China: Big wallet, many questions
China’s economy receives so much press these days that any writer striving for originality is mighty tempted to steer clear of the China News Fad. Bandwagon journalism is, like pop music, a modern scourge. Still, for today, let’s pretend that the CNMI had some actual interest in becoming a successful economy, and that China, our nearby giant, was consequently of interest.
Whether or not China will flood the CNMI with easy money and tourists is anyone’s guess. China is not, however, a fat and sassy, bourgeois-based leisure economy. Which isn’t to say that China doesn’t have travelers, or leisure, but most of the breathless enthusiasm I’ve read in the international tourism industry is long on hype and short on macroeconomic analysis.
The fact is that nobody knows where China’s economy will be in, say, three or five years. Got that? Nobody. Consequently, nobody can really predict how many of the Chinese will be at the roughly $14,000 income level that I consider a rough benchmark for being international tourism candidates. Only a subset of this category would be candidates for CNMI tourism.
There is, of course, lots to be said about China’s economy on its own merits. They’ve just clocked in another eye-popping quarter of 9.5 PERCENT growth. But budding tensions with Uncle Sam are a factor to track, and the Commonwealth is going to have a front row seat to these tensions, which may run the gambit from talk, to threats, to currency wars….to a shooting war.
China produces stuff. America goes into debt to buy it, frequently sucking equity out of inflated home values to do the deed. After diligently selling wares to the U.S. market, China is building a stash of dollars that could hit the $1 trillion mark by the end of next year. America, on the other hand, has nothing but more debt to show for it. You tell me who is in the stronger economic position.
Ah, but a hoard of dollars doesn’t do you any good unless you can spend them. China has been trying to do just that, as their CNOOC, Ltd. has been locked in a competition war with Chevron to buy oil giant Unocal. The bottom line here is that if China gets screwed out of the deal merely for being Chinese, it could, theoretically, decide to flex its economic muscle in response.
And the flexing would be easy. China could probably crash the dollar in a day merely by selling some of its stash of dollars. U.S. interest rates would spike. The debt-laden U.S. economy would plummet.
Actually, China or not, the dollar is going to burn down eventually, the only issue is who is going to run for the exits first. Once somebody makes that dash for the exit, nobody will want to be the last one out the door.
Even if China doesn’t dump its dollars, it might make an attractive scapegoat for America’s coming economic problems. In the U.S., Asian households earn substantially more than other households do, on average, and this fact is already breeding resentment among Homer Q. Public. Maybe Homer should turn off the big screen TV and raise his SAT scores…but that aint’ going to happen, it is easier to blame the Asians for things. Never, ever, underestimate the power of envy.
If tensions arise between the U.S. and China, I think the most likely outcome is that China will warm up to Europe’s market even more; it’s about the same size as the U.S. market anyway. Add that to inter-Asian trade, and China has no shortage of promising markets to address. Besides, at some point, isn’t there a limit to how much debt U.S. consumers can saddle?
On the other extreme, the shooting war realm, we’ll ponder that another time.
As regards the CNMI tourism industry, Japan is still the key player here, though nobody wants to hear that, since it’s not a childishly “creative” answer to things. Lacking the competence to market to Japan does not mean that we will have the competence to market to China.
China does hold promise, but nobody knows how much promise. China plays a role in the CNMI tourism industry, but nobody knows how large that role will be in the long term. The China question is going to be just that, a question, on many levels for years to come. If you’re looking for a way out of the CNMI’s economic mess, forget about China for now, and concentrate on the Commonwealth’s coming election.
(Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. Comments? E-mail him at Ed4Saipan@yahoo.com.)