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A wake-up call from China
The U.S. economy, like Blanche DuBois in A Streetcar Named Desire, depends on the kindness of strangers. Each year Americans consume more than they produce, creating a trade deficit that floods the world with dollars. Fortunately, strangers from abroad like to reinvest those dollars in the USA.The cycle works wonders. Despite the chronic overspending, American consumers have suffered few adverse consequences. In fact, all the money coming from abroad to buy Treasury bills and corporate bonds has held down the cost of borrowing. But last week, Americans got a sense of how foreign investment can also have a downside. The China National Offshore Oil Corp. (CNOOC), 70% owned by the Chinese government, offered to buy Unocal, a 115-year-old U.S. energy producer. The $18.5 billion bid raises a number of thorny policy questions. Among them: Would ceding control of a major oil company to a communist government-controlled entity pose a national security threat? And if the bid were to be blocked, would China retaliate against U.S. companies seeking to expand in China? These questions would be considered by a special national security panel if Unocal accepted the CNOOC bid. Ultimately, however, the proposed acquisition might best be viewed as a wake-up call to U.S. government leaders, who've done little to prepare the American economy for the tidal wave of competition presented by the rising economies of Asia, particularly China. China has a population four times the size of the United States' and an economy that's growing two to three times as fast. Even when it's not buying oil and gas companies, it's buying oil and gas - and other resources - driving up the cost to U.S. consumers. Demand from China is one reason oil is about $60 a barrel. Less spendthrift U.S. practices could moderate the impact of China's ascendancy. Last year, the United States ran a $160 billion trade deficit with China. That gave the Chinese a lot of dollars with which to buy pieces of American capitalism - and to raise questions like those the Unocal bid raises. Cutting the trade deficit involves revamping tax policies and other steps to encourage Americans to save more and spend less. That might sound tough. But in the long run, it's less likely to cause pain than continued reliance on the kindness of strangers. Posted by: Spavirt Pheng6042 2005-06-29 |
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