US-China Trade in the News 3-10-11 Update: Commentaries and Analysis

Simon Johnson argues that the U.S. Federal Reserve is making an error in judgment on bank dividends; he also comments that a healthy financial system cannot be built on the expectation of bailouts.  In China, banks are tightening credit while Evan A. Feigenbaum asserts China is likely to displace traditional trade partners across an array of sectors based on its willingness to take risks.  All this and more in today’s US-China Trade update.

 

Contents
The U.S. Economy
The Chinese Economy
The US-China Relationship
Events

The U.S. Economy 

Commentary – Simon Johnson:  A Healthy Financial System Cannot Be Built On the Expectation of Bailouts
The Baseline Scenario, March 5
“The financial crisis is not over, in the sense that its impact persists and even continues to spread.  Employment remains more than 5 percent below its pre-crisis peak, millions of homeowners are still underwater on their mortgages, and the negative fiscal consequences – at national, state, and local level – remain profound. ” Read more

Commentary – Bill Bradley, Tom Ridge, David Walker: Transportation's Road to Recovery
Politico, March 3
“Transportation investments must help expand the economy, not just provide short-term employment. Nobody remembers how many jobs were created building the Interstate Highway System, but we all still benefit from the economic boom that followed its construction. Long-term economic growth requires sound investment choices bolstered by strategic benefits. Wasteful spending can no longer be tolerated.” Read more

Commentary – Simon Johnson:  Is The New York Fed Making A Serious Mistake On Bank Dividends?
The Baseline Scenario, March 3
“An uncomfortable dissonance is beginning to develop within the Federal Reserve.  On the one hand, senior current and former officials now generally agree with the propositions put forward by Professor Anat Admati and her distinguished colleagues – our leading banks need more capital, i.e., more equity financing relative to what they borrow.”  Read more

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The Chinese Economy

 Commentary – Gordon G. Chang:  Did China Just Change Its Growth Model?
Forbes New Asia blog, March 6
“ ‘We will actively boost consumer demand,’ said Chinese Premier Wen Jiabao on Saturday when he gave his Work Report—often described as China’s State of the Union address—at the National People’s Congress annual meeting in Beijing.  ‘We will continue to increase government spending used to help expand consumption, and increase subsidies to low-income urban residents and farmers.’ ” Read more

Commentary – Jack: China’s Banks Tighten Credit
ManagingtheDragon.com, March 5
“On February 9, the People’s Bank of China, China’s central bank, raised the one-year borrowing rate by 25 basis points to 6.06 percent, and the rate on one-year deposits by 25 basis points to 3.0 percent. These rate hikes came amid increasing pressure on the Chinese government to control inflation. The February 9 increase was the first rise in China’s one-year benchmark interest rates this year, and signals a renewed effort to cool prices and tighten liquidity.”  Read more

Commentary – The Wharton School of the University of Pennsylvania: Battle of the Bourses: Will Hong Kong's RMB Equity Listings Steal Shanghai's Thunder?

Knowledge@Wharton China, March 2-15
“Ever since Chinese authorities first floated the idea several years ago of the Shanghai Stock Exchange (SSE) launching an international board to sell renminbi-denominated shares in non-mainland entities, there has been a steady flow of speculation about when it would open for business. It looks increasingly as if that day will come in 2011. But there's a twist in this latest move to develop China's capital markets -- the long-awaited RMB offering might not be on the SSE, but on the more established rival bourse in Hong Kong.”  Read more

Commentary – The Wharton School of the University of Pennsylvania: Shanghai's Convenience Store Competition Heats Up
Knowledge@Wharton China
“Convenience stores have become a big feature of China’s increasingly affluent, youth-oriented consumer culture and run the gamut from hole-in-the wall, mom-and-pop shops crammed with soft drinks and snacks to modern purveyors using sophisticated analytics to keep their shelves stocked with all kinds of food. Total annual revenue at China’s 380,000 rural and urban c-stores is RMB 425 billion (US$62 billion), according to estimates by consultancy Access Asia using data from the China Chain Store and Franchise Association.”  Read more

Commentary - Yukon Huang: China's Internatl Dilemmas
Carnegie Endowment for International Peace, February 25
Council on Foreign Relations blog, March 7

Analysis – Lora Saalman: China and the U.S. Nuclear Posture Review
“While China has recently grown to become the world’s second largest economy, rising inequality poses serious risks to the country’s internal stability. The leadership has given greater priority to economic before political liberalization and assumed that rapid growth would be enough to maintain social balance. But the increasing incidence of protests and emerging tensions has raised concerns about the future.” Read more

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The US-China Relationship

In the News – Trade Negotiation Committee: Informal Meeting - Members Seek Stronger Push for New Negotiations Texts by Easter
World Trade Organization, March 8
“WTO ambassadors told an informal meeting of the Trade Negotiations Committee on 8 March 2011 that they share Director General Pascal Lamy’s concern that recent progress on substance in the Doha Round is not fast enough to meet late April targets.” Read More, listen more on Statement by Pascal Lamy to the TNC

Commentary – Evan A. Feigenbaum: Is China Eating our Lunch?
“This much is clear: China’s arrival as trader, investor, lender, and builder is dramatically changing the economic environment around the world because, while Chinese investors are not oblivious to the challenges of doing business in, say, Papua New Guinea or Niger, they have taken on risks where American and Japanese (and Indian) firms have not. Over the long term, China is likely to displace other, more traditional partners across an array of sectors.”  Read more

In ther News - Geographical Indications Draft Completed Swiftly but WIth 208 Differences
World Trade Organization, March 3
“In less than two months, a drafting group of negotiators has produced a complete text on the proposed multilateral register for geographical indications for wines and spirits. But because all the present divergent positions are included, the 9-page document — presented to a formal negotiation meeting on 3 March 2011 — contains around 208 pieces of rival text, marked by square brackets.” Read More

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Events

Upcoming Event – “Does Economic Nationalism Threaten the World Economy?

  • Who: Keynote speaker, Professor Lawrence Summers, former Director of the White House National Economic Council for President Obama followed by a panel discussion with William R. Rhodes, President and CEO, William R. Rhodes Global Advisor, LLC; Senior Advisor and Former Senior Vice Chairman, Citigroup, Inc., Kathleen Stephansen, Managing Director and Head of Economic Strategy, AIG Asset Management and Jamie Metzl, Executive Vice President, Asia Society.
  • When: March 23, 2011, 12:00 p.m. to 2:00 p.m. EST
  • Where: 725 Park Avenue, New York, NY
  • Synopsis: Many of the issues addressed in Asia Society's recent task force report, Growing Together Beats Falling Apart: Making Asian Economic Integration Work for Asia, the United States and the World, were discussed when President Hu Jintao visited Washington this January. American lawmakers have accused the Chinese of manipulating their currency in order to promote exports, while the Chinese have argued that the Fed’s injection of $600 billion into the US economy last year amounted to the same thing. Are both sides guilty of engaging in economic nationalism at a time when global cooperation is so crucial? Where is the line between necessary stimulus and harmful manipulation? At a time when many Asian economies are growing faster than most developed world economies, and Asian populations and states are more interconnected than ever before, how can we ensure that Asia's increasing economic prosperity and integration benefit not just Asia, but the world as a whole? What can forestall a rising tide of protectionism, currency and capital control, trade imbalances, and other impediments to free trade?   Read more

Past Event – Managing the Dragon: “Beyond Beijing”

  • Who: Jack Schwankert and Walter McManus, Economist at the University of Michigan Transportation Research Institute (UMTRI) and Director of the Automotive Analysis Group and an analyst from JD Power and Associates.
  • When: Wednesday, March 9, 2011 10:00 a.m. to 11:00 a.m. Beijing time)
  • Where: http://english.cri.cn/beyondbeijing/index.htm
  • Synopsis: During the financial crisis, U.S. auto industry suffered a lot. Now that the signal for economic recovery, everyone concerns the future development of the auto industry.  This Wednesday Mr. Jack Schwankert and Walter McManus, Economist at the University of Michigan Transportation Research Institute (UMTRI) and Director of the Automotive Analysis Group and an analyst from JD Power and Associates, talked about the topic.  Learn more

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