Is China Export Lead?: Part 2Wednesday, November 7, 2007 1:47
Following a recent post called Is China Export Led, I recently found another paper written by Albert Kiedel of Carnegie Endowment for International Peace, who wraps up his summary of his article China’s Looming Crisis – Inflation Returns (PDF HERE) by saying:
U.S. intelligence analysis of this overheating risk should refute the conventional wisdom that China’s growth is export-led—it is clearly domestically driven.
Policy makers need to realize that China’s rapid economic rise is homegrown and sustainable. The United States should quietly remind China that harsh handling of inflation-related unrest could seriously damage U.S.-China relations—especially in a U.S. election year.
Far more aggressive than Jon Anderson in attacking common wisdom, Kiedel’s audience is obviously policy makers who he see are looking at China though McCarthy eyeglasses (tinted with Lead painted Barbie)… and that gives his analysis a much different feel (both reports are well written and as a lay person I have no trouble following the logic of either)
In his article, the tied between exports and the economy is actually a secondary concern as his primary concern is that inflation is a real threat to the Chinese economy (he pulls out a lot of stats in support).
with regard to the importance of exports to China’s economy, Kiedle takes a different approach from Anderson by focus on the trade statistics themselves, but on the importance and size of the domstic econnomy to GDP and GDP growth. … and this leads him to argue that while exports are an important piece of the overall picture, they should be secondary or tertiary concern for plicy makers trying to head off inflation.
Interestingly enough, he actually puts forward a set of conditions that could lead to a devaluation of the RMB. .. not a revaluation.
Essentially, in his mind, the focus of U.S. policy makers on China’s revaluing of the RMB and belief that China is export reliant are incorrect (I am sure Jon would agree). This is something a number of readers allude to in my posts Would 6RMB/ USD Be A Good Thing?: Part 1 and Would 6RMB/ USD Be A Good Thing?: Part 2 , and it is something that I hope policy makers are paying attention to in D.C.
For anyone interested in reading more, you can download the full PDF file here.