Monday, July 27, 2009

US/China Summit

China and America kicked off an important round of meetings yesterday.

Photo found on

For many years, U.S. officials traveled to Beijing and lectured the Chinese about the value of their currency and the need for economic and political reforms.

On Monday, about 200 senior Chinese officials traveled to Washington and heard soothing words of reassurance from U.S. officials: The dollar is still sound, your investments are safe and we are working really hard to restructure our economy.

Such is the nature of the U.S.-China relationship today. Behind all the reassuring language is a nervous sense that the fate of the world economy is increasingly dependent on the United States and China working together.

President Obama opened the first meeting of the U.S.-China Strategic and Economic Dialogue on Monday by declaring that the two countries share a responsibility for the 21st century, and should strive to cooperate not only on economic matters but also on key issues such as climate change, nuclear proliferation and transnational threats.

"The pursuit of power among nations must no longer be seen as a zero-sum game," he said at the start of the two-day meeting, held at the Ronald Reagan Building and co-chaired by Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy F. Geithner. "Progress -- including security -- must be shared."

The meetings are intended mostly to allow officials to exchange views on a wide range of issues and to establish contacts in each other's governments. On Monday, Obama gave a gentle prod to China on its human rights record, noting that "all people should be free to speak their minds," but otherwise focused on forming with China a partnership "of opportunity."


"The United States will never become China, and China will never become the United States," he (State Councilor Dai Bingguo, who oversees foreign policy) added. "But the living fact is that China and the United States' interactions have never been so frequent, our interest has never been interwoven so closely, and the mutually beneficial cooperation between our two countries has never been so broad, and the driving force boosting the China-U.S. relationship has never been so strong."

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I hope that these talks can be fruitful and do some good.

There's little doubt that the election of Obama has done a good job of garnering favor from the citizens of the world. America's favorability ratings in China went from 34% in 2007 to 47% now in 2009. Hopefully some of that good will has also spread to the leaders of China and countries around the world.

There's no doubt that America is mired in a terrible recession. I will not argue with that. The conventional wisdom is that China is the lone nation leading the world out of such dire circumstances. That, I'm not 100% sure about.

There are a few signs around that China's growth might not be all that it's cracked up to be. I'm sure China is optimistic that its massive stimulus and vast amounts of resources will give it keep it's economy going, yield it more power in the international community, and give it the upper-hand in the US/China relationship. It might very well, but I believe there are some reasons to question this thinking.

If these kinds of talks and a general respect from each side towards the other can keep China and America's relations normalized, the world will benefit. There'll sure be huge problems as the world moves forward - both with the economy, the environment, and a huge array of other issues. I'd like the US and China to work together on these things. I don't think the world is going to be able to afford having the two countries at each others' throats.


Anonymous said...

"The conventional wisdom is that China is the lone nation leading the world out of such dire circumstances. That, I'm not 100% sure about."

Oh I'm not either. I'm not even 50% sure. To me it seems that China is once again not learning from other's mistakes and that its ego may be currently preventing it from seeing a looming problem. I look at China's situation right now and it reminds me a lot of America before the crash. Overinflated stock market that doesn't represent true value, Housing prices rising and not in line with what people can actually afford to pay, overconfidence in its economic system, etc...

However, China has a lot of things going for it which will prevent it from a delayed crash. They hold a lot of the world's debt, are benefitting from failed companies like GM which now will produce and sell most of its cars in China, are leading the way in efficient energy reform, etc...

Don't know what to think yet. China as always, remains and enigma.

Mark said...

You're right, Hopfrog, it's a bizarre situation.

For months now, I've been in flabbergasted that China's been doing the exact same things that America did getting into this mess. And I've written about it extensively on this blog.

But at the same time, China does have a lot going for it. There really is so much room for growth in the country.

I'm curious to see which side wins out here. The roaring economic growth or the risky practices China is importing from the West.

Personally, I think it'll be a combination of the two. Growth for a while, some kind of stock bottoming out, more stimulus and more bubbles, more bottoming out, etc.

Not sure what the long-term prospects are. I couldn't imagine that such a boom-bust cycle, being propped up by stimulus packages and such, is a desirable long-term economic situation though.

I watched a movie a few months ago that I thought did a good job of explaining why our economies need to keep running up debt to survive. The movie is called "Money as Debt" and can be viewed for free here.

The movie pretty much says that the way our world is currently operating, we need loose credit and plenty of bank loaning. Debt, the movie says, is the heart of money creation and the engine of the world. Since watching the film, China's actions of tripling and quadrupling debt over previous years loan rates have made more sense.

The production quality of the movie leaves a bit to be desired. But the content seemed reasonable enough to me.

I'd be curious for anyone else's thoughts on the 47-minute film.

Anonymous said...

Wow Mark thanks for that link. A very important video I will pass on to those I know. Some thoughts:

Think about the American and Chinese view of debt. Most Chinese view debt as a bad thing, from my experience, and this is illustrated at the governmental level with their desire to own foreign debt. But this video should really point out, what do they really own? Likewise, America in its short 200 year history has exploded due to the exploitation of this false money system. The reason the US put so much more fake money into the system to bail out financial companies was to prevent the one thing that would have guaranteed a collapse of the world’s economy and exposure of the Emperor’s New Clothes…… a bank run. The world economy cannot even come close to covering fake assets with real assets.

The gold standard is a farce, even Greenspan admitted this. The Goldsmith, The Fed, Bernie Madoff… all Ponzi schemers.

34:39.. maybe the funniest thing ever.

Ok, lets take it a step further. Since you never mentioned seeing Balzac and the Little Chinese Seamstress, you must see a documentary called The Corporation. It will reveal another facet to this game of smoke and mirrors. If you cannot get a hold of it China, remember it and see it when you get back.

One last thing. From the film Wall Street.

Gordon Gekko: “The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market.”

Mark said...

I appreciate your thoughts and am glad you enjoyed the movie, Hopfrog! I haven't had the chance to discuss the movie with anyone really.

I'll definitely check out "The Corporation" when I have some time. "Wall St." sounds pretty good too.

A commenter or two has accused me of going "Mad Max" and being alarmed about the financial crisis for no reason.

Personally, I think the state of the world economic system is horribly bad and that there is massive reason to be gravely concerned about the direction in which we're headed.

We'll see what happens!! It'll surely be quite the ride no matter what!

Anonymous said...

The effect that chinese leadership intend to achieve is a sense of reliance of world population to its growth. It doesn't have to be based in fact.

Because after all, wealth comes from credit.

The chinese has a few thousands years of empire management experience. if anyone has a chance with this global mess, it will be them. (Need I remind you all the rest of the civilizations has failed the empire management test?)