Struggling economies around the world are crying out in unison about the undervalued Chinese Yuan, particularly when it is compared to the U.S. Dollar. Against the Yuan, the dollar is overvalued by 30%, and this discrepancy was a central topic when Chinese President Hu Jintao visited the United States in January. What was Hu’s reaction to Obama’s request that China value its currency fairly in order to level the economic playing field and increase market competition? Hu disregarded Obama’s concerns, displaying complete ambivalence towards one of the most important matters facing the American economy. Although this generally rubbed the American press the wrong way, Hu’s reaction wasn’t all that unusual—in the deepest recesses of the Chinese economic brain, the questions must be, “Why increase the value of the Yuan? Why kill the goose that lays the golden egg?”
With over 1.3 billion people, one would think that China’s massive consumer base could easily support a wide range of domestic industries. However, it becomes clear very quickly that simply having the largest population in the world doesn’t guarantee that significant demand will exist within the marketplace. The best evidence for this is found in an analysis of China’s film industry, where the demand for Chinese movies—both domestic and international—is insignificant compared to China’s demand for American-made blockbusters.
The holidays are upon us once again, and the first decade of the 21st Century is officially winding down. As always, the end of the year is a time for reflection, and as such, it is a good time to try and understand why the economic balance of the world has changed so drastically in such a short period of time. Why has the American economy—still the world’s largest—lost its luster over the course of the decade? What was the driving force behind China’s economic growth? China did, after all, surpass Japan as the second largest economy in the world—why does it seem like its booming economy will continue to grow, while the American economic situation is getting steadily worse? In the words of Charles Dickens, 2010—and the decade as a whole—has been “the best of times and the worst of times” for China and the United States.
North Korea’s recent military actions against South Korea not only aggravated the already hostile feelings between the two countries, but they also underlined the unspoken tension that is mounting between China and the United States. North Korea’s impromptu military strike would be of little interest to the world at large if the death and destruction caused by North Korea’s out-of-control dictator did not have disastrous implications for Asia, as well as for the United States. Kim Jong-Il’s actions caused tremendous tension in the Far East, leaving the peninsula on the brink of war. China is North Korea’s largest—and possibly only—benefactor, supplying Kim Jong-Il’s regime with food, energy, and raw materials. Without China’s assistance, North Korea’s dictatorship would not be able to subsist in its present state. With no international economic presence and an agricultural system in shambles, North Korea cannot even afford to feed its own people.
China’s economy has exploded and the world’s most populous country has become the world’s second leading economy. Spurred by a dynamic manufacturing and infrastructure base, China’s lightening fast economic growth has flabbergasted, and some say threatened, the world’s economic order. Financial superpowers such as the United States, Japan (previously the second ranked economy) and the “little engine that could”, South Korea, view the Sleeping Dragon as a viable economic threat that will eventually overtake the United States in a much nearer future than previously expected. China’s perceived threat to Western financial dominance, and even to that of the remainder of the Asian continent, has prompted the rest of the world's economic order to stimulate some fierce economic competition with one of China’s historical rivals: India. Like China, India has a massive population, which gives it the potential to be another economic hotbed in Asia. India also has the youthful and energetic manpower to stimulate economic growth.
A provocative new video commercial has been circulating the web recently. Produced by the Washington, D.C. based conservative think tank Citizens Against Government Waste (CAGW), this highly-stylized concept video shows a professor lecturing to an auditorium filled with young, attentive students at a large Chinese university. An interesting twist to the scene is that the class takes place in Beijing twenty years into the future, in the year 2030. Dazzling images of the reformed political world, with China at its center, swirl around the classroom as the professor delivers his futuristic lecture. The video sets an ominous, almost frightening tone from the start, and it rattles many Americans to their very core. The professor asks his class, "Why do great nations fail?" His point, which makes mention of the Roman empire among others, is to explain why America, once a great nation, no longer exists in 2030 as it did in the past.
The world's current economies are mired in the worst and most prolonged recession of all time. Led by the United States, countries worldwide have unsuccessfully tried to stimulate their free enterprise economies and grow their business sectors in a failed effort to relieve financial stress and induce new economic growth. However, in the midst of this economic free fall, one country is experiencing its fastest and most successful economic growth period ever.
In the midst of hotly contested mid-term political campaigns in the United States, China finds itself in the middle of a major political controversy brewing between Republicans and Democrats. For its part, all China did was to create jobs the old-fashioned American way. But it is just that successful Chinese version of the capitalist entrepreneurial spirit that turns out to be the cause of many problems in the American heartland. It is a fact that the United States is in the throes of a prolonged economic recession. Money is tight, and for the working class, unemployment is hovering in the double digits. Workers are beset by fears that jobs will be outsourced or eliminated. New jobs are not being created and, as American employees feared, current jobs are being sent offshore to countries with cheaper and less benefit intensive workforces. And don't forget the controversial issue of the undervalued Chinese yuan! Savvy political candidates from both major parties are stoking the fears of the American worker and cashing in by blaming China for America's economic problems and dwindling workforce.
A very important event recently happened in East Asia. Japan backed down. China won. The United States was benched. What happens now? Japan agreed to release the Chinese boat captain that had been detained after a maritime incident with Japan in the South China Sea. The area where the incident occurred is a disputed territory claimed by both China and Japan. China, aggressive in its defense of territorial rights, would not relent in its insistence that Japan release the boat captain immediately. In the past, Japan would only have issued a warning to China. This time, however, Japan chose to make an example of the captain, detaining him and demanding a Chinese apology for the incident. In addition, Japan wanted an acknowledgement from China of their territorial rights to the area's islands. Japan felt that they could be assertive in their response to the the incident because they were counting on the backing of other Association of Southeast Asian Nations (ASEAN) member countries against China's part in the confrontation. But the Tiger sleeps no more.
Did you hear about the massive five day traffic jam just outside of Bejing last week? Five days! How can that happen? I'll tell you how. It happens in a country where all roads lead to the cities. In China, the cities are its heart. But roads are, at best, old two lane highways. Or at worst, dirt roads used by country farmers and laborers bringing produce and goods to the cities. How can a country with an emerging middle class survive without modern highway infrastructure, sleek and wide? It can't happen. No infrastructure stops China's middle class growth explosion in its tracks.