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International News Title: U.S.-China Trade Troubles Grow China has pushed the yuan to a five-year low against the dollar, reviving charges from American firms of currency manipulation to gain a competitive advantage for Chinese goods. The Obama administration has fired off a series of trade complaints and levied duties on several Chinese industries, from chicken feet to cold-rolled steel used in appliances and auto parts. The friction between the world’s two largest economies could worsen as domestic politics collide with already weak growth. The U.S., seeing heightened anti-China rhetoric in the presidential election, wants China to press ahead with promised policies to open up its markets and allow greater international investment. Chinese leaders, worried about a deeper economic slowdown, are trying to keep factories humming and prevent the kind of market unrest that gripped global investors over the past year. U.S. Treasury and State Department officials fly to Beijing early next week for two days of talks to try to calm some of the trade irritants and address ongoing geopolitical tensions, particularly over the South China Sea, where their militaries are operating in sometimes dangerous proximity. The U.S., which moved on Wednesday to cut off North Korea from the banking system, wants Beijing to help rein in its increasingly belligerent ally. U.S. officials also will seek reassurance from Chinese officials about moving ahead with promised reforms, such as restructuring state-owned enterprises and reducing industrial overcapacity, and try to advance talks on an investment treaty. “Implementing this reform agenda—and resisting the urge to hang on to an outdated growth model—offers the best formula for China to achieve an orderly transition and put its economy on a more sustainable footing,” said Nathan Sheets, U.S. Treasury’s undersecretary for international affairs. China’s Vice Finance Minister Zhu Guangyao, while acknowledging at a media briefing Thursday major challenges for China’s economy, insisted Beijing would adhere to its reform agenda and commitments made by the Group of 20 against competitive currency devaluation. Some analysts think President Xi Jinping, wanting to consolidate power in the Communist Party ahead of a leadership transition next year, has paused reform efforts and instead is revving up the old playbook of credit-fueled growth and infrastructure spending. His aim: Ensure economic stability and mollify rivals, they say. An attempt last year by Beijing to allow markets to play a role in setting its exchange rate was mismanaged, adding to a summertime of woe for China’s financial markets and sparking global jitters. The reaction surprised Chinese officials and created a headache for reformers. The Chinese government is keeping steel mills, coal plants and a host of manufacturing industries afloat despite dwindling demand and a tumble in commodity prices that should have closed many. The U.S. recently slapped Chinese cold-rolled steel imports with duties worth 267%, accusing the country of selling products below production cost. By supporting excess production capacity, the Chinese government is “engaged in economic warfare against the U.S.,” said John Ferriola, chief executive of North Carolina steel giant Nucor Corp. “Thousands of hardworking Americans have lost their jobs because of these illegal, unfair trade practices.” The Chinese economy has decelerated after decades of double-digit expansion. Growth is clocking in at 6.7%, its slowest pace since the global financial crisis amid rising debt, growing labor unrest and factory output well above demand. China acknowledges it has an excess-capacity problem. “But we have to prevent massive unemployment,” Premier Li Keqiang said in March. When President Bill Clinton persuaded Congress to in 2000 to back China’s entry into the World Trade Organization, the U.S. counted on expanded trade as the catalyst for political change in the Communist state. U.S. firms hoped to capitalize on the industrialization of the world’s most populous nation. A decade and a half later, U.S. firms and voters are growing increasingly frustrated despite China’s promises to open up the country. Cheaper wages and costs pulled production out of the U.S., Chinese imports surged and American manufacturing declined as a share of the economy. The U.S. trade deficit with China has swollen to $365 billion, now about 2% of U.S. economic output. U.S. presidential contenders are leveraging anger at China over lost jobs into potential votes. Many of the areas hit hardest by China’s rise have shown some of the strongest support for Republican candidate Donald Trump, who has threatened to slap a 45% tariff on China as a way to force a change in Beijing’s trade policies. The Obama administration points to the yuan’s broader appreciation since 2005, renewed talks for a bilateral investment treaty and Beijing’s vows to allow markets to play a greater role in the economy as proof that its diplomacy has yielded gains. But the yuan's recent depreciation and continued obstacles to U.S. corporate access threaten to erode those advances. “There’s a growing risk that if China remains closed, we’re going to see more and more concern about a growing investment imbalance,” said Jeremie Waterman, a U.S. Chamber of Commerce executive overseeing China. China says it also faces access problems in the U.S. Its firms complain of a complicated web of U.S. state and federal laws and rules that are “not transparent enough” and of restrictions on Chinese investment in areas deemed strategic, said Zhang Xiaoqiang, executive vice president of the China Center for International Economic Exchanges. Chinese officials also are eyeing the U.S. political scene warily, concerned about making commitments the next administration could backtrack on. Recent articles in China’s controlled media have raised questions about who is in control of U.S. economic policy. “President Obama’s ability to implement has always been a bit weak, and on the Chinese side now it may be the same,” said Jing Huang, a professor of U.S.-China relations at the National University of Singapore. Post Comment Private Reply Ignore Thread |
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