial policies, its economy is dramatically more open to trade and direct foreign investment than the old Japan Inc. Moreover, as much as the American manufacturing community complains about China, India and other developing nations, remember that it is the members of their club (the manufacturing community) that are putting roots down in Chinese communities instead of Gastonia, North Carolina, Fort Wayne, Indiana and Wichita Falls, Texas.

Go here to read the article.