Monday, August 15, 2005

The Chinese are Coming!

I didn't expect it to happen quite yet, but Chicken Little has made her presence known to a wondering and uncertain America. And her message is clear, "The Chinese are coming, and they're bringing down our market!"

At least that's what I get out of this BBC story from today. It's about Congressional testimony on the reason for the growing number of Chinese companies making bids on U.S. companies, and what the expected result these will have on the U.S. economy.

According to the chairman of the U.S.-China Economic and Security Review Commission (USCC), "I fear the Wall Street crowd that brought us the hi-tech bubble is now fast creating a new China bubble."

I can't say I specifically disagree with the guy on fundamentals; The Chinese economy, while representing enormous opportunity for U.S. private investment, and with great possibility for improved productive capacity (hence profits), is not anywhere near the same type of system as U.S., European, or "Asian Tiger" economies. The rule of law in China is haphazard at best, business accounting procedures are neither standardized nor compliant with U.S. accounting norms; and lastly, Chinese Banks carry a bad-debt load that look palatable only when compared with China's neighbor North Korea.

My problem with the statement made by the chair of the USCC is that he seems to be crossing his arguments. He's afraid of pouring U.S. stock market capital into the Chinese market, but he cites recent attempts by Chinese firms to buy out U.S. competitors as examples. Now, I'm no market expert, but it seems to me that what we've been witnessing in the past several months is an effort by the Chinese markets to infuse the U.S. markets with cash. That seems like something we want--I mean, either we have Chinese pumping money into our stock market and improving our economy, or we have them buying our government debt and encouraging a new generation of "Tax and spend" government. (Where have I heard that before?)

It also seems inconsistent for someone representing a politically conservative point of view, as the USCC's publications indicate it does, to be warning Americans of the potential evils of the market and stopping just short of recommending Congressional intervention in U.S. investment in China.

Why don't we see these types of recommendations coming from the President's council of Economic Advisers when considering the large and growing debt-burden the average American deals with. Why don't we hear these kinds of arguments when Congress is considering approving an increase in the Federal Debt limit of several hundred billion dollars?

It seems that USCC isn't trying to protect American interests vis a vis China. It looks much more like the chairman is trying to instill a fear of China in Washington's decision makers, without giving them adequate background or rationale to make their own decisions on the matter.

Who was it that wrote about governing through fear?

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