Monday, April 4, 2011

Week 2 Reading Responses

Below, you can find the readings for this upcoming Tuesday's class. There are more readings than usual, but they are definitely manageable.

Provide at least a paragraph response for at least one piece. Here are some questions to get things started:
- Which aspects of China's 5-year plan are most interesting to you? Why?
- Are the BRIC countries threats to American economic prosperity?
- Based on these pieces, how does economics seem to color the tone of relations between the two countries?
- Is China still a developing country? If it is, is it different from other developing countries? How so?

"Key Targets of China's 12th Five Year Plan." (Xinhua) . March 5, 2011.

Cooper, Helen. "Obama Sets Ambitious Export Goal." January, 28 2010.

"China and Colombia Announce Alternative Panama Canal." (BBC News) . February 14, 2011

Davis, Bob, Damien Paletta. "U.S. Gets Rebuffed at Divided Summit." (Wall Street Journal) . November, 13, 2010

"China Sees New Emerging Markets Bloc Consensus." (ABC News) April, 2 2011.

Krugman, Paul. "The Role of the Dollar: Who Cares?" (New York Times) . January 17, 2011

Krugman, Paul. "Chinese Confusions." (New York Times) . December 10, 2007.

Yu Yongding. "Reform Global Monetary System." (China Daily) . April 2, 2011.


  1. After reading the article on the 12th Five-Year Plan, I was interested in how the government proposes to accomplish its ambitious goals, such as "non-fossil fuel to account for 11.4% of primary energy consumption". Since this article is only highlighting the key targets of the plan, it doesn't give much detail regarding the legislative and economic machinery that will be needed to bring these ideals to fruition. The goals for social management seem especially vague to me. I'm not quite sure what "better social management system for better social harmony" refers to. Also, I found the decision to stimulate domestic demand to be interesting. A shift from dependency on exports to domestic consumption might boost economic growth and improve the standard of living. Raising the minimum wage standard and supporting the service sector instead of investments and manufacturing would be a way to increase internal demand. On a side note, I am also curious as to how successful the 11th Five-Year Plan was.

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  3. The US and China are economically intertwined with each other in more ways than they would like to be. China has a huge reserve of US Dollars and US credit, and it is afraid that current fiscal policy from Washington (of bailing companies and pumping more liquidity into the economy) is going to depreciate those reserves as the dollar becomes less valuable.
    On the other hand, America does not like the depreciation of Chinese currency, and thinks it unfairly makes American companies and products less competitive. Both are valid concerns, and yet both countries have not made necessary changes to help each other. In America, a need to save failing companies and the economy as a whole has forced the government to pump liquidity into the market. Similarly, China's need to maintain a consistent economic growth (possible only through export at present) in order to prevent tension and uprising has tied its hands.

  4. For the past years, China has showed its growing interest in Latin America. And this cooperation program on alternative Panama Canal is just the tip of the iceberg of China’s involvement in this region.
    As far as I’m concerned, China’s strategy in Latin America is pretty similar to its strategy in Africa ---- gaining access to the region’s raw material to meet the demands of China’s booming economy, while making friends with countries in these regions, providing funding for municipal services, international health insurance , and modernization.
    Also, since it is known that Taiwan has maintained official relationship with several countries in Latin America by providing continuous financial assistance, to isolate Taiwan from its allies in this region might be another reason that explains China’s involvement in Latin America.
    Lastly, I think it'll be interesting to watch if the US starts showing concerns and how they will react when China continues its momentum and builds up solid linkages with Latin America.

  5. To start, I'll say that I have no real economic background and know close to nothing about international monetary issues. Having said that, and SDR sounds very productive to me. Clearly the US needs to be able to bail out companies and stimulate it's economy. This goes without saying. However the effect of doing this on the rest of the world is a legitimate concern. Using multiple currencies to stabilize currency internationally seems like it would (as successfully as possible) allow countries the flexibility to do what they need with their currency domestically. Still, many of the early articles, such as those on trade deficit, mostly confuse me so I'm clearly not the correct person to be supporting or criticizing these techniques.

  6. China's investment in a Colombian "dry canal" seems to be another piece of evidence suggesting that it is attempting to build itself a circle of allies. My sense of Chinese policy is that they see themselves stuck in a U.S.-controlled world, and are working towards creating a situation in which they can circumvent any controls the U.S. and its allies might attempt to place upon them. Unfortunately, I think that this impetus (while completely understandable from a Chinese perspective), as well as China's increasingly aggressive competition for natural resources, will force U.S.-China relations down a path of intensifying rivalry. As Krugman notes in "Chinese Confusions," it isn't that either side wants it this way. Domestic political and economic concerns seem to forcing the two countries into a collision course in foreign policy.

  7. In response to the five year plan:
    1. Economics: For the past couple of years China's GDP growth has far outpaced their predictions. It is likely that the next five years will be no different. Is China making a conscious effort to lower GDP growth and how? Also it would be interesting to see the plan for raising domestic consumption without raising inflation...
    2. Livelihood: I'm surprised by how few improvements they have in the livelihood section. They note increased pensions halfway down, but make no clear plans to address the lack of social services and old age medical care and other benefits. Why is there a reluctance to develop these public service programs?

  8. In Yu yongding's article, he revisits the issue of using SDR as a worldwide reserve currency to replace the dollar so that the value of Yuan is pegged to a so called "currency basket". China has pushed for this agenda before, but now a new context, which is that the G20 agreed to include yuan in the SDR basket, is introduced. Yu's question whether the yuan should be included is now asked under a new circumstance and begs more examination. The inclusion would mean a big step towards the internationalization of the yuan, which President Hu, in his comments on the reform of the international monetary system, said would be our continuing effort. However, it's increasingly becoming clear that this remains a delicate matter. Notice that there is always a hidden context, which is that it's still up to China to decide its pace and the appropriate time, and the inclusion of the yuan into SDR basket certainly will not allow that. Having said that, I still think that the significance of being included into SDR outweighs China's short-term concerns, and this external force will push China towards a reform of currency policy that increases the yuan's convertibility and flexibility.

  9. It is very typical of the five-year plan made by the Chinese government that the growth of GDP is always listed as the first goal to achieve. However, no matter how much the GDP increase every year and how it looks like the economic in China is making great progress in the international market, the danger of economic bubbles behind the monopoly of nation-owned enterprise and the extremely high price of real estate is not completely out of sight. Holding so much debt in foreign currency, from what I understand, the Chinese government would definitely try everything to keep the value of Chinese dollars to maintain its winning role in the international monetary system and the trading market, which is seen as its priority so far in the realm of economic success. I am actually very curious to see how U.S. is going to react to this goal set by Chinese government. One thing that I always remind myself of is, this government in China definitely can do everything if they want, with the large amount of tax money from over a billion population, the military power, and the unpredictable political influence of its people (speaking of the Great Lead Forward and the Cultural Revolution...) And I definitely believe they have the power to play an active role,or even an aggressive role here regarding the economic tie and the "necessary" relations between China and U.S. in many fields.

  10. Based on the new 5-Year Plan, it's hopeful to see China beginning to switch from an export-focused economy to stimulating more domestic demand and innovation. Nevertheless, until the Chinese government allows its currency to significantly appreciate, its commitment to making this transition cannot be taken very seriously. The United States will need to continue applying strong political and economic pressure on the Chinese government to appreciate the RMB to rebalance global trade and reduce an unfair advantage to Chinese products.