Source material and experiences concerning Chinese Film or its study here and abroad.
Tuesday, July 24, 2012
Basic Economic Relation Between China/US
This article
I read yesterday is interesting considering what Minnie and some other said. Consumption in China in terms of quantity is low, but in terms of quality they more than match the US consumers per capita. Conspicuous consumption such as owning a Prius or putting solar panels on the north side of your house because that is the side that faces the street are clear markers that we can associate with. In China these messages take similar though slightly different paths like putting on a lavish funeral for your parent.
The basic problem with the economic relationship between America and China is that they are juxtaposed. America is a debt society that spends more than they make and China ships a vast quantity of goods to the US to meet that demand. China is a savings society so there is very little in the way of domestic consumption which stymies the US because they can't get the Chinese to spend on their products like they would want them to.
This has created a huge trade imbalance with the US as the loser. Usually this would cause a depression in the value of currency, but China buys US government bonds to keep the value of the dollar high. Not only does China manipulate its own currency, it manipulates the dollar as well. In turn it is favorable to China since a strong dollar allows US consumers to keep on consuming Chinese goods.
There is a market of 1.3 billion that everyone wants to see spend, but there is a major problem. The problem is, as Stanley discussed with us, there is no social safety net in China. People save their money for a rainy day, therefore they can't be encouraged to spend more. They save like crazy. The average of the people I knew in Shanghai was something like 30-50% of their salary. If China wants its domestic markets to increase in consumption they will have to eliminate the need for people to save, which means providing safety nets.
If any of you have more questions on economics, or environmental economics I would be happy to have a conversation.
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I wonder what ramifications Hu Jintao's "created in China instead of made in China" push will have on the markets in both countries. If China can "learn" to create it and make it will they then decide that we are not as viable a market as some African or middle Asian companies? I read in an article that China gives over half of its foreign aid to African countries, but I don't know how much that is. Then they'll have the resources and know how to make stuff, but I don't know who will buy it. Maybe we are safe.
ReplyDeleteIt is scary that they manipulate the dollar!
China is HEAVILY invested in projects in Africa. If I remember correctly they are now giving more in aid than the US and have projects of various kinds sprinkled throughout the continent.
ReplyDeleteIn regards to currency manipulation; the type China practices on its own currency is not legal while the type it practices on the USD is legal, according to the WTO.