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China

With less than a year before the Presidential election and with the first GOP caucus in Iowa just around the corner, the US economy is a hot topic of discussion in the media and by all of the candidates. We look at jobs, the value of the dollar, national debt, and other factors when discussing the economic threats that stunt growth and expose weakness. Is the biggest threat coming from abroad? Should China be the focus point of most of the candidates’ economic discussions?

The largest country in the world has its own challenges but they appear to be in a general upswing that’s growing faster than the US since both countries were hit hard by the 2008 worldwide recession. They have major infrastructure problems that have kept the country from developing as fast as it grows, but there’s one thing that makes this something that they can overcome.

Their workforce is huge. Everyone knows that they have a lot more people in the country, but few realize that the labor force itself is a higher percentage of their population than any developed country. They have 4.27 times as many people as the United States, but their workforce is over 5.29 times larger than the US. This is due to a higher percentage of residents working – 49% of US residents are working compared to 61% of Chinese residents working. They get less schooling but are able to start working and earning at a much earlier age.

One might ask, “How is their success a threat to the US economy?” This comes down to Economics 101. Today, China and the US have a variation of a symbiotic relationship. We need their cheap labor and inexpensive products to keep prices of merchandise low. They need the revenue they receive from our purchases and contracts to keep money flowing in. It has worked well for decades.

The atmosphere is changing. Their own internal buying power is increasing as is the demand for their own products and services. The US rise to power in the early part of last century was based on our ability to be self-sufficient, but we’ve grown beyond that now. We have to import. China is experiencing the same sort of internalization that allows them to rely less and less on exporting. In other words, they’re gaining the ability to buy the products they produce. This can be seen in the moves they’ve made in recent years, most notably the raising of tariffs on US-built automobiles last week.

The scariest part of the whole thing is that there is no solution proposed by any of the GOP candidates or the current administration that addresses this issue properly.

US vs China

(Article originally appeared on Conservative Haven. Infographic courtesy of Mint.)

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Comment Preferences

  •  American outsourcing (4+ / 0-)
    Recommended by:
    JeffW, happymisanthropy, JD Rucker, Pluto

    is one the greatest threat to the U.S. economy. Only corporate boards and their Wall Street shareholders forced companies to move these once-American jobs to China in the first place.

  •  China is looming as a huge threat (0+ / 0-)

    To its own economy. China is in a huge real estate bubble that dwarfs the USA's. I think we will see it pop in 2012.

    •  Nope. (0+ / 0-)

      As the saying goes, "Follow the Bouncing Ball".

      The Chinese government managed a deflation of the market in the last 3 quarters and will pump a little air in for the next quarter or so.

      China, unlike the US, has a conservative, boring, strongly regulated banking industry. As a tool for economic regulation it comes in handy because it's based on deposits, not speculative instruments.

      Secondly, the average Chinese property buyer is far less leveraged than American counter-parts, a very significant amount of property is paid for in cash savings. The government just relaxed reserve requirements one tick.

      I'll agree lots of property developers and speculators are feeling the pain now but it's a self-inflicted wound and let them suffer.

      What is more of a question is how big of a hit Chinese manufacturing will take in 2012, as it now stands, some sectors with high capacity such as consumer electronics face pretty big downturns at least in the first 2-3 quarters, so I predict ... more infrastructure projects!

      What about my Daughter's future?

      by koNko on Tue Dec 20, 2011 at 03:30:01 AM PST

      [ Parent ]

      •  I don't think you understand (0+ / 0-)

        It's not the banking industry that's the problem; it's the gigantic, unregulated system of loans and equity that exists in China. Partly it's because China doesn't have a regulated equity market like we do. You either get the PLA (the army!) to help by providing plant or land or financing, or you go to some underground, unofficial source of money. That underground economy is really enormous and it is a huge bubble. I wouldn't go around believing that what you hear from the Chinese government necessarily accords with reality, unless of course you are representing the Chinese government on the internet.

  •  Not as large as the Republicans (3+ / 0-)

    they are bound and determined to destroy our way of life.

    Education is a progressive discovery of our own ignorance.

    by Horace Boothroyd III on Mon Dec 19, 2011 at 10:42:19 PM PST

  •  the biggest threat to the US economy (3+ / 0-)
    Recommended by:
    Deward Hastings, Pluto, koNko

    is america's own plutocrats and global capital. without their predations, we could coexist fairly comfortably with the chinese economy.

    •  That's the bottom line . . . (0+ / 0-)

      we are our own worst enemy.  The Chinese, as Kruschev so quaintly put it when trying to take the credit, simply sold us the rope with which to hang ourselves . . .

      Fake Left, Drive Right . . . not my idea of a Democrat . . .

      by Deward Hastings on Tue Dec 20, 2011 at 01:48:23 AM PST

      [ Parent ]

      •  the chinese are largely stuck in the same system (1+ / 0-)
        Recommended by:
        Deward Hastings

        subject to many of the same predatory structures, if they are viewed as a billion+ people and not as a unitary collective entity run by the state. but their plutocrats and nodes of global capital do not threaten us nearly as much as our own do, and vice versa.

        if both peoples ever figure out out common interests against these people, the earth will tremble.

    •  As of this writing (1+ / 0-)
      Recommended by:
      wu ming

      I'll give "global capital" the edge on negative factors - it even has plutocrats running scared.

      Interesting times.  Is 2011 ever going to end? And then?

      What about my Daughter's future?

      by koNko on Tue Dec 20, 2011 at 03:09:01 AM PST

      [ Parent ]

  •  Is the US the Greatest Threat to China's Economy? (0+ / 0-)

    It may be even easier to make that argument given the fact that a sum equivalent to approximately 20% of China's GDP is parked in US Treasury notes making it essentially a captive investment since:

    (a) It is unsecured.
    (b) Any valuation of the Yuan effectively devalues the principal
    (c) Any significant short-term reduction (i.e., a sell-off) would severely erode the value of the Dollar - see (b) and multiply

    Contrary to your assertion, China is the fastest growing export market of the US and likely to remains so unless the value of the Euro severely declines, making the EU more competitive against the US as a supplier to China.

    I'm actually quite curious why so many Americans consider China to be a competitor to the US when it is actually the EU and Japan that are more directly competitive with the US, particularly in the Chinese market for high tech industrial products and mass-market Branded consumer products.

    Logically, given the demographics and market maturity of the US, EU and China, the latter will continue to be the growth market through mid-century (after which China will age rapidly, shrinking the market).

    In that viewpoint the US has everything to gain by competing to sell into China, India and other developing Asian nations while they focus on under-developed Asian and African consumer markets (which are out-pacing the BRICs in growth).

    In spite of present populist political sentiments in the US, which are increasingly negative toward China and even xenophobic in some cases, China is actually the most important growth market for what the US excels at producing/providing/selling: aircraft, automobiles, high tech infrastructure/services, materials, high value agricultural products and branded commodities.

    It would be far more productive for the American public to look at the picture from that perspective and ask how to get a larger slice of the pie.

    BTW, the trade action you linked is a tit-for-tat reaction to recent actions the US has taken against China. This sort of protectionism in either direction does no one very much good and a classic case of governments thinking with their guts not heads.

    I suggest you look at another economic indicator and compare various nations relative to both the US and China.

    Export/GDP Ratio.

    Particularly the ratios of the Eurozone plus Switzerland.

    Very high export/GDP. Significantly higher than China and even more so than the US, suggesting:

    (1) They are well-organized export engines
    (2) They are well-poised to develop (or maintain existing) markets in China and other developing economies
    (3) They are "The Competition"
    (4) The US try harder and perhaps study how they do it

    I would not worry too much about the US and China falling out very fast or hard, that would be a lose-lose of epic proportions. No matter how appealing it might seem when someone is in a bad mood or speculating, the fact of the matter is we're a Trillion Dollar Partnership.

    Better question might be how to make the most of it.

    Your thoughts?

    What about my Daughter's future?

    by koNko on Tue Dec 20, 2011 at 03:05:31 AM PST

  •  China per se is not an economic threat. (0+ / 0-)

    If you want to work in manufacturing, you have to face the fact that Chinese factory labor is pretty cheap. But, having said that:
      Inexpensive manufactured goods become the basis for enterprise in America. Look how many businesses have been created based on inexpensive computers, for example. Look at the retailers who sell goods produced in China (not just Walmart.) Because we have access to cheap consumer goods, you know longer have to save up for a bathroom heater.
      Hopefully, the Chinese consumer economy will develop and the US will be able to export more goods to China. In the meantime, we are exchanging a good that we manufacture (dollars and dollar denominated securities) for goods that China manufactures.
      China helps us finance our govt at a very low interest rate.
      Despite all the whining about China holding American debt, China is in a dollar trap. It can't dump it's dollar holdings and it can't "call in" the debt.
      China may be a geopolitical problem, but there is no reason to fear an improving Chinese economy.

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