Don't Worry, China Buys Stuff From The US, Too

from the back-and-forth-trade dept

Thu, May 10th 2007 8:25am — Joseph Weisenthal

There's no doubt that one of the biggest threats to China's seemingly boundless economic growth is the prospect of protectionism in the US. Politicians in the US have a number of reasons for wanting to limit trade with China, including China's expanding reserve of US currency and the perceived "threat" of cheap foreign labor and goods. However, while politicians like to pander to worried voters (particularly around election time), many know that any protectionist measures would hurt the US economy equally, so they try to walk a fine line. The Chinese government is, of course, cognizant of all these political issues, so it'll do anything it can to present itself as friendly economic partner, as opposed to an adversary. Along these lines, a delegation of Chinese business leaders has announced that the country will buy over $4 billion worth of technology goods from 27 US companies, including Microsoft, Oracle and Cisco. At a ceremony, the the delegation was joined by California's lieutenant governor to trumpet the deals as an important step in the relationship between the the US and China. Ultimately, though, this is all just a political show. $4 billion is a drop in the bucket compared to the US' annual trade deficit with China. Furthermore, Chinese industrial firms have already been rapidly upping their investments in IT so as to better compete on the global stage, so it's likely that these deals would've happened anyway, even without the desire to address political concerns in the US.

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20 Comments

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Anonymous Jerk, 10 May 2007 @ 9:06am

Outsourcing
That's all well and good, but it doesn't create the jobs that are lost to outsourcing.
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- Dan Callahan, 10 May 2007 @ 9:44am
  
  Re: Outsourcing
  Considering that we have an unemployment rate of 4.5% right now, it would seem that we're doing an ok job of replacing those lost jobs with other ones. If people were doing those lost manufacturing jobs, they wouldn't be doing whatever it is they're doing now.
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Anonymous Coward, 10 May 2007 @ 9:19am

"many know that any protectionist measures would hurt the US economy equally"

Rational people argue that the Chinese government's currency market interventions to keep the yuan undervalued vs. the dollar is, in fact, a mercantilist policy that distorts competitive advantage and undermines the classical economic idea that "free trade is good for all."

While I don't necessarily agree, the author of this write-up comes across as naive, ignorant and arrogant, in my opinion.
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Duhhh, 10 May 2007 @ 9:42am

Cost of ONE copy of Windows Vista Ultimate: $399.00

Cost to make a BILLION illegal copies of Vista: $3,999,999,601.00

That makes $4 billion invested in US high tech. Case closed.
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Stephen, 10 May 2007 @ 10:12am

Don't forget
We outsource a lot of our pollution to China too, in return for us buying cheaply made goods from them.
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Reed, 10 May 2007 @ 10:18am

Trade deficit with China
According to the US Census Bureau under foreign trade statistics in 2007 in the first 3 months we have exported around 14 billion to China and imported around 71 billion for a trade deficit of -56 billion for this year alone.

Somehow I doubt a promise of buying 4 billion dollars of anything is going to make much of a difference.

"Considering that we have an unemployment rate of 4.5% right now"

The unemployment rate does not reflect the amount of people that are out of work in the US. The real figure is getting close to 20% according to some reports I have read. This is because the unemployment rate only indicate those Americans actively looking for jobs and not those who have been discouraged from job hunting. The statistic itself has come under question as it is a poor indicator of the amount of people that our currently out of the labor force.
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mkam, 10 May 2007 @ 10:21am

spelling nazi
country will by over $4 billion worth of technology goods

by=buy

It's hard to trade evenly with a country that purposely undervalues it's currency and in fact indexes it against the US dollar.
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Overcast, 10 May 2007 @ 10:28am

The unemployment rate does not reflect the amount of people that are out of work in the US. The real figure is getting close to 20% according to some reports I have read.

Possibly.... but I don't know a single soul right now that actually wants a job and can't find one (which is unusual with some of the people I know... lol). I get calls weekly from headhunters, employment agencies, contract companies... asking me if I'm looking for a job.
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- Reed, 10 May 2007 @ 11:12am
  
  Re:
  "Possibly.... but I don't know a single soul right now that actually wants a job and can't find one (which is unusual with some of the people I know... lol). I get calls weekly from headhunters, employment agencies, contract companies... asking me if I'm looking for a job."
  
  Sounds like you skills are in demand. This may or may not be true for the rest of your fellow Americans. Since we can never have a real discourse politically about the unemployed people of America it is hard to tell.
  
  If there where plenty of jobs that start at $20 a hour I could agree with you. I know a LOT of out of work Boeing employees who just refuse to get work at $15 or less an hour.
  
  So while I agree anyone who wants a job can get one at Mcdonalds not very many people want this type of job or any other minimum pay no benefit joe-job where the treat you like a piece of poop.
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Sohrab, 10 May 2007 @ 10:29am

Yet, to the average American, they will only hea $4 Billion and think its such a great Deal. Just because they make $7/hr, they think, wow $4 Billion, thats alot of money.
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Dink9, 10 May 2007 @ 11:56am

wow
"Considering that we have an unemployment rate of 4.5% right now, it would seem that we're doing an ok job of replacing those lost jobs with other ones. If people were doing those lost manufacturing jobs, they wouldn't be doing whatever it is they're doing now." Just because you and a few of your close friends all make 50,000 a year doesn't mean everyone is as lucky. Even a college degree doesn't necessarly help you get a "good" paying job these days. If you were "outsourced" or laid off from a job where you made 30+/hr are you going to be willing to work for minimum wage? you couldn't even survive, you would lose everything you had. Also, even by their figures of 4.5% (as an average of those looking for work and finding it rates) many states/cities are much higher. The real issue is simple (and the one you aren't looking at) if you outsource good paying jobs and the people left behind have to work for minimum wage at mcdonalds, there are serious problems. We have moved to basically the forth stage of econimical capitalism, tersherary (sorry can't remember the exact word) jobs where more and more, most are working in customer service related positions. These positions tend to pay much less than the outsourced job and in turn have been lowering the average wage level. And further increasing the gap between the rich and the poor as the middle class is losing ground (blah blah blah) we've all hear it...but guess what, its reality folks. Outsourcing is evil...its not like we outsource bad jobs...once i was a computer tech person, now a janitor...because IBM now runs its main operations overseas (as an example).
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i am me, 10 May 2007 @ 12:11pm

hmmm
So they buy $4,000,000,000.00 worth of technology to reverse engineer and clone and sell it back to the us.. they will be getting huge returns
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henryq, 10 May 2007 @ 12:15pm

They are buying our $ paper
They are buying our print paper (IOU). For their products we bought, if you do not buy from them, you are going to buy from other countries. Remember: Walmart said it very clear to China: if you raise the prices, I will get them from other places cheaper ...
To be honest, it is stupid to hold IOU like that. At least, you can invest them into something.
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Anonymous Coward, 10 May 2007 @ 2:06pm

I don't think software purchases really count. Once the software is made, it costs pennies to produce copies. On the other hand, physical goods produced by honest, hard-working Americans is what really counts. If they really are buying a large volume of tangible goods, then I say great.

Unfortunately, that doesn't even come close to the amount of money we're sending back the other direction. In fact, their investment into out technology will simply further increase our cashflow in their direction. This is a sign we're going further backwards, not forwards.
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the amazing me, 11 May 2007 @ 1:37am

simple really
With regard to outsourcing (of any type of job) or for that matter imigrant labour it's a simple choice of either putting up with the situation or paying more for goods and services. I'm sick of people complaining about migrants doing jobs for pennies a day that they wouldn't consider doing for any money - who exactly had their job 'stolen'?
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Ken, 11 May 2007 @ 6:26am

You Have A Choice
People,
Don't forget that you have a choice when you spend your money. I always look at the "Made in ..." label and if it says "China" I check all the other products to see if I can find something "Made in USA". If not the USA then I will select any other country before China.

I never shop at Wal-Mart for the siimple reason that they have practically mandated that all their manufacturing be done in China. I will pay an extra 10-20% for a "Made in USA" product simply because I understand that this purchase helps support American workers.

In fact, Wal-Mart could single-handedly help to reverse this trend if they would simply commit to trying to market a "Made in USA" alternative wherever possible. As they struggle to find a way to burnish their image, perhaps ooe of their managers will stumble upon this idea.

Now this isn't always possible but if more of us paid attention to the label as a component of the purchase decision then we would see a change in the trend and we would begin to have more control over our own destiny as suppliers recognized the trend.

In my view, China views the game as economic warfare and they are playing for keeps. We have sat passively by as they have usurped a dominant portion of the world's manufacturing capacity. I understand the logic of free trade and globalization but we have to hold China to a standard of free and fair trade that will allow us to compete effectively in those areas where we have competitive advantage.

Ken Stadlin
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Chad, 11 May 2007 @ 2:06pm

I don't worry about the US-China deficit and neith
I've got a few comments. First of all, I should say that I worked and lived in China for 7 years (until last year). I was actually stealing Chinese jobs - lol. I do not worry about the deficit - it is a short-term problem - the gap will close, maybe not completely or in our favor, but to a reasonable level. The reason that this deficit exists is NOT solely because everything is "Made in China". Frankly, everything is not. The two main reasons for the deficit is the value of the RMB (artificially deflated or not) and the gap in spending power between US and Chinese consumers. The RMB will eventually by about 4/5 - 1 with the dollar - it'll take a little time, but it will happen. At the same time, the spending power of an emerging middle class will not only increase, it will shift away from spending on real estate and putting money in the bank to purchasing higher quality items that are not produced in China (trust me, there are a lot of things that fall into that category). Finally, we must remember that although the level of Made in USA items being sold in China accounts for this "deficit" US companies that produce their goods in China to sell to the Chinese (or back to the US, which counts towards the deficit) are making money - and these are US companies, i.e. they help our economy. So don't worry about the decifit - concentrate on creating high quality and unique products, sell domestically and to Europe and Japan in the short term, and just sit back and wait for the spending power of the Chinese to take full shape.
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Reed, 11 May 2007 @ 3:07pm

Don't worry, just be happy (Corporations new anthe
"So don't worry about the decifit - concentrate on creating high quality and unique products, sell domestically and to Europe and Japan in the short term, and just sit back and wait for the spending power of the Chinese to take full shape."

We have all had plenty of plenty of "Let the market handle it" talk over the last 30 years. The market ain't handling it for the little guy anymore and it is only benefiting a small amount of people. The time for ignoring what we can do to make are lives better is over.

There are solutions to the problems of our market economy and sooner or later we will have to implement them. Otherwise we will end up with our own personal third world country inside the United States. Already 50+ Million people are living below poverty levels that are set to $16,000 for a family of four.

I dare anyone who thinks the poor people in this country are well off to live off this meager amount of money.
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- Chad, 11 May 2007 @ 5:46pm
  
  Re: Don't worry, just be happy (Corporations new a
  Do you honestly think that our trade deficit with China has anything to do with a family of four living off of $16K a year? There is absolutely no correlation. If you have a problem with the widening gap between the rich and poor in this country, I'm all for supporting that and finding solutions, but pissing off the Chinese with tariffs and hard-handed tactics will only do just that - piss them off and change Chinese consumer sentiment from, "good stuff comes out of America" to "screw you, we'll buy our stuff from the EU thank you very much". That said, I'd like to hear your "solutions", as you failed to mention any in your post.
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diancangshan, 21 Jun 2007 @ 8:46am

absolutely right,there is nothing to worry about
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