China and the US

Post ImageMost of the articles I read about China (and to a lesser extent India) are pretty much the same thing. It’s almost as if there’s a cookie-cutter formula for these stories so that no one really has to write anything new. And the article I came across in the New York Times today was no different, except for one paragraph:

If finding a way out of Iraq is an immediate problem for Mr. Bush, then dealing with China’s increasingly assertive tone on economic and military issues, and with Mr. Hu’s quiet resistance to Washington’s calls for political liberalization, is a challenge that will last far beyond his presidency.

If you had to sum up relations between the United States and China in a single sentence, that would be it right now. The next president of the US will have to worry about Iraq no doubt, but I suspect China will be higher up on the list of priorities than it is now.

Read: New York Times

Piracy in China

Post ImageThere always seems to be something in the news about China (and to a lesser extent, India) these days, and it’s usually about how China is changing in one way or another. Even articles that seem to talk about a lack of change really talk about change:

But one thing never seems to change, and it’s as obvious on street corners today as it was six years ago. In 1999, when “Star Wars Episode 1–The Phantom Menace” debuted, it was quickly pirated on DVDs that sold throughout China for next to nothing.

Fast forward to May 2005–four years after China joined the World Trade Organization and embraced its stringent rules on intellectual property rights. When “Star Wars: Episode III–Revenge of the Sith” opened in U.S. theaters, copies again hit the streets of Beijing within days. Sold out of bicycle baskets by roving vendors, available in mom-and-pop retail stores everywhere, the counterfeit DVDs retailed for about 75 cents each.

Yes, piracy is a big problem in the world, and not just in China though the problem is particularly evident there. Why is it bad though? Change!

What’s standing in the way of better intellectual property rights enforcement? “It’s not a plot,” says Bruce Lehman, former commissioner of the U.S. Patent and Trademark Office and the chairman of the International Intellectual Property Institute. “It’s the result of a system in transition.”

It’s a pretty safe bet actually, when you hear China, just guess change!

Read: CNET News.com

David Dodge on U.S. Economics

Post ImageI have read many times about the huge current account deficit in the United States, but usually from American media like The Economist, or maybe something from Europe. Never from Canada! It seems the Canadian government generally likes to keep quiet about our neighbour’s spending habits, maybe for fear of more beef or softwood lumber-like troubles. Needless to say, I was quite surprised to read today that Bank of Canada governor David Dodge had something to say on the matter:

In the text of a speech to be given at a Montreal conference, the central bank chief warned of “large, global economic imbalances that have become the subject of increasing concern” to policy-makers.

“I am referring, of course, to the persistent and growing current account deficit in the United States that is mirrored by large current account surpluses elsewhere, especially in Asia.”

Basically what has happened is that the United States has decreased their saving while most of the rest of the world has increased saving. Thus, the U.S. has become reliant on foreign borrowing, creating the large deficits that Dodge and other economists talk about (the United States actually has three deficits, international trade, current account, and federal budget). At the same time, China and other Asian nations have used their large and growing export income to soak up the American debt.

I think it’s really interesting to watch, even if the situation unfolds slowly. For some reason, it seems significant to me that Canada finally had something to say on the matter too, though I can’t put my finger on exactly why.

“At some point, they will have to be resolved. Why? For one thing, a country’s external indebtedness cannot keep growing indefinitely as a share of its GDP. Eventually, investors will begin to balk at increasing their exposure to that country, even if it is a reserve-currency country, such as the United States.

“For another thing, the buildup of foreign exchange reserves by Asian countries will, eventually, feed into domestic monetary expansion and lead to higher inflation. These imbalances will ultimately be resolved, either in an orderly, or in an abrupt, disorderly way.”

Perhaps Dodge is worried that things are heading down the path to a disorderly resolution, which would probably be bad for Canada.

Read: CBC News