The economic growth of 10 percent recorded by China in 2005 would seem to contradict a tenet of faith of all good democratic capitalists.
China's performance tells us that, contrary to the teachings of free-trade liberals, dictatorship and protectionism do not necessarily ensure stagnation. For China is a one-party state and the most protectionist great nation on earth. Yet, her growth has been unequaled by any free-market rival nation for 15 years.
How does China achieve her success? By keeping her currency cheap -- refusing to let it float against the dollar -- China is able to offer Chinese goods at fire-sale prices to U.S. consumers, while the cheapness of her currency keeps U.S. goods priced out of China's market.
Despite blustery U.S. protests, the arrangement continues, because both nations see their interests served.
America's consumers want quality goods at the cheapest price. American businesses want to maximize profit by producing at the lowest cost. China accommodates both, by providing efficient and reliable workers at a tenth of the wages an American needs to support his family.
The plaque inside our Statue of Liberty reads, "Send us your tired, your poor, your huddled masses, yearning to breathe free." Beijing says: "Send us your jobs, factories and technology, and we will produce your goods at a far lower price than your own people."
What the U.S. transnational corporation seeks is to retain its privileged access to American consumers, while getting rid of its American workers. China is delighted to accommodate.
Thus, it was our capitalists who were the first and most enthusiastic hosts of Chinese President Hu Jintao on his visit to America. But what does Beijing want?
In China the consumer does not come first. Nor do the voters decide policy, for there are no voters. The regime, state and nation come first. China's leaders want to make her first in manufacturing and high-technology, to become the primary producers for the world, and to displace the United States as the dominant power in Asia and the world.
The story of China and America is the story of the ants and the grasshopper. We spend every dime we earn. The Chinese are forced by the regime to sacrifice the present for a future their leaders envision.
In 2005, China ran up a $203 million trade surplus with us, selling us seven times as much as she bought from us. That trade surplus with America is responsible for 100 percent of her economic growth. China literally produces for the American market. As a result, her dollar reserves are the largest on earth, approaching $1 trillion.
What does Beijing use the money for?
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