Weekender: The Great Trade Surficit

JR is trying to explain the global economy to himself. It’s a risky undertaking, and full of landmines in unknown locations, because JR is an amateur.
____________

China’s economy surged at an annualized rate of 14.9 percent in the second quarter. The United States economy shrank at an annual rate of 1 percent in that period, writes Keith Bradsher, New York Times, quoting the Chinese Central Bank and other sources.

“So often China and the U.S. are mixed together as being in the same situation, and that is totally wrong”, Bradsher quotes Xu Xiaonian, an economist in Beijing with the China Europe International Business School. Sure – it should go without saying that a creditor is in a different situation than his debtor. But they are still linked to each other. Which is exactly why they haven’t addressed their respective problems (or their common problem) yet: American trade data shows that imports from China only eroded 14.2 percent in the first seven months of this year while imports from the rest of the world plunged 32.6 percent. So the party is still going on, even if quieter than before.

not fun anymore

The continuing American trade deficit make perfect sense for the time being. After all, you can’t revive the American economy with stimulus packages, and curb on demand at the same time – hampering cheap imports would do exactly that. The continuing imports from China keep prices in America at an affordable level, especially for earners with low incomes.

And still, what economists have kept telling us over the past two decades is as true as it always was: it can’t go on.

At the official exchange rate, China’s GDP is $4.4 trillion (2008 estimate). It’s exports were at 1.4 trillion that same year. (It seems to me that it takes the GDP at the official exchange rate to rate the real significance of the export numbers, rather than the GDP at purchasing power parity (ppp). GDP at ppp would be $7.97 trillion.)

based on CIA World Factbook numbers (2008)

Germany is facing similar difficulties as China is in its foreign trade, although it’s  nobody’s creditor to the extent China is. It’s official-exchange-rate GDP is $3.67 trillion (2008). It’s exports in 2008 were estimated at 1.49 trillion.

The tariffs on tires aren’t just a reaction to what American labor unions (and companies) see as unfair Chinese subsidies on their own products, believes Michael Pettis *). Collapsing trade deficits (that of the U.S., for example) can only lead to collapsing trade surpluses (China’s, for example). America can’t pay for Chinese excess manufacturing capacity any more.

Nor can it continue to pay for excess capacities from other countries.

That will have an impact on employment in both China and Germany. Neither country is even close to full employment anyway. In Germany, unemployment was at 7.8%. In China, it may be at 4% officially, but including migration workers, it may be as much as 9%. It’s interesting that countries which are running trade deficits may be closer to full employment, than countries running surpluses. This suggests that while a focus on exports can create wealth for a while, it isn’t the ultimate answer to structural problems of China’s or Germany’s labor markets. It wasn’t the answer before the international financial crisis started, and now, it’s becoming unsustainable.

There was reason enough to address such structural problems even before the international financial crisis struck. Now, the task has become inescapable.

____________

*) “China’s retail sales growth figures are not consumption growth figures”, September 14, 2009. There is currently no permalink function on the China Financial Markets blog – please scroll down to it there.

____________

Related: Politics and Science, August 15, 2009

Convenient Arrest Warrants

Dolkun Isa, secretary general of the World Uyghur Congress, was denied entry into South Korea on Tuesday, and arrested on the airport, by reason of an Interpol warrant. The WUC reported his release and his return to Germany yesterday. The Society for Threatened Peoples (Gesellschaft für bedrohte Völker, GfbV) believes that the warrant was implemented by Beijing to silence one of the most important Uyghur human rights activists in exile, GfbV Asia consultant Ulrich Delius said. “Once again China is using its long arm to intimidate Uyghur critics abroad.”

Dolkun Isa is a German citizen. The GfbV points out that having an international arrest warrant issued is usually easy, as he legality of the respective national warrants issued in the prosecuting state is not as a rule subject to scrutiny. The Chinese government suggests that the World Uyghur Congress is “a terrorist organization”.

In 2005, Isa was arrested by the UN security service, apparently on the basis of Chinese security information when he visited the Human Rights Commission in Geneva.  According to GfbV, the UN later apologized for the incident.

____________

Related: Authorities should not have denied him entry, Amnesty International, September 18, 2009

Kaohsiung Film Festival: “Too Sensitive”

“We selected the Kadeer film because it fits one of this year’s themes — ‘people power.’ Our goal is to promote arts and culture, we hope people will not view the choice from a political angle.”

Liu Hsiu-ying (劉秀英), Kaohsiung Film Festival organizer, on selecting The Ten Conditions of Love, quoted by the Taipei Times on September 6

“I hereby urge the city government to cancel the plan to screen the documentary, as it is too sensitive and could harm cross-strait relations.”

Tseng Fu-hsing (曾福興), Kaohsiung Tourism Association chairman, quoted by the same paper on Friday.

City Government Secretary-General Hau Chien-sheng (郝建生) told reporters the city’s Information Office would review the plan, adding that the city government had not been informed of the inclusion of the documentary before the festival organizers unveiled the list of films for the Oct. 16 to Oct. 29 event.

Taipei Times, September 18

According to Radio Taiwan International (September 17), Kaoshiung’s city government said that the organization of the Film Festival had been assigned to private companies, and that it therefore hadn’t been aware of the planned screening of the documentary movie on Rebiya Kadeer.

Henrik Bork interviews Ai Weiwei

Süddeutsche Zeitung‘s Henrik Bork interviewed Ai Weiwei yesterday. Ai was told in hospital that “if you hadn’t come, then you may not have lived through your next exhibition”. On his blog, Adam Cathcart translated some paragraphs of the interview »

Frankfurt Book Fair: Some Disorientation along the Way

As an appetizer before the [Frankfurt Book] fair, a symposium themed “China and the world – perceptions and realities” will take place this weekend, Global Times reporter Duan Congcong reported from Germany last Friday. And added, with tangible disapproval: However, German organizers also invited two writers deemed unpopular by Chinese readers, which caused strong complaints from Chinese scholars and writers.

Which makes JR wonder how writers who are hardly known within China can be unpopular. Or, the other way round, how they could hope to become popular unless they can freely communicate with the Chinese public. Dai Qing and Bei Ling (let’s assume that Duan was referring to them) are no frequent guests on Chinese television, or the media in general. Maybe some day, when the Chinese people have free access to their own literature, both these writers will be popular at home. Besides, popularity isn’t the only criteria for an invitation. A book fair, as a rule, is no Academy Award ceremony.

Then comes a particularly embarrassing passage (still Global Times):

“We have withdrawn the invitation,” Peter Ripken, organizer of the symposium, told the Global Times. “But one of the writers has been granted a visa from the German Foreign Ministry. My colleague is now negotiating with Beijing.” “The German media is overacting on this issue,” he added.

It’s hard to believe that he really said that. The Ausstellungs- und Messe GmbH, which organizes the Book Fair, is a subsidiary of the German Publishers & Booksellers Association, whose mission is “to represent the German book industry worldwide and to promote international cultural exchange and the free dissemination of the written word“. You can’t lose your way if you have this in mind. Mr Ripken, apparently anyway, lost it.

Die Welt reports today that after the uproar on the preparing symposium, its director Juergen Boos distanced himself from Ripken’s work: his compromise to talk with the authors Dai Qing and Bei Ling and to suggest an alternative to their public appearance at the symposium had been wrong. The Book Fair wasn’t available for compromises at the expense of freedom of opinion and wanted “to create a platform for the most different, including extreme, positions. It was absurd to ask if the fair might be subject to censorship.

Absurd indeed. But absurd things were apparently close to happen in Frankfurt.

“To wish China away will be… suicidal”

To further strengthen the bilateral relationship between South Africa and China, a two-days strategic dialog will take place in Pretoria from Thursday, Channel Africa reported today. The meeting is set to deepen the mutual trust in politics, enhance the strategic partnership and to increase high-level bilateral relations. [Africa Digest, Channel Africa, September 16, 2009]

But I’m not sure if South Africa’s ambassador in Beijing, Ndumiso N. Ntshinga, meant to be harmonious: 
“You cannot deny the importance of China in world politics or in the world economy”, he told the radio station’s correspondent John Bailey. “Actually in the world economy more than anything, you can’t just deny it. To wish China away will be… I don’t know… will be a suicidal thing to do. You can’t wish them away.”

____________

Related: “Forging Africa’s Strategic Partnership”, Jamestown Foundation, June 24, 2008

German Press Review: Ai Weiwei Operation

Ai Weiwei underwent surgery in Munich’s Großhadern Hospital on Monday night, reports Die Zeit. Großhadern is one of the Ludwig-Maximilian University‘s two campuses. Two holes were drilled into his skullcap to reduce pressure.

Ai has recorded more than 5,000 children in Sichuan so far who were killed in collapsing schools, writes Die Zeit. He does research on children killed by collapsing buildings in the Sichuan earthquake last year.

According to Süddeutsche Zeitung‘s, Henrik Bork, Ai said that he suffered from constant headaches after police had headed him off on arrival in a hotel on August 12 in Chengdu, Sichuan province, and hit him hard on his head. As the pain intensified after his arrival in Germany last weekend, he had a check-up, and then the operation.

Hamburg’s weekly Der Stern quotes surgeons as saying that coma had been imminent. Ai hopes to be able to attend the opening of his show at the Haus der Kunst on October 12. He is scheduled to be on the Frankfurt Book Fair, from October 14 to 18.

CNN! CNN! Beijing or Chengdu?

Forums at Die Zeit have seen a vivid discussion routine about China during the run-up to the Beijing Olympics, and it still seems to be far more impassioned than before 2008. At least some pro-Beijingers and China experts who arguably only came to the forums for debates before the Olympics last year originally, have remained faithful readers nevertheless – of the online edition, anyway. Commenter 56 nationalities (“54 Völker)” asks if Ai is a medical miracle – travelling by plane for eleven hours, for surgery in Germany.

A more matter-of-fact commenter advises Die Zeit that the subtitle says that Ai was beaten by police in Beijing, while the article itself refers to Chengdu.

Nuctech Namibia: Defense questions Asset Freeze

The three defendants in the Nuctech corruption probe are free on bail, but their assets have remained frozen. Counsellors Gauntlett, Heathcote and Muller are focusing on the question whether an interim assets restraint order that was given by the Judge President on July 6 should now be made a final order, or if it should be lifted, with the effect that the frozen assets would be returned to the control of Lameck, Mokaxwa, Yang and other parties cited in the case (article by Werner Menges of The Namibian, published online by Britain-based The Zimbabwean). There was no evidence before the court of an offence allegedly committed, except for a claim that Lameck contravened the Public Service Commission Act by not getting the President’s consent for her to do other paid work outside her job as a Public Service Commissioner, Gauntlett said.

According to Windhoek’s Allgemeine Zeitung, Gauntlett argued that Prosecutor Nelius Becker‘s facts hadn’t been complete and that he had failed to inform Lameck that her assets were frozen. There was also no sufficient evidence of corruption. Judge President Petrus Damaseb reportedly replied that as a Public Service Commissioner, Lameck had not been entitled to hold jobs outside the commission. This was, after all, corruption.

The prosecution is scheduled to make a statement today.

____________

Related:
Investigations in EU and Namibia, July 20, 2009
“Defendants bought two Farms”, July 31, 2009