China and the US elections

Whoever wins the US election next week will have a headache trying to figure out how to handle China. Listening to both Mr. Obama and Mr. Romney talk about China during the campaign is largely frustrating because we know neither of them could be serious with what they are saying.

Mr. Obama knows the limitations of the policy options on China. Mr. Romney probably has an idea of how far he can go but does not care for the moment because he still has to win the election. If promising to declare China a currency manipulator as his first official act will win him the election, so be it.

But it is not as simple as that. Last Friday, China’s currency hit a record high against the US dollar for the second straight day. The yuan touched an intra-day high of 6.2380 to the dollar at the open, marking the highest level since 1994 when China launched its modern foreign exchange market.

Maybe China is allowing the yuan to appreciate to defuse criticism that the unit is grossly undervalued, ahead of the US presidential election next Tuesday. “There are expectations that Beijing may use this as a gesture to the United States ahead of the presidential election and the upcoming exchange rate report,” Jiang Shu, an analyst at China’s Industrial Bank, told Agence France Presse.

Or it could simply be “market forces at work.” Expectations on the Chinese economy are improving and the inflow of investments arising from quantitative easing in Western economies could have also helped the yuan appreciate.

Indeed, the Financial Times recently reported that for some countries in East Asia the yuan or the renminbi “has increasingly become the reference currency (meaning emerging market exchange rates move closely with it).” That could mean the renminbi could be closer to its actual market value than US claims of massive undervaluation suggests.

China has assumed the role of the straw man during the US election campaign as both candidates blamed it for much of America’s economic problems. But none of the simplistic solutions that both candidates offer are likely to work and help the American economy get back on its feet.

An Indian blogger based in Chennai minimized Obama’s claim of acting tough on China by slapping duties on low-priced Chinese-made tires imported into the US. Obama boasted his action saved in excess of 1,000 jobs.

The blogger pointed out that “economists at the Peterson Institute for International Economics in Washington have calculated that some thousand-odd jobs might have been saved, but that the cost amounted to $1.1 billion in higher prices to American consumers or $900,000 per job. Surely, a countervailing duty is self-defeating idea in the American context!”

As for Romney, the blogger observes that the Republican candidate “does not seem to realize it is no longer true China exports cheap poor quality goods – rather it exports high quality and sophisticated goods. It is the world’s largest manufacturer and exporter. Any action against China is no longer going to be easy. Period.”

In other words, should Romney declare the Chinese currency manipulators on “day one” as he promised, and levy countervailing duties on Chinese imports, he may just end up raising prices of such popular consumer products like Apple’s i-Phone and i-Pad and all those low priced ”Made in China” Walmart goods that’s keeping the cash poor American consumers afloat. The Indian blogger also warned that if Romney acts unilaterally, he may damage the WTO architecture and bring about an era of trade and currency wars.

Beyond economics, thediplomat.com brings up a more worrisome impact of a Romney victory on US-China relations. The website pointed out that “both Romney and the GOP say that, if elected, he’ll pursue a more robust and confrontational policy toward China in the Pacific and the South China Sea.”  

In reaction, Romney was accused by China Daily of exhibiting a “cold war mentality.” The Chinese paper also observed: “Compared to the ‘strategic pivot’ policies US President Barack Obama is implementing in the region, Romney’s recommendations are more pugnacious.”

With the pragmatists appearing to gain a stronger hand over the Maoists, it may be more useful for whoever wins the US presidential election to have a more intelligent and nuanced approach to its China policy. Confrontational policies may win applause among America’s right wing but increase danger of regional confrontation even as it does nothing to give America’s sluggish economic recovery a big push.

Confrontational American policies only give the extreme left in China’s military and communist leadership reason to be more paranoid. That’s not good for countries like ours living in China’s geographic shadow. China is still at the stage where it is trying to play an unfamiliar super power role in the region and is still not quite sure how to do it without looking like a neighborhood bully.

Anyhow, official statements from Beijing and Washington may seem to suggest a degree of animosity. But the leaders of both nations know their countries are economic Siamese twins, too hopelessly connected to risk a serious political break or a return to the days of a cold war.

It should probably provide us comfort that in reality, not much change is expected after Nov. 6. The presidential debates seem to indicate that whoever wins on Nov. 6, the thrust of current American foreign policy will largely remain.

Still, accidents can happen. With both China and the United States in the midst of a major leadership transition, we can only hope the next few weeks will be uneventful.

Tourism

I got this e-mail from a resident foreigner.

I am an American who has for years enjoyed reading your column in the Star. In regard to your most recent contributions in which you discuss tourism possibilities I’d like to add my own two cents if you don’t mind. I am normally hesitant to do so since Filipinos seem hypersensitive to comments from foreigners (they do however freely and openly criticize my country!) but I’ll take this step nevertheless.

One time I took friends to Luneta but did not see the Marine honor guard at the Rizal Monument, but I did see them in the shade of nearby trees. After walking over to ask what was going on I was told that the “scorching heat” was too much for them.

My, my, my . . . is that how the Marines handle difficult circumstances? Rizal is your national hero and to respect him with a Marine honor guard is a sacred duty. So what if it’s raining or there is “scorching heat”?

Some years ago I went to the Chocolate Hills in Bohol. Locals in Tagbilaran told me it would be very easy to get there by just taking a bus to Carmen and getting off at the entrance to the famous tourism site. I did so and it was a very pleasant experience. At the bus stop there were several motorcyclists offering their services for those who wanted a ride up the hill, a mere 10 pesos because it’s a very short distance. They were all very pleasant and decent fellows, and apparently all friends.

But last year I took my family there and found that a very large, aggressive, and extremely nasty guy had forced the others out of that business and he is now the sole operator there. And of course he charges exorbitant fees to ride up that hill, and the same exorbitant fee to go down!

And why are Manila’s taxi drivers so out of control? When I get in a taxi in Manila and say, for example “Good morning. Megamall please!” they say it will be 250 pesos because of “trapic.” I then say “No, you will turn on the meter and I will pay the meter amount or I will report you to LTO.” But that threat does not deter them from their abuse.

Cebu, however, is different. I’ve seen decent taxi drivers in Cebu and I do often take taxis there. Why is that? Is it that Visayans are decent and honorable people? Or is it that Visayans KNOW that prosperity for their region depends on treating tourists as guests?

Late night political joke

In the spirit of the American election season, here’s something from Bill Maher.

“The Mormons had good news today. Billy Graham, who is 112, has taken Mormonism off his website’s list of cults.

“This is typical of Christian right’s stance on Mitt Romney. They still believe he will go to Hell for all eternity but in this life they’d like a tax cut.”

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco