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The yuan is up 5.5% since the peg to the dollar ended in 2010, reaching 6.469 to the dollar. But this is not helping the U.S. trade deficit. The U.S. Bureau of Labor Statistics shows the price of imports from China are up 2.8% in May over the same month prior year. And the trade surplus for China in the first four months of 2011 is higher than the same period in 2010. What is happening? The improvements in productivity of Chinese manufacturers and the acceptance of lower margins is reducing the effects on trade balance of a small appreciation of the yuan, so that only a fraction of that appreciation is showing up in higher prices for Chinese goods. Also significant is that the yuan's small appreciation against the dollar is not enough to make up for the dollar's fall against other currencies. The yuan is down 8.3% against the euro and has actually declined 3.7% on a trade weighted basis in the last year.

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A recent study by the IMF shows that China has accumulated foreign exchange reserves that are twice what would be needed for traditional purposes such as supporting the economy in a financial crisis. China is still very much a developing country with per capita annual income of $3000, low consumer spending, and rising inflation. This makes the policy of accumulating reserves and preserving an undervalued exchange rate to support export companies counterproductive. There is growing debate about this as inflation is becoming difficult to control. Yu Yongding, an advisor to the PBOC monetary policy committee says China as a developing country should not be exporting capital, which should be used to raise living standards. A rising exchange rate would increase spending power of people throughout China. Fan Gang, head of China's National Economic Research Institute, was a member of the central bank monetary policy committee. He wrote in a recent essay arguing for a higher exchange rate, and societal, tax and other changes that help increase China's household spending. Central Bank governor Zhou Xiaochuan said recently that China's foreign exchange reserves have exceeded reasonable levels that the country needs, adding to inflation risks and making it difficult to conduct monetary policy. The reserves are now over $3 trillion, pasing that mark in March 2011 after increasing 25% in the last year....

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Swiss shareholder activist Ethos Foundation called for personnel changes at UBS. Dominique Biedermann, head of Ethos called for the replacement of Kaspar Villiger and Carsten Kengeter, who head UBS investment bank. Biedermann said UBS should leave investment banking and former Deuthche Bundesbank President, Axel Weber, should join UBS as chairman earlier than the planned 2013 date. He suggested Hugo Baenziger, current chief risk officer at Deutsche Bank, rather than interim CEO Sergio Ermotti, who is an investment banker, as the right person for the CEO position at UBS.

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China showed its sensitivity to U.S. or British criticism by seeing this in terms of the colonial days when Hong Kong was a British colony. Media outlets in Beijing show U.S. diplomats have met with senior government officials. There is a sense that the U.S. and Britain could be supporting the protests. Reports in WSJ show president Trump keen on not letting Hong Kong situation affect the trade talks with China.

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Inflation in China and rising wages are pushing up costs for American manufacturers. The pressure on China, most recently in Congress, is helping to push up the value of the yuan. This combined trend is making it attractive for some manufacturers to bring factories home to the U.S. A trend in the U.S. towards non-unionized labor and the new trend to a two-tier wage level- with lower wages for entry level workers- and the shedding of legacy health care costs, is creating a more cost competitive labor force in the U.S. This extends from older industries such as furniture and auto components to newer industries and technology. The new factories setup in the U.S. use technologies that require a smaller number of workers, in most cases less than half the number of workers that were employed earlier. This adds another element in cost efficiency, though it means fewer jobs are created with new plants.

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Sharply lower consumer spending is hurting Apple sales in China. Apple cut sales and issued a sales warning in January 2019. This follows Apple's sharp slowdown in India with its uncompetitive pricing.

Retail sales growth in China- which bounced back in previous downturns- dropped to the lowest level in 15 years in November 2018. Auto sales are down with the sharpest drop in 7 years- the first annual drop in sales since 1990. Fears of a housing bubble have led to restrictions on home purchases for speculation which have not been lifted. Income tax reduction has not increased spending. GDP growth for the fourth quarter dropped to 6.4%.

Further signs of a sharp pullback are seen in the drop in consumption tax revenue falling by 61% in October and 71% in November 2018. The consumption tax is placed on cars, gasoline and luxury goods, and is paid by the companies making the products.

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Why Paulson's efforts at economic dialogue with China are not convincing Congress and not much is coming out of the talks in the way of tangible progress. See separate articles on the stock bubble developing in China and how it is aggravated by the rising trade surplus, on rising inequality in China.

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China's view on its new Air Defense Zone as expressed by the Foreign Ministry is that if European countries and Japan are entitled to set their own air defense zones then China should be able to set its own zone. The differences with Asian neigbors and the U.S. arises over the fact that this overlaps with the zones of S. Korea, Japan and Taiwan and also covers the area of the disputed Senkaku Islands. Other problems lie in the ambiguous wording and failure to share this information in advance with other countries. As it stands B-52's from the U.S. and Japanese planes entered the zone on Nov. 29, and Chinese fighter jets tracked the planes but there was no incident. U.S. civilian airlines have agreed to follow the rules set by China for the air defense zone, and the U.S. government says it will let the airlines make the decision to follow the zone. The EU protested the setting up of the new air defense zone.

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China's push for globalization is being perceived internationally as an effort to promote its own industries.

Clashes with the U.S. on trade have changed the perception of China in global trade compared to what it was four years ago or in 2008. Tariffs in the U.S. on Chinese imports, slowing foreign investment, inflated property prices, bad debt at banks, and shrinking working age population, are leading to slowing growth which in coming years could drop from 6.1% in 2019. The Belt and Road Initiative is also being perceived differently as it has led to increased in indebtedness of countries in Africa and Asia, debt that cannot be paid back. Much of the ebullient optimism of a few years back is no longer present. The Pew Research Center survey of 34 countries in December 2019 shows about 45% of adults surveyed lacking confidence in China's policy positions in world affairs, according to this report in the WSJ.

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Decades of investment in infrastructure and manufacturing have given China a strong grip on manufacturing. China's economy depends on exports with sluggish domestic demand. One economist in Hong Kong says Vietnam is the key, if tariffs are placed on Vietnam it will be tough he says, because Chinese goods enter the US from third countries.

In 2025 China's world trade is imbalanced to an extraordinarily large degree, hurting thriving manufacturing communities around the world, and depends on a concentration of port logistics, manufacturing and lack of fair trade practices, that allow $3.5 trillion in exports while taking in only $2.5 trillion in imports. By 2008 America was waking up to this, DJT actually flagged it a decade later, Biden realized this, in the second term what appears like a whirlwind 100 days is really action on many fronts that is coming one to two decades late. 

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A bill in the U.S. Senate in October 2011, which has bipartisan support, would push for China to correct an unfair trade advantage from keeping the value of the yuan low. The bill requires retaliatory tariffs for countries that have "misaligned" currency. This makes it possible for the U.S. Treasury Department to take action even if it finds no currency manipulation by China. This is a new approach as the U.S. Congress struggles to restore a level playing field in international trade.

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The U.S. Senate voted 63 to 35 passing legislation that forces the U.S. government to seek tariffs and other action against countries with "misaligned" currencies."

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Mexico's GDP increases at 3.9% compared to 2.7% for Brazil in 2011. Foreign investment is increasing in Mexico especially in the automobile industry and in industries where Mexico is favored over China as a production location. The G-20 meets in Los Cabos, Mexico in June 2012.

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Ji Chaozhu, immigrated to the U.S. during the Japanese invasion of China on the advice of Zhou Enlai. He studied in the U.S and returned to China in 1949. He was the main interpreter for the Chinese leaders in their meetings with American leaders from 1954-1979.

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Jimmy Carter comes back to us from a different era. He was born in a tiny town of Plains, Georgia, in 1924 and grew up on a family farm in a home that lacked plumbing, electricity, as a boy.  Jimmy Carter attended college for 2 years in Georgia, then enrolled at the US Naval Academy graduating in 1946. It shows the changes happening in the US with Franklin Roosevelt and Harry Truman in the efforts to industrialize America, bringing electricity and new opportunity for college education to rural areas in 1932-1952 which continued with highway systems under Eisenhower 1952-1960.  Carter also led the unwinding of the Democratic party with roots in the Roosevelts-Wilson era since 1902, going back to Teddy Roosevelt who as a Republican pushed hard for integrity, pro worker and antimonopoly policies in the administration. A process that went on with another Southerner, this time from Arkansas that led China's entry into the WTO and world trade without any safeguards for American workers 1992-2000. Policies that went unchanged under another Democrat Obama in 2008-2016. Instead of staying in the Navy he joined his family's peanut farm business in 1953, followed by running for governor of Georgia and grasping the opportunity to run for president as an evangelical from the South to bring moral integrity to the White House.   ...

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Sandhya Sharma of The Economic Times puts a spotlight on the dominant role of China in global shipping by 2005. In 1980 China had a tiny role in global shipping, with bicycles a dominant form of transportation in Beijing. By 2019 this role had expanded to dominant position in all the largest modern technology container ports with global shipping volume having more than doubled since 2005. Much of this was done by working with major providers of container port technology such as Maersk of Denmark and other European shipping companies, with imported technology playing a critical part. India is starting from basics in its effort to develop its shipping in the Indian Ocean region with its large coastline facing the Suez Canal and the eastern coastline facing Malaysia, Indonesia and Australia. This was evident during the recent "Atman Nirbhar" global shipping meeting in Vizag- the Maritime India Summit 2021. The goal is to make the next decade one of rapid development of the maritime sector to secure India's position in global shipping particularly in the Indian Ocean region. Collaboration with major European technology providers will play a key role in developing container ports to the levels required for India's future role in global shipping. Sharma discusses the visit of premier Boris Johnson in April 2021 to India to forge strong trade ties.  The Indian prime minister held virtual meetings with premiers of Sweden and the Netherlands, two major maritime nations in Northern Europe for stronger trade and technology ties. These ties are part of the broader effort by the US, UK, and European Union countries to forge strong trade and technology ties with India now that it is clear to them that new supply chain will be needed over the next decade as China disengages from that level of its trade ties with Europe, US and India. New global supply chain means new global shipping container ports and global shipping links of India, Vietnam, Malaysia, Indonesia, with the US and Europe. Looking at what happened between sometime in 1995 and 2005, and in 2005 to 2009 when the global financial crisis hit, when China went from a miniscule level of world trade to predominance. And the years of the Obama administration 2008-2016 when this simply continued without any understanding of its implications for both sides, to levels of China's predominance in world shipping that can only be considered as unbelievable. Growing at over 12% through continued use of  imported technology from Europe and the US. Looking back at what happened one sees that this made China over dependent, its economy too intertwined with Europe and the US. This also made the US and Europe over dependent on China in its supply chain. It took the pandemic and the one term Trump administration, the crisis in Hong Kong, the situation in Ladakh and India's norther border, the South China seas and Vietnam,  for both sides to realize this was not in the interest of any of the countries involved.   ...

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Friedman says the fairly obvious that Democrats in the US and Social Democrats in Europe readily grasp. That unrestricted immigration on the southern border in the US or in the southern border of Europe actually does little to improve the situation for people in the US and Europe or the people in the countries migrants are leaving because of unsettled conditions. Germany has shifted to a policy of becoming involved in development in Africa. Japan's International Cooperation Agency has worked for many years in African countries. The US has its own efforts to assist Mexico through trade and manufacturing. It is working with Central American countries that are a major source of migrants on the southern border at different times. Mette Frederiksen, head of the Danish Social Democrats government, has put it very well when she said that the only people who are getting hurt by open border policies are the working class families in Denmark. This is true also of other parts of the EU and the US. Simply by letting in migrants, a policy that is harmful to workers and families. Conservatives are looking to make political gains and further their own interests, indifferent to social divisions and increasing lack of upward mobility in society. Immigration has become the tool for many of the conservative parties that have used it in ways harmful to interests of workers and families, in Britain, in the US, and in the EU. One has only to see the large delegation that Mette Frederiksen led to India for discussions with prime minister Modi, the economic ministries, and business, to see how she did the right thing on a huge scale. Denmark is the world leader in logistics with Maersk, and in renewable energy. Denmark and the Nordic countries are working closely with a country of 1.4 billion people to improve the logistics to make India comparable to China in manufacturing for export. And similarly in renewable energy technologies. The Nordic countries and the EU have simply by these actions done more to uplift hundreds of millions of people in Asia than anything that ever happened in the history of the world. And the US is also working with India in the same way. India acts as a stable source of growth and model for a whole stretch of Asia from Indonesia to Vietnam. The population lifted out of poverty - 2 billion people. ...

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Like Japan China is looking to wean its exporters away from dependence in the export markets- one of the steps agreed on at G-2- in Pittsburgh- and increase spending by Chinese consumers to buy more of the same products at home. Bicycle manufacturer Tandem has lost 40% of the American sales, now it is looking to the Chinese market as incomes are rising in China. As Tandem's general manager puts it in the US the shift is now to buying cheap things. Chinese exports after rising 20% each year for years, recorded a drop in August 2009 of 23% down over August 2008. In China urban household spending was up 9.2%. THe savings by American households jumped to an annualized $566 billion in the second quarter of 2009, quadruple the rate at the start of 2008. Batson gives this account from Shunde in Chinawhere Tandem has it head offices. He talks with managers at Tandem and sees the struggle within the company to some up with anew mindset, and organization, to sell bicycles in the domestic market where other bicycle manufaturers like Giant Manufacturing Company of Taiwan already have a large share in the high end market. Mr Tseng had to convince his fellow managers and the board that it was a good idea, as the domestic market is tough to pentetrate, kickoffs are common, and competition is intense. Tseng says Tandem will approach first the children's market where competitors haven't focussed, and treat as atoy for kids. Tandem will bring higher quality better built bikes into this market. And this is similiar to what it sells to American kids with lots of colors and funny names. Tandem managers aren't sure Chinese distributors or retailers will pay enough attention to their bicycles so they decided to open astore in Shunde and start small and scale up. Tseng says that Tandem will have to pay its tution first and learn about the market. This means it will still continue selling to America and Europe. Chinea's government is now encouraging these efforts to target the domestic market with tax breaks and coupons. But as China and Japn also become more inward looking economies and trade inside Asia increases, the domestic demand is not enough to make up for the loss in the American and European markets. The US and Europe each put in $9.5 trillion into the global economy, even at their current recession diminished pace, compared to the $1.5 trillion spent by Chinese households. Per capita incomes tell the story. In the US $35,486 and in China $2,270. T...

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Tariffs policy is part of a renegotiation the US is conducting with China similar to that started with Japan by Lighthizer in the Reagan era as Deputy Trade Representative. It does not in any way have anything to do with the tariffs of Herbert Hoover in 1930 that gave tariffs a bad meaning. This is because tariffs were reduced since Harry Truman's efforts in 1945 by 2017 to 1.47% on average on total imported goods into the US and world trade makes up 63% of world GDP, so large is world trade today. What are Lighthizer- DJT tariffs trying to accomplish? As with Japan in the 1960-1970's it is intended to reverse the trends for China in 2000-2017 that allowed it to game the world trading system to gain an unfair advantage by dumping specific products into the US destroying American manufacturing and communities dependent on it. The US tariffs on Chinese goods proposed in 2024 by former USTR Robert Lighthizer come at a time when US tariffs are in 2023 only about 2.2% of all imported goods, $33 billion on 2333 billion of imported goods. In 2023 the total import duties or tariffs as a percentage of US total imported goods is about 2%, with total imported goods into the US from European Union 3%. and with total imported goods into the US from China about 19% matching China's about 19% on American imports into China. By the time the first tariffs were taken up by the DJT administration in 2017 the total tariffs the US had imposed on imported goods were down to an all time low of 1.47% of imported goods value, $33 billion out of $2333 billion in total imported goods. Compared to the 29-40% under Hoover Act of 1930 raised to 60%.  Today world trade makes up 62% of world GDP, in 1930 it made up 9% of World GDP.  In 2023 the total import duties or tariffs as a percentage of US total imported goods is about 2%, with total imported goods into the US from European Union 3%. and with total imported goods into the US from China about 19% matching China's about 19% on American imports into China.   ...