Chinas Goverment Helps Manufacturers Economy Booms Ours Not So Much

Dave Johnson

As an election strategy conservatives blocked or watered down everything they could that might help the economy, hoping voters would blame the President’s party for job losses. Tomorrow we will learn if this strategy succeeded. But Wednesday can we start doing things to help the economy and the country again? Please?

Candidates on both sides are running ads asking for fixes to trade with China. Chinese manufacturers are starting to fight, claiming that (now jobless) Americans will have to pay more for goods if they have to adjust their currency toward market rates. But Chinese manufacturers are doing just fine, according to recent surveys, because their government is doing everything it can to stimulate their economy, their manufacturing and their jobs.

Where’s our government?

Today’s Progressive Breakfast hilites two stories:

Chinese manufacturers, complaining that their government has adjusted currency too much, tell Americans Christmas will be more expensive. W. Post: “‘If the renminbi keeps appreciating, our prices have no more room to drop,’ said Cai Qin Liang, 38, who has been in the business making Christmas ornaments and handicrafts for more than a decade. ‘We can just stop making these Christmas accessories, but foreigners still celebrate the Christmas holiday and need these things.’ It is small manufacturers such as these that the Chinese government says it is worried about as it resists calls for a larger and more rapid appreciation of the currency.”

Yet Chinese manufacturing doing just fine, buoyed by stimulus. AP: “Chinese manufacturing accelerated in October with spending on infrastructure projects spurring a jump in new equipment orders even as export demand remained subdued, surveys showed Monday.”

What kinds of things is the Chinese government doing to help its manufacturers? Earlier this year I wrote, in Lessons From China’s Stimulus

China’s stimulus brought them through the economic crisis, even as they lost some exports because of the slowdown. They made the leap into alternative energy technology, spent $100 billion just for high-speed rail, and showed the world how fiscal stimulus works. Their growth rate is currently 13%. Ours is currently … nowhere near 13%.

. . . So their stimulus totaled about 14% of their GDP. Our own stimulus was $862 billion in a $14 trillion economy, or about 6%. The differences between the priorities of the two plans are clear when seen on charts.

From a year ago: China’s Stimulus Package: A Breakdown of Spending: (please click through for more)

china_stim_chart

. . . China focused on investment in public infrastructure, which leads to future economic growth. We are mired in conservative ideology so we focused on tax cuts, which do little more than increase our debt.

. . . Quick lessons:

- China spent serious money, quickly. It worked.
– China focused on infrastructure. It worked.
– China has a national economic/man manufacturing strategy and invests in R&D and developing strategically important industries. We don’t.
– Don’t cut taxes, it only causes massive yearly deficits and accumulated debt.

Frank Sobatka describes one of the main reasons for the problem:


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