Tuesday, June 17, 2008

Booming, China Faults U.S. Policy on the Economy

How times have changed.

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.

The evidence of the economies is clear.

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.

Ditto: Bush and his boy Brownie sat on their asses and did nothing.

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.

Dynamic? As Bear Steans and Lehman Brothers were dynamic?

The gradual approach [of allowing the renminbi to appreciate against the dollar] 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 deficit.

While Paulson kept going over to China to jawbone them, the dollar plunged. Putz.

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.

Absolutely mismanaged; arrogant.

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