Globalization Unit Lesson 4 US-China Relations Globalization Unit Lesson 4

Objectives Review China’s economic transformation & growth. Identify & describe key issues in US-Chinese relations. Deconstruct the “currency war” Evaluate speeches to determine how perspective influences policy.

Warm Up How did a subprime mortgage crisis lead to a downturn in the global economy? Lending houses bundled mortgage-backed securities & lost $ with high foreclosures Credit-default swaps by AIG insurers threatened massive losses Collapse of Bear Sterns & Lehman Bros led to global market panic & credit crunch Decrease international trade & GDP

China’s Economic Rise Mao Zedong Deng Xiaoping (1978) FAIL! SUCCESS! Command econ Great Leap Forward Collective farming Deng Xiaoping (1978) Decollectivization farms Lifted price controls Allowed private enterprise Opened foreign investment Privatized industry Socialist or free-market? FAIL! SUCCESS! Mao – followed USSR example in creating centrally planned economy (decide what goods to produce & who’s going produce them). Harnessed people & resources to build roads, ports, dams, and other large-scale projects. Implemented economic revitalization plan called Great Leap Forward in late 1950s. Plan to organize peasants into huge peoples communes – 10s of 1000s of people, self-sufficient in agriculture & industry. Failed! Disorganized, bad weather = crop failure = famine killed 30million people. Deng wanted to reform economy – realist, advocated practical policies to advance China’s development. Dismantled command economy. Help 70% p population living in country. Families could lease farm land, lifted price controls 7& allowed to sell most of crops in market place. Loosened controls on housing, health care, education in countryside. Allowed to open business outside agriculture. Within 7 years, output up 50% Extends reforms to industry & commerce. Opened up to foreign investment, expanded international trade. Created Special economic zones along coast (easy investment, little got interference). Millions new enterprises open. Mix of socialism & capitalism – Chinese government party calls itself communist, most scholars see a socialist poly & econ system. Govt manages goods and social services (health care, education) – is really moving toward free-market economic system. Many socialist features – workers obtain housing through got workplace, pay little rent. Largely controls food prices. Owns many businesses, employs millions of people.

China’s Economic Rise Impact Rapid Growth Unemployment issues Environmental impact Pollution Population growth Govt corruption Free thought Rural-Urban divide Rise crime Inflation Govt-run businesses outdated & inefficient (too big) (can’t all guarantee free home & healthcare) Rapid industrial expansion with coal & oil (burns more coal than US, Japan, Euro combined) – 20% greenhouse gas emissions. Traffic & plants polluting air, water – threaten human & animal life. 1.3 billion (+8 million /year) – demand energy & food. International community pressuring for change in all areas to more sustainable growth Emphasis on individualism & materialism led got officials to want pike of action for themselves. Bribes (permits, licenses, building, docs), embezzlement, Cell phones, TV, internet linked China to world – tourists & students too introduce Western world to China. Govt has tried to censor! Youth have shifting values – economic opportunity makes them less likely to challenge/criticize got (unlike 1989 – Tiananmen Square Riots) Millions older people or people in rural areas suffer from poverty while there is a growing urban middle class. Urban homeless, beggars. Farmers still can’t own their own land – declining infrastructure in rural areas (roads, bridges, irrigation canals, grain silos). Rise in violent crime, drug use & prostitution. Crop prices don’t’ keep up with cost of manufactured goods -

Presidents Xi Jinping & Obama shake hands June 2013 China on World Stage Trade, Aid, Influence Ex: Africa (Economic investment vs. Political might) UN Security Council Sovereignty Modernized Military Nuclear Force Rival to US in trade, aid, and influence around globe Invest in Africa strong and growing over past year. Sovereignty – generally supports right of country to govern own affairs. Wary of interfering in what it considers internal matters (b/d doesn't want US interfering with it). Not fan of economic sanctions – prefers other diplomatic means to pressure countries to change policies (aid & development). Presidents Xi Jinping & Obama shake hands June 2013

US-China Relations Term Brief Definition Significance Budget Deficit US got spends > earns, borrow $ to fund spending China funding up to 10% US debt…undue influence Trade Imbalance US buys more goods than it sells to China US pushing China to change policies to close gap Tariff Tax on imports US free trade, China protectionist WTO Governs global trade Both benefit from drawing China into internatl system, both critical of others practices Intellectual Property Laws Protect rights of businesses over their creations China pirates US music, film, and software products Recall Remove dangerous products from shelves Lack oversight & safety in Chinese manufacturing put Americans at risk (toys, pet food, medicines) Currency War Competitive devaluation of currency Makes goods cheaper, long-term decline in profit & trade

BRICS 2001 Goldman Sachs Paper Economic & Political Reforms Fast growing economies (investment potential)! Significant influence regional affairs? BRICS Forum 2011 Brazil Raw materials Russia Raw materials (oil & n.gas) India Cheap services China Cheap manufactured goods South Africa/South Korea?

Closure Can you think of other areas over which the US & China disagree? Taiwan Tibet Human Rights Military modernization (nuclear) & arms markets North Korea Role of UN Security Council (diplomatic vs. economic/military sanctions & intervention)