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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (20905)	1/10/2005 9:28:23 AM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Hi, Kastel, 1) One major reason for the wide trade deficit bet. China and the US is the trade restriction of all high-tech product. So you cannot expect China to fill the gap by only buying wheat, soy or Boeing from the US<g>; This is also the major reason why the trade deficit bet. the US and India is low; 2) The way of the US counting trade deficit is not fair to China; 3) It is true that labor in Canada is more expensive than in China, as it should be, but Canada have other benefit. As for Mexico, some outsourcing has already returned from China, as the energy and labor in China are getting more expensive. And Mexico should stress more on education... to win back the outsourcing

To: Cogito Ergo Sum who wrote (20905)	1/10/2005 11:40:08 AM
From: RealMuLan	Respond to of 116555

Hi, Kastel, here is a little more about the trade deficit and the labor cost. Cheap labor cost is not everything. For advanced high-tech industry, the labor cost only accounts for 10-15% of the total cost according to the following article. Canada has more advantages comparing with China and other developing countries in terms of better infrastructure, abundant energy supply, and better protection for IPR. So if Canada plays the game right, they should not necessarily in a losing position. Message 20931879 Why do I say the US way of calculating the trade deficit is not fair to China? The US counts the total value of imports on China’s account alone, even though China has to spend US$ or other hard currency to purchase up to 95% of the total value of those imports. As everyone knows, RMB is not a hard currency, China has to sell staff to earn them, so mathematically, China could never have a balanced trade with the US even if China sold the whole country out. Someone may argue, China should trade equally with those countries where the parts come from, but it is very hard to realize in the reality. China is no Japan in terms of trade protection. China has much less trade protection even compared with India. It is projected starting from 2005, China will have >$24 billion total trade deficit. By 2007, China will have one of the most open markets in the world. It will be so open that in most of industries, foreign business would have a dominant position. The trend has started now. I won’t be surprised that in the next new round of Doha negotiation (in 2006), China will have to consider to reposition themselves in terms how the country should be opened. So if the US insists on blaming China for the huge trade deficit, then China can only blame other nations for the trade deficit bet. China and them (such as Japan, S. Korea, Taiwan, etc) and the US trade protectionism in high-tech product. I posted an article here, Message 20931919 It mentioned that more than $2 billion of the $2.28 billion international sale made by Huawei came from customers in Africa, the Middle East, and Asia Pacific. In my opinion, this will become a trend in future. China will trade more with developing countries, and less with developed countries.