US to China: Don't depend on exports to US for growth

[GoFlyKiteNow]

US to China: Don't depend on exports to US for growth

China will be told at the Strategic and Economic Dialogue in Washington the U.S. recovery will be "a slower recovery than than what the Chinese are used to" and that therefore China's economic growth "isn't going to come from exports to the U.S.," said David Loevinger, Treasury's coordinator for the bilateral talks.

The United States would stress the need for both countries to do all they can to sustain their economic recoveries through maintaining their monetary and fiscal stimulus programs, he said.

But China needs to understand that the days of easy credit and a housing boom driving U.S. consumption were over, said Loevinger.

"It's not so simple as putting in place a big fiscal stimulus, a big monetary stimulus, to tide each economy over for a year or two, and then we can get back to the old days, where China was exporting into a consumption boom in the U.S.," he told a group of Asian-American business leaders in Washington.

China will "need to depend much more on home-grown growth ... particularly consumption-led growth," added Loevinger.

Washington would also repeat its recommendation that China adopt a more flexible exchange rate policy that would lead to a stronger Chinese currency, said Loevinger. (Reporting by Paul Eckert, Editing by Kenneth Barry)
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[longbow]

You forget that current US recovery is entirely based on lose credit provided by the Chinese. I really want to see how much the US is going to bring up this undervaluation of Yuan.

If the Yuan strengthens then Beijing will not need to buy so much Treasuries and US interest rate will shoot up through the roof. So lets watch the talk vs action.

As for Chinese consumption just watch the booming Chinese car market. As for depending on US exports, that again is more talk. If products are made in the US, it will cost a lot more. Doubt if Americans are willing to pay more for something of a similar quality.

At the end of the day must read in between the lines and watch the tangible actions taken. Read that Geithner was talking about US policy for a strong dollar vs Bernanke's keep rates at near zero to prop up the dead real estate market and banks (both are highly dependent on cheap money provided by the Chinese).

Was reading article by Stephen Roach, MD of Morgan Stanley Asia.

According to him, Obama faces lots of pressure from unions to act. Also in a recession, China is a good target for politicians. Hence the tire sanctions. Problem is if Obama is forced to act and get into a trading spat, the Chinese might not come to the Treasury auctions. At least that is his fear.

US to China: Don't depend on exports to US for growth

China will be told at the Strategic and Economic Dialogue in Washington the U.S. recovery will be "a slower recovery than than what the Chinese are used to" and that therefore China's economic growth "isn't going to come from exports to the U.S.," said David Loevinger, Treasury's coordinator for the bilateral talks.

The United States would stress the need for both countries to do all they can to sustain their economic recoveries through maintaining their monetary and fiscal stimulus programs, he said.

But China needs to understand that the days of easy credit and a housing boom driving U.S. consumption were over, said Loevinger.

"It's not so simple as putting in place a big fiscal stimulus, a big monetary stimulus, to tide each economy over for a year or two, and then we can get back to the old days, where China was exporting into a consumption boom in the U.S.," he told a group of Asian-American business leaders in Washington.

China will "need to depend much more on home-grown growth ... particularly consumption-led growth," added Loevinger.

Washington would also repeat its recommendation that China adopt a more flexible exchange rate policy that would lead to a stronger Chinese currency, said Loevinger. (Reporting by Paul Eckert, Editing by Kenneth Barry)
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[GoFlyKiteNow]

What is your basis to say that the current recovery in US is due to " the lose credit provided by the Chinese". far from the reality.
In the first place China had a good run for over 2 decades because of the export market the US provided it and huge manufacturing investments poured into China by US firms. (WallMart is a good example).
If not China's average growth rate would have been 6 % or so. Secondly, the US is not in any need of capital. It has more than enough to handle the recovery. And there are enough oil money of the Saudis and Arabs parked in USA to dwarf any other foreign funds, China included.

The other thing..China has no choice but park their reserves in treasury bonds, because there is no other place or country to absorb it. The US never asked for it and the US never stopped China from taking the money back. In fact China is using the privileges of the US open economy and financial markets to its benefit. The same with the Arab oil states.

Just as former Secretary of treasury Paulson, told CNBC's Maria, before leaving office - " We are a rich powerful country. We can handle and manage this crisis " (..caused by Wall street ).

If the Yuan strengthens, then there is big trouble for the China economy, already reeling under the lack of US and European markets. China registered its 13th consecutive monthly fall in exports - trade data released recently. Make the yuan more expensive vis a vis the USD, and then it is trouble, for the China economic recovery. Hence it is China that is hoping that the US will not lower its dollar any further. It can and may still do that by pushing gold, commodities and oil prices higher.

Well, the USA has been a great power for over 100 years, much much before China even opened its economy and was given MFN status by the US Nixon admin. The US still is the dominant economic, geo-poltical and technological power by a long shot vs other nations. What does that tell you.?.

Making goods cheaper is not the end all and be all of an economic state. There is more to it than fast car sales ( due to the stimulus money poured in to keep the China economy afloat till exports go back to good old bygone days...which it will not anyway).

You can't beat reality with wishful thinking.
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