Each and every time we have an election, we always hear the same big words from our politicians saying that they will be announcing China as a currency manipulator and pushing them to change their policies, and if they don’t we will buy much less from them. Well in theory I think that would be really great. Because that’s a basic bargaining tactic. You are the biggest client of your vendor and you tell your vendor if they don’t drop their price, you will go somewhere else. Well if there in fact is someone else, this might work (also we are NOT counting this vendor as your 3rd largest customer in your whole portfolio), but what if there isn’t anyone else. I have always been the analytical type that likes to check the numbers for comparison. According to our Foreign Trade Stats, if we combine main “China alternative countries” like Taiwan, Indonesia, Malaysia, Singapore, Thailand and India with their 2012 first 8 months trade numbers, they are not even half of what we bought from China between January and August. In this comparison we don’t have certain commodities that we have to buy from China anyways, as other countries don’t have it, and the same thing goes for the certain commodities that we have to buy from that specific country.
NOTE: All figures are in millions of U.S. dollars on a nominal basis
So when you think about it, would you like to have less variety of products when you go to a toy store, a retail store or a gift shop? Would you mind $15 tomorrow, for something you paid $10 for today? I bet a lot of us would mind. This is a very similar example if we think the currency will bring jobs back to the United States. In USA, the labor force is much better trained and skilled than in China. The job/salary ratio is completely different and it will not compensate our lives and at the same time produce competitive products. Besides the imports side, in 2012 until end of August, China was the 3rd largest export market that USA had after Canada and Mexico. So they are the largest overseas customer for US products. Considering the growing buying power of the Chinese people (especially on the coastline) for consumer goods, exports to China will only go up from this point on. As the need for higher quality products and brands increase, our exports to China will also increase. On top of the trading cooperation, growing China is having new projects of energy and infrastructure. US companies like GE, Boeing or others have their fair shares of these projects. Certainly there are also Chinese companies working in the United States, but the numerical dollar value comparison is not comparable with what we have there and what they have here. So, I think we should check all the facts and see if we really have a strong hand in this bargain or not.