Op-Ed Columnist – Chinese New Year – NYTimes.com
Well, the new year is here and it seems that Wal*Mart’s supplier might finally be running out of mercy from the rest of the world. China is basically screwing up what portions of the world economy work to restore trade imbalances and it’s been working their way for a long time now. A columnist from the NY Times has laid out why that’s broken. Have a read.
Op-Ed Columnist – Chinese New Year – NYTimes.com
By PAUL KRUGMAN
Published: December 31, 2009
It’s the season when pundits traditionally make predictions about the year ahead. Mine concerns international economics: I predict that 2010 will be the year of China. And not in a good way.
I have no beef against China personally. They compete on cost, not on quality in the majority of things which doesn’t make them my preferred supplier of goods in general, but they are a respected and powerful country with smart, industrious people in it. We’ll leave the politics aside as I have a major beef there, but we’re talking just economics for now.
China wants to play in the world, but only with the rules that favour them. Thus they have for a very long time pegged their currency by mandate rather than market. That’s bought them most of their hyper-accelerated growth and industrialization, but now it’s gone past being irritating and as the columnist puts it, it is turning predatory.
All I have to say is, either unpeg the currency and let it float or every single industrialized nation should create a slowly increasing set of duties on import goods from China that will increase quarterly until the values of the goods are close to the estimated value if the currency was floating.
This means a good chunk of our goods get more expensive. But we ladder it in. The flip side is that China doesn’t build everything for the entire world, but manufacturing gets distributed around again as it should in a free-trading economy. The other benefit is the Chinese people get some purchasing power in the world, rather than just selling power. Some standards of living might go up as the Yuan is worth more on the open market. That will deplete some of the Chinese hard currency income and even reserves, but the system will slowly balance itself out to some extent from the huge inequity it’s in now.
The shocker is that the Chinese leader is complaining about the duties. Maybe he really doesn’t understand market economics and the fact that the rest of the world isn’t a game he plays on a spreadsheet. We look out for our countries and people too. Too bad it took so long for that to happen this time.
Currently playing in iTunes: Holiday by Green Day