CHINA AND ITS REGION / economist

thats just in.... gerade reingekommen

Commerce Dept. sanctions China over subsidy dispute
The U.S. Commerce Department announced sanctions against China on Friday in connection with a dispute over paper subsidies. Secretary Carlos Gutierrez said the U.S. has the right to apply countervailing duties to Chinese paper imports, which he said threaten U.S. products

more from bloomberg http://tinyurl.com/yo957m

The U.S. Commerce Department decided today to begin to levy new duties on imports from China to compensate for Chinese subsidies to exporters, reversing more than two decades of its practices

The immediate case concerns a complaint by NewPage Corp. that low-cost imports of subsidized glossy paper from China, South Korea and Indonesia are undercutting its profitability. China's exports of coated paper were set to almost triple in 2006 to $263 million from their level in 2004, according to U.S. government data.

this from the nyt http://tinyurl.com/2dtg44

At present, imports account for only 5 percent of the domestic market, but American manufacturers fear that imports are underpricing what they can produce and could wipe out the industry in a matter of years.

But trade and industry officials say future actions based on the department’s new policy could lead to duties on imports of Chinese steel, plastics, machinery, textiles and many other products sold in the United States, if as expected those industries seek relief and the department finds that they are harmed by illegal subsidies.

About NewPage Corporation
NewPage Corporation, headquartered in Dayton, Ohio, is a leading U.S. producer of coated papers in North America. With 4,300 employees, the company operates four integrated pulp and paper manufacturing mills located in Escanaba, Michigan; Luke, Maryland; Rumford, Maine; and Wickliffe, Kentucky. These mills have a combined annual capacity of approximately 2.2 million tons of coated paper

>i´m not sure if this is the right approach ...? ( to put it mildely) some might have forgotten that they need china to fund their deficit........

will be interesting to see what happens when the election is getting closer....last time one topic was the outsourcing to india........

>kann mir nicht vorstellen das dies der richtige ansatz ist...? (gelinde gesagt) evtl. haben einige vergessen das china dringend benötigt wird um das defizit zu finanzieren.......

wird spannend sein wenn die us wahlen nächer kommen...beim letzten mal war das outsourcing nach indien das große thema.......

>lets hope that things calm down and don´t escalate. if not....the cartoon could be outdated.. then the imports and the oil will get more expansive..........

>bleibt zu hoffen das sich die dinge beruhigen und nicht eskalieren. dann könnte der folgende cartoon überholt sein. dann wird für für die usa wohl öl und die importe teurer.......

>but i´m pretty confident that hank paulson is busy....... if this lead to free trade this is one of the rare times i would appreciate it.....

>ich tippe mal das hank paulson bereits am wirbeln ist...........wenn das zu einem freieren handel führt wäre eine der seltenen einflußnahmen die ich befürworten würde......

rodger rafter has some good points at "the market traders board" (especially the looming treasury auction on monday........... :-) http://tinyurl.com/2979sd

now to the original story:

So far the world has come to China, but now a rising China is beginning to reach out to the world, starting with Asia

...China's economic rise is certainly impressive. The economy's growth—an average of 10% a year since 1990—is not really more remarkable than the earlier rise of other Asian economies, led by Japan, but there is a difference: the huge size of China's population, at 1.3 billion. In 2005 China overtook Japan in the volume of trade it conducts. Depending on how you measure size and guess at future growth rates, it may overtake both Germany and Japan within 15 years to become the world's second-biggest economy. Measured at purchasing-power parity, China's share of the world economy is already much closer to the rich countries' (see chart 1). But bear in mind that the average Chinese income remains low. If China is on its way to becoming a superpower, it will be the world's poorest one yet.

Opinion polls suggest that the vast majority of Chinese see their rise as nothing that should trouble others. For many of them it merely marks a return to historical norms. Angus Maddison, an economic historian at the University of Groningen, has estimated that between 1600 and the early 19th century China accounted for between a quarter and a third of global output (see chart 2). At that time China's agriculture was more advanced than the West's, its cities bigger and more literate and its ruling classes more meritocratic. The country had also proved itself capable of long-distance exploration by sea. Another historian, Niall Ferguson, reckons that what went so spectacularly wrong for China then is more remarkable and worthy of investigation than why things should now be going right.

But what is the nature of China's rising economic power now? There is room for misperceptions. Policymakers in Washington, DC, are alarmed by China's export strength and its ballooning trade surplus. China is lambasted for having mercantilist policies that artificially boost exports, depress the Chinese currency, restrict imports and widen America's trade and current-account deficits.


In several respects that view is wrong. With a trade-to-GDP ratio of around 70% and a sea of foreign investment, China is one of the world's most open economies. Much of the growth in America's bilateral deficit with China reflects a shift in low-cost manufacturing from other parts of Asia to the Chinese mainland. Certainly China's currency is undervalued, having followed the dollar down since 2002. But that is reinforcing inflationary pressures, particularly in wages, so China's advantage as always the lowest-cost producer can no longer be taken for granted.

America's emphasis on exports misses the point about China's economic power. That power comes not so much from being a seller of things but increasingly from being a buyer, an investor and a provider of aid, in Asia and beyond. One Chinese diplomat puts it thus: “Imports: that's real diplomacy, because it means you're attractive to others. It means other countries need you, not that you need them.” This subtle understanding sets China in stark contrast to how Japan viewed the world during its post-war rise.

With this new kind of power, the economic and geopolitical sides are ever more intertwined. China's presence as a commercial force is rapidly being felt around the world, through its growing investments overseas and through an apparently insatiable hunger for resources to fuel the industrial revolution at home. The shock troops of this force are there to see in China's main airports: planeloads of oil-drillers, pipe-layers and construction workers, in company overalls and hard hats, off to work on oil rigs or build ports, highways or railways in South-East Asia, Africa, Latin America or the Middle East. Chinese workers are also moving into other countries in less formal ways. In the northern birch forests of Mongolia, unofficial groups of them are cutting down trees for chopsticks. In poor northern Laos, thousands of Chinese labourers have come across from neighbouring Yunnan to grow corn and sugarcane for export back to China; traditional slash-and-burn agriculture is giving way to polytunnels and large-scale market gardening.

This is not the first time that mainland Chinese have fanned out to work the world's natural riches. In the 19th century hundreds of thousands of coolies—indentured workers lured by Chinese and Western recruiters using a greater or lesser degree of deception—toiled in some of the world's worst hellholes: the guano deposits of Peru, the canebrakes of Cuba or the gold mines of South Africa. Now the Chinese are back in some of the same parts of the world. The difference this time is that Chinese capital, usually state-owned, stands behind them.

Trying to charm
One of the advantages of state-led development is that China can entice countries with packages of corporate investment, cheap loans and other aid goodies. This way China has rapidly acquired interests and influence across swathes of South-East Asia, Africa and Central Asia. China's outward foreign direct investment more than quintupled in the first half of the decade, to $11.3 billion in 2005, and will have risen sharply since. Once a big aid recipient, China hosted a summit of 48 African leaders in Beijing last November, promising $5.5 billion in aid for Africa. According to a recent report by the Institute for Public Policy Research in London, China has become Africa's third-biggest trading partner after America and France.

China is also increasingly investing in the rich world. To some Americans, in particular, this is distasteful. In 2005, citing national-security concerns, Congress succeeded in thwarting the $19 billion bid by China National Offshore Oil Corporation (CNOOC) for Unocal, an American oil major with reserves in Asia. Competing resource companies from the West often claim that Chinese companies outbid them in third markets, using cheap, state-subsidised funds. Yet in growing numbers of countries, rich and poor, the Chinese presence is welcomed for bringing jobs, cash and infrastructure.

read also "china is shifting $ reserves to equities" http://tinyurl.com/3x6q7e

Australia has received more Chinese investment than most Western countries, much of it in mining. It is criticised in America and Europe for cosying up to a dictatorship. “We're also strong on the human-rights front,” an Australian diplomat says in defence. “But there's stuff to be done in the meantime.” When a senior Canadian official is asked what conclusions Chinese resource companies should draw from CNOOC's experience, he replies instantly: “Come to Canada.”
China's rise is a global phenomenon, but the rest of this special report will concentrate on its relations with Asia. After all, the region is on its doorstep. “If we can't get respect in Asia,” says a Chinese policymaker, “we can't get on in the world. If we can't have a peaceful and prosperous backyard, then there can't be any rise of China.”

In vying for influence in Asia, China has many competitors. They include India, rising in its idiosyncratic way; Japan, seeking a more robust foreign policy in the face of China's rise; Russia, a resource giant, even if a diplomatic minnow in Asia; the ten countries that make up the Association of South-East Asian Nations (ASEAN); and—still the top dog even if distracted in the Middle East—America. here more on the strong ASEAN position http://tinyurl.com/2dpy6l

It is in Asia that America risks falling prey to a final misperception. As Mr Lampton points out, just as Americans overstate China's export prowess as a source of economic power, so they underestimate China's intellectual, cultural and diplomatic influence. If policymakers view China's power “in substantially coercive terms when it is actually growing most rapidly in the economic and intellectual domains,” he writes, “they will be playing the wrong game, on the wrong field, with the wrong team.”