China is “No Threat” to the US, But…

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In line with recent reports from the WTO (reported here) US Commerce Secretary, Carlos Gutierrez, is reported as saying that China’s emergence as an industrial giant does not pose a threat to the US, and the US must focus its efforts on “higher value manufacturing, differentiation of products, higher technology, and in many cases new services” instead of competing head-on with China’s “manufacturing of commodity-type products” (something we have often said on this blog).

Meanwhile, in Washington DC, although a vote on the imposition of 27.5 percent tariffs on Chinese imports has been postponed, there is still pressure on China to relax its currency management system, and to allow the Renminbi (RMB) to appreciate. A new bill by Senators Max Baucus and Charles Grassley would allow the US to take action against countries with “fundamentally misaligned currencies” (i.e. China).

The currency issue and the US trade deficit with China go hand-in-hand. However, it is worth noting that, China accounted for US$201 billion of the massive US$804.9 billion US deficit last year (so is far from the only culprit). Also, as one Chinese official mentioned the other day, China is barred by US government policy from importing a lot of the expensive, high-tech goods that would help to balance things out…but that’s another matter. As is the “oil deficit” with America’s friends in the Middle East.

The comments by Gutierrez are a step in the right direction – and President Hu Jintao will find some friendly faces when he visits the US this month – but there is still a long way to go.
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