U.S., China Pledge Joint Fiscal Effort in Global Crisis
January 19th, 2009
Submitted by: Jason Larocco
This article brings to mind what Fareed Zakaria referred to as “the rise of the rest” in his book The Post American World. Solutions to improve the world economy are as dependent, if not more, on China as they are of U.S., Europe, and Japan. Both the U.S. and China are well aware of their economic interdependence and how the relationship of the largest developed and the largest developing countries affect the world economy. What is interesting is that the Chinese government has gained enough confidence in their economic policies to start voicing their opinions on the world stage. Andrew Batson, the author of this article, states “The Strategic Economic Dialogue, twice-yearly talks held since 2006, has long been dominated by U.S. complaints about Chinese trade practices… The latest talks showed signs of becoming a more equal exchange of views, with the Chinese side more assertive about voicing its concerns…” Later on in the article China also suggests that the U.S. look to reform some of its own economic policies in order to curb the negative effects of excess consumption and debt.
The assertiveness of the Chinese shows their readiness to lead and it was a very interesting component of this article. However, China’s suggestion of economic reform to curb excess consumption and debt in the U.S. also grabbed my attention. The fast growth in China over the last twenty years has depended in large part on U.S. consumer spending. So why would China want to curb our tendencies toward excessive consumption? I think China is well aware that although there may be short term gains from this behavior, it is not a good long term strategy for either country. Over the past five years the word sustainability has been a part of every major corporation’s agenda (whether in heart or only on paper can be debated). Environmental sustainability is what typically comes to mind, but economic sustainability is also a topic that deserves a lot of attention right now. Increases in commercial trade have helped create a bridge over the Pacific Ocean between our two countries. But, if we continue to finance any country’s growth by over extending our own budgets and living outside our means, how economically sustainable are we?
Fearing China’s rise as world leader will in no way help us to create a strong position for the U.S. amongst the new world powers. However, if we continue to grow our debt with China how strategic of a position are we leaving for ourselves? Hopefully the current world economic situation has humbled us all, including China, and it will give way to a change of our current habits. As consumers we need to take charge of our own fiscal responsibilities, and as future business leaders we need find new ways to build bridges without eroding our own foundation.
Entry Filed under: Pre-Departure, Beijing, China
3 Comments Add your own
1. Eric White | January 19th, 2009 at 6:22 pm
I agree. Money talks. When China exceeds the U.S in economic output, what type of strategic position does the U.S. want to have? Certainly we would like to have an influence over a few key issues such as human rights, but in our current position, it is only our economic superiority that is keeping us on the negotiating table. If we are to have legitimate negotiating power, we need to clean up our act in sustainability so that we are not so completely dependent on another country to finance our deficit spending.
Easier said than done, I know, but as Jason pointed out, a main focus of nearly every company today is sustainability and that is definitely a step in the right direction.
2. Chris Carr | January 20th, 2009 at 7:59 pm
The US-China relationship, I believe, is the most important relationship of this century. Think of the possibilities if we work together. Think of the destruction if we don’t.
I have few regrets in life, but one regret I have is that while I am young,I likely won’t live long enough to see how the most recent China chapter and book plays out. Some issues will finalize the next ten or twenty years which I will see. Most will take 50, 60, 70 years or more — long after I will be gone, assuming/hoping I live to be 80.
You each are young enough where are likely to see whether the China story has a happy or sad ending and the role the US will play in that story. You are very lucky to have the opportunity to be a part of that story and shape the ending.
3. Andrew Welborn | January 22nd, 2009 at 7:53 pm
The point Jason brings up about China’s suggestion to reform our excessive consumption and debt provides insight into the future of the Chinese economy. It has long been debated if China has been outgrowing their sustainable output and this statement, to me, affirms that they are beyond their growth comfort zone, fueled over the past decade by some of our excessive spending. This economic downturn may be exactly what they need to weed out weak industries and create strategic changes that will allow them to grow at a sustainable pace.
They are also taking advantage of the downturn to play or more central role in foreign economic changes possibly to further their own economic agenda. I am leery of their intentions due to the lack of transparency in their markets. Although the change in the value of the yuan may be due to external factors, it can’t be ignored that it may have been to further their economic position.
My comments sound negative, but I applaud China for stepping up and affirming its own position, it may be exactly what the U.S. needs to reform our country to prevent being left in the dust of China’s progress.
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