Opinion

The Great Debate

from David Rohde:

Will “Made in America” sell in China?

Update: My apologies. In the first version of this column, I confused two different Camaro models. A corrected version is below.

SHANGHAI –When the third film in Hollywood’s Transformers franchise debuted here in July, vast numbers of young Chinese flocked to movie theaters -- and Chevrolet dealerships. Wealthy moviegoers wanted to buy one of the film’s half-car, half robot main characters, a bright yellow Chevrolet Camaro coupe called “Bumblebee.”

“Everyone knew Bumblebee,” said Richard Choi, the director of sales and marketing for Chevrolet in Shanghai. “I had to get the press guys to call it Camaro, not Bumblebee.”

Over the summer, Chevrolet dealers in China sold about 350 400 bright-yellow Camaros. A separate Camaro model specifically designed to look like “Bumblebee” sold 2000 units worldwide, but will not be available in China until December. nearly one-quarter of the 2,000 “Bumblebee” Camaros the company sold worldwide.

Chinese observers say Chevrolet, though, could have sold vastly more Camaros in China. Chevrolet built the specialized Camaros each Camaro in the U.S. only after it received specific orders, creating a three-month-delay in delivery that frustrated Chinese consumers.

from Africa News blog:

Was South Africa right to deny Dalai Lama a visa?

By Isaac Esipisu

Given that China is South Africa’s biggest trading partner and given the close relationship between Beijing and the ruling African National Congress, it didn’t come as a huge surprise that South Africa was in no hurry to issue a visa to the Dalai Lama.

Tibet’s spiritual leader will end up missing the 80th birthday party of Archbishop Desmond Tutu, a fellow Nobel peace prize winner. He said his application for a visa had not come through on time despite having been made to Pretoria several weeks earlier. (Although South Africa’s government said a visa hadn’t actually been denied, the Dalai Lama’s office said it appeared to find the prospect inconvenient).
Desmond Tutu said the government’s action was a national disgrace and warned the President and ruling party that one day he will start praying for the defeat of the ANC government.

It’s the second time the Dalai Lama has been unable to honour an invitation to South Africa by Tutu after failing to make it to a meeting in 2010.

Can China afford to downgrade the U.S.?

By Joseph S. Nye, Jr.
The opinions expressed are his own.

After the rating agency Standard & Poor’s downgraded America’s long-term debt, China said that Washington needed to “cure its addiction to debts” and “live within its means.” It must have been a delicious moment in Beijing, accustomed over the years to lectures from Washington about its management of the yuan.

But actions speak louder than words. The real test will be whether China moves away from the dollar in any significant manner. While it makes modest adjustments to its reserve holdings, there are few good alternatives to the dollar. And while it calls for an international basket of currencies to replace the dollar, there are few takers. Of course, China might move toward opening its currency and credit markets in an effort to make the yuan a reserve currency, but the authoritarian political system is unwilling and unprepared to move to that degree of economic freedom.

Many commentators see the downgrading of American debt as a great shift in the global balance of power between the U.S. and China. Some wags have warned the American navy not to sail too close to China, because if the Chinese captured our ships, we would no longer have enough money to ransom them. But such jokes misunderstand the nature of power. Analysts point to China’s seemingly unstoppable growth and its holdings of United States dollars. But as I show in my latest book, The Future of Power, they fail to take into account the role of symmetry in interdependence in creating and limiting economic power. If I depend on you more than you depend on me, you have power. But if we both depend equally upon each other, there is little power in the relationship.

What is the best strategy against Chinese cyberattacks?

By Ian Bremmer
The views expressed are his own.

All eyes should be peeled on China, but not for the reason you think. While the biggest structural risk right now is global rebalancing, especially between China and the U.S., there is another important threat from China: cyberwars. Cyberattacks are one of the biggest fat tails (along with climate and North Korea).

It’s no surprise that the latest Google hack attack came from China. The presumption is that the vast majority of cyber attacks hitting the U.S. are coming from the Chinese government. It’s very hard to know where threats are originating – country-wise and/or person-wise — because it’s very difficult to go back and figure out the paper trail. But at a minimum, there is an environment in China that tolerates cyber attacks.

Proprietary information around technologies – gaining profit shares, increasing revenues – allows a country to be much more economically competitive. China has leverage because everyone wants to get into China. If you want to make something in their country, you have to share the technology.

What are China’s next steps?

By Michael Spence

China has weathered the present financial crisis better than most countries, for a number of reasons. It reacted very quickly to the collapse of external demand with a domestic stimulus package of 9 percent of GDP in both 2008 and 2009. The stimulus package in China was heavily weighted toward investment, especially in infrastructure, which is something they know how to do. To some extent, the Chinese relied on past experience in the ’97–’98 currency crisis in Asia, a storm they weathered without depreciating the currency but instead with what was then a large domestic stimulus pro-gram. China also eased credit quickly, and used their massive reserves to stabilize the currency.

The result is a rapid transition to high growth, with projections for 2010 in the 9 percent and above range. On the other hand, as with other countries, the stimulus and other dimensions of the emergency response are not a permanent solution. There is a growing concern among knowledgeable Chinese policy makers and academics with regard to two things. One is a return to the old ways, meaning the strategies and policies of the past thirty years that focused on investment and labor-intensive exports, policies that worked well but have outlived their usefulness. The influence of those in government and in the labor-intensive sectors that are set to decline is still substantial. Their hand has been at least temporarily strengthened by the crisis.

The other is a deep concern about overconfidence in the economy’s resilience in the face of some daunting short- and medium-term challenges. Managing to bounce back in the worst global crisis in eighty years — and by far the largest in the history of the PRC — is impressive. But, then, the hallmarks of Chinese growth have been rapid learning, a long time horizon, a willingness to support and encourage constant change, and a pragmatic problem-solving approach to a long process. These will likely reassert themselves and displace any short-term tendency toward triumphalism. Nevertheless, the risk is there.

U.S., China and eating soup with a fork

-The opinions expressed are the author’s own-

Are economists the world over using an outdated tool to measure economic progress?

The question, long debated, is worth pondering again at a time when two economic giants, the United States and China, are sparring over trade, currency exchange rates and their roles in the global economy.

In the run-up to U.S. mid-term elections on November 2, politicians from both parties, for different reasons, blamed trade with China for American job losses. China responded with irritation and hit back by accusing the U.S. of “out of control” printing of dollars tantamount to an attack on China with imported inflation.

Euro zone faces QE2 pain test

QE2 — a second round of quantitative easing — means that soon the U.S., Japan and Britain will all be busily exporting their deflation, raising the question: Just how much pain can the euro zone take?

If by November we have three of the largest economies printing money and buying up their own debt, the outcome — in fact the intention — will be to drive their currencies lower against their trading partners, opening new international markets for their goods and, by raising the price of imported goods, fighting deflation before its debilitating psychology can take hold.

That is the plan, at any rate, and, unless something else happens, it will force the euro up against all major currencies, including, as it is tied to the dollar, the Chinese yuan. The euro has risen about 9.5 percent against the dollar in the past month, a trend that ultimately will murder European exporters and its stock market.

from MacroScope:

Will China make the world green?

Workers remove mine slag at an aluminium plant in Zibo, Shandong province December 6, 2008. REUTERS/Stringer

Joschka Fischer was never one to mince words when he was Germany's foreign minister in the late '90s and early noughts. So it is not overly surprising that he has painted a picture in a new post of a world with only two powers -- the United States and China -- and an ineffective and divided Europe on the sidelines.

More controversial, however, is his view that China will not only grow into the world's most important market over the coming years, but will determine what the world produces and consumes -- and that that will be green.

Fischer, who was leader of  Germany's Green Party, reckons that due to its sheer size and needed GDP growth, China will have to pursue a green economy. Without that, he writes in his Project Syndicate post, China will quickly reach limits to growth with disastrous ecological and, as a result, political consequences.

China runs circles round adversaries

If the global currency war was a baseball game, they would have to invoke the “slaughter rule” and send China home the winner.

Motivations and consequences aside, China is so adroit in melding diplomacy, jawboning and action to keep the value of its currency low that you have to feel something approaching compassion for its plodding adversaries from the U.S., Europe and Japan.

China’s latest well played move is its pledge to use some of its massive foreign currency reserves to support poor Greece, which the markets widely believe will default some fine day, European Union support or not.

Speculators and China win big on yen move

What does $4 trillion a day in business, never sleeps and sees Japan’s Ministry of Finance as just one more patsy?

The foreign exchange market, of course, which is licking its collective lips as Japan embarks on another round of unilateral intervention to sell the yen in an effort to drive down its value and protect its export-oriented economy.

There are going to be two big winners in this, and neither begins with a “J.”

  •