China and India's Threat to the West

The Drudge Report steered me to a most interesting Daily Mail article about China, by Anthony Browne.


[Thanks to coverbrowser.com for the image.]

Browne notes that "Napoleon III compared China to a sleeping giant and warned: 'When China awakes, she will shake the world.'"

He makes some fine points that bear listing:

1. China and India are emerging out of their third-world status and growing at a speed up to four times that of the US or UK. Examples: "China is spending 35 times as much on crude oil as it did eight years ago, and 23 times as much on copper. As it builds gleaming skyscrapers on its fields, China alone consumes half the world's cement and a third of its steel."

2. The once-self-sufficient Western World can no longer ignore them.

3. China and India's economies are growing rapidly, while we in the West are struggling with a liquidity and/or solvency and/or monetary-policy crisis that will reduce our current GDP to something approaching zero.

4. Their increased consumption is spurring an impressive surge in demand for all raw materials that is contributing to the rise in commodity prices around the world. (I note here that I believe their exploding demand is only one contributing factor behind those price increases, the other factor being the inflating and consequent loss of credibility of many of the world's fiat [unstandardized] paper currencies.)

5. China and India's cultures put much less emphasis on individual liberty and property rights than we do in the West. Example: "At home, [China] holds mass executions of criminals with bullets in the back of the head while transplant surgeons stand by to harvest their still pulsating organs." They have fewer qualms about siding up to brutal dictatorships, such as those found in Africa and South America in their search for trading partnerships.

6. A long-suppressed nationalistic mood is stirring in China and India, and their present government structures are not unamenable to excessive executive power.

7. China and India are taking advantage of the education prospects offered by the West, but they are no longer emigrating to the same degree as in the past. Business and employment opportunities are emerging at home.

Two things come to mind that Browne may have omitted. First, on the positive side, the Chinese and Indians love and respect gold. I would conjecture that they are more aware of its role in monetary history, and they just may find a way to shore up their currencies so as to make them viable competitors for today's two fiat anchors, the weakening dollar and the untested euro.

Secondly, and on the more negative side, Chinese and Indian cultures' long standing lack of respect for human rights may be a stumbling block to their advancement. Cultural stickiness has a way of undermining the game plans of even the most visionary of ideas, to wit America's loss of a good portion of the moral and political underpinnings of the U.S. Constitution. And our struggle to maintain the ideals of our Founding Fathers may be nothing compared to the battle both India and China will face, as push comes to shove between, on the one hand, those concepts of individual freedom, equality of opportunity, and property rights that are the source of the Western World's three centuries of progress, and on the other hand, the centuries of class repression that have weighted upon these Eastern cultures.

But I am an optimist at heart and can imagine that, with the speed and openness of today's flow of information, they will evolve as fast as they possibly can.

China: Friend or Foe?

Townhall has published a good article by Herb London about the tensions building between China and the US.

He describes America's frustrations with the Chinese refusal to allow their monetary unit to float like most of the others, and China's frustration with the US for menacing to put barriers against Chinese imports.

I would add that the barriers are already rising. According to an article by Sarrah Filus in the LA Business Journal of 8/20/07, "some 3000 companies in LA's apparel industry could be affected by the so-called 'safeguard quotas' ", whatever those are. "The quotas went into effect in 2006 on 34 categories of apparel imported only from China. In 2005, there were no quotas. The quotas were imposed as a result of pressure from U.S. textile manufacturers who were alarmed at the rising imports from China.... For example, the limit of 271 million cotton pants and 261 million pairs of underwear from China are expected to be reached as early as October. Thereafter, no more imports will be allowed on those items until next year."

Who knew.

Add this to the poisonous toothpaste, the lead-painted dolls, the tainted fish and dog food, and all the other scares we've been hearing about recently, and you have a de facto embargo against China that the latter don't appreciate.


[Thanks to BizHat.com and Nokia for this photo.]

Only trouble is, as Mr. London points out, this very same China is holding 44 percent of the American national debt.

This would be okay, but given the instability of the US financial markets--indeed world markets--at this time, I'd be careful how I threw names, sticks and stones at them, all the more so in light of the fact that the US Federal Reserve is a partner in crime when it comes to creating the wherewithal for American citizens and their government to spend away their children's future and make it possible for China to hold so much of our debt. (For more on this, see my previous posts, like this one.)

China: 1.3 Billion, of whom 900 Million are Peasants

China is a huge country, and with its recent incorporation of capitalist market freedom, one would think that the only direction for their economy is up. But the path upward will be a torturous one, because 70% of the population is still living in an agrarian economy.

Just think about this. Nine hundred million peasants. This means that the other 400 million are carrying the weight of the industrial boom all by themselves -- not many more people than in the US. How is the Chinese government dealing with this dichotomy?

I have translated below an interesting review in a French website called LesEchos.fr of a book that was censured in China but that managed to circulate anyway, clandestinely, at a volume of millions of copies. The book is titled in French: Chinese Peasants Today, and the authors' names are Chen Guidi and Wu Chuntao. (See below for information about the Engliah translation.)

Here is the interesting review [my translation]:

"The Study. Today China has 900 million peasants. For Mao Tse-tung, this peasant class was supposed to be the spearhead of the revolution. It is, instead, the forgotten bystander of economic growth. After three years of research in a rural province west of Shanghai named Anhui, the two authors offer up the true portrait of hard Chinese reality: peasants who are overtaxed, victims of the corruption of local authority figures whose powers succeeded those of the old war lords. 'The sky is high and the emperor is far away,' decry the authors to describe the difficulties the peasants encounter in appealing to Beijing for help.

"Points of interest. Forbidden in China, millions of copies of this work were distributed clandestinely, before being translated into several languages. The authors use a style that is simple, sometimes almost naive, to turn their report into a cry of alarm: one day a peasant revolt could transform itself into a new revolution.

"The quote. 'The first three shovelfuls are for the government, because taxes must be paid in money and in kind; the next three are for the community leaders, the team and the production brigade, because their salaries must be paid; the next three, for the multitude of contributions, because their glasses of alcohol must be bought. And the last tenth is for me,' according to an old saying from the 1970s."

You can buy the American version of this work at Amazon at this page. The title is Will the Boat Sink the Water?: The Life of China's Peasants.


[Thanks to Amazon.com for the image.]

Insider Reaction from China

[Thanks to trekearth.com for the photo.]

Andy Xie, Chinese economist, reacts here to some questions at Bloomberg. (Look for the Audio/Video report in the list for today's date.)

The two points I found most interesting were:

1. The Chinese financial authorities might be making noise about letting the yuan float; but in the long run, their main focus is their employment situation. They have a conflict between their international relations and their internal relations. While on the one hand they might want to play fair with their trading partners and let the yuan out of its pegging straightjacket, they cannot allow a sudden blow-back that might disrupt their employment progress to date, because there are too many Chinese looking for work and a hitch would destabilize the whole country. This is understandable. (Katy comment: The Chinese got themselves into this pegging straightjacket in the first place, not us -- although no one here seemed to object while it was starting up. There was just too much profit on the horizon for our own outsourcing manufacturers. As Xie points out, a pair of Nike shoes priced at $40 is probably selling at $120 in the US [my figures.])

2. The US trade sanctions against certain paper commodities are a symbolic gesture. When the US starts to put tariffs on Nike shoes, then we'll know they're serious.

Interesting interview.