Oxstones Investment Club™ByAgustino Fontevecchia, Forbes Blog,
Chinese authorities have released a series of announcements indicating that they might be beginning to correct their share of the so-called “global imbalances” by channeling domestic spending and revving up imports. While Premier Wen Jiabao announced on Saturday that his administration would look to “actively boost consumer demand,” the government-approved China Council for the Promotion of International Trade (CCPIT) announced a record number of Chinese trade delegations would make the rounds this year, as “maintaining balanced trade is now an urgent task for China.”
Whether the announcements are pure rhetoric or actually hold some firepower is impossible to tell, but Chinese authorities have been raising the issue of trade imbalances and domestic growth with greater frequency as of late. Forbes contributor Gordon Chang reported that on Saturday, Chinese premier Wen Jiabao, in the so-called Chinese State of the Union, the “Work Report,” stated that his administration would “actively boost consumer demand” as they “continue to increase government spending [in order to] help expand consumption, and increase subsidies to low-income urban residents and farmers.”
Echoing his own statements, Premier Jiabao told a panel on Sunday at the National People’s Assembly that China would “basically eradicate poverty” by 2020, according to China Daily. Through a new ten-year poverty-reduction plan, the government would substantially raise the current poverty line of 1,296 Yuan a year (about $0.5 a day) and help lift millions out of poverty. According to data from the UN, 150 million Chinese citizens would be considered poor under the international body’s “one dollar a day” threshold.
The announcement by the CCPIT is the final straw in a series of announcements which aim at reversing the current situation of global imbalances. Wan Jifei, chairman of the CCPIT, clearly stated that “China expects to show its willingness to reduce its trade surplus with developed nations,” in one of the most direct expressions of the current state of affairs in international trade.
While not a government entity, the CCPIT counts with government approval, giving Jifei’s statements official backing. The issue of trade imbalances has been brought up again and again, not least by US Treasury Secretary Timothy Geithner who’s backed off from officially labeling China a “currency manipulator” at the last second on various occasions. Jifei’s recognition of the problem provides an additional example that China understands the magnitude of its trade surplus, which reached $181.3 billion with the US and $142.8 billion with the EU in 2010. (Read Geithner’s Criticism Of China, Another Lost Opportunity To Fix Global Imbalances).
Through trade delegations, China will focus its importing on energy-saving, environmentally friendly products, a move that will allow it to tackle, in addition to trade imbalances, the problem of environmental degradation. “Mechanical and electrical products, especially those related to new energy, new material and energy-saving, will be given priority when it comes to imports, as demand is growing and more such imports could help to boost the world economy,” read the article published in China Daily.
Whether or not these concerns are truly in the administration’s mind is a matter of debate. Gordon Chang notes that “unfortunately, we have heard this [talk of imbalances and domestic demand] from Premier Wen and other Beijing officials before.” While Chang and many others are skeptical that China will change its policies, the administration in Beijing is well aware that it has loaded itself up on $1.16 trillion in US Treasuries which have turned the tables on them, as what was once a hedge against currency instability has become an anchor forced to reckon with the eroding value of the dollar. Whatever path they may take, the issue is more clearly on the table than ever before.
Tags: Asia, ccpit, China, China Council for the Promotion of International Trade (CCPIT), china daily, china focus on importng energy-saving, domestic consumption, domestic demand, energy-saving, environmental degradation, environmentally friendly products, government spending, new 10-year poverty reduction plan, new energy, new material, premier wen, subsidies to low income urban residents and farmers, trade imbalances, wan jifei