Caution: The U.S. Will Empty China’s Money Bag

Recently, the U.S. Senate has been pushing strongly for a bill on the Yuan exchange rate to punish China. The U.S. not only wants China to continue to invest currency reserves in America, but it also attributes the trade imbalance to the so-called underestimation of the Yuan exchange rate. The U.S. also blames China for pillaging job opportunities in the U.S. by manipulating the Yuan exchange rate and views Chinese currency reserves as stolen goods. It is obvious that the U.S. plans to not only put pressure on the Yuan, but also take money from China to save itself.

First, the U.S. needs China’s money to solve the economic crisis, but it does not accept China’s bag of money as a sign that the Chinese model is excelling. In today’s world, even though the U.S., Japan and Europe have absolute advantage in many areas, the European debt crisis and Wall Street finances have caused them to lose their credibility; this has fundamentally undermined the rationality and morality of capitalism. Although China’s significant amount of currency reserves proves the great success of the Chinese model, this model is regarded to be the cause of the wounded U.S., Japanese and European models. Therefore, the U.S. takes pleasure in condemning China. The U.S. has its eyes on China’s money, calculates how to benefit from China’s money bag and wants to extricate itself from poverty. But it still maintains its everlasting arrogance. America is using “soft power” by condemning the Yuan, to disgrace China into contributing money. China would then have to ask the U.S. for forgiveness and understanding and refrain from attaching conditions to the loans.

Second, the U.S. strategy of attacking the Yuan as an attempt to gain the moral high ground on the issue of Sino-U.S. debt can be summarized into three steps: Step one is passing the pending bill and getting itself ready for a Sino-U.S. trade war. Step two is ignoring China’s reasonable proposal for the U.S. to lift trade restrictions on technology [exports], at the same time forcing China to invest substantial currency reserves in U.S. infrastructure to stimulate the U.S. economy. The jobs that would go to millions of well-paid U.S. workers would consume a large amount of Chinese investment, forcing China to fall into the U.S.’ trap. Thus, in the future, the U.S. can effortlessly control Chinese businesses in the U.S. via technology, environmental regulations and other legal means. Step three is a tactic that never changes: Choose the most opportune time to allow the dollar to depreciate with the purpose of repudiating their debts.

Third, to achieve the goals above, the two houses of Congress and the Obama administration cooperate with each other. When the U.S. Senate strongly promotes punishment of China, rumors float around that even if the two houses pass this bill, the U.S. government might still find a way to avoid trade war through Sino-U.S. strategic talks. And if China can invest a large amount of currency reserves to support American infrastructure and extricate the U.S. from economic crisis, President Obama will reject this bill. Nevertheless, China won’t know: The two houses and the Obama administration have colluded to cheat China diplomatically.

Certainly, to be cautious about the U.S.’ diplomatic scheme to empty China’s money bag does not mean completely refusing to spend currency reserves on U.S. infrastructure; it means refusing to accept the American imperial logic and be made to invest in these projects. If China decides to invest in these facilities, it should at least follow the three points. First, China should claim what it is due. China is justified in asking the U.S. to give up slanderous statements; it should not allow Americans to borrow money from China while stating that the Chinese steal their money. Second, there should be equality and mutual benefits; infrastructure projects should not only benefit the U.S. by stimulating the U.S. economy. China has the right to ask for reasonable returns, and the U.S. should not use debentures or debt interest to cheat China. Rather, it should open to trade a sufficient number of technology products. Third is safety: China and the U.S. need to sign a loan investment contract to make sure the contract offers qualified Chinese creditors, according to the characteristics of Chinese companies, and set some necessary concessionary terms to avoid Chinese companies from being controlled or cheated in the U.S. The U.S. is in the habit of burning bridges after crossing it. China should therefore be cautious.

The author is a professor in the School of Marxism Studies at Renmin University of China.