China Shows Who the Real Boss Is at USA Inc.
With its huge ownership stake in the American economy, China is beginning to extract concessions from a humbled U.S.
April 26, 2009 - 12:00 am
The nice thing about owning your own business is that you get to call the shots. Want to take the day off? Take the day off. Want to reupholster the office in pink, candy-striped vinyl? Go right ahead and have at it.
Along the same lines, I give you China — an ever-increasing stakeholder and now permanent board member at USA Inc.
Over the past few years the Chinese have plowed over $2 trillion into USA Inc. And since joining the management team they have been a bold and aggressive partner in shaping the company’s policy both domestically and abroad.
One can only sympathize with the outranked managing director (President Obama) as he tries to keep USA Inc. employees (that would be us) satisfied, while at the same time keeping the Chinese members of the board of directors happy as well.
Case in point: Manager Obama flip-flopped recently and declined to cite China as a country that manipulates its currency to gain unfair trade advantages — which plainly it does.
Just two months ago, Manager Obama said the same thing himself through USA Inc.’s chief financial officer, Tim Geithner.
“President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” Geithner wrote, adding that Manager Obama would “aggressively use all the diplomatic avenues open to him to seek change in China’s currency practices.” He also said that “countries like China cannot continue to get a free pass for undermining fair trade principles.”
Well, that was two months ago — back when Chinese activity in USA Inc. was static. Now that they have agreed to take an even larger stake in the company, well, you can see the dilemma faced by Manager Obama as he struggles to keep USA Inc. afloat.
He takes the concerns of the Chinese board members very seriously; he recently sent out his top sales exec, Hillary Clinton, to convince the Chinese to buy more stock (Treasury bonds) in USA Inc. Thankfully, they agreed, so Americans can continue to buy more products from China Inc.
The rationale (lie) Manager Obama gave for his changed view of Chinese currency manipulation is that China has been allowing their currency value to rise along with the dollar. Wow, how generous the Chinese are — if the dollar goes up or down due to market factors, they have agreed to manipulate theirs along for the ride.
The union of American manufacturers (once again, that is us) contends that even with the pegged rise in the value of the Chinese yuan with the dollar, it is still undervalued by 20 to 40 percent against the greenback. But hey, what’s wrong with a little manipulation between fellow USA Inc. execs?
And not only is China doing as it pleases with its currency; it is also starting to open up independent China Inc. franchises in America’s own backyard — South America. Never would we have seen that happen ten years ago, but welcome to the new world.
In fairness to the Chinese, their position on the USA Inc. board of directors is still inferior to Japan — which has by far the largest stake in the company. That is why Japanese Prime Minister Taro Aso was the first foreign leader to visit the White House and the first foreign leader to receive a visit from Manager Obama.
But the difference between China and Japan is that only one of them is positioning itself to be the world’s next CEO.