Twofish's Blog

December 17, 2006

More comments on Paulson’s trip

Filed under: china, finance — twofish @ 4:41 pm

I don’t think that is the main barrier to the State Council taking action. I think what is the case is that China considers the risk of “something unexpectedly bad happening in response to a sudden move” to be much greater than Americans.

There is also the issue of cultural expectation of time. Americans want something to happen *RIGHT NOW*, whereas among Chinese, a year or two to do something is just a blink of an eye. I thought it was odd that people labelled Paulson’s trip a failure because he didn’t get anything. If you step back, it’s a little weird to think that having one big meeting will resolve all or any of the big issues between China and the United States.

Also, I do think that fears of a protectionist backlash are overblown. There are large sectors of the economy that are against protectionism, and even people you’d think would be in favor (labor unions) are rather divided. (Longshoremen depend on China trade, and people in the service industries don’t care.)

With the sole exception of textiles, any sort of protectionism would just cause jobs to move from China to Mexico, and I think everyone realizes that.

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