For this we dissed the Dalai Lama?
The pro-Obama media machinery is excusing the lame trip of Obama to Asia, particularly China, as reflecting the weakness of America relative to a rising Asia led by Communists in Beijing.
But is China a lender to the US, as Brad Setser of the Council on Foreign Relations and others claim?
Not really. China is, in fact, an investor in the United States.
It links the value of its currency to the dollar so that it can continually earn US consumer dollars no matter how the dollar’s value fluctuates.
As the most powerful economy in the world it is only American consumers that can afford to expand consumption. That is because America’s powerful education system feeds a giant productivity machine that we can afford to borrow against. Actually, despite the huge absolute numbers, relative to our GDP we actually borrow less than it appears.
Chinese exporters then take the dollars they earn from US consumers and buy US capital goods (e.g., high end machinery) and intellectual property (e.g., software). What is left over of those dollars is exchanged with the Chinese banking system for Chinese currency to buy local supplies and hire Chinese labor.
Then the state controlled Chinese banks together with the monetary authorities in China invest those dollars in US treasuries. That investment is their rational decision that the US remains the most attractive place to put those dollars.
If the Chinese authorities rationally thought the US was a bad place to invest they would delink their currency from the dollar and that would interrupt the flow of dollars back into US treasury notes. There has, in fact, been a very small shift in this direction but nothing on a scale that would suggest a fundamental loss of faith.
The US then has recovered the dollars it originally used to buy Chinese exports. The Federal Reserve then decides whether to use its open market operations to expand the supply of dollars by purchasing those securities available to expand domestic consumption and investment by US consumers and companies.
In other words, there is a joint decision by the Chinese and the US financial system that gives US businesses and consumers access to surplus dollars that had originally flowed into China.
That hardly suggests to me US weakness as against China. It seems clear China is as dependent on us as we are on them.
If we really want to change this system we should be advocating a limit on the ability of US companies to exploit sweatshop Chinese labor and that China should recognize the right of Chinese workers to form truly independent unions. This would force the regime to rebalance the Chinese economy to favor domestic consumption as opposed to dependence on an unstable export economy.
It is hard, then, to understand the propaganda being put out there by the Obama machinery. US power relative to China has not shifted just because Obama won the presidential election. This hardly seems a reason to have, for example, insulted the new Asian human rights movement led by buddhists like the Dalai Lama and Vietnam’s Thich Nhat Hanh.