The World Economy: “Made in China”

My latest article for the Odyssey Online at UMass Amherst. #china #tpp #trade

July 27, 2015

by: Jordan Deschenes

Although the communist nation has been excluded from the Trans-Pacific Partnership, the People’s Republic of China has had other plans to fortify its place in the international economy.

China is the championing mercantilist in the international community. The nation has a population of over 1.3 billion and is also in close proximity to seven of the fifteen most-populated nations in the world.

China is – and always has been – a “global” nation; however, it comes as no surprise that it has been excluded from the Trans-Pacific Partnership. The proposed free trade agreement – drafted in 2005 – has been well a major catalyst for increased development in the People’s Republic (PROC) over the past decade.

For almost everyone around the world, the TPP seems to have sprung up out of nowhere. In fact, the agreement was drafted in 2005 by only four countries, the US wasn’t included until 2008.

In addition to maintaining trade with the West, China has also been bolstering its economic presence throughout Eastern Asia. Just in the past decade the PROC has made extraordinary changes, most notably the ushering of over 250 million citizens into major cities.

Since 2000, state infrastructure construction has required the demolition traditional two-floor siheyuan courtyard-houses to make way for cost-efficient high rises. The government usually gives residents a monetary incentive to move into the city.

The PROC’s relationship with neighboring nations such as Russia, Kazakhstan, and Mongolia has recently improved with the implementation of the Silk Road Economic Belt in the northwest Xinjiang province. The region is home to a minority Muslim population of Uighurs, an ethnic group historically rooted in the area.

Xinjiang officials hope to strengthen China’s oil and gas imports through the Silk Road, where trade has been booming since the early 2000s. China produces little to no oil and is still reliant on coal.

Like the US, China exports (and keeps for itself) a plethora of stuff that developed nations “need” to make a living. In conjunction with Russia, the PROC stabilizes the entire East-Asian economy – all while balancing a trading partnership to mass-supply “everyday” products to the West.

For the U.S. and, to a lesser degree, the rest of the Americas, the products of Chinese manufacturing are at our fingers – they light our homes, ease our communication, clothe our bodies, and occupy our time into the night.

Global iPhone and Android sales totaled to over 1.2 billion last year, with China overtaking the US as the biggest buyer of the product it manufactures, as of Q2 this year. Relative to what Americans pay for the devices, Chinese consumers are actually paying more. In fact, this financial strategy keeps the Chinese economy internationally attractive.

In the U.S, private banks are struggling to cover the billions owed to them by nations around the world. This isn’t a problem for China, which holds over 1.3 trillion dollars of US debt, and still owes the US roughly the same amount.

As a large holder of US debt – specifically in Treasury bonds, notes, and bills – the PROC is able to manipulate its own currency, the Yuan, if the Dollar’s value drops. When this happens, China just buys more US bonds – thereby increasing the US demand for the dollar.

The U.S’s dependence on the Chinese economy has become a point of leverage for the PROC, and the West has noticed. Recent military developments on disputed islands in the South China Sea and a strengthened tie with Russia have been seen as a threat to the US.

President Obama’s historic visit to Vietnam, also a TPP member, last month included talk of China – without specifically mentioning it. Obama and Vietnamese President Nguyen Phu Trong discussed China’s military activity, referring to it as “East Sea developments.”

The TPP has only further aggravated a growing economic tension between China and the US. The problem has become so severe, that it’s incorporated military aspect as well. The TPP has a similar air to the North Atlantic Free Trade Agreement, which was responsible for the exploitation of Mexico’s workforce and the crippling of the value of the peso.

China knows that it can handle itself without the TPP, and so does the rest of the world.


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Filed under Historical Context, Journalism, Observation, The Odyssey at UMass Amherst

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