You know things are bad when Donald Trump is your only fan
Not too long ago, the Chinese stock market was booming and Alibaba’s Jack Ma was on the cover of every magazine. Now it’s back to the “China is a house of cards” scenario. And the country’s leaders, as the economist Paul Krugman put it, are “clueless.”
Donald Trump begs to differ, however. This billionaire US presidential candidate believes China is one of the best-run countries in the world.
In his view, the Chinese are smart - the real idiots are American politicians who handed jobs and technology to the country on a silver platter.
Among the smart things China’s leaders have done? “They’ve been devaluing the currency for years,” Trump barked last week in an interview with Fox News anchor Bill O’Reilly, apparently unaware that the renminbi has in fact been appreciating for a decade, and in the past year, as the yen and euro collapsed, has been on one of the best-performing currencies on a real trade-weighted basis.
O’Reilly went on to ask Trump whether President Barack Obama was kowtowing to China by inviting “Xi Jinpang [sic]” to visit the United States, and treating him to a state dinner at the White House.
Trump took the bait, answering that if he were resident at the White House, President Xi Jinping would only get a McDonald’s hamburger. He softened his position slightly in the course of the interview – upgrading the meal to a “double-sized Big Mac.”
As Trump is front-runner among the Republican candidates, he is putting pressure on those trailing him to join in on the China-bashing.
Why would we be giving one of our highest things a president can do -- and that is a state dinner for Xi Jinping, the head of China -- at a time when all of these problems are pending out there?" Scott Walker asked. "Those honours should only be bestowed upon leaders and countries that are allies and supporters of the United States, not just for China, which is a strategic competitor."
Reading statements like these, one can almost visualize the flashcards the Wisconsin governor’s foreign policy advisers are drilling him with on the campaign bus.
“Xi Jinping = the head of China.”
“China = a strategic competitor”
Keep in mind that we are early in the presidential election cycle, so the field is still very wide - there’s even a teenager named “Deez Nutz” who is polling well. It would be premature to fear any of these clowns will actually end up leading the world’s most powerful country.
And to be fair, presidential candidates are not the only Americans who have gone extremist on China.
Media outlets, economists, financial analysts, and opinion-makers have all discovered their inner China bears.
At The New York Times, nearly every single one of the regular columnists have rolled out a China-bashing opinion piece, and long-time China bears have been dusted off and featured in glowing articles about their prescience.
Krugman, in the column where he called China’s leaders “clueless,” also reduced the country’s notable economic achievements of the past 30 years to a simple case of “surplus labour” - that is now running out.
By this thinking any poor country with a 25 per cent unemployment rate – and there are plenty - should be the next boom economy.
No doubt China’s large supply of cheap workers was a huge incentive for overseas investors to shift production to the country. But low-cost labour is not a unique characteristic in this world. There are other developing countries with large populations that don’t pull it together –too much corruption, too dangerous, too little infrastructure, or too little investment in the basic education and literacy of the workforce.
Perhaps Krugman should recall something he once wrote upon hearing a group of fund managers pan Japan during a bear market. Everyone in the room harped in unison that Japanese companies were “uncompetitive” and “atrociously managed” – yet only a couple years earlier, Krugman noted, the country’s management techniques were the subject of hundreds of adulatory books and articles.
“They were never really that good,” Krugman wrote, “but surely they are better than their current reputation.”
That motto might well apply to China at this time.
Cathy Holcombe is a Hong Kong-based financial writer