China Supplies, We Demand

As has been said here before, the destiny of the United States, due to our appetite for cheap goods and debt, is being placed in the hands of foreign countries.  With Secretary of State Hillary Clinton’s recent trip to China, it becomes even more clear that the balance of power is shifting more and more towards China.  According to Mrs. Clinton:

“I certainly do think that the Chinese government and central bank are making a smart decision by continuing to invest in Treasury bonds,” she said during an interview Sunday with the popular talk show “One on One.”"It’s a safe investment. The United States has a well-deserved financial reputation.”

“Our economies are so intertwined, the Chinese know that to start exporting again to their biggest market, namely the United States, the United States has to take some very drastic measures with this stimulus package, which means we have to incur more debt.”

More and more it is starting to sound like the United States is a drug user and China is our supplier. The recent stimulus bill, which is now law, forced the U.S. to take on more debt which will be issued in the form of bonds and securities.  China is the main buyer of this type of debt.  Should China balk at buying more U.S. debt there will be severe repercussions both of the U.S. and for China.  In essence, China currently has little choice but to buy more U.S. debt as they need our market because U.S. imports of Chinese products have nearly tripled since 2000, according to the Commerce Department.

Because the U.S. needs China to buy our debt so much, other issues like Chinese human rights will go to the back burner.  This has alarmed supporters of human rights.  They better get used to it because as the main buyer of debt, President Obama cannot do anything to cause a slowdown in Chinese debt purchases.  In fact, it is clear from the tone of Mrs. Clinton’s visit that the power has already shifted in the U.S.-Chinese relationship:

Mrs Clinton landed in Beijing from South Korea, where she lashed out at the North Korean “tyranny” of its leader Kim Jong-il.

But in contrast she offered a conciliatory hand of friendship to Mr Kim’s ally China, contradicting hostile policies both she and President Barack Obama promised during their presidential campaigns last year.

She said she would continue to press China on issues such as human rights and Tibet, but added: “Our pressing on those issues can’t interfere on the global economic crisis, the global climate change crisis and the security crisis.”

It is not just human rights concerns that will be tabled by the U.S. but the issue of “greenhouse gases” will also be set aside.  China has made few efforts to curb emissions of gases that many Democrats say cause “Global Warming.”  Even as President Barack Obama seeks to regulate these gases it is doubtful that he will meet with any success in persuading China to do the same.  It was this very issue that killed the Kyoto Protocols under President Bill Clinton.   What this means, in the larger scope, is that U.S. industry will end up paying taxes based on how much CO2 they emit but Chinese companies won’t, placing the U.S. at a disadvantage.  This is happening because the amount of U.S. debt that China owns, and the importance of that country to continue to buy debt overshadows any sort of political agenda President Obama may want to further.  After all, you cannot anger your drug dealer.

This growing  coziness with China concerns Japan, formerly the largest holder of U.S. debt (which has now been surpassed by China):

Some Japanese officials are uneasy at the growing rapport with Tokyo’s old rival China, while even Washington’s stance on Pyongyang has recently sounded more conciliatory than either Japan’s or South Korea’s.

China needs, at least for now, to continue to buy U.S. debt in order for the U.S. to continue to buy their goods.  In 2007, for example the U.S. imported $321.5 billion worth of products from China.  Since the American economy has slipped into recession Chinese exports have slipped 32.3% from a year ago and idled many factories, raising unemployment in China.  The stimulus bill signed into law by President Obama is supposed to allow U.S. consumers to once again start spending their money.  If historical trends hold true, this spending will really mean a continuation of wealth transfer from the U.S. to China, putting the United State even further into the economic debt hole.

What is most interesting is that, whilst campaigning for president, Barack Obama said:

We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times… and then just expect that other countries are going to say OK. That’s not leadership. That’s not going to happen.

What’s so ironic is that, once he became president, that’s exactly what he did by signing the stimulus bill into law.  I wonder what Democratic activists will do as the Obama administration continues to look past core Liberal issues like “Global Warming” and human rights so that China will continue to allow U.S. consumers to spend as if there is no tomorrow.

One day, tomorrow will come and what will we do then?

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