As John McCormack reported yesterday, Republican vice presidential candidate Paul Ryan had this to say about China:
“Free trade is a powerful tool for peace and prosperity, but our trading partners need to play by the rules," Ryan said. "This challenge focuses on China. They steal our intellectual property rights, they block access to their markets, they manipulate their currency. President Obama promised he would stop these practices. He said he’d go to the mat with China. Instead, they’re treating him like a doormat. We’re not going to let that happen. Mitt Romney and I are going to crack down on China cheating and we’re going to make sure that trade works for America.”
Patrick Chovanec, a business professor at Tsinghua University's School of Economics and Management in China, writes in to say that Ryan and presidential candidate Mitt Romney should know this about China:
1) China's economy is not just slowing, it is entering a serious correction. The investment bubble that has been driving Chinese growth has popped, and there are no quick "stimulus" fixes left. There is the very real possibility of some form of financial crisis in China before year's end.
2) China is in the midst of a once-in-a-decade leadership transition that has not been going smoothly. The transition will take place, but it has paralyzed the Chinese leadership's ability to respond to the country's growing economic troubles. China's leaders believe time is on their side; they do not "get" how serious and urgent the situation is, and that what has always "worked" is no longer working.
3) China's economic problems spell trouble for the U.S. on several fronts.
* First, China is flirting with devaluing its currency to boost exports—a move that will put it in direct conflict with Mitt Romney's commitments on this issue.
* Second, China is already dumping excess capacity in steel and other products onto the export market, a tactic that is likely to inflame trade tensions and reinforce imbalances in the global economy.
* Third, in a worst case scenario, China may be tempted to provoke a conflict in the South China Sea to redirect popular discontent onto an external enemy.
All of these things are happening now and could unfold before the end of the year, or the end of the campaign. They will certainly shape the first year of any Romney-Ryan administration.