US-China Trade in the News 1-12-2012: China's Economic Collapse?

This week, analyst Gordon G. Chang continued banging his drum regarding the collapse of the Chinese economy.  Predicting the collapse of China a decade ago and despite positive economic growth over the last decade , Chang continues to predict a negative future for China. This prediction comes as the questions of China aiming the eurozone with their debt grow louder.  The idea of Asia extending a helping hand to Europe has been around ever since the G20 summit in Cannes, France in early November, when world leaders failed to organize exceptional contributions to the International Monetary Fund (IMF) that could help support the eurozone. The hope was revived, however, by European leaders at their latest debt crisis summit in December.

Meanwhile, news regarding U.S. manufacturing is positive.  In contrast to the contraction in activity in Europe , manufacturing activity in the US continues to gather pace.  December  was the 29th successive month of growth in manufacturing activity, with the Manufacturing Purchasing Managers’ Index rising to 53.9 in December from 52.7 in November.  With consumer and business spending robust and stocks at low levels, analysts are predicting manufacturing output is likely to increase in the coming months.  All this and more in this US-China Trade Update.

Contents
Trade
Economy
Global Relations
Currency

Trade

Analysis – International Monetary Fund : Trade Winds—Has the Spectre of Protectionism Blown Away?
iMFdirect, January 06, 2012
“The global crisis has pushed trade reforms off—or at least to the edge of—the political radar screen. But shying away from improving the trade system in these tough economic times seems a little like cutting off your nose to spite your face...The IMF’s First Deputy Managing Director David Lipton summed the issue up in a recent speech: 'trade wars can put millions of jobs in jeopardy, while trade integration can be an engine of growth.' ”  Read more

Commentary – Jagdish Bhagwati : America’s Threat to Trans-Pacific Trade
Project Syndicate, December 30, 2011
“As if undermining the World Trade Organization’s Doha Round of global free-trade talks was not bad enough (the last ministerial meeting in Geneva produced barely a squeak), the United States has compounded its folly by actively promoting the Trans-Pacific Partnership (TPP). President Barack Obama announced this with nine Asian countries during his recent trip to the region.” Read more
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Economy

Commentary – The FP Survey :  Follow the Money
Foreign Policy, Jan/Feb, 2012
“What's wrong with the world economy? We asked top experts to fill in the blanks -- and they had a lot to tell us...Experts in this article discussed about the following topics: the biggest threat to the global economy, my out-oh-box suggestion to revive the global economy, Barack Obama's biggest economic mistake, Occupy Wall street, By election day 2012 how will U.S. Economy be? Where should economists pay more attention? ”  Read more  

Analysis – The Groupon Effect in China
Knowledge@Wharton China, January 06, 2012
“In January 2011, Groupon, the world’s fastest-growing company, launched its online coupon business in China, the world’s fastest-growing economy. At that time, more than 2,000 Chinese group-buying clone sites were already competing aggressively in a highly saturated market. While Groupon might have pioneered the group-discount model in the Western world, the concept of group-bargaining already existed in the Chinese culture. What forces helped shape such rapid growth in this industry in China? How are group-buying companies responding to the competitive landscape? And what are the implications for Chinese consumers today?”  Read more

Analysis – Uncorking China's Wine Market
Knowledge@Wharton China, January 06, 2012
“Although China’s bustling metropolises and staid Bordeaux may seem worlds apart, the two are becoming increasingly intertwined. Indeed, China recently overtook the traditional strongholds of Germany and the United Kingdom to become Bordeaux’s largest export destination. This transformation is particularly remarkable given the country’s short history of mass wine consumption. Historically, beverages such as sorghum-based baijiuand beer have dominated Chinese alcohol consumption, with wine only recently gaining wide acceptance.”  Read more

Analysis – Talent Management in Multinational Firms in China
Knowledge@Wharton China, January 06, 2012
“Developing the Chinese market is a top priority for many multinational companies. Across industry sectors, however, they face a common obstacle -- attracting, developing and retaining the local Chinese talent needed to accomplish this goal. Global firms realize the importance of having local leadership in tune with the idiosyncrasies and rapid shifts of the Chinese market. In a recent interview with The Wall Street Journal, Pierre Cohade, the Asia-Pacific president of Goodyear, confirmed that the number one challenge in China 'is absolutely the fight for talent.' Goodyear is hardly alone: Over the past 13 years, the American Chamber of Commerce has conducted annual surveys of U.S. companies in China and frequently cites management-level human resource constraints as the top business challenge.”  Read more

Analysis – Louis Vuitton and the Traveling Chinese Consumer
Knowledge@Wharton China,  January 06, 2012
“When it comes to the market for luxury goods, 'China is the rising star,' according to Claudia D'Arpizio, a Milan-based partner with Bain & Co., the consultancy. Luxury sales in China currently represent 10% of the global market. CLSA, a leading Asian investment bank, estimates that by 2020, China will be the largest domestic market for luxury goods in the world and will account for 44% of global demand. Consumption by Chinese consumers abroad has helped fuel this growth in more mature markets in Europe. CLSA and other firms estimate that currently more than half of Chinese luxury spending occurs overseas. Some Chinese tour groups travel to France and Italy for the sole purpose of luxury shopping.”  Read more

Commentary –Andrew Sheng: Global Finance’s Supply-Chain Revolution
Project Syndicate, January 05 2012
“In March 2011, the catastrophic earthquake, tsunami, and nuclear disaster that hit Japan halted production of key components on which many global supply chains depend. The sudden disruption of these essential materials from the production process forced a reassessment of how these supply chains function. But such vulnerabilities are not confined to the manufacturing sector. The finance industry, too, has suffered its own near 'supply chain'  meltdown in recent times.”  Read more

Analysis – Global Macroeconomics Team: Prospects Daily: U.S. manufacturing activity remains robust
World Bank,  January 04, 2012
“U.S. manufacturing activity remains robust. In contrast to the contraction in activity in Europe (see below), manufacturing activity in the US continues to gather pace. The Institute of Supply Management’s Manufacturing Purchasing Managers’ Index rose to 53.9 in December from 52.7 in November [see Chart at http://prospects or http://www.worldbank.org/prospects] – the 29th successive month of growth in manufacturing activity (the 50 mark separates contraction from expansion). With stocks at relatively low levels and US consumer and business spending remaining resilient amidst financial turmoil elsewhere, manufacturing output is likely to continue increasing in the months ahead. The new orders sub-index increased for the third successive month to 57.6 in December from 56.7 in November, indicating that new manufacturing orders grew at a faster rate in November compared to the previous month. In other favorable economic news, US factory orders, driven by non-defense aircraft orders was up 1.8% in November, from the 0.2% decline in October, according to a report by the US Commerce Department today.”  Read more

Commentary – Harold James: Schadenfreude Capitalism
Project Syndicate, January 04, 2012
“The protracted financial and economic crisis discredited first the American model of capitalism, and then the European version. Now it looks as if the Asian approach may take some knocks, too. Coming after the failure of state socialism, does this mean that there is no correct way of organizing an economy? ”  Read more

Commentary– Jack Perkowski: What's Most Surprised Me in 2011
Forbes,  January 02, 2012
“It’s that time again — time to see how clear, or cloudy, my crystal ball was a year ago as 2010 was coming to a close...Going back in time, China watchers were concerned about the health of the country’s economy at the end of last year, just like they are today. The most commonly voiced concerns were over high property prices, rising inflation, and of course, China’s growth rate. The debate as to whether China would have a 'hard' or a 'soft' landing raged on, with many pundits predicting that a “property bubble” would bring China’s economy to its knees. Sound familiar?”  Read more

Commentary – Kenneth Rogoff: Rethinking The Growth Imperative
Project Syndicate, January 02, 2012
“Modern macroeconomics often seems to treat rapid and stable economic growth as the be-all and end-all of policy. That message is echoed in political debates, central-bank boardrooms, and front-page headlines. But does it really make sense to take growth as the main social objective in perpetuity, as economics textbooks implicitly assume?”  Read more

Commentary – Gordon G. Chang: The Coming Collapse of China: 2012 Edition
Foreign Policy, December 29, 2011
“In the middle of 2001, I predicted in my book, The Coming Collapse of China, that the Communist Party would fall from power in a decade, in large measure because of the changes that accession to the World Trade Organization (WTO) would cause. A decade has passed; the Communist Party is still in power. But don't think I'm taking my prediction back." Read more

Commentary– Tim Ferguson: What's Most Surprised Me in 2011
Forbes, December 29, 2011
“Maybe a 'dog that didn’t bark' review will distinguish this from most of the others at the end of the year. Or, more precisely, a dog that didn’t need walking–developments that really surprised me.
I’ll begin by claiming that some big headlines did not surprise me: The slow recovery and political standoff in the U.S., the deterioration of Europe’s fundamentally unsustainable zone-wide economy, or the fact that China is facing its own limitations in trying to centrally direct and modulate a huge national growth story." Read more

In the News – China Reveals Its Space Plans Up to 2016
The Associated Press, December 29, 2011
“China plans to launch space labs and manned ships and prepare to build space stations over the next five years, according to a plan released Thursday that shows the country's space program is gathering momentum.”  Read more  
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Global Relations

Analysis – 'Thanks But No Thanks' to Made in China
Knowledge@Wharton China , January 06, 2012
“Ambitious Asian firms have long been interested in penetrating the global market and have done so using several methods. In the 1980s, Japanese companies such as Toyota and Honda succeeded in the automobile industry and were well-known for efficient management practices and superior product quality. Other Japanese companies soon followed, making a global name for themselves in the consumer electronics and diversified technology products markets. In the 1990s, companies from the small but formidable Asian “tiger” economies also emerged, with Korean brands such as LG and Samsung succeeding in consumer electronics and Kia and Hyundai making inroads in the automobile industry, and Taiwanese brands such as Acer and Asus making waves in the technology industry. These companies have managed to sustain and grow sales overseas while maintaining their competitive advantages -- lower costs, efficient management practices, superior product quality and innovative R&D.”  Read more

Commentary – Nicholas D. Kristof :Where to Go to Understand the World in 2012
New York Times, January 06, 2012
“If you want to understand the world, you need to understand Asia. That, in turn, means setting foot in China and India .Together, those two countries account for one-third of humanity and much of the world’s recent economic growth. They reflect two of our richest civilizations, two broad religious traditions and a vast share of the world’s artistic heritage — and its future.”  Read more  

In the News – U.S. Secretary of Treasury to visit China
 Xinhua, January 06, 2012
“The U.S. Secretary of Treasury Timothy Geithner will visit China from Jan. 10 to 11 as a special representative of the U.S. President Barack Obama, Chinese Foreign Ministry spokesman Hong Lei announced on Thursday...Timothy Geithner's visit is at the invitation of Chinese Vice Premier Wang Qishan, said Hong.”  Read more   

In the News – Chinese News Agency Warns Against U.S. Moves
New York Times, January 06, 2012
“China’s state-run news media warned Washington on Friday not to 'recklessly practice militarism' or engage in 'war mongering,' a day after the Obama administration outlined a new military strategy with an increased focus on China.”  Read more  

Commentary –Liu Tian, Wei Jianhua : 2012, a bumpy year ahead for China-U.S. relations?
Xinhua, January 06, 2012
“After a year of ups and downs in China-U.S. relations, are the two giants heading for collision or cooperation in 2012, in the context of global economic woes and U.S. presidential elections?...The answer is not clear, partly because of the contradicting messages from Washington in the past year. President Barack Obama said his country would conduct sound cooperation with China in the beginning but later met with the Dalai Lama, approved arms sales to Taiwan and interfered in the South China Sea issue.”  Read more

Commentary – Patric M Cronin: Power Play
Foreign Policy, January 05, 2012
“For a president who admires a slick backdoor pass and the occasional alley-oop, it is fitting that Secretary of State Hillary Clinton described his key strategic doctrine in terms of pivoting. In a recent Foreign Policy article, she articulated the administration's grand new strategy: America would 'pivot' from conflict in the Middle East and Southwest Asia to deeper engagement in the dynamic Far East, shifting from an over-concentration on Japan and Korea to a more distributed posture across East Asia and throughout the Pacific and Indian oceans. The strategy entails a focus on ensuring alliances in the region are 'nimble and adaptive,' and guaranteeing allies up-to-date 'defense capabilities and communications infrastructure.' Speaking at the Pentagon today, President Barack Obama declared that the United States would achieve this pivot towards Asia, especially China, from a 'position of strength.' ”  Read more  

In the News – U.S. treasury secretary to travel to China, Japan
Xinhua, January 05, 2012
“The U.S. Treasury Department announced on Wednesday that Treasury Secretary Tim Geithner will travel to China and Japan next week for meetings with top officials there to discuss a range of economic and other issues...Geithner will meet senior government officials in both countries between Jan. 10 and 12 'to discuss the state of the global economy, policies to strengthen global growth and other economic issues of mutual importance,' the Treasury said in a statement.”  Read more

In the News – Vice Foreign Minister Cui Tiankai Holds Talks with U.S. Assistant Secretary of State Campbell   
Xinhua, January 04, 2012 “Vice Foreign Minister Cui Tiankai held talks with visiting U.S. Assistant Secretary of State Campbell. Both sides exchanged views on China-U.S. relations as well as major international and regional issues of common concern. ”  Read more

In the News – China’s President Lashes Out at Western Culture
New York Times, January 03, 2012
“President Hu Jintao has said China must strengthen its cultural production to defend against the West’s assault on the country’s culture and ideology, according to an essay in a Communist Party policy magazine published this week. The publication of Mr. Hu’s words signaled that a new major policy initiative announced in October would continue well into 2012.”  Read more  

In the News – China, U.S. agree to enhance dialogue, properly handle disputes
Beijing Daily, December 31, 2011
“Chinese State Councilor Dai Bingguo and U.S. National Security Advisor Tom Donilon held a telephone conversation on China-U.S. relations on Friday...The two senior officials reviewed recent developments in China-U.S. relations and agreed to carry out in 2012 the important consensus reached between the heads of state of the two countries.”  Read more   

In the News – China, U.S. agree to enhance dialogue, properly handle disputes  
Xinhua, December 30, 2011
“Chinese State Councilor Dai Bingguo and U.S. National Security Advisor Tom Donilon held a telephone conversation on China-U.S. relations on Friday...The two senior officials reviewed recent developments in China-U.S. relations and agreed to carry out in 2012 the important consensus reached between the heads of state of the two countries.”  Read more

Commentary – Jean Pisani-Ferry: China to the Rescue?
Foreign Policy, December 29, 2011
“The idea of Asia extending a helping hand to Europe has been around ever since the G20 summit in Cannes, France in early November, when world leaders failed to organize exceptional contributions to the International Monetary Fund (IMF) that could help support the eurozone. The hope was revived, however, by European leaders at their latest debt crisis summit in December.”  Read more  

In the News – 4 U.S. Makers of Towers for Wind Turbines File Complaint Over China’s Steel Subsidies
New York Times, December 29, 2011
“Four domestic companies that make most of the steel towers for wind turbines in the United States filed a trade complaint against China and Vietnam on Thursday, seeking tariffs in the range of 60 percent. The action is a significant new skirmish in an emerging green energy trade war.”  Read more  
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Currency

Commentary– Gordon G. Chang: China Says Yuan Will Be Fully Convertible Soon
Forbes, January 01, 2012
“Yesterday, Zhou Xiaochuan was quoted by Caixinas saying that the renminbi will be freely convertible soon.  'We are now not too far from our goal of capital account convertibility,' the outgoing chief of the central bank told the influential Chinese magazine.  Today, the currency is convertible only on the current account.”  Read more  
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