America’s dangerous dependency on China
We see a lot in the news about China having evolved from a weak and isolated third-world adversary of the United States during the Cold War. Its only strength was nuclear weaponry. The same was true of the old Soviet Union. The relationship with Beijing changed with what was called “the opening of China” during the Nixon administration.
China shifted away from its failed hardline and brutal communism to embrace many capitalistic policies. China prospered — proving again that free-market capitalism is by far the most beneficial economic model in history. Although the China version was not as politically free as we see in western nations.
Because of many years of suppressed wages, China entered the world of international trade and commerce with a huge advantage – cheap labor. Almost overnight, China became the go-to manufacturing center of the world.
Coincidentally, China’s relationship with the United States warmed significantly. If not a full ally, China had become a very friendly nation to the United States. Trade, tourism and student exchanges were almost – that’s almost – as comfortable as America’s relationships with our allied nations in Europe.
The flow of money into China enabled the nation to swiftly build the most successful economy in the world with the highest growth rate. That also enabled the Chinese to purchase critical natural resources from around the world. They were able to exceed the United States in the development of technology. They joined the space race. They became the Artificial Intelligence leader of the world. They built arguably the second most powerful multi-force military in the world.
Less recognized, China became the world banker – especially for the United States. As America relied on more and more debt to maintain the country’s voracious appetite for government benefits, China was covering more and more of that debt. It currently has more than 20 percent of the internationally held treasury bills, notes, and bonds.
Enter Xi Jinping.
Xi came to office as President of China much like Russia’s Vladimir Putin – with an aggressive ambition to dominate the world in business, military, and cultural influence. Also, like Putin, Xi has reversed the more democratic policies to establish himself as dictator-for-life. Unlike Putin – who presides over a bellicose third-world country – Xi has the levers of world leadership in almost every category.
Taking America’s business to China made a lot of sense in the 1980s, 1990s, and even into the first decade of the 21st Century. With the relationship with China chilling and becoming more adversarial, the reliance on China has become a serious threat to America’s world leadership – maybe an existential threat.
America cannot afford to fully respond to China’s aggression – whether it be in the South China Sea, with Taiwan or in China’s expansion of global influence. To put it simply, Uncle Sam is now too dependent on the whims of China to maintain world leadership. That is because we are no longer the world leader in many critical areas.
More than 20 years ago, I wrote an opinion piece based on my years of experience in dealing with China. In that commentary, I warned that unless the United States changes course, the 21st Century would belong to China. They had all the latent advantages – a growing industrial base (including many American factories), unlimited natural resources, cheap (hard working) labor, advanced technology, mountains of cash (including US dollars) and a huge domestic market to offer world exporters.
America has been proud of our high wages, but that is what sent all those manufacturers overseas. We bragged about having the highest paid auto workers in the world. Because of that, we lost dominance in the auto market. General Motors currently has 17 percent of the American auto market – Ford, 13 percent. Both are declining.
China has been using all those benefits strategically to its advantage. In many ways, they are using the American model of the mid-20th Century –using our economic and military might to force or buy our influence over foreign nations. It was sometimes characterized as the “ugly American” era. Today we have the “ugly Chinese” era – in which they are exerting or buying influence over nations in Africa and South America.
Today, the United States is seriously dependent on a nation that is increasingly adversarial to American interests. With Washington going bonkers with debt-financed spending, America needs China to service some of the debt. Next to the United States, China is the number one foreign holder of U.S. dollars.
Even worse, we have farmed out many of our essential industries to China. When the Covid Pandemic hit, America was short of critical supplies, such as N95 masks, hospital garb, and medical equipment. All being produced in China.
While Uncle Sam is pounding his symbolic chest over the development and distribution of the Covid vaccines, most of the ingredients necessary to produce them are sourced from China.
Because they are a big rich country now, the nations of the world are gradually shifting under the influence of China – doing business with China is not a priority.
If you want to see the negative impact of having so much of our manufacturing base in China, you just need to look at the supply-chain crisis that is encumbering imports of both retail goods and more critical supplies – and will not be solved for more than a year, if then. Theoretically, the clog in the supply chain would not even exist, if those goods parked offshore were produced in America.
All those ships anchored offshore with trillions of dollars of goods are there because we did not produce them in America. Minimally, we should have been more protective of essential goods. These shortages – along with reckless spending in Washington – are producing inflation in the United States.
The worst part of the situation is that it is not solvable in the short run – and maybe not solvable at all. It could get a lot worse if relations with China deteriorate. It is very arguable that the United States is now totally dependent on China for survival – and largely incapable of stopping the Middle Kingdom from being the most powerful and influential nation in the world – if they are not already.
So, there ‘tis.
This one might have a bit of spin on it Larry; by spin I mean your facts are correct, may have left a few out, yet it seems you may be “leading“ the reader in a certain direction: some unnecessary fear.
I believe the total foreign debt ownership is around 40%; therefore China’s 20% equals 8%. Still a big number. And honestly if it’s 20%, then they’ve been increasing in the last couple of years because it was 16% a few years back as they trimmed. The largest foreign owner of our debt is Japan, that seemed to work out. Other major owners include UK, and a few other mostly current, not past, friends. Like five at the top.
If memory serves me correctly, we, that is Social Security are one of the largest holders of our debt.
Regarding the boats; does it really matter that it’s China. Let’s face it, we cannot afford to pay these low labor rates as low as our minimum wage is. If it isn’t China it’s going to be some other country and we’re looking for low labor rates, chances are they’re not gonna be the friendliest.
Yes, China has a large army; by large I mean they have a lot of men. But in terms of equipment they are woefully underdeveloped. Planessuck, they got like one carrier to our dozen, and the list goes on. Yes they are a significant force, but they are nothing compared to us.
I do think we have a lot to fear from China as a competitor,. I also think on the financial issues, the banking issues, the money supply, etc. we need to be very wary.
But I do not think their foreign investment is going to force us to do their bidding nor do I think their military will compare to what we can do. They don’t spend anywhere the amounts we do. They don’t practice in real time situations like we do. Remember Larry, we own “death from above,“ and when push comes to shove we can pretty much bomb anyone back to the stone age in a week or two. It would take huge balls and one crazy brain to launch anything full scale against us.
So we can all do the dance, jockey around the table, they are a powerhouse, and so are we. Worthy of keeping an eye on, try to lead them to free market democracy and to embrace human rights, but I don’t think the sky is falling yet.
I think you are spinning this a little hard towards the fear factor. At least based on the numbers. Think we are still in trust but verify area not oh God the sky is falling
Let me put on my economist hat. I’m not real good at this but here goes… Generally speaking, Third World nations rise because of low labor rates and the ability to copy others in raw manufacturing. Japan became powerhouse by making things we invented after World War II culminating in the 80s. I remember being there, it was all so foreign. But as I was watched sumo croquet on TV, I noticed a man speaking Japanese apparently trying to convince the people to stop eating Doritos. At that point, I knew they had reached the next stage in economy moving from simple factory jobs to jobs requiring invention and creation.
I believe China will follow that path. We just need to start shipping Doritos over. You rightly noted how they are already moving into high-tech areas, sometimes with success. Sooner or later the people will go, fuck all this work for low pay, I want a few days off and some Doritos! And then we may need to really worry as they move more and more into the high-tech market. Same path as Japan, South Korea, and other Third World industrial nations.
OK, now my economist hat will be made of tinfoil! My feeling is that you don’t want to lower the water, we need to raise the bridge. That is, America needs to learn how to invent and create things like we used to produce cars off the Henry Ford factory line. Everything from pet rocks to interstellar spaceships. That’s a big thing to ask for from a country and culture that still wants to bring back Henry Ford. Perhaps the more modern Chinese version.. How do you create the environment where invention is the product that is as routine and as standard a process as pushing a car down the line. It would take an overhaul of everything from culture to education to even the concept of private industry itself. It is a tall order but that’s what I think the US needs to do to take our Economy to the next level. That’s where tomorrow’s profits lie. Otherwise, China, some other country or group of countries will be catching up to us.
How about them apples?
Yeah, SS is about 27% of the debt; we are are own biggest creditor.
The US is one of the largest food producers in the world, almost as big as China, with about a quarter of their population. Where does that extra food go? China!
Interdependency, by definition, is not a one-way street. We can produce anything that China does, just at a higher price. Most of their technology came from the US, and we still have the expertise. And truthfully, people buy a lot of things they don’t need, just because it’s so cheap. That could end, and most people would be perfectly fine. The biggest complaint I’ve heard about the shipping problems is that “people won’t be able to find XMAS gifts for their families”. Yes, it has a trickle-down effect to the US economy, but lack of Christmas gifts is not going to kill anybody, unless Aunt Sophie was planning to give you a heart-lung machine for your COVID. But hey, maybe she’ll drive you to get vaccinated instead, and save a lot of money to boot.
And we do protect our essential industries – all defense contractors, and any company that wants to keep their technology out of Chinese hands can get their goods manufactured here. It’s not a matter of not being able to get stuff, it’s just a matter of being able to sell it cheaper than the competitor. If everybody’s prices go up, you don’t really lose competitive advantage. The consumer buys less junk, pays a little more for important things, and the economy adjusts.
I work for a company that still has its own manufacturing floor, making industrial equipment. They buy some raw printed circuit boards from China, purely for price savings, but board and final product assembly is done here. In the end, the savings amounts to maybe 10% per unit, but they could just as easily buy boards made in the USA. None of their designs have turned up as Chinese knock-offs. Losing chinese manufacturing would raise the end cost by 10 or 15%, but other than some inflation and a temporary disruption in supplies, it’s just about the same effect as COVID – hurts the economy a little, but it will recover soon enough.
I’m not sure that China could turn on the food production like that. If they really wanted to disrupt supplies, people would start to starve, and that would be the end of the Communist Party. I don’t care how many soldiers they have – starving people have nothing to lose. And soldiers and their families have to eat too.
Words from a damned lying idiot. By the way, Florida has been proven to have less Covid cases. The governor there is doing a great job. I laugh when I read Frank and Joseph trying to seem intelligent when they don’t know their asses from their elbows.
Pick a statement and prove it’s a lie. It’s easy to sit there in your lazy-boy and criticize others…
Florida has been proven to have less (actually correct English is “fewer”) Covid cases THAN WHAT? The only thing the governor is doing a great job at is killing his supporters, and covering up the statistics. Florida is showing 0 deaths on a daily basis, and yet there are thousands of active cases. The only way for that to happen is for Florida to stop reporting. Yeah, then the statistics start to look better, but the people are still dying.
It does appear that for FL, death has literally dropped off the map. Especially when viewed against the number of cases they are still reporting. It’s spooky when you look at any other state in the union and the death rates they are showing. DeSantis did change how death is calculated in Florida, but it really doesn’t explain the disappearance of death in Florida while cases are so high. Against the rest of the nation, it’s an anomaly. It really stands out. Hopefully a miracle and whatever the census is doing, every other state copy.. Since he is doing nothing, I vote cover-up. However, no one has uncovered any foul play beyond his totally unscientific approach in opposition to the medical community approach yet.
I like the part where he’s offering a bounty for on backs to police to come and work in Florida. Just one pause to consider; is there so much crime in Florida that extra police are needed? Or, where have all the police gone? I think we can guess the answer and It sin attrition.
Florida did well in the first and second surge, however in the Delta surge Mr. DeSantis has failed miserably. FL is now the number three state in the nation for total number of cases. It is number 7 for cases per capita. The worse part is the nursing homes where it used to rule but today is number three in terms of death and at the very bottom of the pack for patient and staff vaccinations. Apparently, you reap what you sow.
The state cases and death rates come from CDC and verified through multiple other sources; the nursing home data is compiled by AARP and can be viewed on their dashboard. Use table form to see rankings.
Continue your spurious ad hominem attacks, I’m really not sure what you were saying regarding DeSantis’ record on COVID. If I lived there, I would be rioting. You seem to have a separate reality.
Living in NJ, part of the NYC epicenter, I watched as Florida surpassed all of our COVID records. It was sad. Sigh.
NJ? That explains a lot. What’s wrong with you Yankees? Must be something in the water. Word on the street is that NJ might have a Republican governor next year. Still too early for speculating. Cristy was great. But like conservatives, he got screwed over by crooked commiecrats I’ll just stay down here in Dixie. I love playing that song on my fiddle.
I do agree with all the ideas you have presented in your post. They’re really convincing and will definitely work. Still, the posts are too short for starters. Could you please extend them a bit from next time? Thanks for the post.
Makes good bathroom reading when Frank and Joseph send posts
Dan. And now you know why our posts are so long; you’re full of it and need extra time 🙂
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