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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (600)	8/29/2003 11:54:36 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China not an obstacle PETER HADEKEL Freelance Friday, August 29, 2003 For many Americans, the biggest single obstacle to economic recovery in the United States lies not at home but on the distant shores of China. Anti-China sentiment has been building among politicians, manufacturers and trade unionists upset at a loss of investment and jobs to low-wage China. With an election year coming up, China-bashing is likely to become a more popular topic among senators and representatives in the Congress. The dramatic gains China has made were underlined by new statistics published this week. A United Nations report shows the total amount of foreign direct investment there is beginning to approach levels in the U.S. Last year, the country was far and way the most popular destination for foreign direct investment, drawing a record $52.7 billion U.S. in new investment from abroad, while, by contrast, there was a net outflow of such investment from the U.S. of $98 billion. The irony is that much of the investment pouring into China is from U.S.-based companies. The latest example: Intel Corp. announced plans this week to invest between $200 million and $375 million in a new semi-conductor chip plant in the central part of the country. At home, meanwhile, Americans are still wondering when business spending and investment in technology will pick up. Critics have blamed China for flooding the U.S. market with cheap goods, but American investment in the country is partly responsible. The sword is double-edged. Try telling consumers that the plunging price of laptop computers, digital cameras and other popular gadgets assembled in China is a bad thing. Still, the deflation threat that has stalked the U.S. is blamed, in part, on China, which pumps out high-quality goods at low prices and prevents U.S. competitors from raising prices of their own. It's called competition, but for many in the U.S. it's a demonstration of the evils of free trade. U.S. manufacturing industries have shed millions of jobs during the last few years. Many politicians and union leaders have had enough, pointing to China's $100-billion trade surplus with the U.S. Republicans and Democrats in the Senate are pressing President George W. Bush to demand that China boost the value of its currency. They want the Chinese to free the undervalued yuan from its peg against the U.S. dollar. By some estimates, the yuan is 40 per cent below the value it would have if it floated freely in the world's foreign-exchange markets. An undervalued currency is a big advantage in the race for global market share, allowing China to export its products at cut rates. But Peter Perkins, an economist at the Montreal-based Bank Credit Analyst, says even if the yuan is undervalued, it wouldn't be realistic to expect the Chinese to do much about it. He notes that China has been battling a deflation threat of its own. A more expensive currency would worsen that problem and make it tougher to create new jobs for the tens of millions of unemployed and underemployed people in that country. So, is China really an obstacle to recovery? "Unequivocally, no," Perkins said. China is a major benefit to the global economy, he points out, sucking in imports from the U.S., Europe and Japan at a growth rate of 40 per cent. Beating up on China may be good politics. But turning back the clock on global free trade is not going to happen. phadekel@videotron.ca © Copyright 2003 Montreal Gazette canada.com