Hello Chinese exports, good-bye U.S. jobs

[Heracles 417]

Hello Chinese exports, good-bye U.S. jobs

By Aaron Smith, CNNMoney.com staff writer June 9, 2010: 2:40 PM ET

NEW YORK (CNNMoney.com) -- For millions of unemployed Americans, the news about China's surging export market isn't necessarily cause for celebration, even if it might be a harbinger for global recovery.

Chinese exports surged 50% in May from a year earlier, easily trouncing expectations for a 32% increase, according to a Reuters report citing a leaked statement from a Chinese official.

This information is an unconfirmed sneak peak of China's official trade report, which is expected to be released Thursday.

"The Chinese exports are still growing briskly and that implies that the world economy has thus weathered the financial instability in Europe," said Moody's chief economist John Lonski.

But Lonski also pointed out a negative side.

"The very high rates in [u.S.] unemployment are, in part, a consequence of the loss of jobs to less expensive manufacturing operations in countries such as China," he said.

Lonski said the furniture manufacturing industry in the South has lost jobs in direct competition with China, contributing to the relatively high unemployment rates of 10.3% in Tennessee, 10% in North Carolina and 10.4% in South Carolina.

Peter Morici, an economist at the University of Maryland, said this dynamic is being fueled, in part, by China's system of currency fixing, which keeps the yuan undervalued.

"By not letting their currency appreciate, it keeps their products artificially cheap at the WalMart (WMT, Fortune 500) and makes U.S. products artificially expensive in China," he said. "So that keeps out our exports and drives their sales here."

But Morici said that this system won't last forever and it could actually undermine China in the future just as it undermines the U.S. today.

"With currency being the way it is, Chinese exports are going to grow like gangbusters until there's no market left in the U.S., until there's so much unemployment in the U.S. we stop buying [their products,]" he said.

But investors seemed to take the news at face value sending Shanghai's SSE Composite Index Stocks 2.78% higher on the in response. The exuberance spread to Wall Street: The Dow Jones industrial average, the Nasdaq and the S&P 500 all rallied by about 1%.

Not everyone shared in this exuberance. There's reason to doubt the leaked news on the Chinese export report, according to Marc Chandler, chief foreign exchange strategist for Brown Brothers Harriman: it might not be true.

"In my experience, I say that China doesn't leak," he said. "There's no doubt that the Chinese official said it - three different people heard him say it - but that doesn't mean that it's a genuine leak, and I wouldn't say it's a legitimate driver of the markets."

http://money.cnn.com/2010/06/09/news/international/china_export/index.htm#

[IndigoSkies 168]

If American make McDonalds toys for half cents a pieces, McDonalds will buy their craps from Americans rather than from Chinese markets. Seriously, this is about as capitalism as it gets. But the system will self-correct eventually. As more American become poorer and poorer, they'll buy less and less. This will decrease import. Hopefully export will rise in comparison. Then we'll stop buying Chinese goods. Then we'll have our jobs back.

[Heracles 417]

If American make McDonalds toys for half cents a pieces, McDonalds will buy their craps from Americans rather than from Chinese markets. Seriously, this is about as capitalism as it gets. But the system will self-correct eventually. As more American become poorer and poorer, they'll buy less and less. This will decrease import. Hopefully export will rise in comparison. Then we'll stop buying Chinese goods. Then we'll have our jobs back.

It takes decades for countries to come back from poverty. However, America has a knack for being reactive rather than proactive.

I am a conservative capitalist but I just don't buy it being necessary to ship all jobs to low cost third world countries, particularly those that are [ironically] communist.

Both the naive American consumer and greedy corporations are to blame for this shift. Perhaps if people stopped worrying about the Steelers and actually looked at where something was made, things would change.

Edited June 9, 2010 by Booyah!

[IndigoSkies 168]

Corporations aren't greedy. A corporation isn't a being. It's a bunch of legal documents. If anything it's a machine that seeks the most profit possible by any legal means. Have a little more faith in America. We have came out of the Great Depression, the market crashes of the later 20th centires, and we're on our way to a painful recovery.

Since you consider corporation greedy, I would like to hear your solution. Should McDonald hire Americans to make the plastic toys at $7/hr over paying a Chinese person 20 cents an hour? How's going to make McD do just that? Would you have America pass laws to say they cannot outsource? This would fly in the face of WTO rulings. Are you suggesting America not give a flying hoot about WTO. If so, how are American companies and goods going to be protected in foreign markets? What's gonna stop China from making an exactly replica of iPod or iPhone?

To a corporation which again isn't an empathic being, Chinese being Communist doesn’t matter at all. If consumers stop buying from these corporations because they import from Communist country, then the corporate machine will take notice. But how are you going to stop billions of people from buying from these corporations? You cannot. It’s fine that you complain. But at least tack your complaint with a solution.

What’s more is that Chinese Communism isn’t purely Communism. It’s as much capitalistic as some other countries with a very strong government oversight into pretty much everything. The opening up that China has done since 1970’s and 1980’s are joke. Pray tell me why you dislike Chinese communism?

Edited June 9, 2010 by IndigoSkies

[IndigoSkies 168]

-double post, lol-

Edited June 9, 2010 by IndigoSkies

[Heracles 417]

There is a great deal a nation can do that does not violate the WTO. After all, do you think China will allow others to take their jobs now that their economy is doing well? China is not allowing the yuan to appreciate, why not use measures to forcefully get the Yuan to appropriate levels. Take away all incentives to export jobs and do whatever possible to mitigate the chance that a corporation will want to export jobs.

At the end of the day, it first starts with educating the naive domestic consumer. As I said before, stop worrying about the Steelers, Nascar or what Paris Hilton is wearing and starting focusing on your country and your own neighborhood. As silly at it sounds, it's called priorities.

The US need hundreds of billions spent on infrastructure projects to improve, repair and generally get it back to the 21st century. Construction is not something that can be exported, yet it's the least pushed. Though, what little is constructed is usually carried out by illegal aliens.

Edited June 9, 2010 by Booyah!

[SMR 368]

There is a great deal a nation can do that does not violate the WTO. After all, do you think China will allow others to take their jobs now that their economy is doing well? China is not allowing the yuan to appreciate, why not use measures to forcefully get the Yuan to appropriate levels. Take away all incentives to export jobs and do whatever possible to mitigate the chance that a corporation will want to export jobs.

At the end of the day, it first starts with educating the naive domestic consumer. As I said before, stop worrying about the Steelers, Nascar or what Paris Hilton is wearing and starting focusing on your country and your own neighborhood. As silly at it sounds, it's called priorities.

The US need hundreds of billions spent on infrastructure projects to improve, repair and generally get it back to the 21st century. Construction is not something that can be exported, yet it's the least pushed. Though, what little is constructed is usually carried out by illegal aliens.

How do you intend to cause the yuan to appreciate?

How do you intend to take away incentives to export jobs? I work in an industry where we buy circuit board assemblies. Because of arms restrictions, some of our boards have to be domestic while others are purchased from international suppliers. International suppliers are typically less than half the price. That is considering that international suppliers have a naturally higher shipping cost and many of the parts in the circuit boards are purchased from third parties and thus are the same price no matter what. So it's likely the costs for labor and other processes are less than 20% of what they are here.

What are you going to do to force a company like mine to buy domestic? If we had to pay domestic prices on all our parts, we could essentially close up and go home. Some lines of business we could keep open, particularly US military (since that has to be domestic anyways). But there would be no way to compete with foreign companies for foreign contracts.

[Heracles 417]

Put some sort of artificial price levy on it. I don't know about you but I am not interested in seeing the countries wealth drain to another country.

You touch the issue right there - price. Price is why Americans put up with walmart and have allow it to become an untouchable giant. Price sensitive consumers [ironically] says a lot about the status of the economy and the consumers of a country. This race to the bottom, race to find the cheapest is why such a large part of America is now a ghost town. Americans were 100 fold wealthier than European and Asian counterparts in the 50's and 60's yet things were still manufactured here. Ironically also the time when the largest number of middle class had the highest [world leading] quality of life.

America does everything and anything it can it protect its own interests abroad but seems to allow the private sector to do as it pleases here. Heck, the oil spill and its epic failure is a the best indication of what happens when a country relies on the private sector alone. Do you think the Chinese government will sit there and allow another country to take this huge success away from them?

Edited June 9, 2010 by Booyah!

[Heracles 417]

edit: the country's

Edited June 9, 2010 by Booyah!

[Darnell 8,478]

I dunno - I'll wait for the report to be officially issued.

China has been ramping up with new export levels to Africa and South America these last 3 quarters, I wanna bet is 'more of the same' into these 2 places, and NOT an export hike into the USA. The buy our sh|t, and sell us cheap oil model is working very well for China, into Africa and South America - so I'm gonna bet this 'increase in exports' is NOT so focused on the USA.

If I lose, I promise to eat 100 jiaozi, 5 bowls of curry laksa, and 10 bowls of poutine, ship the resulting sh|t overseas for further fecal processing.

Edited June 9, 2010 by Darnell

[mawilson 2,133]

But the system will self-correct eventually. As more American become poorer and poorer, they'll buy less and less. This will decrease import. Hopefully export will rise in comparison. Then we'll stop buying Chinese goods. Then we'll have our jobs back.

Lovely.

[spookyturtle 9,465]

Both the naive American consumer and greedy corporations are to blame for this shift. Perhaps if people stopped worrying about the Steelers and actually looked at where something was made, things would change.

You're a Steelers fan?

[SMR 368]

Put some sort of artificial price levy on it. I don't know about you but I am not interested in seeing the countries wealth drain to another country.

You touch the issue right there - price. Price is why Americans put up with walmart and have allow it to become an untouchable giant. Price sensitive consumers [ironically] says a lot about the status of the economy and the consumers of a country. This race to the bottom, race to find the cheapest is why such a large part of America is now a ghost town. Americans were 100 fold wealthier than European and Asian counterparts in the 50's and 60's yet things were still manufactured here. Ironically also the time when the largest number of middle class had the highest [world leading] quality of life.

America does everything and anything it can it protect its own interests abroad but seems to allow the private sector to do as it pleases here. Heck, the oil spill and its epic failure is a the best indication of what happens when a country relies on the private sector alone. Do you think the Chinese government will sit there and allow another country to take this huge success away from them?

I agree with what you're saying in general but I find your answer too vague. You can certainly use tariffs to give local manufacturers and producers a leg up in the domestic market. But that doesn't help American manufacturers compete in export markets. In particular, I'm talking about anything that has outsourced sub-assemblies which is really a lot of things. Anything that contains plastic or metal, any electronics, clothing and many other things typically come form a manufacturer who purchased materials and sub-assemblies. And those things are more cheaply available from foreign sources.

Your suggestion could eventually lead to a situation where we would have a 0 trade balance where nothing is imported or exported. But in reality we need to move towards a system where we have a positive trade balance based on exports. We don't need to penalize importers but rather need to increase our exports. That is the only way to a meaningful positive trade balance.

[Texanadian 10]

This race to the bottom, race to find the cheapest is why such a large part of America is now a ghost town. Americans were 100 fold wealthier than European and Asian counterparts in the 50's and 60's yet things were still manufactured here. Ironically also the time when the largest number of middle class had the highest [world leading] quality of life.

America does everything and anything it can it protect its own interests abroad but seems to allow the private sector to do as it pleases here. Heck, the oil spill and its epic failure is a the best indication of what happens when a country relies on the private sector alone.

Ghost towns are a visible effect of a plant closing down. The invisible effect elsewhere is not seen though. If IBM closes a computer plant in Deleware, it's visible. But what you don't see is a wind farm in Texas that uses 10,000 computers that saved a ton of money by buying Taiwan made Compaqs instead. Or somebody who opened up their own home run business using a computer for $300 that would have cost $1500 in the past.

Were Americans really wealthier in the 1950's and 60's? How many families owned 2 cars? Or lived in a 2000 sq ft house? How many even had more than 1 telephone? And that phone was more often than not a party line, shared by the neighborhood. More families sewed their own clothes. Because it was hard to buy clothes for your 4 kids on 1 income. You probably owned 1 TV. But it more than likely wasn't a color TV. Those were too expensive for a family to buy.

As for the oil failure, what could the government do to make it better? Completely take BP (and any other oil companies' expertise out of the equation?) It was government laws that made offshore drilling illegal in shallow water. Forcing them to go farther and deeper in order to get the oil. Government itself only has maybe 5% of the knowledge of anything compared to the whole of society (private markets and people). So why not allow the private markets to figure out the way to run things? I'll take a Chevy over a Yugo any day. I'll take a private retirement fund over Social Security any day. The fact that there have been over 85,000 different ideas coming in from the public about the oil spill only goes to show that private citizens know more about fixing the oil problem than government alone does.

[Darnell 8,478]

Yup - those numbers were NOT for USA-bound imports.

So now what ya gonna do, in yer number-crunching research?