Economy: Apparently having not enough to do back home, the premier of communist China took time this week to travel halfway around the world to castigate the U.S. for its economic sins. But he's a fine one to talk.
On the first day of the annual World Economic Forum in Davos, Switzerland, Chinese Premier Wen Jiabao had some choice words about the way the U.S. runs its economy. We weren't surprised. Outside the United Nations, Davos is the biggest forum for U.S.-bashing in the world.
The current financial crisis, Wen opined, is due "to inappropriate macroeconomic policies of some economies and their unsustainable model of development." This, he said, is "characterized by prolonged low savings and high consumption (plus) excessive expansion of financial institutions in blind pursuit of profit."
Ever the careful politician, Wen avoided direct reference to the U.S. But it was clear who he was talking about. And, you know, he's right: U.S. macroeconomic policy has been far from perfect. But let's look at the other side of the coin, shall we?
On its way to prosperity, China has rung up a record (for one country) $200 billion trade surplus with the U.S. It's not far-fetched to suggest that U.S. bargain shoppers at discount chains such as Wal-Mart have built China into an economic powerhouse, and helped literally hundreds of millions of Chinese escape poverty.
You'd think a little gratitude might be in order.
When Wen scolds the U.S. for its "high consumption," he also might want to look at what his country has done to foster that. Treasury Secretary Tim Geithner was widely criticized recently when he noted a simple fact: China "manipulates" its currency. But this is undeniably true.
China has what's called a managed float for its currency. It keeps the yuan below actual market value to boost sales of goods to the U.S., while making it harder for its own consumers to buy imports.
As a result of the persistent trade surpluses, dollars have piled up in China's reserves. That's given the country a financial cushion of nearly $2 trillion — making it easy for Wen's regime to finance a $580 billion bailout of its troubled economy.
Many of those trade dollars have been round-tripped into U.S. Treasuries, helping keep interest rates here lower than they normally would have been. This helped finance our economic expansion from 2003 to 2007 — and our housing boom.
This imbalance, of course, is both good and bad. But it's all the logical result of a strong-dollar, weak-yuan model that has created China's powerful growth.
For well over a decade, China's GDP has grown at an average rate of 10% — best in the developed world. This rapid growth has given China great clout and prestige as an up-and-coming economic power. Indeed, it has now eclipsed Germany as the world's third-largest economy (behind the U.S. and Japan).
Yet all's not well. In the fourth quarter, China's economy expanded just 6.8% year-over-year. Economists say that in an economy predicated on rapid, export-led growth, 6% or less would, in effect, signal a recession. China's dependence on the U.S. shows.
As such, China must now deal with its own "unsustainable model," based on forcing its workers to save more than 30% of their incomes while denying them access to the very consumer goods they so prolifically turn out for the rich world's markets.
How strange it is to hear a communist leader bad-mouthing the world's biggest capitalist economy, especially when that capitalist economy is largely responsible for his nation's emergence from poverty.
Memo to Wen and the rest of the Davos attendees: Before criticizing others, take a long look in the mirror. The world's economic ills won't be solved by finger-pointing.
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