David Goldman* at Asia Times, July 31:
....MUCH MORERenmin University professor Jin Canrong has Washington’s attention. The senior director for China at the US National Security Council, Rush Doshi, cited him two dozen times in a new book entitled “The Long Game: China’s Grand Strategy to Displace American Order.”
Professor Jin’s warning on Friday at the “Observer” (guancha.cn) website that US inflation might lead to the bankruptcy of the US government will be read carefully in Washington – especially because Jin claims that China can help America out of its economic problems.
“The United States is in a state of mental transition,” the Chinese academic averred, citing the late Elizabeth Kübler-Ross’s five stages of grieving: denial, anger, bargaining, depression and acceptance. America was in denial three years ago, and shifted to anger, but “some sane people may be ready for the third stage,” and “be ready to bargain.”
“China should calm down,” Jin added, “do well at home, and keep Sino-US relations combative without breaking down.”
China’s exports to the United States in 2021 stabilized well above the long-term trend line, at an annual rate of about $550 billion. The above chart shows Chinese data for exports to the US (these are more accurate than US data, because many US companies routed Chinese imports through other countries to avoid tariffs).
The data is seasonally adjusted using the standard TRAMO algorithm on the Eviews econometrics platform. Shown on the same graph (right hand scale) is China’s net foreign asset position, which rose by a trillion dollars during the past two years.
American factory capacity can’t begin to meet the demand created by about $5 trillion of consumer stimulus, and American consumers turned to China’s robust supply chain for consumer electronics and just about everything else.
The United States needs Chinese imports, and it also needs China to reinvest its export earnings in American capital markets, as I argued in Asia Times last month (“The Enduring Triumph of Chimerica,” June 15, 2021.
America’s dependence on Chinese imports is stunning. Americans spend about $2 trillion a year on consumer durables and $500 billion on apparel, so their imports from China account for roughly a fifth of total spending on these items.
The Biden administration is attempting the fiscal equivalent of sucking a golf ball through a garden hose. There simply isn’t enough production capacity to meet the demand, and American industries show scant interest in adding to it.
America invests about as much in manufacturing as it did in 1996 after inflation, and America simply can’t meet the demand. CapEx for the industrials sub-index of the S&P 500 is expected to languish at 30% below the 2019 level (“US quits capex as inflation squeezes margins,” July 24, 2021).
The outcome is the worst durable goods inflation on record. During the past three months, the annualized rate of change of the durable goods component of the Consumer Price Index (CPI) spiked to around 50%.....
*Our boilerplate mini-bio on Goldman:
...The author of this piece, David Goldman, is Deputy Editor (Business) at Asia Times.
Prior to taking that position he was:
- Global head of credit strategy at Credit Suisse
- Global Head of Fixed Income Research for Bank of America
- Global Head of Fixed Income Research at Cantor Fitzgerald
In addition to apparently not being able to hold onto a job I think one of his requirements for moving on was a "Global Head" title. (JK, young Master. G.)
