----- Original Message ----- From: "Martin Hart-Landsberg" <[EMAIL PROTECTED]>
Interesting discussion. I guess the question for me is what is at stake in this dance between Chinese and U.S. leaders?. Let us assume that the Chinese can in fact move in and out of the bond market to give the U.S. a bit of shock treatment. Given their development model what do you think that they might use their power to achieve. Will they just demand that the U.S. drop its objections to their dollar peg? And thus the export-import connection continues further? Or said differently, what U.S. policies are now potentially undermined by this new financial power and in what ways does that change the political/economic terrain? Marty ----- I'll wager a trio of guesses: 1) The $ peg must end soon per WTO obligations so China can ignore US whining until that day. That piece of the discussion has left out the fact that while China runs a trade surplus with the US, it is running a trade deficit in toto, which must compound the policy modeling for all the players paying attention to worst-case scenarios. The question of the how much of a trade deficit would there be if all the exports from US firms/subcontracotrs in China switched ledger places on the accounting books would be an interesting exercise in debunking and swith attention back to the problems of MNC's and their ability to manipulate State policies, giving a toehold for breaking up the Realist-cum-State centric storytelling still in vogue with all it's attendant problems for conflict escalation. 2) China can tell the US to back off on Intellectual Property enforcement issues for a decade and calls from the AFL-CIO for independent trade union rights. They also have greater bargaining chips when it comes to the transfer of hi-tech know-how which are deemed national [in]security sensitive in the US. 3) China can effectively block the sale of weaponry to Taiwan, clearing the way for further economic integration so that Taiwan is just an eventual Hong Kong type handover on a larger scale/slower timetable. This will hurt quite a few US firms wanting to make sales who've been lobbying Congress and the White House since Dubya and his pack of nihilists took hold of the State in 2000. Also, see the piece below on China and Iran: http://www.washingtonpost.com/wp-dyn/articles/A55414-2004Nov16.html Iran's New Alliance With China Could Cost U.S. Leverage By Robin Wright Washington Post Staff Writer Wednesday, November 17, 2004; Page A21 TEHRAN -- A major new alliance is emerging between Iran and China that threatens to undermine U.S. ability to pressure Tehran on its nuclear program, support for extremist groups and refusal to back Arab-Israeli peace efforts. The relationship has grown out of China's soaring energy needs -- crude oil imports surged nearly 40 percent in the first eight months of this year, according to state media -- and Iran's growing appetite for consumer goods for a population that has doubled since the 1979 revolution, Iranian officials and analysts say. An oil exporter until 1993, China now produces only for domestic use. Its proven oil reserves could be depleted in 14 years, oil analysts say, so the country is aggressively trying to secure future suppliers. Iran is now China's second-largest source of imported oil. The economic ties between two of Asia's oldest civilizations, which were both stops on the ancient Silk Road trade route, have broad political implications. Holding a veto at the U.N. Security Council, China has become the key obstacle to putting international pressure on Iran. During a visit to Tehran this month, Foreign Minister Li Zhaoxing signaled that China did not want the Bush administration to press the council to debate Iran's nuclear program. U.S. officials have expressed fear that China's veto power could make Iran more stubborn in the face of U.S. pressure. The burgeoning relationship is reflected in two huge new oil and gas deals between the two countries that will deepen the relationship for at least the next 25 years, analysts here say. Last month, the two countries signed a preliminary accord worth $70 billion to $100 billion by which China will purchase Iranian oil and gas and help develop Iran's Yadavaran oil field, near the Iraqi border. Earlier this year, China agreed to buy $20 billion in liquefied natural gas from Iran over a quarter-century. Iran wants trade to grow even further. "Japan is our number one energy importer for historical reasons . . . but we would like to give preference to exports to China," Iranian Oil Minister Bijan Zanganeh said this month, according to China Business Weekly. In turn, China has become a major exporter of manufactured goods to Iran, including computer systems, household appliances and cars. "We mutually complement each other. They have industry and we have energy resources," said Ali Akbar Salehi, Iran's former representative to the International Atomic Energy Agency. China's trade with Iran is weakening the impact on Iranian policy of various U.S. economic embargoes, analysts here say. "Sanctions are not effective nowadays because we have many options in secondary markets, like China," said Hossein Shariatmadari, a leading conservative theorist and editor of the Kayhan newspapers. Accurate trade figures are difficult to get, in part because trade is increasing so rapidly and partly because China's large arms sales to Iran are not included or publicized. But at the second annual Iran-China trade fair here in May, Chinese Vice Minister of Commerce Gao Hucheng said trade had increased by 50 percent in 2003 over the previous year, according to the Islamic Republic News Agency. Beijing has also provided Iran with advanced military technology, including missile technology, U.S. officials say. In April, the Bush administration imposed sanctions on Chinese manufacturers of equipment that can be used to develop weapons of mass destruction. The Iran-China ties may be partly a response to the United States, analysts here say. President Bush's strategy has been to contain both China and the Islamic republic, said Siamak Namazi, a political and economic analyst, "so that's created natural allies." The growing presence of U.S. and other Western troops in Central and South Asia and the Middle East is another joint concern. In the English-language Kayhan International, Ali Sabzevari wrote in an editorial: "Politically, the two countries share a common interest in checking the inroads being made by NATO in Asia. . . . The presence of outsiders does not bode well for peace and security." The countries also share concerns over radical Sunni Muslims. Most Iranians follow the rival Shiite strain of Islam; China has more than 20 million Muslims, and the government has been facing Muslim unrest in some of its western cities. The dissidents receive support from Islamic groups in Afghanistan and the countries of former Soviet Central Asia -- the region that straddles both Iran and China. Islam has historically been a link between the two civilizations. It made its way to China via Persia, the ancient state that was based in present-day Iran, Iranians note. Many Chinese Muslims pray in Persian, not Arabic. Their everyday language is Turkic, but their alphabet is Persian. But in recent times, ties between China and Iran have not always prospered. In the midst of the unrest that led to Iran's revolution, one of the last foreign leaders to visit Shah Mohammed Reza Pahlavi before he was overthrown in 1979 was Chinese Communist Party chief Hua Kuo-feng. "The visit left a very strong negative feeling about China among Iranians," said Abbas Maleki, director of the Caspian Institute, a Tehran research organization. But today, China with its one-party political system appears to feel fewer restraints than do Western nations in dealing with the world's only theocracy. "For China, issues like human rights don't affect your relations with Iran," Namazi said.
