Indulge me for a moment while I give a little background to support my position. China’s population is 1.3 billion which causes U.S. companies to go crazy thinking about how their sales would go through the roof if they could do business with them. As you know, China put birth restrictions on their citizens so their birth rate that is 24% lower than other developed countries. Because of this India is expected to surpass China’s population in the next couple of decades.
Think about this very important factor; China’s landmass is quite larger than India’s and their population base is more spread out so even though they have a very large population their purchasing power is diminished because it’s more difficult to reach people outside of the major cities especially since a lot of them are farmers. So even if there was a good distribution network to where goods and/or services could get through to these outliers, it wouldn’t matter because this segment of the population doesn’t have the money to make many purchases. So right off the bat, the potential buyers U.S. businesses think they’d have in China is reduced dramatically.
India’s land mass is much smaller than China’s and their population is more centralized making it easier to reach from both a product distribution and marketing perspective. Plus more of their population has money to spend because of the concentration of city dwellers they have; not a lot of spending power but definitely more than an average Chinese citizen.
This is important because we give China more leverage than they deserve when it comes to business opportunities which negatively affects our trade policies with them. We make unnecessary concessions because we don’t want to blow the perceived benefits in gaining access to their marketplace. My opinion is that we’d be better off focusing on opportunities in India due to their much better trade practices; I’ll explain in just a moment how China exploits U.S. businesses, something India doesn’t do.
China has the upper-hand in our trade relations for a variety of reasons; one of which was covered above. The greatest reason they can dictate our foreign policies and trade policies with them is they own us so to speak. We borrow $120 billion dollars a year from China and it has grown by 23% over the last few years. From a biblical perspective if you owe someone money you’re their slave and they are your master; I believe this is an outstanding way of looking at it. Let’s face it we’re a slave to China. What else can we do but give in during policy negotiations.
China does a lot to negatively affect trade with them but I’ll give you a couple of examples that I feel are the worst. We protect businesses by not letting companies infringe upon other companies’ copyrights, patents, and trademarks; bottom line is that we have fair trade standards for both economic and ethical reasons. What entrepreneur would want to take the risk of going into a business venture when any company could take his or her idea and run with it? Small businesses are keeping our economy going so if we take away the incentive for going into business our economy would crash.
But here’s the problem; even though we play by these rules in the U.S., China doesn’t. A patent here doesn’t mean China will honor it. They’re
supposed to as it is an international fair trade practice, but whose going to stop them when they don’t do it. Let me give you a great example. Apple products are a huge hit with young people in China. So China duplicated some of Apple’s products and even put up an Apple store that looks exactly like those in the U.S. When it first opened, the people who went in the store had no idea it was owned by the Chinese government. Can you image how Apple feels? All those years trying to tap in to the Chinese market and they get hijacked. Of course our government got involved in what happened but once again what leverage did we have? Surprise, surprise, the Apple store is still in business (I couldn't find out how many there are now).
Another area where China is exploiting trade (not just with us but everyone doing business with them) is they depress their dollar by dumping money into their economy. A great example of this is when you travel to another country and hope you’ll get a good exchange rate. If our dollar is worth more than theirs (it does fluctuate) then you’ll be given more of their dollars to spend during your trip. On the flip side there are a lot of countries you can visit now where if you gave them $1,000 dollars they'd give you $750 in trade. The bottom line is that because China devalues their dollar it makes it more attractive for other countries to purchase their products because they costs so much less. This in turn leads to trade deficits because we end up buying way more product from them than they do us.
I mentioned this same subject in my article on our economy but it very much applies to what I’m sharing now. We’re in terrible trouble because of what China has done. Our annual trade deficit is over $300 billion dollars which is about three times what we borrow from them each year. With this in mind, over $400 billion dollars leaves our economy each year and doesn’t come back. If this wasn’t happening then those $400 billion dollars would keep going around and around in our economy; meaning when I spend $100 on a tire it goes to the tire store then they pay their employees, their employees buy things with their money and on and on it goes. Eventually it will make its way back into my pocket in one way or another and then I can keep the spending going; maybe the next time I'll spend the $100 on a tree for my yard and then the dollar starts travelling that direction. Our problem is that $400 billion dollars are leaving our wallets each year so our economy keeps going down and down. This is why I’d rather spend our time developing great relations with India versus our focus on trade relations with China. It’s not even close to a fair partnerrship with them and it’s foolish to think it’s going to change.
Let me wrap up with the scariest thing of all; the $400 billion dollars that’s seeping out of our economy each year is about 3% of our total economy. What this means is that if we continue on this path our economy will deflate by close to 30% in a 10-year period. If you’re wondering what this means; it’s called a depression; not a recession but a depression. The only way we can compensate this some is to grow our economy each year but increasing it by 3% a year is a definite reach. Plus even if we did, we'd prevent a depression but still have a recession because we wouldn't experience any economic growth which means our standard of living goes down each year due to pretty much built in inflation. Basically cost go up like food and gas but our paychecks don't.
I want this to be a wake-up call. Please contact all of your representatives and ask them about this issue and what specifically can they do to help the situation. You can copy and paste this article (don’t worry about putting my name on it you can use yours) and email and/or snail mail it to them. We tend to ignore a lot of things because we’re busy; I ask that you please don’t ignore this article. If we don’t do something to address this issue we will experience hard times like we’ve never experienced before. If you think you’d fare well in a depression then that’s fine but if you don’t, you might want to take action now!