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| Andy Mok |
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| Sara Hsu |
China’s recent order requiring banks to finance steel exports represents an act of ill faith toward the U.S. and EU in particular, which have suffered from China’s low-price steel exports. As part of a global oligopolistic industry, in which a few firms dominate, steel firms should engage with the rest of the world. Failure to do so has resulted in declining profits for all steel firms and has created mistrust among non-Chinese players for Chinese firms. In return, the European Union has been loath to grant China Market Economy Status, which would allow Chinese firms to more easily justify their actions in WTO anti-dumping cases.
Although it appears that China’s leadership wants to eliminate excess inventories of steel right away, the industry may be better off if the government chooses to purchase and hold stores of steel until demand rises, as it does for agricultural products. The incentive to export rather than hold steel comes from firms’ desire to lock in higher prices as steel prices continue to slide, and from firms’ need to stay productive rather than temporarily close and write down bad loans.
As a result, both steel firms and their government advocates remain fixed on short-term outcomes and are not playing the long game. In the long or even medium run, China is committed to expanding urbanization. It will need a great deal of steel for this process. A steady rise in demand for steel will hike world prices. China will also have to continue to engage with its trading partners, and its dumping practices are generating some bad blood among its Western counterparts. Even if steel mills remain open and produce at a break-even level, storing steel inventories may result in higher prices and better trading conditions than exporting the glut to disenchanted foreign markets.
While China’s reduction of steel capacity is a smart move at present, trade-related steel policies need to be revisited. If these policies are not altered, the industry and its workers will continue to suffer.More in the Diplomat.
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| Sara Hsu |
At present, international online sales account for only a small percentage of total online sales. This is because international shipping costs for goods purchased by Chinese consumers on American websites remain high compared to average purchase prices for online retail goods, restricting U.S.-China online retail sales to relatively low levels. Most non-bulk, lighter manufactured products covering such a distance move via air transportation. Still, online stores with branches in China, such as Amazon, are able to get around the firewall and to ship retail products domestically by maintaining a local presence. For truly international sales from the U.S. to China, shipping costs may decline in the future, and American firms do not want to reduce sales and marketing opportunities even before they open up.
To truly understand the impact of China’s firewall on international online commerce, more energy must be devoted to scrutinizing the costs and benefits surrounding this industry. The financial and economic impact of firewall restrictions on online commerce is a research topic that is vastly understudied, so there is no information about how much business American firms lose annually due to Chinese firewall blocking. In addition, while the World Trade Organization does study e-commerce, the implications of China’s firewall on international online business has not been examined. E-commerce issues analyzed by the WTO include discussion of IT goods, internet infrastructure services, electronically traded services, and digital products, and not online international sales per se.
To some extent, then, the impact of the Great Firewall on international e-commerce and trade is a gray area, and assertions supporting or rejecting the idea that the firewall is a trade barrier must be bolstered with concrete economic and regulatory study. As use of online sales spreads, as is occurring rapidly in China, international retail sales are likely to expand on the assumption that shipping constraints will ease. Until that time, this controversial area should be made a point of study, both by the Office of the US Trade Representative, and by the World Trade Organization.More in the Diplomat.
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| Sara Hsu |
China’s aims in relations with controversial foreign regimes are most often to promote economic ties that serve its self-interest rather than to choose a preferred political ideology. Even as China has maintained genial relations with the West, the nation has been criticized for doing business with dictators that engage in atrocious human rights violations. China’s policy has been “noninterference in internal affairs.” Although regular trade relations with violent regimes may be necessary to supply goods to the people, trade in weapons and nuclear materials supports violence and can be easily viewed as interference in internal affairs.
Moreover, Iran’s commitment in fighting terrorism can be called into question. The U.S. State Department has repeatedly accused Iran of supporting terrorism, including Hezbollah and the Syrian army under President Bashar al-Assad. Terrorism has been viewed as a tool of the state since 1979, after the launch of Iran as an Islamic Republic. Iran has used terrorism to weaken rival governments, influence disputes outside its borders, and to intimidate or use as political leverage. While certainly relations in the Middle East are complex and often hostile, Iran’s use of terrorism against a multitude of parties renders it a questionable ally against terrorism.
Whether China’s relations with Iran are a threat to the West can be viewed from different perspectives, but the real threat of violence stemming from Iran must be taken seriously. As a key stop on China’s One Belt One Road, Iran’s importance to China seems healthy, but the sales of weapons or nuclear material in particular cast a shadow over this partnership. As China becomes increasingly influential on the world stage, this relationship will likely be more deeply scrutinized.
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| Shaun Rein |
Risks of a trade war are rising as anger is bubbling up not only in Washington but also in Beijing where officials face huge domestic pressure to stand up and declare an end to American hegemony.
On Thursday October 6 President Obama lashed out, "China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States.” He continued, "Currency manipulation is one example of it."
After hearing President Obama’s speech, one influential Chinese person told me angrily, “We have already appreciated the renminbi 8 percent in the last year, forcing the closure of many factories, yet America’s jobs growth remains anemic. America’s jobs problem has nothing to do with China’s currency rate but Congress’ irresponsible bickering, lack of a job recovery plan and inability to reign in Wall Street. Congress is causing more problems than solving (any).”
The anti-China rhetoric is one of the few issues that gain bi-partisan support in the Congress. America’s political leaders have tried to divert attention from their own inability to create a job creation plan by blaming another country’s exchange rate despite China playing a relatively responsible role in the past year.More in CNBC Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.
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| Janet Carmosky |
Bad argument #3: China’s predatory currency rate has cost America jobs.
Bad assumption: America is a passive participant in its own fate; if we lose it’s not because we’re not a good team, it’s because the other guys are cheating.
Fact contradicting bad assumption: In this era and previous eras, every nation that succeeds in creating national wealth in strategic arenas does so by investing specifically and consistently in its national capacity and industrial base. The United States has not been doing this. China has. The United States has left investment in the hands of a) the private sector, beholden to stockholders who tend to demand quarter on quarter improvement in financial performance. Major long term industrial initiatives call for patient stewardship over years if not decades; b) elected officials who spend their resources on the short-term goal of getting re-elected. There’s no upside to focusing on long term issues unless the voters understand and reward it.
Real reason #3 why China sanctions won’t help create USA jobs:Our political system allows open debate and discourse toward a climate of critical thinking about serious issues. First among them, declining national competitiveness. We’re losing competitiveness not only to China, but to every nation that has a plan. Why don’t we have a plan? Because our electoral process and corporate reporting focus on pleasing us, the American voters, customers, citizens and investors. We have bought into the idea that the only time frame that matters is the short term. The jobs crisis? The root cause isn’t remotely related to currency valuations. It’s a lot deeper than that. It’s about the attention span of the American voter. China is single party rule by the elites. Our political systems calls for an educated voter base – one with tolerance for complexity, stamina in understanding issues, ability to focus on the real game instead of the posturing of the Shake Weight salesmen. We can “hold China to account” all we want; let’s just be sure we hold ourselves and – especially since our systems were specifically designed for this purpose - our private and public sector leaders to account as well.More in Forbes
Toyota SUV in trouble via Wikipedia
For almost five years I have covered the Chinese scrap trade, and in the course of visiting Chinese ports and scrap facilities, I have seen American scrap shipments contaminated with medical waste, household garbage, dead animals, sludge, mud, and other items not included on the shipping manifest. And these are just the shipments that DON’T contain e-waste. All of this occurs despite China’s strict laws on waste imports – many of which were implemented in reaction to American exports of hazardous materials to China.
(Later at Chinabiz)
Tooth paste, cough syrup, fish, cars, pet food: the world has seen a host of China-scares in the recent months. Of course: pets should not die when they eat food and killing more than hundred people in Panama is nothing short of a criminal act. But in the slipstream of those incidents, a flood of similar stories has been setting off many alarm bells. While vigilance is more than justified when the quality standards of Chinese products are being challenged, we should also watch out for the Western spin doctors, who see a good chance of destroying the image of their Chinese competitors. They often have a free ride, because nobody is really opposing their strategies.
When German and Dutch lobby organizations published in June about a devastating crash test of the China-made sedan Brilliance, I heard another alarm bell going off.
In 2005 those same organizations tested also the Landwind and the devastating results of that Chinese SUV killed off the efforts of yet another Chinese car producer to export their cars to Europe.
In March last year, I was standing at the tarmac of Pudong Airport, waiting for a flight to Hong Kong, when I discovered my neighbor worked for a major supplier of the Landwind-producer. Of course I expressed my sympathy. "Did you never hear the original test was recalled?" he wondered. I did not.
Later I discovered he was right. The Landwind has complied with the European safety standards, but that message never got through to me, let alone to the thousands of potential buyers. European spin doctors had effectively destroying its image.
For all those reasons it should have been logical to look at the June test results of the Brilliance with some care, but with few exceptions the Chinese car became again part of a successful lobby targeting Chinese products.
Apart from European spin doctors scoring yet another success in blocking Chinese trade with unjustified arguments, the silence on the Chinese side is equally disturbing. Chinese companies with global aspiration, especially when they make relative high-end products like cars, should be aware of the power of media campaigns on their new markets. Regardless whether those arguments are right or wrong, or a little bit right and a little bit wrong, they should have their counter-strategy in place. Now it is only the importing companies who are faced with the negative fallout and all to often they will stick their hands in the air and try to cut their losses.
Next year there will be a new Chinese car, trying to enter the international market. In Dutch we have a saying: a mule does not hurt itself twice at the same stone. Let's hope the Chinese car makers do not hurt themselves for the third time at the same stone.
