[Marxism] NYT: Booming, China Faults U.S. Policy on the Economy

Walter Lippmann walterlx at earthlink.net
Tue Jun 17 07:34:18 MDT 2008

“U.S. credibility and the credibility of U.S. financial markets is
zero everywhere in the world,” said Joseph E. Stiglitz, a professor
of economics at Columbia University who has sharply criticized the
Bush administration and praised China’s economic management in the
past. “Anybody looking at this from the outside says, ‘There’s been a
lot of hot air coming out of the U.S., so why should we listen to
these guys when they didn’t know how to manage risk?’ ”

(COMMENT: Economics being the dismal science that it is, the economic
troubles which are  currently afflicting the U.S. economy, which aren't
abstractions but are affecting virtually everyone, may generate some
thinking and, perhaps, some intelligent talk by people about the
nature and structure of the U.S. economy and their relationship to
the way ordinary people in the United States live. Not that we should
have confidence that this WILL take place, but it's a possibility.

June 17, 2008
Booming, China Faults U.S. Policy on the Economy

BEIJING — Not long ago, Chinese officials sat across conference
tables from American officials and got an earful.

The Americans scolded the Chinese on mismanaging their economy, from
state subsidies to foreign investment regulations to the valuation of
their currency. Your economic system, the Americans strongly implied,
should look a lot more like ours.

But in recent weeks, the fingers have been wagging in the other
direction. Senior Chinese officials are publicly and loudly rebuking
the Americans on their handling of the economy and defending their
own more assertive style of regulation.

Chinese officials seem to be galled by the apparent hypocrisy of
Americans telling them what to do while the American economy is at
best stagnant. China, on the other hand, has maintained its feverish

Some officials are promoting a Chinese style of economic management
that they suggest serves developing countries better than the
American model, in much the same way they argue that they are in no
hurry to copy American-style multiparty democracy.

In the last six weeks alone, a senior banking regulator blamed
Washington’s “warped conception” of market regulation for the
subprime mortgage crisis that is rattling the world economy; the
Chinese envoy to the World Trade Organization called on the United
States to halt the dollar’s unchecked depreciation before the slide
further worsens soaring oil and food prices; and Chinese agencies
denounced a federal committee charged with vetting foreign
investments in the United States, saying the Americans were showing
“hostility” and a “discriminatory attitude,” not least toward the

All this reflects a brash new sense of self-confidence on the part of
the Chinese. China seems to feel unusually bold before the Summer
Olympics, seen here as a curtain raiser for the nation’s ascent to
pre-eminence in the world. The devastating earthquake last month
helped by turning world sympathy toward China and dampening criticism
of its handling of Tibet.

The Chinese attitude is no doubt bolstered by the lame-duck status of
the Bush administration and by the fact that the United States is
widely seen as having squandered its political and military
leadership during the war in Iraq, which China opposed. Likewise,
Chinese officials and state news media have suggested that the
relatively quick mobilization of the Chinese Army during the recent
earthquake in Sichuan Province contrasts favorably with the Bush
administration’s reaction to Hurricane Katrina.

The aggressive stand comes at an inopportune moment for the White
House. Treasury Secretary Henry M. Paulson Jr. and other cabinet
members are to meet with Chinese officials in Annapolis, Md., on
Tuesday in the latest round of semiannual economic talks. The
Americans have a laundry list of complaints, among them that the
Chinese use regulations to favor domestic companies over foreign
rivals and that Beijing does too little to police the theft of
copyrights and patents held by Western companies.

The United States is also pressing China to address concerns about
the safety of food and drugs it exports.

But China has its own list of grievances, topped by management of the
dollar and restrictions on foreign investment in the United States.
And the Americans could find themselves with little negotiating

“U.S. credibility and the credibility of U.S. financial markets is
zero everywhere in the world,” said Joseph E. Stiglitz, a professor
of economics at Columbia University who has sharply criticized the
Bush administration and praised China’s economic management in the
past. “Anybody looking at this from the outside says, ‘There’s been a
lot of hot air coming out of the U.S., so why should we listen to
these guys when they didn’t know how to manage risk?’ ”

Here in China, economic observers are noting that the Chinese posture
toward the Americans has decidedly shifted.

“This time, the Chinese side is trying to change its attitude to be
more active, to be more aggressive, to balance the two sides,” said
Song Hongbing, author of “The Currency War,” a best-selling if
conspiratorial book on the American economy. “They just started to
change their attitude for the future.”

Chinese officials are expressing their disdain in forums around the
world. Last month, Liu Mingkang, the chairman of the China Banking
Regulatory Commission, delivered a lecture at the British Museum in
London in which he blamed the American government for the subprime
mortgage crisis that came close to freezing Western debt markets and
required extensive intervention by the Federal Reserve. The turmoil,
he said, was “counteracting the course of global civilization.”

“Does moneymaking or doing business justify the regulators in
ignoring their duty for prudential supervision and their job of
preventing misbehavior?” he said.

One of Mr. Liu’s colleagues, Liao Min, told the newspaper The
Financial Times in late May that the “Western consensus on the
relation between the market and the government should be reviewed.”

“In practice, they tend to overestimate the power of the market and
overlook the regulatory role of the government, and this warped
conception is at the root of the subprime crisis,” said Mr. Liao,
director general of the commission.

China is grappling with its share of economic problems, including
high inflation. But it has reasons to feel optimistic.

Some economists say it has improved its state-owned banking system by
writing off bad debt and overhauling management even as it rejected
American pressure to privatize banks and allow unfettered competition
in the financial sector. Its financial system is more tightly
regulated and less dynamic than the American one, but also more
stable, Chinese economists argue.

On currency management, China has been under heavy pressure to raise
the value of the renminbi, which foreign critics say is maintained at
an artificially low level to make Chinese exports less expensive. So
far, China has managed to walk a tightrope. It has allowed the
renminbi to increase in value against the dollar in tiny increments,
for a total of 20 percent since 2005, a less dramatic change than the
Bush administration and Congress demanded.

The gradual approach has allowed the export sector to adjust while
preventing a currency shock that might derail growth.

Meanwhile, the Americans allowed the dollar to plunge in value. That
angered the Chinese, which keeps most of its $1.76 trillion in
foreign reserves in dollars. Chinese officials have accused the
Americans of mismanaging the dollar at a time when Washington is
still pressing China to appreciate the renminbi to narrow the trade

This month, the Chinese envoy to the World Trade Organization said in
Geneva that the United States had failed to safeguard the value of
its currency, worsening the pain for people around the world who pay
high oil and food prices in dollars.

The envoy, Sun Zhenyu, also said the United States was engaging in
protectionism by imposing unfair duties on Chinese goods and
subsidizing American products.

Also this month, several Chinese institutions submitted sharp
critiques to the Treasury Department of proposed new regulations
relating to foreign investment in the United States. Some of the
remarks were scathing.

“The regulations still include some sections and procedures which
reflect the enshrouded protectionism, an obvious contradiction to the
spirit of free competition the U.S. has championed since long time
ago,” wrote the China Securities Regulatory Commission.

The commission said the proposed regulations reflected a
“self-evident hostility” and “discriminatory attitude” to certain
types of foreign investments and “will ultimately hurt enthusiasm of
foreign investment in the U.S.”

China was particularly stung in 2005 by opposition in Congress to a
bid by its third largest national oil company to buy the Unocal
Corporation, an American oil company, for $18.5 billion.

Mr. Paulson, the Treasury secretary, said Monday that he agreed that
there had been a “general trend” of China’s becoming increasingly
vocal in its criticism of American policies, but that this was not a
cause for concern.

“We’ve had a relationship where both sides have been pretty frank
privately and pretty frank publicly,” Mr. Paulson said in a telephone
interview in Washington. He said China’s criticism of American
policies grew out of its rise as an economic power, with greater
voice in global discussions on trade, currency and the flow of

Nicholas R. Lardy, a China expert at the Peterson Institute for
International Economics in Washington, said in an interview that “the
Chinese are reacting adversely, and I think with some justification.”

He added, though, that he interpreted China’s recent aggression more
as a reaction to specific events or policies involving the American
economy than as a result of a new surge in national confidence.

If that is the case, China might be able to avoid the pitfall of
hubris. Japan attacked the American government’s economic management
in the 1980s, only to find itself tumbling into recession and
stagnation ever since. Some economic experts here warn that China’s
economy could soon feel the full brunt of the downturn in the world
economy, and that the American economy, in the long run, could stay
on top.

“The U.S. has always considered its economy powerful and is reluctant
to listen to other countries,” said Lin Jiang, the head of the
economics department at the China Youth College for Political
Sciences in Beijing. “Of course China now is more confident than
before and Chinese people are more proud of China’s economy, but we
can’t be blind. It’s still hard to challenge the U.S.”

Huang Yuanxi contributed research from Beijing. Keith Bradsher
contributed reporting from Hong Kong, and Steven R. Weisman from

Copyright 2008 The New York Times Company

     Los Angeles, California
     Editor-in-Chief, CubaNews
     "Cuba - Un Paraíso bajo el bloqueo"

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