If you insult a Dragon …

The United States needs to think about what is hanging in the balance while criticizing China. If relations would go bad, the U.S. economy would be in even more trouble.

As the presidential race clamors on and the Summer Olympics draw near, China is becoming a hot topic. Democratic nominees continuously paint the US-Sino trade arrangement in an evil light, largely focusing on China’s currency “manipulation.” Because of the conflict in Darfur, activists have labeled the coming Olympic Games the “Genocide Olympics.” And Tibetans are making good on the time-honored tradition of making the Olympics a political statement. These problems are anything but simple.

China has become the primary trading partner with America, but the relationship has been troubled. As a means of upholding its competitiveness, China maintains an exchange rate that ensures its currency, the Yuan, is worth less than the dollar (the exchange is currently 7:1). It is a principle factor that it is so cheap to do business in China. Many see such a practice as insidious, but they are wrong.

For starters, the cheap cost of doing business in China is what allows essential goods to be so affordable. America’s poor have seen a dramatic increase in their purchasing power – and subsequently their quality of life – from trade with China. One wonders what politicians like Sen. Barack Obama and Sen. Hillary Clinton seek to accomplish by attempting to force China to revalue its currency. Does America really want China to change its monetary policy? If China were to rapidly revalue its currency, inflation in America would soar to damaging levels far beyond the control of the government. China has become one of the largest consumers of commodities, and if it had a stronger currency, its demand would push prices to skyrocket.

Of course, if China revalued slowly, then such a problem could be avoided – assuming China is willing act in America’s best interest instead of its own. Absurd. America is not in a great position of strength over China. Many see the large trade deficit with China as signs of trouble. Yet, there are so many dynamics involved in the deficit number that it is widely misunderstood.

First, America imports more than it exports, which, by definition, is a deficit. Second, the imbalance is misleading, stemming from the difference in currency values. Third, the deficit is not indicative of China pulling a fast one on America. In the global market, China is but a step on the assembly chain. Many of the products it produces are partially assembled elsewhere. China actually runs a trade deficit with other Southeast Asian nations. Finally, the entire deficit is not actually owned by China. In fact, foreign companies from Taiwan, Europe and even America own most of it.

Darfur has recently become a hot topic for Chinese critics. Oil dealings with the Sudanese government have led many to accuse China of funding genocide. But that is a false claim, as the crisis in Darfur is not genocide. The bulk of the deaths have been from starvation, which, while nevertheless tragic, does not fit the definition. If Darfur’s crisis is genocide, then there are many other genocides happening throughout Africa right now. The genocide label takes too much attention away from other crises that are just as serious. Calling it so belittles the significance of the atrocities that already own the label (such as Rwanda and the Holocaust).

Most of the world does not believe the genocide claim. And while blame is laid on China, America is guilty of similar sins. American oil companies have substantial investment in Nigeria – a nation rife with violence and corrupt government. Indeed, the humanitarian situation in Darfur is deeply troubling. So is the situation in the Gaza Strip, which has been called one of the worst humanitarian disasters of recent history. As long as America turns a blind eye to Israel’s behavior towards the Palestinians, it cannot credibly criticize China over Darfur.

The other more recent point of tension over China is Tibet, which grows restless with the Olympics only months away. Again, America criticizing China’s rule over Tibet is complicated. China believes that its actions in Tibet are matters of national security. Well, as it happens, so does Israel in Gaza. The right and wrong of either situation is much a matter of perspective.

Western criticism over Tibet has stirred Chinese nationalism. One of the more absurd comments being circulated about the Tibet issue is the belief that because China restricts information, the Chinese people are less informed and, therefore, their opinions should be disregarded. What nonsense. By that reasoning, the voices of the poor in America should be ignored, as they do not have access to the same levels of education as the more affluent. By that reasoning, the basic principles of democracy are mere fantasy. China resents criticism, like any other nation. Why should anything different be expected?

With all that said, do Americans have the right to take issue with Chinese practice? Of course, and they are encouraged to do so. But the complexities of the issues need to be better understood, as some of the criticisms being put forth border on naïve self-righteousness. Out-sourcing is not solely the result of China’s undervalued currency; America’s high health insurance costs and capital taxes play big roles (and America can address those). China could do better on human rights but, after this administration, so could America.

Furthermore, the most essential component of a good human rights record is the institutions to uphold it. That implies advanced development. China has grown by leaps and bounds, but with 1.3 billion people, it has far to go. To sustain its future economic growth, China will soon be forced to address its human rights and pollution problems, plus play a more active and responsible role in the world. Time, itself, may prove to be the best critic of all.

Those at St. James’ Street welcome comments at [email protected]