Ok, so it’s pretty common knowledge that China holds alot of US treasury bonds and that it’s ownership has increased in the past decade, which got me thinking, since China exports alot of products to the US market, whilst not importing an equal amount in return, just US debt, is China knowingly pursuing a Mercantilist policy against the US?
I remember reading one of my history books about economics and how Ming China (One of the dynasties, I forget) in the 17th or 18th Century, was the largest economy in the world, had alot of Silver hoarded up due to trade in Tea and Silk with the UK and France for example, however quickly over time, this surplus shrunk to a point where the UK and France were in a better position and ended up for a time, to dominate Chinas’ moribund economy and thus became the Worlds leading economies themselves because they had this economic mindset and China didn’t.
Now with that example in mind, I think in my opinion that China and some other developing states are or have been playing the same game with us with a modified version of Mercantilism. Is this the right assertion, or is it more complicated than that?
Yeah I guess so, but with the average Chinese citizen saving in order to provide for parents or family, and since China has a glut of savings from it’s citizens and debt from the US, it’s rolling in money with no products to spend domestically, a simplisitic view, I know it’s not as cut and dry as that, but that’s the general impression which leads me to think they’re practising that form of economic theory at the USs’ detriment.
their GDP per capita is still in the 4 digits. they’re not rolling around in dough, except for the dudes at the top. and since we don’t manufacture cheap, low-margin crap, instead focusing on highly expensive things, selling to the top of the heap in china isn’t really going to offset the amount of cheap, low-margin crap we buy from them.
but, i don’t think their economic policy is targeted for the US’ benefit, if you catch my drift.
Yes, they are. Just like Japan, South Korea, and the US in the period in which it experienced the greatest economic growth: the late 1800s and early 1900s.
The problem is what your mean by “mercantilism”. According to the actual theory of trade, centuries ago, international exchange was indeed a zero sum game, and so states should do all they can to encourage exports and discourage imports. That was the justification for border tariffs and domestic subsidies. And yes, that specific zero-sum theory is bunk.
That does not mean, however, that tariffs and other policies to discourage imports can’t be helpful for domestic growth. They absolutely can be helpful, given a lack of retaliation. But how, exactly, could we retaliate against China for deliberately undervaluing their currency? What kind of commercial sabre-rattling could we convincingly pull off? That sort of stern international policy just doesn’t seem to be the kind of thing that a conciliatory prez like Obama would be interested in pursuing.
And I thank God for it. China holds too many high cards and, though we might still hold trumps, creating a zero-sum state the old-fashioned way is MAD, in a Mutually-Assured Destruction way.