Hopkins Hears a Hu

Written By Brian Hicks

Posted April 18, 2006

Man, I missed China. I missed delicious dumplings, eye-popping neon signs, and bombastic speeches. I especially missed the speeches. Halfway between high school coach and preschool teacher, Chinese bureaucrats have a flair for the sentimental as motivation. Last week in England, I refueled my reservoir of rhetoric.

At the Solar Cities Congress held at Oxford University, I met all kinds of people. Brazilian industrialists riding the ethanol wave. Berkeley-bred American architects looking to build the homes of the future from recycled and low-energy materials. And then there was the Vice Mayor of Dezhou, China.

Dezhou wants to be the site of the 2010 Solar Cities Congress. Dezhou and its leaders want this honor so badly they have compiled a showcase video to highlight the city’s current renewable energy virtues and its capability to develop even more capacity to host Solar Cities.
I learned about all this with the help of subtitle translation and the emotive power of Vangelis’ "Chariots of Fire."

As I envisioned marathon runners breaking the finish line tape, I tried not to chuckle at the sappy choice of song. But my smirk was a real smile, because I do not doubt Dezhou and China’s renewable resolve for a second.

Today, Chinese president Hu Jintao arrives in America.

We Dine on China, While China Dines on Us

The baggage Hu brings with him is really not his. It’s our election-year trepidation that he will have to deal with more than any actual policy decision that would be made independently by Beijing.

As Undersecretary of State Robert Zoellick told the Institute for International Economics yesterday, "For America’s own future, I always find it unfortunate when we blame others for our own problems. So we also have to focus on things we need to do."

So, what can the United States do to get its own house in order? Improving the number of high-dollar items we can sell to China would certainly help to reduce our monstrous trade deficits with that country. No firm knows this better than Boeing, whose executives are meeting with Hu before the leader meets with our country’s president.

China knows its business bedfellows are slightly less strange than its political ones, and we should know by now that raw economics, not Capitol Hill whining, will get China to be the best friend we could have in international commerce.

Capitol Hill loves to make a fuss though. U.S. Senators Lindsey Graham and Chuck Schumer have crossed party lines in the Senate to embark on a taxpayer-funded hissy fit to Beijing and Shanghai, where they threatened last month to slap Chinese goods with an across-the-board 27.5% tariff which, the Senators’ logic goes, would offset China’s advantageously undervalued currency.

With Easter recess in effect, perhaps the shrill political protectionist choir won’t be as audible as Hu traverses the United States of Debt.

But the politicos will find plenty more to kvetch about, with China’s growth in Q1 2006 coming in at a torrid 10.6%. Q1 growth is generally low compared to the rest of the year, so there may be reason to fear. But again, what China does should not be our primary concern.

The average American household now has a negative savings rate. Spending at the counters of fast-food restaurants across the country when credit cards are used is generally 30% higher. You just HAD to have that extra-large soda, didn’t you?

And our country’s borrowing practices (China is now closing in on 1 trillion USD in its foreign reserve accounts) are a terrible role model for American consumers. At a national level, China and Japan are essentially the bankrollers of Washington’s fancy. I say China and Japan, because no one is crying foul about Japan’s currency being undervalued as China’s is – yet our dollars still sit in Tokyo caches.

The best thing for the U.S. to hope for is that China will ramp up its purchases of American goods, especially high-tech and high-dollar items like the 80 Boeing 737s that China will snap up on this tour.

Hu is set to make a policy speech while at the Boeing plant tomorrow. I’ll bet his focus is less on praising the United States for its insurmountable technology, and more like, "We will take your planes, see what they are made of, and build some ten times better."

That is the true Chinese spirit.

Though ingenuity may be lacking from an innate one-party mentality, China can leave it to the Land of the Free and the Home of the Wildly Litigious to come up with the ideas while they take notes well enough to alter designs and skirt nascent intellectual property rights (IPR) legislation.

As the mayor of Dezhou and the Chinese Communist Party intend, China will also take the lead in a booming renewable energy industry worldwide. China is already the world’s leading producer of solar water heaters.

Axis of Evil? Try "Arc of Energy!"

Let’s not forget what competition means for global hegemony (i.e. Uncle Sam falling off his rocker).

For some reason, I seem to be the only American who is aware of the Shanghai Cooperation Organization. The six-country group, which I have written about many times, pivots around Russia and China, with four -stans in the mix as well. Now, the SCO is set to announce four new countries with at least observer status, possibly membership.

Those countries are Iran, India, Pakistan, and Mongolia. Iran’s Deputy Foreign Minister, speaking this week in Moscow, called for a Russo-Iranian "arc of oil and gas."

As President Bush tries to bring joint global pressure to bear on Iran to stop its nuclear enrichment, look to the Shanghai Cooperation Organization to throw a banana peel on the path. Quite simply, the more fuel Iran gets from nuclear, the more they have to export. Therefore, the more China and Russia can buy.

While Hu Jintao eats steak with Bill Gates this week, he knows how his country’s growth is sustained: with hydrocarbons, not microchips, does China fuel its fortune.

China hopes to make its next major economic mark not in sweatshops but in techshops. Making computers and solar cells instead of underpants may help the economy to cool a bit. But as foreign investment keeps flowing in and domestic consumption keeps the funds circulating internally, that growth is hard to stunt.

Hu might as well go for the black gold, and he will. Chariots of Fire.

-Sam Hopkins

Angel Pub Investor Club Discord - Chat Now

Brian Hicks Premium