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					To analyse implications of changes in China’s trade with the USA




                                                   1999              2008
Chinese exports to the USA                        $82bn             $338bn


                          [Source: The US-China Business Council]
To analyse implications of changes in China’s trade with the USA




                                                   1999              2008
Chinese exports to the USA                        $82bn             $338bn


                          [Source: The US-China Business Council]




                     What questions do you want to ask?
To analyse implications of changes in China’s trade with the USA




                                                   1999              2008
Chinese exports to the USA                        $82bn             $338bn


                          [Source: The US-China Business Council]


                       What questions do you want to ask?

                       What calculations should you make?
To analyse implications of changes in China’s trade with the USA




                                                   1999                     2008
Chinese exports to the USA                        $82bn                $338bn


                          [Source: The US-China Business Council]


 What questions do you want to ask?                        N-O      x100%
                                                            O
  What calculations should you make?
To analyse implications of changes in China’s trade with the USA




                                                   1999               2008
Chinese exports to the USA                        $82bn              $338bn
                                                 338-82 x100%       312% increase
             % change                              82



                          [Source: The US-China Business Council]


                       What questions do you want to ask?
                        What calculations should you make?
                 How might an economist try and explain this?
To analyse implications of changes in China’s trade with the USA


          The Asian Growth Model
Features of the Asian thrift economies
• comparative advantage in low-value manufacturing
• export-led growth  X → ↑AD
To analyse implications of changes in China’s trade with the USA


          The Asian Growth Model
Features of the Asian thrift economies
• comparative advantage in low-value manufacturing
• export-led growth  X → ↑AD



Features of the Asian thrift economies
• high savings ratio S → I → ↑AD
• poverty reduction [600m + people lifted out of poverty in
  China in the last 30 years but US GDP per capita still 20
  x greater than China’s in 2001] ↑C → ↑AD
To analyse implications of changes in China’s trade with the USA




                                                  1999               2008
Chinese exports to the USA                       $82bn              $338bn
             % change                                              312% increase


[Source: The US-China Business Council]


Some US politicians worried about a huge trade deficit with China blame
China’s weak currency for US woes.
To analyse implications of changes in China’s trade with the USA

       “China’s weak currency is to blame for the US trade deficit”


US politicians
• Call for China to allow the RMB to appreciate because
  weak RMB makes Chinese exports too competitive
• Blame China’s trade surplus for USA’s trade deficit
To analyse implications of changes in China’s trade with the USA

       “China’s weak currency is to blame for the US trade deficit”

                                   Alternative views




       RMB too weak                                     US Dollar too strong

US politicians                                    BUT US politicians forget that
• Call for China to allow
  the RMB to appreciate                           • US also has a trade deficit
  because weak RMB                                  with the EU and the oil
  makes Chinese exports                             exporters
  too competitive
                                                  So…maybe the US trade deficit
• Blame China’s trade
  surplus for USA’s trade                           is caused by the USD being
  deficit                                           too strong - it sucks in
                                                    imports [blaming a weak
                                                    RMB is a red herring]
To analyse implications of changes in China’s trade with the USA

    “China’s weak currency is to blame for the US trade deficit”
                                   Alternative views

                                                             US Dollar too strong

       RMB too weak                                 BUT US politicians forget that
                                                    • US also has a trade deficit with the
US politicians                                        EU and the oil exporters
• Call for China to allow                           So…maybe the US trade deficit is
  the RMB to appreciate                               caused by the USD being too
  because weak RMB                                    strong - it sucks in imports
  makes Chinese exports                               [blaming a weak RMB is a red
  too competitive                                     herring]
• Blame China’s trade                                     Why is USD too strong?
  surplus for USA’s trade
  deficit                                       The status of the USA as the world’s reserve
                                                currency -a safe haven in troubled times
                                                - ↑D for USD → ↑ex. Rate

                                                [China is the world’s largest holder of US
                                                Treasury Bills at $800bn]
To analyse implications of changes in China’s trade with the USA




                                                   1999              2008
Chinese exports to the USA                        $82bn             $338bn
Total Chinese exports                            $195bn             $1429bn

                          [Source: The US-China Business Council]


                       What calculations should you make?
To analyse implications of changes in China’s trade with the USA




                                                  1999               2008
Chinese exports to the USA                       $82bn              $338bn
Total Chinese exports                          $195bn               $1429bn
             % change                                              312% increase

             % of total


   [Source: The US-China Business Council]


 What calculations should you make?
To analyse implications of changes in China’s trade with the USA




                                                  1999               2008
Chinese exports to the USA                       $82bn              $338bn
Total Chinese exports                          $195bn               $1429bn
               % change                                            312% increase

               % of total                         42%                 24%
[Source: The US-China Business Council]


             What conclusions might an economist try and draw from this?
To analyse implications of changes in China’s trade with the USA

                Can we relate this to current circumstances?

 2008 – GFC [Global Financial Crisis] prompts dire
    warnings
 At the height of the GFC in 2008 there were dire
 predictions being made about:
 • export markets drying up,
 • industrial output declining

 and the forecast was that surplus countries [like the
 Asian thrift economies] would suffer most
To analyse implications of changes in China’s trade with the USA

                  Can we relate this to current circumstances?
 2008 – GFC [Global Financial Crisis] prompts dire warnings
 •  At the height of the GFC in 2008 there were dire predictions being made about export
    markets drying up, industrial output declining and the forecast was that surplus countries
    [like the Asian thrift economies] would suffer most


The Asian Boomerang June 2009 →
• US industrial output still declining
• BUT China and the rest of emerging Asia picked up
  [independently of what was happening in the US]
To analyse implications of changes in China’s trade with the USA

                     Can we relate this to current circumstances?
    2008 – GFC [Global Financial Crisis] prompts dire warnings
    •  At the height of the GFC in 2008 there were dire predictions being made about export
       markets drying up, industrial output declining and the forecast was that surplus countries
       [like the Asian thrift economies] would suffer most


The Asian Boomerang June 2009 →
•      US industrial output still declining
•      BUT China and the rest of emerging Asia picked up [independently of what was
       happening in the US]


Why?
1. More effective government intervention [China’s fiscal
   and monetary stimulus package far larger as a %% of
   GDP than in the West]
2. Trade with emerging Asia picked up [China less
   dependent on the US buying its output]
To analyse implications of changes in China’s trade with the USA

                     Can we relate this to current circumstances?
    2008 – GFC [Global Financial Crisis] prompts dire warnings
    •  At the height of the GFC in 2008 there were dire predictions being made about export
       markets drying up, industrial output declining and the forecast was that surplus countries
       [like the Asian thrift economies] would suffer most


The Asian Boomerang June 2009 →
•      US industrial output still declining
•      BUT China and the rest of emerging Asia picked up [independently of what was
       happening in the US]

Why?
1.   More effective government intervention [China’s fiscal and monetary stimulus
     package far larger as a %% of GDP than in the West]
2.   Trade with emerging Asia picked up [China less dependent on the US buying its
     output]

                                                               1999                       2008
    Chinese exports to the USA                                 $82bn                     $338bn
    Total Chinese exports                                     $195bn                    $1429bn
                       % of total                              42%                        24%
To analyse implications of changes in China’s trade with the USA




                                                  1999               2008
Chinese exports to the USA                       $82bn              $338bn
Total Chinese exports                          $195bn               $1429bn
               % change                                            312% increase

               % of total                         42%                 24%
[Source: The US-China Business Council]

                So…..which is the most useful % change or % of total?
To analyse implications of changes in China’s trade with the USA


                                 Plenary
Have we made Comrade Kapanev happy?
To analyse implications of changes in China’s trade with the USA


                                 Plenary
K?

Ap?

An?

Ev?
To analyse implications of changes in China’s trade with the USA


                                 Plenary
K + Ap comparative advantage, export-led growth, stats
  on US-China trade patterns, Asian boomerang


An? – some causal relationships explored
    - looked at data in two different ways
    - challenged received wisdom

Ev? – compared usefulness of two things we can do with
  trade figures [change over time + relative importance]
    - used evidence to make judgements
To analyse implications of changes in China’s trade with the USA


                                 Plenary
Have we made Comrade Kapanev happy?

				
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posted:10/5/2012
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