Transcript US-Chinese Relationsx

US-China Relations
Objectives
 Review China’s economic transformation & growth.
 Identify & describe key issues in US-Chinese
relations.
 Deconstruct the “currency war”
 Evaluate speeches to determine how perspective
influences policy.
Warm Up
 How did a subprime
mortgage crisis lead to
a downturn in the
global economy?
 Lending houses bundled
mortgage-backed securities &
lost $ with high foreclosures
 Credit-default swaps by AIG
insurers threatened massive
losses
 Collapse of Bear Sterns &
Lehman Bros led to global
market panic & credit crunch
Cartoon Review
 Economies are so interconnected that failure of
bullish US economy led to a series of global events.
 US economy has the power to destroy the entire
global economy.
 With collapse of US economy, China remains as
leading power. Global panic when their market
shows slight weakness.
 In the end, the US public will pay for Wall St errors
in one way or another (higher taxes, or increased
price consumer goods)
China’s Economic Rise
 Mao Zedong
 Impact Rapid Growth
Command econ
Collective farming
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 Deng Xiaoping (1978)
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Decollectivization farms
Lifted price controls
Allowed private enterprise
Opened foreign investment
Privatized industry
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Socialist or free-market?
Unemployment issues
Environmental impact
Pollution
Population growth
Govt corruption
Free thought
Rural-Urban divide
Rise crime
Inflation
US-China Relations
Term
Budget Deficit
Trade Imbalance
Tariff
WTO
Intellectual Property Laws
Recall
Brief Definition
Significance
US-China Relations
Term
Brief Definition
Significance
Budget Deficit
US govt spends > earns,
borrow $ to fund spending
China funding up to 10% US
debt…undue influence
Trade Imbalance
US buys more goods than it
sells to China
US pushing China to change
policies to close gap
Tariff
Tax on imports
US free trade, China
protectionist
WTO
Governs global trade
Both benefit from drawing
China into internatl system,
both critical of others
practices
Intellectual Property Laws
Protect rights of businesses
over their creations
China pirates US music, film,
and software products
Recall
Remove dangerous products
from shelves
Lack oversight & safety in
Chinese manufacturing put
Americans at risk (toys, pet
food, medicines)
Currency Wars
 Currency Wars Explained
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During recession a weak currency can stimulate econ growth
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Weak currency = cheaper exports = lower prices to consumers =
increased demand = more jobs = more income = economic recovery
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Chinese Govt “pegs” currency– sets fixed exchange rate (rate at
which bought/sold on foreign exchange markets)
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Currently no demand for RNB/Yuan = weak value = cheaper goods
US Govt wants China to “float” RMB – allow rate to be determined
on open market through supply & demand
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Stable econ = high demand = increase value = Chinese goods more
expensive = US goods more attractive on global market = smaller
trade deficit.
Currency Wars
 Currency Wars Continued
 When one nation devalues its currency, other countries
reciprocate to maintain competition & economic growth
Lower interest rates (US already at nearly 0%)
 Buy assets from other nations (China buys our debt)
 Greater demand for $ = $ value rises = local currency more
competitive
 Puts more Yuan in circulation = keeps value down
 Increase money supply (“Quantitative Easing”)
 Put more money in circulation by buying back its own bonds
 Supply exceeds demand = value drops = weaker currency
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Currency Wars
 Currency Wars Continued
 Problems:
Makes global market unstable
 Discourage investment & trade = slows global economic growth
 Increases inflation
 More $ in circulation decreases value = buys less than it used to
= prices of goods rise.
 Decreased purchasing power, tapped out savings, no growth =
recession/depression.
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Activity – Understanding Perspective
Watch-
 In groups of 3 or 4: read
the 2 speeches & answer
the questions that follow.
 http://www.choices.edu/resourc
es/scholarsonline/erickson/ae4.
php
 How does each side describe
 http://www.choices.edu/resourc
es/scholarsonline/erickson/ae2.
php
 http://www.choices.edu/resourc
es/scholarsonline/erickson/ae3.
php
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conflicts or areas of
cooperation?
What issues seem to be most
important to each side?
Why might the two sides convey
a different tone?
Is one side more right than the
other?
How might different
perspectives & communication
styles impact US-China
relations?
Closure
 Can you think of other areas over which the US &
China disagree?
 Taiwan
 Tibet
 Human Rights
 Military modernization (nuclear) & arms markets
 North Korea
 Role of UN Security Council (diplomatic vs.
economic/military sanctions & intervention)