I’m in Egypt, I really am, even though I haven’t blogged about it much yet. Let’s just say logistical challenges and other concerns have reduced my blogging productivity and immediacy somewhat..
Plus, I’m trying to reach the best possible judgment on how to weigh and report on the many, widely varying viewpoints I’ve heard here so far. Not the work of an hour or a day.
Meanwhile, a lot has been going on elsewhere in the world, and I’ve been a little out of touch. (Apart from looking at updates from the Gaza ceasefire talks and the Israeli elections. More on those topics, obviously, later.)
But this evening, I got some good time to catch up on my reading and discovered that China Hand has published some excellent blog posts on China, Afghanistan, and Pakistan over the past couple of weeks:
In this January 30 post, titled, “China to Obama: “Nice T-Bill Auction Ya Got There…Hate to See Anything Happen to It””, he unravels several key aspects of the current US-China economic relationship.
He looks at the controversy over the dollar exchange rate for China’s RMB (yuan) currency and concludes his post thus:
- As a matter of personal opinion, I do think that the RMB is undervalued.
I think the Chinese government, as a matter of practicality, has maintained a dollar peg for its currency in order to provide a stable economic environment for its exporters (instead of making them to manage their forex risk through the complicated free-market frou-frou of currency futures markets, derivatives, etc.), and that’s a legitimate national economic goal;
I think the peg was set on the high side, to give Chinese exporters a bit of a leg-up;
I think the Chinese government believes that its forex structure—the dollar peg, enabled by sale of forex to the government bank and severe limits on cross-border flows of capital—has worked pretty well, especially in light of the financial disaster sweeping the open markets of the United States and Europe;
And… I don’t see the Chinese government heeding international political pressure right now to make more than incremental adjustments to the exchange rate and the overall capital account regime.
Having said that, I think that the Chinese government is desperate to revive the world economy and get its export factories humming again, so it will be prepared to do its bit to help matters along—like pissing away its government reserves buying more U.S. Treasury debt and hope that the Obama administration’s stimulus package jumpstarts the world economy.
And I believe that the Obama administration will decide in the end that Chinese cooperation on the stimulus package will be more important than a political struggle over the exchange rate, especially as the recession causes imports from China to sag.
… Despite the theoretical and practical obstacles, however, there will be continued across the board ideological enthusiasm for continuing to bash China.
Right-wing commentators, it seems, don’t like the Chinese rubbing our noses in our recession because they consider the PRC an imperfect and dishonest exploiter of the magnificent capitalistic system the West has bequeathed to the world.
Left-wing commentators, in my view, consider Chinese macroeconomic activity as an extension of the regime’s immoral policies, as the CCP tramples on the environment, Tibetans and Uighurs, Darfurians, and the world’s working poor with equal gusto in its headlong pursuit of profit.
There is a certain amount of hoping and wishing that the Chinese economy would suffer a spectacular collapse as divine punishment for its government’s malfeasance.
These expectations have been complicated and, perhaps, exacerbated by the fact that it was the advanced free market economy of the West that went into the tank first, and not the inferior Oriental model.
… My bet is that the Chinese banking system, thanks to the recession and government intervention, manages to dodge the well-deserved fiscal bullet again.
I think observers who anticipate that the Chinese Communist party is going to spend itself into oblivion as the Soviet Union did (gorging on the fatal apple of shopping malls instead of armaments) will be disappointed.
Systemic financial failure–hyperinflation or the annihilation of people’s savings through the collapse of China’s state run banking system that terminally discredits the CCP regime and destroys the legitimacy of its rule–doesn’t appear likely.
The recession—and millions of impoverished Chinese returning to their villages from shuttered factories along the coast—will certainly exacerbate the simmering resentment against the Party’s serial corruption, oppression, and arrogant incompetence, especially at the local level.
However, the greatest threat to the Chinese Communist government has never been popular unrest provoked by economic suffering.
It has been the threat of fissures within the ruling elite, of the kind that nearly destroyed the CCP during the Cultural Revolution, is typified by the assisted suicide of the CPSU under Gorbachev, and provoked Deng Xiaoping’s ferocious wrath against Zhao Ziyang during the 1989 democracy movement.
Currently, the CCP ruling cadre in Beijing is riding high, coming off a decade of economic growth with a fair amount of money in the bank, reveling in its Olympic triumph, and enjoying the apparent vindication of its managed, nationalist economic model over the open-market nostrums peddled by the West. The United States, instead of representing a triumphant and destabilizing alternative, is mired in political and economic problems of its own.
If and when popular unrest does occur as a result of the recession, the Party will confront it with an effective combination of ingenuity, unity, and brutality—and the sacrifice of as many flagrantly incompetent and corrupt local officials as it takes–unhindered by the example or effective condemnation of the West.
I expect that, instead of threatening the existence of the CCP, the global financial crisis has enhanced the legitimacy and prolonged the life of the current Chinese Communist regime.
That’s not an endorsement or a value judgment, by the way. It’s just how I see it—and how I think the Obama administration might weigh economics in its China equation.
Continue reading “Great blog posts on Afghanistan, China, from China Hand”