Living with backlash

PUBLISHED : Wednesday, 22 October, 2003, 12:00am
UPDATED : Wednesday, 22 October, 2003, 12:00am

One night, more than 10 years ago, I bumped into a group of intoxicated sports fans coming out of a bar in Chicago 'Hey Chink, go home,' one yelled. 'You take our jobs.' As I walked away, I could hear the others laughing hysterically.

The incident occurred during the US economic recession, when China-bashing was all the rage. While Bill Clinton, then the presidential candidate, accused president George Bush senior of 'coddling' dictators in Beijing, other politicians blamed China for supplying the US market with products made by prison labour, and for the loss of US jobs. Many Chinese Americans like myself became the epitome of the evil place at which politicians were pointing their fingers. There were many cases of taunting and attacks on Chinese and other Asians.

Fast forward to today. Although the economy is emerging from a deep recession, unemployment is still at a nine-year high and consumer confidence is shaky. With a presidential election around the corner, politicians from both sides, eager to show they are sensitive to constituents' economic difficulties, are looking for scapegoats. China has become what one Hong Kong professor calls 'the whipping boy' for the US economy.

The latest round of China-bashing was triggered by a petition from the National Association of Manufacturers, a powerful industrial lobbying group. It claims the Chinese government is keeping the yuan artificially low to gain a competitive advantage over US companies. It is planning to file a complaint to the US trade representative, which could trigger tough penalties on Chinese imports.

Suddenly, the yuan, relatively unknown a few months ago in the US, is on everyone's lips. Its low value is being blamed for the huge US trade deficit with China and the loss of 2.7 million US manufacturing jobs.

Congress has responded quickly. US President George W. Bush has been urged to pressure China to revalue. Presidential hopefuls have seized the opportunity to attack Mr Bush's economic policy. 'Foreign currency manipulation is killing US manufacturing jobs,' said Senator Joseph Lieberman. 'Until the renminbi and other currencies are fairly valued, the haemorrhaging of America's manufacturing base will continue.'

If these remarks seem inflammatory, consider the comments of one conservative political columnist in the Southwest Farm Press, a Texas-based newspaper: 'The Chinese are eating our lunch, and they are eating it off cheap cotton cloth goods, with which they continue to flood our markets.'

Is China really responsible for taking lunches from Americans and causing their economic hardships? I am no economist, but recent talks with US-based economists and China experts have convinced me that the Chinese currency debate is over-exaggerated and misguided.

There is no doubt among experts that the Chinese currency is undervalued. This fixed exchange rate since 1994 has made Chinese exports cheaper, relatively, and has contributed to China's trade surplus with the US. However, one can also argue that the issue cuts both ways. American consumers have benefited from the affordable Chinese goods. With the huge foreign-exchange reserve derived from its trade with the US, China has purchased dollars and US Treasury bonds, which helps finance the US budget deficit and keep US interest rates low. At the same time, experts point out the decline in the US manufacturing sector is structural. As America moves to the post-industrial phase, growth and jobs are created in the service and hi-tech areas.

In other words, revaluating the yuan will not dramatically reduce the US trade deficit and bring back jobs to America. Instead, it could cause instability in China's economy, disrupting the very supply chain for US companies. Moreover, a higher-value yuan that makes Chinese good less competitive would leave the Chinese government with less money to buy US Treasury bonds. This could lead to higher interest rates, thus jeopardising US economic recovery.

So far, the voices of these experts have been drowned out by harsh rhetoric. In US politics, perception rules and truth often becomes obscured. It is not surprising that the complex issue of trade and unemployment has been reduced to a single factor or a sound bite.

In many ways, one has to acknowledge that China has become suited to the image of America's public enemy: people see it as a communist dictatorship. Many Americans still remember how Chinese troops cracked down on innocent students in Tiananmen Square. Moreover, Americans are constantly reminded of China's export prowess when they walk into any store. There have also been constant reports about Chinese companies violating World Trade Organisation rules.

I am not a supporter of the regime in China. I personally believe that many Chinese businesses are violating WTO rules and that the Chinese government is not doing enough to address the issue. However, China-bashing will not provide a miraculous cure for US domestic ailments.

Instead, it spawns unnecessary hostility towards China and instigates hatred and discrimination against the Chinese people and Chinese Americans. Also, past experience shows that politicians seldom follow through on their campaign rhetoric. While Mr Clinton accused his opponent of 'coddling' dictators in Beijing, he 'coddled' them even more during his presidency.

China-bashing distracts voters from the real issues, such as the failure of the Bush administration and Congress to invest in education and retraining of its workforce to make America more competitive; to reduce the burden of huge health-care expenses for employers; and - more importantly - to cut the tremendous cost of the war in Iraq.

In China, the government is unlikely to revalue its currency because of the serious ramifications it would have on its economy. As more signs emerge that trade with China will be an important campaign issue in next year's US election, the abrasive rhetoric towards China could escalate.

This could backfire and be counterproductive. China may respond in kind because President Hu Jintao faces pressure from the patriotic Chinese public to stand up to the 'US imperialists'. China-bashing will further fuel the anti-American sentiment, leading to tension in Sino-US relations. The fallout could jeopardise US efforts on fighting terrorism, the multilateral talks on the North Korean nuclear crisis, and productive Sino-US trade negotiations.

As for myself, I may try to avoid rowdy drunks. Perhaps I should wear a T-shirt with large letters saying: 'Made and bought in America.'

Wen Huang is a writer based in Chicago