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Obama tackles US-China trade issues

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Obama tackles US-China trade issues

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Recession or not, China’s inexorable rise shows no signs of stopping. It’s already overtaken Japan to take second place in the world economic league, and analysts say China could replace America as Number One within ten years. As the two giants compete in the global market place, issues such as human rights are relegated to the back-burner. In difficult economic times, trade takes precedence. And, particularly, currency imbalances. The huge discrepency in the value of trade between the USA and China is not helped by the strength of the yuan, which many economists say is undervalued, which makes Chinese goods particularly cheap.

Last year, cross-Pacific commerce was worth more than 400 billion dollars: the US bought more than 330 billion dollars worth of Chinese goods, around five times the amount of trade going the other way. That means an annual American trade deficit of around 260 billion dollars. “The relationship is based on the fact that Americans buy Chinese products,” said China specialist Sydney Rittenberg. “China takes the money and finances the national debt in America. Without this financing, life would be much harder in the American economy.” The two economies are ever more interdependent. So, however much President Obama would like to use taxes and a ‘buy American’ policy to bring the deficit down, he has little room for manoeuvre on other issues. “The United States government will not drop these issues, they will continue to raise them and to play a role, and where necessary, apply pressure,” said Rittenberg. “But that won’t allow them to interfere with discussion on the main issues such as security and economic ties and so on.” So, Obama will urge China to accept its responsibilities, and play its part in the global recovery. By buying more foreign goods, it will help the rest of the world recover from the deepest slump since World War Two.