China, U.S. an odd couple
Furniture Today Staff -- Furniture Today, August 26, 2010
Politics isn't the only thing that makes for strange bedfellows; so do economic relationships.
Take the somewhat peculiar relationship between China and the United States. In fact, a better term might be a codependent relationship.
Thanks to our growing appetite for most of what China exports - in our case, home furnishings - the Chinese need U.S. consumers to keep buying those goods.
In return, Uncle Sam needs China to keep buying our debt to help keep our precarious economy above water.
But it's getting interesting. As a result of our recession, we are quietly placing fewer and smaller orders with China.
And rather quietly, for the second month in a row, China reduced its holdings of U.S. Treasury debt.
Publicly, the two codependents strike a familial pose. Privately, however, the image may be more like a cartoon depicting two people with their hands tightly wrapped around each other's neck and a caption that says, "Careful, friend."
Now, with China having officially passed Japan as the world's second-largest economy, I wonder if this could result in China squeezing just a little bit harder.
According to most global economists, China's economic eclipse of Japan has monumental significance. While other countries are struggling to realize any growth, China has been zipping along at an annual growth rate of about 10%.
And while China's economy is still only about one-third the size of ours, one can't help but wonder how much further - or faster - China will continue to assert itself politically and economically.
To be sure, a key factor in China's growth has been its ability to be a low-cost producer of just about everything, from furniture to fabric.
And an infusion of $586 billion as part of China's government stimulus plan didn't hurt either. But how can China continue to enjoy double-digit growth when some of its biggest customers, including the U.S., aren't ordering at the same levels?
A logical answer would be for China to shift its focus and begin selling more of what it makes in its own backyard.
And considering our dependency on imports, that, my friend, would be a game changer.
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