China Wags its Finger at the US on the Management of its Economy

And After Further Review, the Chinese Appear to be Correct on This One.


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Chinese officials today are gaining high levels of self confidence and are regularly breaking tradition by criticizing the US and its mis-management of the American economy.

The Chinese economy has continued to grow by leaps and bounds while the US economy has basically been heading in the other direction. With the Summer Olympics on the horizon in China, the Chinese are now showing a serious level of influence in the world and they seem to not be intimidated by the recent scolding they received from the US on the managing of their economy. While being told by American diplomatic officials that "their economy should look more like the US", they have responded saying that the Chinese style of economic management, "serves developing countries better than an American model". They went on with outward verbal expressions, accusing the Americans of hypocrisy on the economy as they have felt that the Bush Administration has shown poor leadership, both political and militarily, regarding the occupation of Iraq and the mis-handling of Afghanistan. They also feel that their response to the recent major earthquake in a remote Chinese province was handled in a far superior fashion when compared to the Bush Administration's response to Hurricane Katrina.

Even high-level American banking regulators seem to agree with the Chinese and one US banking official recently blamed Washington for having a "warped concept of market regulation for the subprime mortgage mess that is having a major negative effect on the world economy". Even the World Trade Organization (WTO) has called upon the United States to halt the dollar's depreciation before the effect on the soaring world oil and food prices takes on a life of its own.

In recent meetings between US treasury officials and Chinese government officials, the Chinese essentially "blew off" a list of US demands that the Chinese "police their on-going theft of US copyrights and patents and regarding American's concern over the safety of the food and drugs that China exports". They also politely told the US officials to "mind their own house" when the US asked the Chinese to use their regulations for favoring domestic companies over foreign competitors.

Professor of Economics, Joseph Stiglitz, of Columbia University, agrees that the "US credibility and the credibility of US financial markets is zero everywhere in the world." He praises the Chinese economic management while blasting the Bush Administration's lack of being able to manage the nation's economic risk issues.

The Chinese attitude toward the US has moved to a more aggressive position and they are now expressing their "distain" of the US with other nations around the world.

In a recent lecture to the British last month by the Chairman of the China Regulatory Commission, Liu Mingkang, blamed the "US government for the subprime mortgage crisis that came close to freezing Western debt markets and that had required extensive intervention by the Federal Reserve." He went on to say; "Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?" Mr. B. Liao, Director General of the China Commission also stated, "In practice, they [the Americans] tend to overestimate the power of the market while overlooking the regulatory role of the government. This warped conception is at the root of the subprime crisis."

Unfortunately, China's rise on the world wide stage has also allowed their economic success to somewhat over shadow the the world's criticism of China's occupation and their handling of Tibet.

Even though thousands of Americans have asked President Bush to boycott the opening of the Summer Olympics as a protest regarding Tibet, (which a number of countries are expected to do), Deputy US Assistant Secretary of State Thomas Christensen, recently said the United States is not threatening a boycott of the (opening of the) Summer Olympics. When asked at a congressional advisory panel hearing how rioting in Tibet would affect the games, he stated; "The Summer Olympics is an opportunity for China to put its best face forward and show progress to the world on human rights and other matters", he said. "To be successful, they're going to have to address some of these issues while the world is watching China. And the world will be watching China."
Speaking before the U.S.-China Economic and Security Review Commission, the Deputy Assistant urged China to address the Tibetans' "long-standing grievances" and to hold direct talks with the Dalai Lama, Tibet's exiled spiritual leader. Christensen's comments came as the fiercest anti-China protests in Tibet in almost two decades were attracting international scrutiny of China.

Beijing has continued to ignore these comments and still vows to protect its claimed territory of Tibet. It will be interesting to see how China handles the Tibet situation during the Summer Olympics as the world will truly be watching and most democratic nations are expected to continuing having disparaging comments about China's handling of the Tibetan situation. This is expected to occur, regardless of the anticipated outstanding performance and handling of the Olympics that is expected from the Chinese government.

Even though China is having its own problems with its economic issues, such as high inflation and the high costs of its growing demand for energy resources, they are still very optimistic.

Many economists say that China has vastly improved its state-owned banking system by writing off bad debt and overhauling its management systems. It still however, continues to reject pressure from the US to privatize its banks for open competition. (One could surmise that after seeing what happened with the US subprime mess, the Chinese will probably keep their state-owned systems for years to come.) The Chinese financial system is tightly managed by the government and is much more stable than the American system. (Less dynamic, but more stable.)

As China has become more outspoken and is adverse to international criticism of their economic system, many economist say that that the Chinese are justified in having a negative reaction to those that criticize their approach for managing their economy. Had they followed the US economic methods over the past 3 decades, their progress would have been been much further behind than they are today. Per a Chinese banking diplomat, "American systems take too long to make key decisions and the time required for implementation by a democratic process does not allow for a quick response to important issues."

The situation in China is looking very good for them today. However, just as it happened with the Japanese, when they questioned the American economic management in the 1980's, and then fell into recession and economic stagnation, the same thing could happen in China's future. On the other hand, China and Japan are difficult to compare and the US is no longer in its strong, number one position as it was back in the 1980's. Now, only time will tell.