China's invisible handNick Land / text
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China's invisible hand
Shanghai Star. 2003-11-06
By Nick Land
As this page has already noted on more than one occasion, China-bashing is
emerging as a major theme among neo-protectionists, both in international
trade diplomacy and in the heated rhetoric of the US electoral process.
After whining about Japanese manufacturing prowess in the 1980s and
Mexican competitiveness in the run-up to NAFTA, US enemies of free trade
are now consistently turning their fire on the Chinese economic miracle (with
Indian software engineers also coming under criticism for being too good at
what they do).
This entire economically-illiterate pantomime is thoroughly depressing. Not
only has the pitiful free-trade record of the Bush administration been
consummated by the recent WTO debacle at Cancun, but super-protectionist
Richard Gephardt, marginalized as a cheap populist under Clinton's proglobalization regime, has emerged as a major challenger for the Democratic
presidential candidacy, attesting to the renewed acceptability of economic
isolationism within the US opposition party.
For all these reasons it is worth placing the recent spectacular US growth
spurt - of over 7 per cent - in its proper context, which is that of deep and
deepening mutual advantage, based on trade integration, of the US and
Chinese economies.
To begin with the most straightforward - or at least widely perceived - aspect
of the relationship, supporting China's economic expansion is of immense
benefit to the entire world economy, including prominently the US. With the
Eurozone and Japanese economies serving as seemingly bottomless
reservoirs of disappointment, China's supercharged growth now provides the
second-largest contribution to (fresh) global demand - after only the US itself.
The Chinese export machine is supporting the most thoroughgoing economic
reform process the world has ever seen, directly lifting a fifth of the global
population out of poverty, while offering a uniquely powerful lesson in
economic good sense to the whole of the developing world. This lesson has
already helped to guide India and Viet Nam in the direction of marketoriented growth-positive policies.
The US also benefits even more directly from its bilateral economic relation
with China, in ways essentially linked to the current revival of growth, since
the Bush administration's born-again "Reaganomic" recipe of low-taxes and
high government deficits is massively dependent upon US openness to
Chinese trade.
As the "Walmart revolution" in US retailing demonstrates, highly competitive
Chinese imports are reshaping the US economy by stimulating consumption
while holding down inflationary pressures. Since much of this importsupported retail revenue is captured by US companies (whether through
overseas operations or by adding value in the supply chain) the result is an
injection of adrenaline into US business and new jobs in dynamic sectors.
Perhaps most importantly, without the influence of cheap Chinese imports,
inflation would force interest rates upwards at a far earlier stage of the
business cycle, choking-off recovery. Furthermore, US government deficits
are directly financed by China's trade surplus (accumulated in US dollar