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<a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp">http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp</a>
<BR>
<o:p> </o:p><BR>
<p class="MsoNormal">
<br><!--[endif]--><o:p></o:p></p>
<p class="date">March 30, 2010<o:p></o:p></p>
<h2>Exclusive: <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>’s
‘Friends’ Work for Them, Not Us<o:p></o:p></h2>
<p class="articleauthor"><a href="http://www.familysecuritymatters.org/authors/id.89/author_detail.asp">William
R. Hawkins</a><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">In an earlier <a href="http://familysecuritymatters.org/publications/id.5808/pub_detail.asp">column</a><b>,
</b>I cited a spokesman for the Chinese Commerce Ministry as saying American
firms were lobbying on <st1:city w:st="on">Beijing</st1:city>’s behalf in <st1:state w:st="on"><st1:place w:st="on">Washington</st1:place></st1:state>. But
corporations prefer to have their views expressed by third parties, especially
when working in league with a foreign power. And there are plenty of media
outlets and think tanks willing to act as apologists for the <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city> regime.</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">For example, the <i><a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink0"><span class="klink"><span style="font-family: Arial; text-decoration: none;">Wall Street Journal</span></span><span id="preLoadWrap0"><span class="preloadwrap"><o:p></o:p></span></span></a></i></span></p>
<p class="MsoNormal"><i><span style="font-size: 10.5pt; color: blue; display: none;"><a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined"><span style="text-decoration: none;"><!--[if gte vml 1]><v:shape
id="_x0000_i1026" type="#_x0000_t75" alt="" style='width:16.5pt;height:16.5pt'>
<v:imagedata src="file:///C:\DOCUME~1\MARCJA~1\LOCALS~1\Temp\msohtml1\01\clip_image003.gif"
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</v:shape><![endif]--><!--[if !vml]--><img src="file:///C:/DOCUME%7E1/MARCJA%7E1/LOCALS%7E1/Temp/msohtml1/01/clip_image003.gif" style="border-style: none; border-width: medium; height: 22px; width: 22px;" class="preloadImg" v:shapes="_x0000_i1026" width="22" border="0" height="22"><!--[endif]--></span><span style="font-size: 12pt; color: windowtext; font-style: normal; text-decoration: none;"><o:p></o:p></span></a></span></i></p>
<p class="MsoNormal"><i><span style="font-size: 10.5pt;"></span></i><span style="font-size: 10.5pt;">published an <a href="http://online.wsj.com/article/SB10001424052748703312504575142202930482866.html?mod=googlenews_wsj">op-ed</a>
by Zhong Shan, the Vice Minister of Commerce for the People's Republic of <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>, on March
26th. The Chinese argument was so fraudulent as to border on outright lying.
Zhong claimed that in 2008, “Chinese and <st1:country-region w:st="on">U.S.</st1:country-region>
interests in bilateral trade are roughly balanced” when, in fact, the American
trade deficit with the PRC was $268.1 billion, with the <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink1"><span class="klink"><span style="font-family: Arial; text-decoration: none;">cash flow</span></span></a> running
5-1 in <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>’s
favor. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Zhong got to a “balanced”
figure by two questionable methods. First, he understated Chinese exports,
placing them at $252.3 billion when the U.S. Department of Commerce reports
$337.8 billion. Second, he lumps together all goods sold in <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region> by
American firms whether produced in country or imported, and then compares that
number with Chinese exports. Since the <st1:country-region w:st="on">U.S.</st1:country-region>
only exported to <st1:country-region w:st="on">China</st1:country-region> $69.7
billion worth of goods and services in 2008, most of the $224.7 billion worth
of products Zhong counts as sold in <st1:country-region w:st="on">China</st1:country-region>
was produced in <st1:country-region w:st="on">China</st1:country-region>, not <st1:country-region w:st="on"><st1:place w:st="on">America</st1:place></st1:country-region>. They
may have had American logos, but they came out of Chinese factories, just as
did <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>’s
exports. So either way, it is a “win-win” for <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>. <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city> gained the benefits of expanded
industrial capacity and jobs creation on a very unbalanced basis.</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">And how American are
Chinese-made brands? Consider General Motors, lured to <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region> because
it is the world’s largest auto market. Chinese demand for motor vehicles is not
satisfied by imports, nor will it be. GM’s production and technology operations
are in the form of <a href="http://www.gm.com.cn/english/corporate_info2/company_gmchina.jsp">nine
joint ventures</a> with Chinese partners in which GM owns no more than 50
percent of the enterprise and sometimes less. Its main partner is Shanghai
Automotive Industry Corporation, a state-owned enterprise (SOE) that is the
third largest automaker in <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>.
Beijing Automotive Industry Holdings has bought power train technologies from
GM's Saab unit for use in its vehicles manufactured in <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>. The <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city> regime makes sure
that GM serves Chinese national interests. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">It should be mentioned that
on March 18th, the Chinese Ministry of <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink2"><span class="klink"><span style="font-family: Arial; text-decoration: none;">Finance</span></span></a> announced
that during the first two months of 2010, total SOE profits were up 88.9
percent year-on-year. <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>’s
“national champion” firms are expanding both at home and overseas against
foreign rivals.</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">On that same day, the WSJ <a href="http://online.wsj.com/article/SB20001424052748704743404575127511778280940.html">editorialized</a>
in defense of <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>’s
currency policy. It parroted <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>’s
claim that,</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Numerous countries continue
to peg their currencies to the dollar, and with the establishment of the euro
most of <st1:place w:st="on">Europe</st1:place> decided to move to a fixed-rate
system. The reason isn't to get some trade advantage against their neighbors
but to gain the economic benefits of stable <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink3"><span class="klink"><span style="font-family: Arial; text-decoration: none;">exchange rates</span></span></a> –
and in some cases a more stable monetary policy. A stable exchange rate
eliminates a major source of uncertainty for investment decisions and trade and
capital flows.</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Overlook for the moment that
the WSJ normally calls for “free markets” rather than government control of
economic factors. It has long granted <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>
exceptions to the rules. The real point is that If China merely wanted
stability; it could adopt any <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink4"><span class="klink"><span style="font-family: Arial; text-decoration: none;">fixed exchange rate</span></span></a>
for the Yuan. What <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>
picked was a rate that is undervalued by 30-40 percent in order to give
China-based producers a competitive edge both at home and abroad. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><st1:city w:st="on"><span style="font-size: 10.5pt;">Beijing</span></st1:city><span style="font-size: 10.5pt;"> did allow the Yuan to appreciate against the dollar
from 2005 to 2008, but this halted in as soon as <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>’s trade surplus started to be
impacted. <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>
wants a stronger currency to pay for imports, especially oil which is priced in
dollars, but not one so strong that it reduces exports. Maintaining its trade
surplus is the top priority because that is what provides jobs. Mass
unemployment would pose the risk of revolution. <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city> has not given up its independence by
linking to the dollar as the<i> WSJ</i> tried to argue disingenuously. It has
been moving cautiously in the resolute pursuit of the best policy outcome. The
$2.4 trillion (and growing) currency hoard it has amassed, along with the
world’s fastest economic growth rate, attests to its success.</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Another organization that <st1:city w:st="on">Beijing</st1:city> loves to use to its advantage is the libertarian
Cato Institute based in <st1:place w:st="on"><st1:city w:st="on">Washington</st1:city>,
<st1:state w:st="on">DC</st1:state></st1:place>. Daniel Griswold, director of
the Center for Trade Policy Studies at Cato, often gives “exclusive” interviews
to <st1:city w:st="on">Xinhua</st1:city>, <st1:country-region w:st="on">China</st1:country-region>’s
state-run media outlet, in support of <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>’s
policies. Chinese propagandists like nothing better than to throw the words of
an American back at <st1:country-region w:st="on"><st1:place w:st="on">America</st1:place></st1:country-region>.
And what could be more ironic than a libertarian shilling for a Leninist
dictatorship? </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">In a March 8th <a href="http://news.xinhuanet.com/english2010/china/2010-03/18/c_13215077.htm">interview</a>,
Griswold said, “<st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>
has been moving in the right direction since 2005 by allowing the currency to
appreciate. Threats from the <st1:country-region w:st="on">U.S.</st1:country-region>
government actually make it more difficult for the Chinese government to resume
appreciation because it would look as though <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city> was giving in to foreign
pressure." He apparently missed the fact that Chinese appreciation stopped
in 2008. And, of course, <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>
will not voluntarily change a policy that is working to its advantage. It will
take exactly the kind of pressure Griswold wants to head off to redress the
imbalance. Griswold, however, is not interested in the international balance,
only in protecting Sinophile business interests. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">The libertarian view at the <i>WSJ</i>
and Cato is that corporations know best, and if they think they can profit by
working with <st1:city w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:city>,
so be it. That’s just “free enterprise.” Yet, there is more at stake. <st1:city w:st="on">Beijing</st1:city> is using the gains from trade, capital and
technology, to expand its influence around the world in ways that confront <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> interests
on every front and pose a rising threat to national security. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Unfortunately, many in the
business community simply don’t care even when they see the danger. Best
selling author Jim Rogers made a fortune on <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink5"><span class="klink"><span style="font-family: Arial; text-decoration: none;">Wall Street</span></span></a> before
becoming infatuated with <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>.
In his 2007 book <i>A Bull in China: <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink6"><span class="klink"><span style="font-family: Arial; text-decoration: none;">Investing</span></span></a>
Profitably in the World’s Largest Market</i>, he does not advocate setting up
American firms in <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>;
he wants to <a href="http://www.familysecuritymatters.org/publications/id.5860/pub_detail.asp" target="undefined" id="KonaLink7"><span class="klink"><span style="font-family: Arial; text-decoration: none;">invest</span></span></a> directly in
Chinese corporations. He writes, </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">Just as the nineteenth
century belonged to <st1:country-region w:st="on">England</st1:country-region>
and the twentieth century to <st1:country-region w:st="on">America</st1:country-region>,
so the twenty-first century will be <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>’s turn to rule the roost.
Before I get into a single stock listing, the very best advice of any kind that
I can give you is to teach your children or your grandchildren Chinese. It is
going to be the most important language of their life-times. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;">His real sub-title ought to
be “How to Profit from the Coming End of Western Civilization” as if he and his
fellow travelers think their lives will be just fine in the wake the collapse
of American preeminence. So fine, they can help bring it on without a second
thought. There is nothing more dangerous (or loathsome) than arrogance based on
stupidity, fueled by an irresponsible, myopic greed. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><st1:country-region w:st="on"><st1:place w:st="on"><span style="font-size: 10.5pt;">China</span></st1:place></st1:country-region><span style="font-size: 10.5pt;">’s “friends” need to be seen for what they are, and
their lobbying efforts summarily rejected. They do not have the best interests
of the <st1:country-region w:st="on"><st1:place w:st="on">United States</st1:place></st1:country-region>
and its people at heart. </span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><i><span style="font-size: 10.5pt; color: blue;"><a href="http://www.fsmarchives.org/"><span style="color: rgb(182, 0, 0);">FamilySecurityMatters.org</span></a></span></i><i><span style="font-size: 10.5pt; color: black;"> Contributing Editor William R. Hawkins is
a consultant specializing in international economic and national security
issues. He is a former <a href="http://www.familysecuritymatters.org/publications/id.5622/pub_detail.asp" target="_top">economics</a> professor and <a href="http://www.familysecuritymatters.org/publications/id.4789/pub_detail.asp" target="_top">Republican</a> Congressional staff member.</span></i><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="font-size: 10.5pt;"><o:p> </o:p></span></p>
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