Why Obama and Romney shouldn’t have taken pot-shots at China in the debate

“Governor Romney, on behalf of the Chinese people, I wish to ask—what exactly does ‘crack down’ mean?”
“Governor Romney, on behalf of the Chinese people, I wish to ask—what exactly does ‘crack down’ mean?”
Image: AP Photo / Larry Downing
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Ever a punching bag in US politics, China was mentioned 20 times in the second presidential debate on Oct. 16. President Barack Obama and his Republican challenger, Mitt Romney, argued over who would be tougher on the world’s second largest economy and major US trade partner. Romney repeated his oft-made promise to “crack down” on China by labeling it a currency manipulator, while Obama took credit for an appreciation of the yuan and boasted of how tough he’s been on trade measures.

But as one Sina Weibo user in Guangdong, China said, “The second US presidential debate couldn’t be more boring. As always, they are using the bash-China card.” Here are a few reasons why that card isn’t helpful to the debate about US-China economic relations.

China has been letting its currency appreciate. Romney argues that an artificially weak yuan makes Chinese goods cheaper than they should be and hurts US manufacturing. But as my colleague Tim Fernholz writes today, China has let its currency hit a 19-year high against the US dollar, and there are signs that the yuan is now at a reasonable value. Analysts have speculated that a recent strengthening of the yuan, an increase of 1.3% since the end of August, was a deliberate move to help Obama, since he would clearly be less unfriendly to China than Romney. (Obama even slightly exaggerated the extent of the rise, claiming in the debate that the yuan has gone up by 11% during his presidency; it’s 9%.)

China can be good for jobs. Both candidates spent a lot of time explaining how they would create jobs and keep them in the US. One of those ways was—surprise—being tough on China. But a September report from Rhodium Group, a research firm based in New York, found that Chinese investors could create as many as 400,000 US jobs by 2020 through investments worth a cumulative $100 billion-$200 billion. That’s if Chinese foreign direct investment (FDI) in the US continues to grow at its current rate: from an annual average of around 30 deals worth less than $500 million before 2009 to almost 100 deals worth about $5 billion in 2010 and 2011, according to the report.

That trend might not continue if Romney or Obama mean what they say about being hard on China as a trade partner.

In Romney’s words:

My priority is making sure that we get more people hired. If we have more people hired, if we get back manufacturing jobs, if we get back all kinds of jobs into this country, then you’re going to see rising incomes again… I know what it takes to get this to happen, and my plan will do that, and one part of it is to make sure that we keep China playing by the rules.

Obama, taking a shot at Romney said:

When I said that we had to make sure that China was not flooding our domestic market with cheap tires, Governor Romney said I was being protectionist; that it wouldn’t be helpful to American workers. Well, in fact we saved 1,000 jobs. And that’s the kind of tough trade actions that are required.

In an editorial before the debate, China’s state-owned news agency warned:

…. it is perhaps better for these flip-flopping politicians to spend a little more time handling their own problems and a little less time scapegoating China, as their China-blaming tricks would by no means bring to the United States any substantial benefit and might eventually backfire… if the China-U.S. ties are allowed to be consumed by the zero-sum and near-sighted U.S. partisan politics, American businesses would be among the first to suffer.

Obama talks tough on China and last month blocked a purchase of US wind farm projects by a Chinese developer, citing national security concerns. But he seems to understand what is at stake in the US-China trade relationship. He said in the debate that US exports to China had increased dramatically under his administration. They have indeed, to $103.9 billion in 2011 from $65.2 billion in 2007, according to data from the US-China Business Council. If Romney is elected he would probably want that to continue, notwithstanding his rhetoric.

The China-bashing is hopefully just be bluster. As another Weibo user in Shandong, China astutely observed, “Every change of US presidents always sets off a small wave of anti-Chinese sentiment.”