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Let's focus on what we can change
January 20, 2011 - Rob Weaver
As Chinese President Hu Jintau visits the U.S. this week, there has been heightened awareness of issues between the two countries, including human rights, the trade deficit, economic growth and military might.
Of these, I think the trade deficit is the least important. I base this view on the purchasing power of individual residents of each country.
Note that, according to an Associated Press report, in China, “average incomes for citydwellers rose 11.5 percent in 2010 to about $3,200. Rural per capita income surged nearly 15 percent, but at $900 it lags far behind.”
Meanwhile, U.S. per capita income — even after the recession — is more than $30,000.
Plainly put, Americans can buy more stuff than their Chinese counterparts.
Of course, there are about 308 million Americans and about 1.3 billion Chinese. The potential for economic growth in China is what contributes to China’s clout. From 2005 to 2010, the U.S. economy grew by 16 percent. During that same period, China’s economy doubled.
That growth propelled China to its current status as the world’s No. 2 economy, trailing only the U.S.
Our economy still is about twice the size of China’s. It would be an amazing feat for China to double the size of its economy again in the next five years, though; inflationary pressures and infrastructure challenges likely wouldn’t allow that.
Plus, the overall population is aging, which is not surprising, considering the official one-child policy. I also wonder what will happen in a few generations, when the lack of family support — the absence of brothers, sisters, aunts, uncles, nephews, nieces and cousins — transfers the burden of supporting the elderly to the government.
If current conditions persist, I see one (or both) of two things occurring: Rising production costs in China will slow an narrow the trade gap; and devaluation of U.S. currency leading to China, and other creditors, declining to fund our growing U.S. national debt.
Ultimately, as Hu’s visit fades from view, Americans should refocus on two inter-connected issues we can control: stabilizing and reducing our national debt, and growing our economy.
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