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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

July 11, 2011 at 9:45 AM

Chimerica gets back to its old imbalances, with nasty new twists

I don’t know if stocks are really down today because of Eurozone fears, as the headlines say. Pity the poor market writers who have to find something to pin these moves on. I’d throw in the cold water on recovery from Friday’s abysmal jobs report, which raises the danger of a double-dip, particularly if the debt-ceiling standoff leads to default or draconian cuts. Then there was the pre-July 1 run-up based on portfolio rebalancing, and now it’s time to take profits. In any event, merger news such as Precision Castparts’ deal for Primus International and Lonza’s $1.2 billion acquisition of Arch Chemicals are too small to whip up animal spirits.

The most interesting news is that China has not only rebounded in exports from the Great Recession, but posted 20 percent increases: to $162 billion in June and $874 billion in the first half. Both are records. The Wall Street Journal notes that this performance comes more than a year after Beijing began to let the renminbi appreciate against the dollar. (American first-quarter exports totaled around $351 billion, including a mere $26 billion to China).

Yes, China plays currency games, but they are not the primary reasons for the country’s continued pummeling of America in the trade arena, however many lawmakers made populist hay over it. China has achieved this growth despite appreciation, despite rising labor costs and general inflation, and despite slowdowns in America and Europe.

China keeps opening and expanding new export markets while Washington fights wars and fails to stimulate the economy to grow and create jobs. We’re not competing against another country playing by our trade rules, or even our style of capitalism, degraded as it has become by cronyism and socialization of losses. It’s an entirely different system, which for all its risks, is working for Beijing. If it melts down, watch out. If it keeps succeeding, watch out.

American corporations that hire there rather than here, and Americans who are more unthinking “consumers” rather than citizens, don’t help. The really bad news is that the imbalances of Chimerica, the unsustainable stuff-for-debt relationship that preceded the Great Recession, remain. But China’s moving ahead, while we’re stuck with millions unemployed not least because of our failure to address the way China really does business.

Today’s Econ Haiku:

Rupert in scandal

It gives a whole new meaning

To the label ‘hack’

Comments | More in China economy and business, Trade

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