Although I have been here six years I am still sometimes surprised by the weird hypersensitivity shown by the Chinese towards anything that suggests foreign criticism. A number of research reports in the past year, for example, have argued that after years of exporting deflation, China may now be exporting inflation.This is really an economic matter that reflects rising prices in China, a rising local currency, and rapidly growing demand by Chinese businesses for commodities.Since inflation both in China and around the world seems to be rising, it probably should not be surprising that several of the world’s largest economies, including China, are likely to be contributing to this inflation. It may or may not be true, but its truth is an empirical matter and either way hardly represents “criticism” of China. Nonetheless many commentators in China are furious about the accusation and treat it as the equivalent of China’s being accused of human rights violations or imperialist tendencies.
Recently a magazine in the Republic of Korea published reports that China had become the primary source of price rises around the world, and a report by the central bank of Canada claimed that China's demand for petroleum and mineral resources would push prices up in the next few years. These set off an angry denial in today’s China Daily by a Chinese economist (“Price rise accusations have no foundation”) who says “These opinions are actually accusations that China is exporting inflation to other countries. This is not true and has been denied by the Chinese authorities time and time again.” He goes on the say “It is, therefore, especially important to analyze the validity of the accusations to see whether or not the rising prices of Chinese commodities in the domestic market have threatened the welfare of consumers in other countries.”
The article doesn’t make a lot of sense and consists largely of a bunch of unrelated statements, government projections and facts to conclude, in a style of argument one often sees here, that foreign accusations against China are unfounded.
As a matter of fact other countries should realize that the real reason for the intensifying inflation pressure is because of short-sighted trade protectionism. Trade protectionist campaigns of various countries keep low-priced Chinese commodities of reliable quality out of reach of their consumers, and raise their cost of living. As a reliable supplier of low-priced commodities to consumers around the world, China does not deserve any blame from other countries.
It is hard to imagine economists elsewhere in the world discussing the inflationary impact of their own economies on the world in such an aggrieved and defensive way.
Every notice how all these weird off-ball comments always get published in the China Daily and never in the People's Daily or Xinhua? It's not a paper known for the level of commentary.
The hypersensitivity has some historical roots, but I think it has been trending downward over the last several years.
I've noticed hypersensitivity too, among Chinese citizens defending Chinese policies that I wonder how much they really know about. But question (to be fair): Could there be 2 different issues here? Inflation related to labor costs (which cheaper Chinese labor would help push down no?) and inflation related to raw materials (which Chinese ever-growing demand would push higher yes?). One thought ...
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
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Comments (2) for "Hypersensitivity"
- 1/7/2008 3:34 PM
December, 2007