What President Hu's US Visit Should Focus On

Here are some things to keep in mind this week as China’s President Hu Jintao flies stateside to hang out with President Obama and Chicago Mayor Richard M. Daley, among others, later this week:

Same old, same old from the diplomatic machine.

Secretary of State Hillary Clinton does what she’s supposed to, by downplaying the tension between the world’s two largest economies. She said that the US is neither viewing China’s rise “as a threat, nor are they “interested in constraining Beijing’s growth, according to this Reuters article. It’s great when heads of state formally say things that everyone else in the room doesn’t really believe (often including the person saying them!)

Meanwhile, People’s Bank of China makes it look like they’re playing nice.

As folks like Treasury Secretary Tim Geithner keep insisting that China take measures to let the yuan appreciate faster, China’s central bank makes small, conciliatory moves (such as this one). According to forex dealers in the article, while China’s government “tries to paint a picture of resisting U.S. pressure for yuan appreciation, in reality it often lets the currency strengthen ahead of major political events in recognition of the importance of the ties between the world’s two biggest economies. The yuan’s value was pushed up to 6.60 against the dollar; at the end of the day Wednesday, the currency was up 3.53 percent since it was depegged from the dollar in June 2010. Look for no more than some gentle pushing from Obama on this issue this week, while Hu demurs it’s been said that Hu is not looking for any major moves forward, but simply wants to do some light patching of relations. They’ll find some way to dance around it, while what really needs to happen is a “come-to-Jesus moment, if you will, to put the imbalances of US-China trade directly on the table.

Don’t count out Chicago it wants to be “friendliest city to China investment.

Mayor Daley is throwing a private, corporate-funded dinner for Hu on Thursday, while the Chicago Council on Global Affairs will arrange a networking lunch and session at which more than “40 US-China business deals are expected to be signed ¦ including contracts, trade agreements, partnerships and Chinese investments in the U.S., reports Crain’s Chicago Business. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products helped organize the business event, while President Hu is set to “visit a Chinese-owned auto parts firm, a Chinese wind energy company and the Confucius Institute in Chicago, a Chinese language and cultural education center housed at Walter Payton College Preparatory High School on the Near North Side. Covering all bases!

Going forward from here how to help US manufacturing.

In the Good-News department, The Fed reported on Jan. 14 that industrial production grew overall in 2010, coming in at 5.8 percent, according to Agence France-Presse. “Industrial production, led by manufacturing and mining, finished the year on a strong note and is poised to sustain growth in 2011, said Thomas J. Duesterberg, CEO of the Manufacturers Alliance/MAPI, quoted in Industry Week. He continued that “strong export markets and “strong capital spending is needed to drive further growth which is where a federal plan for US manufacturing would come in. With the State of the Union address coming up, the Alliance for American Manufacturing wrote a letter to the Obama administration, outlining five key areas to focus on: Access to capital, creating demand and promoting manufacturing utilization, workforce development, and ultimately (most closely related to Hu’s visit) competitiveness and trade deficit reduction.

American manufacturing has made its points clear to the current government deal with the China problem, or there’s no turning back. We’ll see if formal state visits such as these will make any meaningful dent, or if politicians continue to dance around the elephant(s) in the room.

–Taras Berezowsky


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