Skepticism of Bannon declaring an "economic war" with China

Fresh off steering strategy for a presidential campaign and White House which has damaged institutions and democratic norms in the United States, Steve Bannon flew to Hong Kong in the second week of September to deliver a speech to investors at an event hosted by a Citic subsidiary. He was greeted by protesters outside the venue decrying the toxic politics Bannon is famous for nurturing. 

In line with his nationalist rhetoric, Bannon declared an "economic war" between China and the U.S. during his speech. At ChinaFile, a number of experts discussed the merits of this sort of label for the relationship between the two countries. My small contribution to the conversation is copied below. The entire discussion can be read here.

I question the motives of the messenger. The discussion above, to the credit of its participants, has revolved so far around the merits of using “economic war” as a concept in the discourse of U.S.-China relations and the extents to which China is competing on a fair playing field. But we should be wary of Bannon, a regressive political figure and “alt-right” enabler who craves conflict within the U.S. and apparently war with China, of dishing up a conversation on the policy nuances toward China. Somewhat like the race-based theories of social organization to which his Breitbart faithful adhere, Bannon seems to selectively use bits and pieces of acknowledged fact to advertise a normative argument for deeper conflict, in this case with China.

Many people within the policy and political science community have engaged for years in discussion of the U.S. trade stance toward China and its bucking of international norms and standards. This conversation should continue, inclusive of those across the policy spectrum. But we ought to remain circumspect toward those who may not be engaging in good faith, who do not intend to maintain a just and peaceful world or resort to conflict as a last resort, those who undermine democracy with ethnocentric populism and envision a world divided along such lines. Bannon’s Hong Kong speech is an effort to stay relevant after leaving the chaos he helped mold in the White House.

Raising the Minimum Wage Weeds Out Poor Working Conditions: An IMF Study Looking at China （含中文版）

Photo: Adjusting the minimum wage upward. Credit: Fufang Network.

（本文中文版在下面）

A friend of mine (and IMF economist) shared a 2014 IMF study with me on the effects of raising the minimum wage in developing countries, using China as a case study. The study, called "Does Raising the Minimum Wage Hurt Employment? Evidence from China", delivers the following upshots: (1) "a 10% increase in the minimum wage lowers employment by 1%" and (2) "in low-wage firms, raising the minimum wage lowers employment but raises wages more than in high-wage firms."

My take on this data: the employment lost from a higher minimum wage probably includes contracted temp workers or short-term workers, which are not really steady employment and usually include a number of other harmful labor practices, such as a lack of labor contracts or mandated social benefits, underage or child labor, unpaid work and overtime wages, etc. In short, assuming effective enforcement, raising the minimum wage weeds out some exploitative conditions and leaves more stable, fair employment in its place.

提高最低工资会减少恶劣工作条件：国际货币基金组织的研究

我的朋友（也是国际货币基金组织的经济学家）跟我共享了一个国际货币基金组织的研究，是论提高最低工资标准的影响，以中国为例。该研究文章叫做“提高最低工资会损害就业吗？中国的情况”，核心结论有两个：（1）“最低工资提高10%会导致就业下降1%”；（2）“在低工资企业，最低工资提高导致的就业下降幅度和工资增加幅度都大于高工资企业。”

我对研究的信息如下：更高的最低工资所导致失业情况可能包括外包临时工或短期工，二者均不属于稳定就业，也通常涉及若干恶劣用工行为，例如缺少劳动合同或法定社会福利、使用未成年工或童工、无偿工作或不支付加班费等等。简言之，在有效执法的情况下，提高最低工资标准会减少剥削就业，并留下更稳定地更公平的就业。

Media Round-up: Child labor at Samsung supplier Shinyang

On July 10, CLW exposed another case of child workers making Samsung products at a Samsung supplier plant in southern China called Shinyang Electronics. Beside child labor, there were a list of 14 other labor abuses, such as 120 hours of overtime per month, unsafe working conditions, and more.

There was a considerable media follow-up on the heels of the report. Among the stories, I spoke on CNN's Quest Means Business and WSJ Live, and interviewed with the International Business Times. The videos are below.

CNN clip



WSJ clip

"Could you help me find a sweatshop for my friend?"

(Reuters)

On Monday, I attended the fifth annual Forecast of China's Economy at the New York Stock Exchange, an event organized by the National Committee on United States-China Relations which invites Chinese experts to discuss China's economic policy and its potential to influence the economy in the coming year.

Made in the USA -- Owned in China?

There are three recent and interesting cases of Chinese businesses buying into American brands. First, in order to receive public money, Morgan Stanley had to raise some private funding. As a result, China's sovereign wealth fund now has a 10% ownership stake in Morgan Stanley, America's sixth largest bank.

Second, two Chinese investors, Jianhua Huang and Adrian Cheng, are buying a 15% combined stake in the NBA's Cleveland Cavaliers. (Incidentally, this is my hometown team.) The move by Cleveland may have a lot more to do with globalizing the team's brand than budget problems. Cleveland hopes to entice the team's phenom, LeBron James, who could be fancying a new city after the Cavs were beat -- yet again -- in the late stages of the playoffs.

Lastly, a Chinese industrial company, Tengzhong, is expected to close a deal later this year on total ownership of Hummer. General Motors, Hummer's current owner, chose to sell off Hummer as part of its restructuring deal with the federal government. 

These three bids are important for a few reasons:

1) They represent the larger economic trends underway in the US and China. During this deep and long recession, the US contracted by 6% in the first quarter of 2009 while China grew by the same amount. China has taken a hit in its export sector, but its large government stimulus and considerable investment has left many Chinese companies in strong positions. Meanwhile, the US market has made penny stocks out of heretofore dependable behemoths -- such as GM -- and these firms are cutting jobs or going belly-up. In some cases, then, Chinese companies are well-suited to buy up these quintessential American brands while the market price is dirt cheap and the US companies are desperate for cash. In short: China and its businesses are gaining from the economic destruction taking place in America. 

2) Relatedly, such investment is ultimately good for the US economy. America's deflation is worsened by the lay-offs produced by businesses shutting down. Every Chinese firm that saves a US firm from liquidation helps to counter deflationary pressure. For example, Tengzhong's buy-out of Hummer will keep employed 3,000 factory workers as well as employees at 100 Hummer dealers.  

3) These investments are signs of deepening globalization. As Chinese entities take more ownership in US entities selling in the American market, China's fate will necessarily be more connected to the fate of America. Even though the pattern, until recently, has been interconnection via cheap Chinese exports and incredible American consumption, this new direction should be expected to become more common. Furthermore, heightened interdependence will make official Sino-US relations more complicated. But at the same time, it may also assure that the relationship remains peaceful. 

Of course, you may have a problem with the loss -- partial or total -- of big American brands to foreign entities. (A "quasi-American" Hummer just doesn't have the same patriotic appeal.) I would offer a couple responses. First, if it is any comfort, most components for your favorite American products have been coming from abroad for many years. Second, find a positive coping mechanism. Globalization is quite unlikely to go away, particularly during the most globalized recession in human history.