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COURTSHIP AND CENSURE IN US'S CHINA POLICY

Benjamin A Shobert

Asia Times, December 15, 2009

To turn a phrase that is often used by US policymakers about China, it seems that with respect to the question of how to best invest China's newfound savings, the US could have done a better job as the "responsible stakeholder". It was the choice of the US government to design public policy in such a way that new home ownership programs could be supported with low interest rates, just as it was the choice of consumers to view inexpensive capital as a right, not a privilege, and one that could go away if not used properly.

In both cases - the government and consumers - other options for using this pool of Chinese capital existed. Inexpensive capital could have fostered much-needed investments in infrastructure and education. Testifying to the USCC, Robert Skidelsky, an economist, stated, "It is one thing to borrow from abroad for investment, a different matter to borrow for consumption, since this does not create assets which can service the debt."

The 2009 USCC report does attempt to represent both sides to this question, but the overarching storyline that predominates is that, at a minimum, China has some blame in the US's economic situation and that, at worst, its policies were contributing causes to the US's fall. This is very troubling as the report serves to educate many in congress about the role of China's policies and practices within the US. To the extent the report distracts American politicians from a single-minded focus on what the US can control, and what it must do differently, it is unlikely to create meaningful change or have a lasting impact.

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