Carla Hills on China

Tuesday 9 June, 2009

The Chicago Council on Global Affairs hosted the inaugural Dr. School Foundation lecture on US-China relations featuring former US Trade Representative Carla Hills, who in addition to being essentially the lead consultant @ Hills & Co. , is also the chair of the National Committee on US-China Relations.  Here’s what she had to say:

Her advice to Barack is, as the new #3 economy in the world & rapidly approaching #2, make China a priority & engage on an ongoing basis.  There are currently 60 bills in congress which affect China-consider their impact.  China is both a threat & collaborator, playing a greater role in the World Bank, IMF, etc.  On the 20th anniversary of Tienanmen Square incident, the majority of students now feel positively about the Chinese government & blame the US for the current financial crisis.  While there are still 300M Chinese mired in poverty, they have raised 200M out of poverty, a monumental feat.  While Chinese economic growth will fall from 11% to 6%, they believe 8% growth is needed for stability.  20M migrant workers which have been laid off could become a problem.  There are many dichotomies in China: investment does not equal consumption, rural vs. urban, ageism, environment, & health care are all issues.  Pollution & demand for energy are relics of 3 decades of over-investment in heavy industry.  The environmental cost is estimated to be 8% of GDP in China.  Only 15% of land is arable, & that is declining.  Of the 20 most polluted cities in the world, 16 are in China.  Currently 7% of the population is 65+, but that will double soon, which poses problems.  Treasury Secretary Geitner visited & emphasized changing the focus from export growth to domestic consumption.  Issues remain in intellectual property, dumping, & non-tariff barriers.

Q&A revealed:

  • China is active in Latin America in seeking commodities, grains, ore, steel, etc.  The US is concerned about China’s influences on foreign policy issues of other countries.  We can partner with China in this region, but need to do so without diminishing other countries.
  • China’s suggestion of a new world reserve currency simply expresses their frustration with holding so many $, watching them fall, & being able to do nothing about it.  According to her analysis, this will not happen in the short, medium, or long term.
  • Refocusing from export to domestic economic issues is happening @ high levels.  It was mentioned in lead remarks to alleviate poverty, but gears can’t be switched so quickly.

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