Sunday, May 31, 2009

China should downgrade its relations with Denmark

By China Watcher

In terms of bilateral relationship, there is this very unambiguous phrase that each country should respect other’s sovereignty interest over one’s territorial rights. Under the case of Tibet, every country that agreed to set up diplomatic relationship with China has more or less agreed that Tibet is an inalienable part of China.

But Western nations, as usual, choose, to conveniently leave this portion out of its agreement for reasons it seemed, to them, will win them votes for being a government who stands on its own principles, that is, it condones human rights advancement. To me, the meeting of the Dalai Lama may seem “harmless” from their political viewpoint but it is also a moral encouragement to the spiritual leader and his bunch of exiles to work out a long term plan for independence. The Western nations should actually encourage the Tibetans-in-exile to accept “partial” autonomy instead of a “full scale” autonomy which is demanded by the Dalai Lama and his independence cohorts.

African and Asian countries will continue to be the Chinese trusted partners, and they rarely allowed such visits by the Dalai Lama, more so, to meet the senior officials of these countries concerned. No wonder the Tibetan exiled spiritual leader loves the Western people and he will always try to arrange with these sympathetic governments to highlight its full autonomy cause. The cunning and shrewd religious leader knows very well that he will not receive any “red carpet’ welcome from any Asian (except probably Japan) and African countries.

Danish Prime Minister Lars Loekke Rasmussen and Foreign Minister Per Stig Moeller in its official capacity met with the Dalai Lama in Copenhagen on Saturday.

The Chinese government should not only protest over Danish government officials' meeting with the Dalai Lama, but to take the bold step to downgrade the diplomatic status to a “consular” level and to monitor for a period of six months, and if there is no improvement to cut off all ties with the government.

The constant warnings to Western governments in its many meetings with the Dalai Lama will meant nothing if the Chinese government do not take stern actions. The meeting, even after strong verbal reminders from China, indicates that the Western governments do not take the diplomatic relationship with China seriously and there is only one course of action – to downgrade the status not now but immediately. It will serve as a strong message to the Western world.

Thursday, May 14, 2009

China should boldly face the threat of currency manipulation label coming from the US

By China Watcher

Every year at around this time, you would be able to hear high handed political rhetoric from the US lawmakers and an incessant stream of anti-China tirades ringing across the floors of the Congress and Senate.

The hottest topic is still the alleged currency manipulation by China. Either the US lawmakers are congregating to try to justify imposing punitive tariffs on China goods which indirectly support the hordes of inefficient and badly managed US’s manufacturers from further revamp and closure or there is a hidden agenda to hold back a rising China.

The accusation of China of keeping the Yuan artificially low is not a new issue but one which was raised countless times by the US politicians since the Bush era. The current US Treasury Secretary has made some remarks concerning China as a currency manipulator when he took office late last year. Since then, he has toned down his aggressive overtures after a meeting with Chinese trade and commerce officials. There will be another round of government to government commercial negotiations in June 2009.

The US lawmakers plan to propose the Currency Reform for Fair Trade Act, which is to counter any currency manipulator nation by allowing the imposition of anti-dumping and countervailing duties on its goods to protect US based industries. Is it not that the US already had existing legislation to bring about fair trade policies and to protect its people from exporting nations?

The question being asked here is “Does China has an obvious advantage in international trade if it manipulates its currency?

First, China does not only trade with the US. It also imports lots of intermediate components from surrounding countries like Japan, Korea and ASEAN to be assembled into finished goods (which is then re-exported to US and EU). The Chinese only makes a small profit margin as a final producer of goods. With the relative lower exchange rate against the US presently, the Chinese would need to pay more local currency to buy the same quantity of intermediate goods. If the Yuan is higher, the producers need not have to spend so much local currency to obtain the same volume of components. The production cost in making the item is therefore lower, making it even more competitive. In the production chain, the actual contribution of the Chinese is in its lower cost of labor of which the US or developed countries will not be able to match.

Second, if China’s currency value (Yuan against US) is higher, it indicates that the US importers would need to pay more US$ for Yuan denominated goods thus making China’s goods more expensive. The US importer which previously imports garment A from China at US$3 per piece would now review its other choices since the price of the same garment A from China has gone up to US$8 (due to the increase in exchange rate). The importer would continue to import from other low cost producing nations like Vietnam, Sri Lanka or India at perhaps, US$7 a piece. The local US producer can only sell the same quality garment at US$12 (due to the higher cost of production). Even if the US succeeds in getting the Chinese to revise upward on its exchange rate, the US would still need to import from other low cost producing countries unless the US would be able to label the other low cost producing nations as “currency manipulator” as well. From the economic standpoint, the US consumers are worse off – they had to pay a higher price for the same quality of goods (US$3 as against US7) – which means a lower standard of living for US residents.

Third, the flow of trade would not just go back to the US if China’s relented to shore up its exchange rate unless the US residents can also adjust to a lower cost of living and/or increasing its level of work productivity. Personally, I think the US residents actually spent more than what they earned which have been happening throughout the last decade. The savings rate in the US society is extremely low. There are just not enough funds to support the the average family expenditure on a rainy day as was observed n the recent financial related crisis. Translated into a macro arena, the outrageous spending by its populace has caused the US economy to be in deficit since the Bush’s Presidency. Is the US single household willing to live a lifestyle similar to a typical Asian household where the apartment/house is much smaller and the car is just a compact? There is also lots of wastage in the US societies. US children are seen to eat only 30-40% of the food served on the table, with the rest going into the garbage bins. If there is going to be any significant decrease in the US’s current account deficit with a heavy reduction in imports (from China), every US individual will need to change their lifestyle. Are there willing to make this sacrifice?

Fourth, politicians felt that is always easy to blame someone when things go wrong and the best possible way is to continue to harp on the low currency exchange and the cheap imports from its top trading nation. China being the biggest creditor to the US will always have to bear the brunt.

As stated before in my article, China must be strong to fend off the heavy rhetoric from these US politicians. It must also accept the fact that one day the US would impose trade protectionist measures on the flow of goods and services between the two countries once the trade friction cannot be managed anymore. A good ongoing initiative taken by China is to diversify its markets elsewhere and reduce the dependence of its exports to the US to, let say, 10% within 10 years’ time. Another suggestive move would be to increase domestic consumption and become less reliance on overseas market.

In the future if those diversification efforts are successful and if these politicians continue to bark, China can just turn a deaf ear.

Tuesday, May 5, 2009

China quarantine measures are crucial to keep the swine flu (A/H1N1) at the borders

By China Watcher
For the past few days, the Western media had an “open day” reporting of the overly aggressive approach used by the “authoritarian government” of China in putting about 70 suspected Mexicans under quarantine. These reporters would go to every extent to interview the affected Mexicans to highlight the negative side of the ordeal and stressed that the rights of the foreigners have been infringed. Some of them even tried to link it to the extreme measures taken in locking down Tibet last year months ahead of the Olympic Games. What has this got to do with the swine flu? It is not surprising as it is expected if the news come from Western news agencies. Fortunately a high percentage of people of Chinese origin do not rely on Western sources for their information.

I fully support the Chinese government in the use of its existing laws (the isolation approach) to prevent the outbreak of contagious disease in the country. China is a huge country with a population of about 1.35 billion and if there is a runaway pandemic, the impact would really be severe and could result in deaths of an unimaginable proportion. Then, who is to be blame? Not the West.

Most Chinese online users also support the decision to quarantine Mexicans. A poll by major information portal showed that 92.5 percent of 4,263 online users said the quarantine was "a necessary preventive method and had nothing to do with discrimination". The quarantine measures were taken in the interest of both the detained guests and the public.

Yesterday, the Chinese government also quarantined 29 students, the majority of them are Canadians, in a hotel over the suspicions that the Canadians, the second highest risk group besides the Mexicans, have contacted the deadly flu. Even Chinese nationals who returned from Mexico are subjected to preventive measures. All these proved that what the Mexicans claimed that the quarantine acts are discriminatory in nature is clearly unfounded.

Being supportive of Mexico as a Third World and a developing nation, China offered US$5 million in aid to Mexico last Wednesday – US$1 million in cash and US$4 million in medical supplies - the first country to send aid after the epidemic broke out. Yesterday, the second batch of US$5 million of disinfection tools, gloves and screener equipments were transported out from Guangdong Province to Mexico

The Ministry of Health (MOH) said yesterday although the mainland has not yet reported any cases of H1N1, there is a possibility of the virus making its way. The General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) said yesterday six more supervision teams had been sent to Shandong, Hebei, Sichuan, Jiangsu, Zhejiang, Hunan, Hubei and Shaanxi provinces to work with local authorities in epidemic prevention. It sent five teams to Beijing, Shanghai and Guangzhou in late April.

The Chinese government hoped that Mexico would understand the current strict measures adopted and that the two countries can jointly addressed the epidemic in an objective manner without any strong emotional outburst.

I think it is a wise move on the part of the Mexican government to issue travel warnings to China. At least the Chinese government can devote more efforts and resources to curb the spread of the virus from elsewhere and also, to develop cost effective vaccines for the Chinese people and the world.

China need not follow the “relax-type approach” of the West in the implementation of preventive measures during a potential disaster or a crisis. The measures undertaken must be effective and practical. The important thing is to ensure that the health and safety of its people are protected at all times.