Cailean Bochanan-3rd October, 2010
In a week in which much of Britain’s Murdoch press announced triumphantly Britain’s miraculous “recovery” and Houdini- like escape from the feared double-dip my wayward imagination envisaged as a headline: Murdoch names Britain “top model”
by analogy with the bizarre media blunder involving Murdoch’s daughter as MC in Australia’s top model contest. The surprise discovery that we we’re winners after all led only to bewilderment and disappointment as the mistake dawned on us: “Oh my God! I’m so sorry- I’m so so sorry”; the Murdoch press- normally so meticulously accurate -blurted out. “It’s not Britain….it’s ..China”. China, the people’s favourite, is the top model. We’re stunned- but so happy for China! We’re clinging on to her in an emotional hug. Congratulations China! - Yes, we should embrace China and we should “be happy for her”. She is indeed the top model with the new paradigm of investment in the real economy as a counter crisis measure and we need to recognise too that she is offering us a lifeline which can enable us to do the same thing. Instead we have embarked on a new round of futile griping in tandem with our American partners, claiming China’s culpability in our predicament on the basis that she has undercut us in the export market by artificially maintaining a low RMB. The fact that exchange rate variation can’t compensate for the near total erosion of America’s industrial base has already been revealed by the failure of a falling US dollar to make a dent in its trade deficit. We will have noted the same reality here in Britain where the pound falling against the Euro has brought little or no benefit. A recent article in the People’s Daily revealed another less trumpeted aspect of the situation...>>
“On Sept. 15, a piece of less-noticed news came from the other side of the earth when American congressmen were heatedly discussing how to force the RMB exchange rate to appreciate at a hearing of the House Education and Labor Committee. China’s Anshan Iron and Steel Group Corp (Ansteel) signed an official agreement with U.S-based Steel Development Company (SDC) in Beijing to build a steel mill in the United States.”
This joint venture turns out to be more the exception than the rule:
“The success of Anshan Iron and Steel Group reminds us of a large number of Chinese companies’ failure to open up shop in the U.S. market. For example, China National Offshore Oil Corporation tried to acquire the Union Oil Company of California; Huawei tried to purchase U.S. software supplier 2Wire Inc. and Motorola Inc.’s wireless equipment unit; and Northwest Nonferrous International Investment Company tried to purchase a tiny Nevada gold mining company Firstgold, but all the proposed purchases were blocked by the U.S. Government.” And so, preferring conflict to collaboration the US is blocking incoming investment from China. Given the state of the USA this is a rather shocking revelation. Let’s look at the situation more closely.
Why would China wish to invest in the US?
Firstly, China is a habitual and obligatory investor in the US anyway, since it has little choice but to recycle dollar earnings into US debt. Given the precarious value of the dollar and the prospect of quantitative easing without end this is not in her interests. China prefers to invest or, rather, divest of its dollars into real assets. Secondly, these are the workings of Chinese “soft power”: by entering into partnership with the US she can draw her sting. A new cold war is not in China’s interest, cornering her into endless military expenditure and blocking the road from poverty for her people.
Why would America wish to encourage Chinese investment?
Firstly, the path of conflict has exhausted itself. The failed coup in Ecuador is only the latest demonstration of US impotence, the futility of force. America cannot impose itself on the world, full-spectrum-dominance has failed. Geostrategic pre-eminence can no longer compensate for national failure and so the new slogan must be: nation building begins at home!
Secondly, America is, anyway, dependent on capital inflows to cover her trade deficit and government debt. The only question is: under what conditions can they continue? They can continue on the basis that they are flowing into real assets and not potentially worthless dollar-denominated securities: they can continue on the basis of industrial reconstruction paving the way for the US paying its way in the world. And yet in this Year of the Gift Horse the US has decided to look it in the mouth. Why is that? The American elites are mired in the past. It is a question of pure inertia: thinking that what worked in the past i.e. coercion, will work in the present they have opted for it again despite its obvious failure. This is normal: we all function in this way. But the moment comes when we must resort to a time-honoured manoeuver: the 180 degree about turn.
For a historic geostrategic compromise.
The benefits of partnership with China should be perfectly evident. Strangely, what we are talking about is simply embracing globalisation. Not the globalisation which culminated in defeats in Iraq and Afghanistan, but the benign globalisation process which emerged in its stead: globalisation without hegemony, the emergence of a global community of nation states in a new multipolar world. This historic compromise goes beyond just economic partnership: it entails a process of collaboration across the board, of conflict resolution, of new global institutions reflecting the greater equality of nations, of setting out on the long trek towards the demilitarisation of international relations and rebalancing the global economy with a new paradigm of harmonious economic growth which brings real quality of life to all and not just rampant consumerism to a few.
China wishes to see the situation in bordering Afghanistan resolved peacefully and is fully prepared to invest in that happy outcome. She wishes to be secure in her borders. She wished to resolve the question of Taiwan. She wishes to secure her energy supplies and her shipping routes. She wishes access to the best of Western technology. She wants an environment of peace in which to complete her development.
America needs to stave off the dreadful prospect of becoming a failed state, as Paul Craig Roberts puts it. The abyss before her must focus her mind on remedial action: a whole series of quid pro quos with China can bring some immediate relief and help her through the transition to a new post-war prosperity where finance is the servant of industry and industry of the public good. And it isn’t just about China: similar bilateral partnerships can be formed with other nations, notably with some of those with which she now seeks conflict, such as Venezuela or Iran. This is the peace dividend and America needs it now. Virtually everything above also applies to Britian: China also has significant holdings of sterling reserves- in fact, 5% of their forex holdings are in sterling. As it happens, Greece has just announced that she wants
“to build this strategic partnership with China”. in the words of Investment Minister Harris Pamboukis awaiting the visit of Chinas premier Wen Jiabao. China in turn pledged once again, to “undertake a great effort to support euro zone countries and Greece to overcome the crisis’
This looks like a cue for us, not just to move towards China but to do so in the context of a more constructive engagement with Europe.
The question of the hour is then: whither the Anglo-American elites? At the moment our elites are set to become the victims of their own success. They have so successfully imposed their values and policies on society, so successfully co-opted or marginalised all opposition that we are seemingly destined to follow them towards the goal to which they are leading us: that is to say, into the abyss.
But alternative routes are being forcibly brought to our attention and we trust that the more alert, more open-minded elements amongst us, seeing the danger looming before us, will do their national duty and speak out loud and clear. In the dire circumstances in which we find ourselves there is, for those with the courage to respond, a chance to lead us towards a brighter future, if not of as top-model then at least as one still competing amongst a galaxy of emerging talent.
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China's growth is projected to average 10.5 percent in 2010 and 9.6 percent in 2011, driven by domestic demand, the International Monetary Fund (IMF) said in a report Wednesday.The Washington-based international lending agency made the projection for the annual fall meetings this weekend of the 187-nation IMF and its sister lending organization, the World Bank."The slight moderation in recent activity is expected to continue through 2011 in light of tighter quantitative limits on credit growth, measures to cool off the property market and limit bank exposure to this, and the planned unwinding of fiscal stimulus in 2011," the IMF said in its report. The report said this year's sustained growth in retail sales and industrial production confirms that private sector activity has advanced beyond the lift from government stimulus. "On average over 2010-11, private domestic demand is poised to contribute two-thirds of near term growth, and government activity about one third, whereas the contribution from net exports will be close to zero," the report said. Despite the robustness in domestic demand, the pickup in inflation in 2010 reflected mainly higher food prices rather than core inflation, the report said. The report said China's increasingly wide trading network is driving growth in numerous economies, especially commodity exporters. The report said Asia's medium-term growth depends on the rebalancing of drivers of growth -- greater reliance should be put on domestic markets instead of foreign demand. The report said such a rebalancing in China, the world's second largest economy, is critical to enhance the role of household consumption in domestic growth.The report also recommended that China implement reforms to health care, education, and pension systems to enhance the social safety net.
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