[Viewpoint]A U.S.-China time bombThere was a report on an American housewife who wrote a book about trying to go a year without buying any Chinese products. She wrote that her experience was dotted with a series of ordeals, as was expected.
She had to search two weeks to find a pair of sneakers for her child, and the ones made in Italy she finally found cost her four times as much as Chinese-made ones. She even gave up on the idea of buying a mouse trap since there were none that was not made in China.
She wanted to buy a toy for her child, but the only non-Chinese-made alternative was another set of Legos from Denmark, which she already had plenty of at home.
Her bold experiment finally ended in failure when she bought a pumpkin for Halloween. It turned out to have been grown in China.
Now we have only two choices ― either buy cheap Chinese products or pay much higher prices for non-Chinese products.
According to the Korea International Trade Association, among products that hold top market share, some 958 are made in China. Quality and safety problems aside, we are living in a world where we cannot survive without Chinese products.
Some people say that there will be a riot in the United States if the U.S. government imposes an import ban on Chinese products.
As the United States relies on China for manufactured goods for daily use ― from toothpicks, toys and clothes to electric home appliances ― the U.S. trade deficit with China is snowballing.
Last year, the United States recorded a trade deficit of $232.5 billion with China. Following last year’s record, the United States saw a deficit of $117 billion in the first half of this year. China, on the other hand, is lending its hard-earned foreign exchange to the United States.
China is investing some $900 of every $1,330 it has in foreign exchange reserves in U.S. dollar-based assets like Treasury bonds. With the money it has made through trade with the United States, China is making up for the financial deficit of the United States.
In this state, China can raise its voice when it wants to. When protectionist moves surfaced, such as a demand to impose retaliatory duties on Chinese imports and pressure from the U.S. Congress to revalue the Chinese yuan, Beijing reminded the United States that its foreign exchange reserves can be used for political purposes.
A researcher at the Chinese Academy of Social Sciences, in a recent interview with the China Daily newspaper, said menacingly, “The United States should remember that China can make the value of the American dollar plummet, if it makes up its mind to do so.”
If China decides to sell dollar-based assets en masse or stop buying American government bonds, it could critically damage the credibility of the American dollar as a key currency. It will also be a direct hit to the U.S. real estate market, which is already dying due to the subprime mortgage financial crisis.
If the U.S. economy limps into recession as a result of this, the entire world economy will also be pulled into stagnation. Ultimately, China will find it cannot be an exception. This is a scenario for the downfall of the world economy. Since the United States is well aware of this, it does not really mind even if the Chinese utter warnings.
However, it will be a different story as China becomes more powerful, whether it is economic, military or political power. China will most likely keep a low profile until it is sure its power equals that of the United States. No one can say, however, what will happen after China amasses that power.
A well-known economist and professor of economics at MIT, Lester Thurow, said in a recent newspaper article that China reaching parity with the United States “is absolutely not possible in the 21st century.”
To me, however, it sounds like a case of anxiety Americans have in their hearts. Whether the United States wants it or not, coexistence between the United States and China is a direct result of globalization.
After its industrial infrastructure was gutted by deindustrialization, what is left in the United States are such intellectual properties as brand, know-how and a powerful financial industry.
As long as the detonator of an astronomical U.S. national debt ― $8.97 trillion ― exists, the uneasy U.S.-China coexistence is like a time bomb that can blow up at any minute.
*The writer is an editorial writer and traveling correspondent of the JoongAng Ilbo.
by Bae Myung-bok