China agrees to purchase billions in US goods
Posted by WARREN MOSLER on January 20th, 2011
So President Obama declares victory because we get to build planes and send them to China.
And why?
To get our dollars back, of all things, as if there’s any public purpose to that.
And so because we continue to believe we could be the next Greece, we continue to turn ourselves into the next Japan.
Which includes being an exporter, just like Japan.
China agrees to purchase billions in US goods
January 19 (CNBC) — The Obama administration, trying to build ties with an economic rival, said Wednesday that China would buy $25 billion in U.S. goods and had given final approval to a long-negotiated $19 billion deal for 200 Boeing planes.
The announcement came as Chinese President Hu Jintao arrived at the White House for a state visit with President Barack Obama.
January 20th, 2011 at 9:08 am
gets even better
G.E. to Share Jet Technology With China in New Joint Venture
http://www.nytimes.com/2011/01/18/business/global/18plane.html
GE’s China Avionics Deal: A Q&A with R&D Magazine
http://www.rdmag.com/News/Feeds/2011/01/manufacturing-ge-s-china-avionics-deal-a-q-a-with-lorraine-bols/
“In all, GE Aviations work in China translates into about 1800 GE high-technology jobs in the US. They involve producing and supporting jet engines for China”
because of the supposed need to produce any jobs now, at any cost, we’re guaranteeing a more worthy security threat later; which of course would continue select profits for defense contractors
almost makes one think there could be self-fulfilling, Bernays-like propaganda at work;
surely we’re not that greedy & foolish? just totally misinformed? about more than currency?
Let’s see. I have one child who’s a foot surgeon, & another is a gun dealer. To support both, I have to buy a gun & shoot myself in the foot. THERE ARE NO OTHER OPTIONS! (right?)
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strawberry picker Reply:
January 23rd, 2011 at 4:06 pm
“Forbes has an interesting article about America losing its edge in innovation because engineers and scientists in the US are not as respected as they are in other countries, and thus fewer youths aspire to become one. Quoting: ‘I’ve visited more than 100 countries in the past several years, meeting people from all walks of life, from impoverished children in India to heads of state. Almost every adult I’ve talked with in these countries shares a belief that the path to success is paved with science and engineering. In fact, scientists and engineers are celebrities in most countries. They’re not seen as geeks or misfits, as they too often are in the US, but rather as society’s leaders and innovators. In China, eight of the top nine political posts are held by engineers. In the US, almost no engineers or scientists are engaged in high-level politics, and there is a virtual absence of engineers in our public policy debates.’”
What? No hedge fund managers are celebrated as heroes outside the USA? No football stars? No race car drivers? Warren it looks like you just wouldn’t be celebrated as much in foreign countries as you are in the USA, what was your degrees in again Warren?
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strawberry picker Reply:
January 24th, 2011 at 4:03 am
Warren, why would I continue to bank with YOU at your bank, when soon these china bankers will come in and give me better loan rates and more free toasters and such and undercut you? How is your bank going to compete with the “china price” that is usually lots cheaper than the USA price?
China Bank Moves to Buy U.S. Branches
ICBC Signs a Deal for Bank of East Asia’s Retail Outlets
http://online.wsj.com/article/SB10001424052748704754304576096002767228880.html?mod=WSJ_hp_LEFTWhatsNewsCollection
CHICAGO—China’s biggest bank signed an agreement that would make it the first Beijing-controlled financial institution to acquire retail bank branches in the U.S., though regulators could still block the deal.
Under the deal, Industrial & Commercial Bank of China Ltd., by some measures the world’s largest bank, agreed to acquire a majority stake in Bank of East Asia Ltd.’s U.S. subsidiary. ICBC will pay $140 million for an 80% stake. Bank of East Asia, which is a publicly traded company based in Hong Kong, has a total of 13 branches in New York and California. ICBC and Bank of East Asia have talked to U.S. regulators about the deal, these people said.
China’s largest bank, Industrial & Commercial Bank of China Ltd., is the first Chinese bank to acquire a U.S. deposit-taking bank. Ken Brown explains why it could be the start of big expansions by Chinese financial institutions in the U.S.
The transaction is expected to be carefully scrutinized by U.S. regulators, including the Committee on Foreign Investment in the U.S., known as CFIUS, because of the state-controlled nature of the Chinese bank. A previous deal by a Chinese bank to acquire a bank in the U.S. was rejected by regulators. “It is going to be a long process,” a person familiar with the matter said.
ICBC, as the bank is known, is based in Beijing and is 70% owned by the Chinese government. It has become increasingly comfortable venturing outside its home markets, which still account for the bulk of its profit. Last year, ICBC got into the broker-dealer business in the U.S. with a symbolic $1 purchase of the U.S. brokerage unit of Fortis Securities, controlled by France’s BNP Paribas SA. That deal didn’t subject ICBC to tight U.S. regulatory restrictions on foreign purchases of retail-banking operations.
The move by ICBC underscores the desire by Chinese banking executives to transform their strength into a greater presence globally, as Chinese banks have emerged from the global financial crisis largely unscathed. Their hope is to better support Chinese companies and guard against losing customers to U.S. and European banks that already have networks world-wide. Meantime, Beijing has encouraged Chinese companies to expand overseas in recent years. In light of the huge foreign-exchange reserves China has, Beijing has encouraged its banks to invest more overseas.
In a speech at the event Friday, Chen Deming, China’s Commerce Minister, said one of the priorities for the Commerce Ministry is to “encourage our companies to go out.” He pointed to the vast foreign-exchange reserves held by China, saying that “we should turn those reserves into capital and assets.” Otherwise, the reserves could decline in value because of inflation, Mr. Chen said.
While China’s resource and construction companies have moved aggressively into new markets, its financial institutions generally have been slow to follow.
Bank of East Asia is led by prominent Asian banker Sir David Li. Mr. Li drew unwanted attention to himself in the U.S. and Hong Kong in 2007 when the former board member of Dow Jones became the target of an insider-trading case involving News Corp.’s buyout bid for Dow Jones. Mr. Li later agreed to pay $8.1 million to settle the civil charges. Mr. Li couldn’t be reached for comment.
So far, most Chinese investments in the U.S. financial sector have involved the Chinese taking passive, minority stakes in firms such as Blackstone Group LP and Morgan Stanley. Taking a majority stake in Bank of East Asia is a change of tactic for ICBC
At the same time, Bank of East Asia is no stranger to ICBC. It sold a 70% stake in its Canadian operations to ICBC last year and all of its six branches in Canada have since been rebranded ICBC Canada. Bank of East Asia has 13 branches in the U.S., concentrating in New York and California—two states that boast the largest numbers of Chinese immigrants. The bank formed its U.S. banking subsidiary in 2001 through the acquisition of Grand National Bank, of Alhambra, Calif.
.The deal, if approved by U.S. regulators, would allow ICBC to gain relatively quick access to American depositors. Right now, ICBC has one branch in New York, but it isn’t involved in the retail-banking business. Bank of China Ltd. is the only mainland Chinese bank that has a retail license in the U.S. market. The bank, also state owned, has two branches in New York and one in Los Angeles. It recently has started allowing American customers to buy and sell the Chinese currency through its U.S. branches.
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strawberry picker Reply:
January 24th, 2011 at 4:08 am
I can see it now Warren, you and your fed boyz bout to have your power usurped. In the future I can go to the chinese bank and get really cheap or even free loans, or possibly even where they PAY ME to take out a loan (negative interest loan) to go and buy made in china tv’s, made in china cars, to spend on chinese contractor made houses, and go eat at chinese restaurants. They will give me a negative interest loan and pay me to take my chinese girlfriend on a trip to shanghai – etc etc – How is your bank going to compete with what china is going to do for me? I can even see where they will get all kinds of tax concessions where through lotsa silly loopholes if I take out a loan at thier bank and buy thier “approved” stuff I will get tax deductions and such.
Game over dude.
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January 20th, 2011 at 11:07 am
man I personally am cool with Obama on most things but he just really seems to be scrambling when it comes to China. I just don’t get it. He’s a smart dude…surely he understands the economic relationship between China and the US!?!? But nope, his policies show that he thinks China’s his sugar daddy or something. Dude I am all about respecting China but seriously we got to know what’s what before we go kissing ass (pardon my french). Hopefully Obama will get into MMT sooner than later!!!!! haha!!
Warren, I’m sure you’ve sent him a copy of your book right? I think he definitely needs it!!
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WARREN MOSLER Reply:
January 20th, 2011 at 10:36 pm
already did, to him and wife
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January 20th, 2011 at 2:01 pm
“Which includes being an exporter, just like Japan.”
The developing US business model is to have US businesses (multinationals) exporting to the developing world. Division of corporate profits is already tending steadily in that direction.
Another factors that most people in the US don’t realize is that exports from the US are increasingly produced using automation and robotics. The necessity to move factories off shore to take advantage of low cost labor in the developing world is only temporary. When the cost of the labor inevitably rises, it will be more cost-effective to go to machines instead.
The pressing question is, of course, demand. Without increasing income levels, where is the demand going to come from? The interim answer is the increasing volume of consumers in the emerging world, and that interim period in the process of globalization is likely to last for decades.
This is not going to be a smooth transition of workers in the developing world rising to the living standard of the developed world, with living standards of the developed world remaining unaffected, as many apparently presume.
Socially and politically, this is going to result in problems. The US and China recognize this, and their elites, which dominate politics in both countries, are trying to work it out in a fashion that avoids unrest. It’s going to be juggling with knives, I suspect.
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strawberry picker Reply:
January 20th, 2011 at 2:31 pm
Living Standards? Dude I was at the biggest RV show in the nation over the weekend. They had a history movie on RV’s of old. One RV (1940′s I think) had a built in maid quarters and seperate sleeping cabin for the driver. That is back when oil was cheap and the USA was rich. You don’t see RV’s anymore with seperate maid quarters and such. Reminds me of an old movie with Jason Robards where the evil dude had his own private train going back and forth over the USA. I even have to pump my own gas at most places, doesn’t matter how much money I got in my wallet, their just aint no more full service gas pumpers.
I used to travel with my dad all over europe in a VW van, he was hardcore military killer but everyone thought he was peace hippy dude, we parked free everywhere, peed anywhere we wanted. Dude it costs like 50 dollars a night at nice RV parks now, and if you try to park for free on the side of the road or pee on the side of the road, the police will get you!
Our living standards have went WAY down in a lot of ways. I felt so much more FREE back then, people so much nicer, too many rules, too many people, not enough space and resources anymore.
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strawberry picker Reply:
January 21st, 2011 at 6:46 am
http://www.businessinsider.com/obama-appoints-jeff-immelt-2011-1
Jeff Immelt replacing Volcker? They say in the article Immelt is really big on EXPORTS. Warren always says exports are a cost. Looks like we about to get way poorer. I sure hope Warren is right that we are going to get way poorer.
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January 21st, 2011 at 12:22 pm
It’s already happening, but most people don’t see it yet. The fact is that the world has a problem with over-supply and lack of demand. This is very simple to fix by transcending the capitalistic model and creating a more suitable one for the future, where work is done mostly with machines.
Life after Capitalism-Robert Skidelsky
The old model was to employ excess workers as servants for the wealthy and powerful. No need to go back there. There is a better way.
For instance, Bucky Fuller pointed to the example of R&D centers like Bell Labs. Just fund groups of trained people and provide them with equipment, and one of the thousands groups will come up with a contribution that justifies them all.
Fuller observes that the principal source of human wealth is metaphysical rather than physical, i.e., intelligence. A maturing humanity needs to exploit intelligence more and wean itself away from the immature idea that wealth is chiefly material.
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January 22nd, 2011 at 10:53 am
I wonder if G.E. already spent the $50 Billion we gave them as a reward for failing!
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