The American economy: what role does China play?
As President Hu Jintao of China prepares to visit the United States, Sarah Smith looks at whether the Chinese are helping the US economy or trying to take it over.
President Hu Jintao is about to arrive in the US for his first official state visit. He will touch down at Andrews Airforce base about an hour after Channel 4 News comes off air.
Vice President Biden will be on the tarmac waiting to greet him. On Wednesday a very grand state banquet will be held in his honour. Only the second official banquet hosted by the Obamas. The first was for Indian PM Manmohan Singh.
This choice of guests makes clear who the White House sees as America’s most important economic allies and competitors. And China is both. Financial friend and foe.
In Saginaw, Michigan they don’t know whether to love or hate Chinese economic might. One of their major employers Nexteer Auto, was about to go bust when the Chinese stepped in and bought the firm. 3,000 jobs were saved, but at the cost of US dignity.
When something as iconically American as the auto industry is being bought by the Chinese it feeds American fears that their economy is about to be overwhelmed by China’s.
Ads like this show how politicians can tap into the fear of China and exploit it for their own ends. In this case arguing to cut back US government spending.
The truth is that the Chinese have far more money to spend than Americans these days. They are the ones who can afford to buy up parts of the ailing US car industry and have money left over to invest in further expansion.
The only American firm bidding to buy Nexteer wanted to “downsize and consolidate operations”. In other words cut jobs and shrink production. Pacific Century – the new Chinese owners – want to expand and can afford to make that happen.
It’s the biggest deal of its kind in America and it will test just how much inward investment – from China into America – the US can stomach.
People were initially worried that Pacific Century might just move the whole operation to China. Others are convinced that this Chinese firm only bought Nexteer because they wanted to get their hands on the one thousand unique patents that Nexteer owns.
Patents that could help to build the emerging Chinese car industry. But Pacific Century seems to be committed to Saginaw for the next five years at least.
The Chinese want to make this deal work because they are increasingly looking for places to invest their money and they want to be welcome in the US.
Just as their president will be warmly welcomed to the White House. There will be requests from America that the Chinese stop keeping their currency artificially low to keep the price of their exports artificially low.
There may even be some concerns expressed about Chinese military expansion. But mostly there will be polite greetings and praise for the country that owns nearly one trillion dollars of America’s debt.
And now owns a major cars parts factory in Michigan. As Hillary Clinton memorably said: “How do you get tough with your banker?”