Mr. Hu is going to pay a visit to the US, this is big news for the Chinese and Americans are treading very cautiously. I once read of the importance to understand your enemy, and in my view, it is very clear that should you propose such a stance between the US and China, the Chinese by far have the upper hand. American’s know too little about China.
I read a recent article in the Economist about China’s upcoming visit. A very good one that I believe sums up the stance that both governments are taking. The message essentially is that both the Chinese and the Americans need each other, but neither are going to overly capitulate to the other’s demands. As a compromise, they are each doing little things here and there, hinting for greater cooperation to come. In my opinion, it is doubtful, however, that the efforts by the Chinese is a permanent one.
Here is a list of some of the more visible efforts undertaken by Mr. Hu’s party (reference Economist article):
1. To help reduce America’s record trade deficit with China, valued by the Americans at $202 billion last year, a Chinese delegation last week embarked on a buying tour in America that is expected to result in some $15 billion-worth of deals
2. China’s RMB is at an all time high, now 8.05 to 1 USD (it was pegged at 8.27 before)
3. In response to concerns about violations of IP rights in China, the Chinese authorities have staged a show of resolve in recent weeks. Some shops in Beijing selling pirated DVDs have been closed. Banners have appeared on the streets urging citizens not to buy them.
4. In late March the government ordered computer manufacturers to pre-load licensed operating-system software onto machines to prevent retailers using pirated versions
5. And increased efforts to participate in global affairs (Iran’s nuclear energy program as well as N. Korea’s nuclear weapons program as major cases in point)
This is all fine and dandy, but the number 1 mandate for China is to maintain stability in a country that has had a history of continued instability and infighting. The strategy is thus to grow economically, militarily and socially through influence of the government.
For #1 – 2, the US can do many things to help ease the current trade imbalance. Sell high technology items, there is currently a blacklist of what the Chinese cannot buy, many in the high tech sector. Well, yes, you may be feeding a dragon of monstrous proportions, but there is no way the yuan will re-evaluate in a drastic way. Too many industries will be affected, and more importantly, too many people will lose their jobs. China’s got lots of money in the bank. Over $850 billion!
For efforts 3 – 4, there is no way that this issue will be resolved in the next 10 years. There are thousands if not hundreds of thousands of people who make a living and depend on income generated from pirated dvds and software. Businesses that run on pirated Microsoft OS, Adobe programs etc. This is the new wired China. They hunger for the latest Hollywood movies, and are using cutting edge technology, but cannot afford it at US prices. There may be banners on the MAJOR streets encouraging people not to buy pirated dvds, but within a 5 block radius of my home, there are over 25 outlets that sell pirated dvds that are not affected by these signs and police closures.
Effort 5 is a tricky one, because of the current energy needs of China, the whole TW issue, as well as attracting FDI in China, China has been wisely picking its battles.
Please, my American neighbors, do not think for once you have China figured out. Things go a lot deeper and abusive accusations to the Chinese need to be met with self criticism. I guess that’s the disadvantage of being on top, everyone seems to be gunning for you.
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