Wednesday, March 20, 2013

China's rise: harming our interests?

On Sunday, an article from Yahoo! asserted that China has replaced Britain in the world's top five arms exporters. With coverage from Reuters, China has become the world's fifth-largest arms exporter... its highest ranking since the Cold War, with Pakistan the main recipient. It is no question that China is a rising economic powerhouse, owning much of the U.S debt, but many argue that China's economic rise harms the United States' interests.


 Peter Navarro of UC Irvine cites three reasons for lower prices of manufacturing in China: cheaper labor, an undervalued currency, and export subsidies from the chinese government. Each can be attributed to China’s rise because the rise allows China to tap into cheap labor with better infrastructure, provides the government with enough power to manipulate its currency and enough money to subsidize exports. Cheaper manufacturing in China actually has several empirically proven benefits to the U.S, economically. First, it lowers the cost of living. According to data from the US census bureau and Christian Broda of the University of Chicago, Chinese imports have decreased the price index of goods by over 3 percent since 2000.
Based on data from the Bureau of Labor statistics, this saves the average American household 1,491 dollars per year.Broda finds that chinese imports disproportionately effect poorer Americans and have directly led to a decrease in inflation relative to wealthy people of 6 percent.This lower cost of living allows Americans to better sustain themselves, promoting their interests.

Furthermore, China's rise has stimulated American job growth. According to the San Francisco federal reserve, 55% of the retail revenue of Chinese made goods actually goes to pay for services in the united states, creating American jobs. In comparison, only 36% of revenues from non-Chinese imports go to Americans. Thus, Chinese imports stimulate the economy more than other countries imports. Trade Partnership Worldwide furthers, “Eight U.S. jobs owe their existence to imports from China for every one that is “lost.” They explain that U.S. jobs are added to support the increased amount of products, transportation of those products, and profits from those products. Derek Scissors of the  Heritage Foundation in 2012 explains The difference between the final price of goods to American consumers and the much lower value of those goods when they first entered U.S. territory is the .... value added by American labor during this process”

While we blame the Chinese for many of our problems (maybe unfairly?), China is actually benefiting our recovering economy. Why do we tend to blame our problems on other countries, despite their efforts to help us stay afloat? Please share your thoughts below.

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