Chinese Bogeymen Jude Wanniski March 5, 1997

Letters Editor
The New York Times
229 West 43 St.
New York, NY 10036

Dear Editor:

In "The Real China Threat," op-ed, March 5, William Greider worries that China will go into the indefinite future with an annual trade surplus of $40 billion. The idea is preposterous, unless you can imagine China being stupid enough to continue investing its annual receipt of $40 billion in hard currency in U.S. Treasury bills and bonds. Having built its monetary reserves to well over $100 billion, as a cushion against a run on its currency, the renminbi, China's appetite for U.S. paper assets will soon be satisfied, and its trade surplus with the world will turn to a deficit, as it imports more than it exports.

Greider's other bogeyman predicts that the global auto industry will be able to produce 79 million vehicles in the year 2000 and there will be a demand for only 58 million. "Someone somewhere is going to have to close more car factories — lots of them." At the current rate of China's economic growth, which will continue at 9% annually, it alone should soon be able to consume 20 million cars a year. Where will the fuel come from? Remember that China has not yet explored its vast land mass for petroleum. When that begins in earnest, they are likely to discover more oil and natural gas than has been consumed by Americans in our history.

The only way the Sinophobes can present a scenario wherein it "swamps the global economy" is by holding the United States and the rest of the world constant. In 20 years, the United States will be producing more cars than it is today, but they will all be luxury cars, and the rich Chinese will be importing them from us.

Sincerely,

Jude Wanniski