China's Paper Tiger, Unfair Currency Advantage, Stirs Gov. Granholm

Loss of Manufacturing Jobs to China Major Issue in Presidential Race

August 27, 2003
By: Dave Rogers

It's the economy, and unfair manufacturing competition from China, stupid!

Gov. Jennifer Granholm is among politicians leading the charge to change Chinese monetary policy which many commentators believe is giving the Asian economic tiger an unfair advantage.

Gov. Granholm says the issue of retaining manufacturing jobs in Michigan is so important she will make Chinese monetary policy a test of who she endorses in the Democratic Presidential primary.



The problem is caused by a 20-40 percent currency advantage which China maintains over the U.S. dollar. The Beijing government pegs the yuan, China's currency, to the dollar rather than allowing it to float in world currency markets. Economists say that undervalues the yuan by up to 40 percent, allowing Chinese manufacturers to inundate U.S. markets with products at ridiculously low prices. Spokesmen for American manufacturers say they can compete with China but not with the unfair currency advantage.

What that means to us in Michigan, and especially the Saginaw Valley, is that employers who can't compete lay off their workers, who then can't afford the cars, homes and products to keep local economies vibrant. We see the results graphically in empty stores, offices,apartments and parking lots.

One metal fabricator in the Saginaw area was undercut in price by a Chinese firm despite the fact that the automotive related product he bid on had to be shipped to China and back. About six employees lost their jobs, and the business owner hasn't been able to find work to rehire them. That story is repeated in different versions all over Michigan, and the Midwest, affecting hundreds of thousands of workers.

It's about time the Bush Administration got on board to address the problem before the worst fears of some American manufacturers are realized and our industrial base is gone. Talk about a national defense issue! Without the industrial infrastructure to make the planes, tanks and ships needed for national defense we would be helpless before a foreign aggressor -- perhaps China itself. Remember, China is still a Communist country, albeit one in democratic free enterprise sheep's clothing. Who knows what their real long term intent may be? Ambitions for world domination have come from lesser military powers in the panorama of world history.

The issue is made obvious by reports that last year about 80 percent of the world's largest construction cranes were at work in China. A government-directed infrastructure building boom caused fixed asset investment in China to rise by a third in the first half of this year over the same period last year.

Bay City, which used to make the largest cranes in the world until about 25 years ago, is clearingthe industrial site where those cranes were produced for a riverfront development project. Condos, casinos, a ship museum, shopping centers are among the uses bandied about. Tourism, not industrial jobs, is the focus.

An outbreak of protectionism is on the horizon if monetary rates aren't equalized and the flood of cheap Chinese imports doesn't slow up. And it will be well justified. We can't give away our industrial infrastructure and job base and remain the most prosperous country in the world. The signs are evident that our future could be in the Third World rather than the First.