If right-wingnut Glenn Beck needs a China hater on the tube, he usually calls Gordon G. Chang. Chang is always good for talking bad about China. In 2001, Gordon Chang published a book titled. “The Coming Collapse of China.” In it, he predicted that China would implode by 2006, if not earlier, due to the mass of non-performing loans in Chinese state banks. Much to the chagrin of Chang, China is still standing. It must give Chang heart palpitations that the Chinese economy grew more than three times since he penned his doomsday book. To add injury to irony, instead of a China syndrome caused by the meltdown of  Chinese banks, a non-performing global financing firm called Lehman Brothers started a chain reaction in 2008 that brought the world financial system to the brink of nuclear winter.

China ranks as the world’s third largest economy since it passed by Germany in 2007. China is likely to overtake Japan to become the world’s second largest economy, either this year or by 2010. In the world of Gordon Chang, all this growth must be as real as a Gucci bag at China’s notorious fake markets.
(Read More…)

Forget the rice paddies and straw hats. Think Autobahn, and a testosterone-driven car on your tail, with his (it’s always a he) brights on. China is Bimmer country. The robust sales of BMW in China over the first nine months of the year made the Middle Kingdom the fourth-largest market for the Bavarian maker, Bloomberg reports.

(Read More…)

President Obama paid his outstanding union dues and slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA. The new duty will take effect on September 26 and comes in addition to an existing 4 percent duty, Reuters reports. Everybody, except for the United Steelworkers, agrees that this is one of the most boneheaded decisions of the new administration.

No American tire manufacturer supported the case. Cooper Tire even publicly opposed it. No wonder: US tire companies are the biggest offenders (in the eyes of the United Steelworkers), having moved most if not all of their budget segment tire production to low labor cost overseas sites. Chinese tires are not in the USA because China wants to rape and pillage the market. Chinese tires are here, because US tire companies set up joint ventures in China to make what the market demands: Tires for less.

China is not the only exporter of budget tires to the USA. According to the Wall Street Journal, 43 percent of the tires sold in the USA are imported. Only 11 percent are imported from China. The far larger share is imported from low labor cost countries such as Malaysia, India, or Central Europe. What the boneheaded decision does is simply shift tire production from China to other low cost producing countries. These countries can take advantage of 11 percent of the tires effectively removed from the US market. The low cost producers can raise their prices until the market settles. The American consumer will bear the cost. Not a single new job is created in US tire companies. Jobs will be lost at tire distributors and dealers. This decision achieves nothing for America except higher prices and troubles with China.

The American Consuming Industries Trade Action Coalition wrote in a letter to the US Trade Representative John Kirk: “The absence of tires from China in the market will raise costs to downstream consuming industries, including automobile manufacturers, will limit consumer choices and affect most seriously those with the fewest resources. Thus, these tariffs will be the most regressive of taxes.”

“Those with the fewest resources” (i.e., the poor) are easiest sold on buying the import-restriction Kool-Aid. They drink it in big gulps: Imports bad for jobs. When they find out that fewer low cost imports mean higher prices, that they still have no jobs, and that their welfare check buys much less, then it’s too late.

The complaint by the US Steelworkers does not allege unfair trade practices. No longer needed. In US law, there is a special anti-China provision, called section 421. The Hong Kong Trade Development Council explains the complicated law in the most succinct way: “Under Section 421, the USITC determines whether a specific product from the mainland is being imported into the U.S. in such increased quantities, or under such conditions, as to cause or threaten to cause market disruption. ‘Market disruption’ is defined as rapidly increasing imports, either absolutely or relatively, so as to cause or threaten to cause material injury to a U.S. domestic industry. If the USITC makes an affirmative determination it proposes a remedy, which the president may or may not implement.”

The USITC is the United States International Trade Commission, “an independent, quasi-judicial federal agency that provides trade policy advice to both the legislative and executive branches of government.” The USITC is often called the International Trade Commission to give it a fake supranational flair. It’s pure US government.

“Market disruption” is a vague concept. If anyone feels disrupted by Chinese imports, they can petition the USITC. If the USITC accepts it and takes it to the president, and if he signs it, no more Chinese imports. Under Bush, for all his failings, every section 421 petition that reached his desk was rejected: He had to decide on strategically important goods such as wire hangers, steel pipe, brake drums and rotors and “pedestal actuators,” a component used in scooters for the disabled. All voted down.

Obama approved the first 421 petition that was put before him. China and US companies are rightly afraid that this will trigger a flurry of section 421 cases. “Multinational companies such as Caterpillar Inc., Citigroup Inc. and Microsoft Corp. have urged Obama to refrain from curbing imports, saying it could lead to a “downward protectionist spiral,” writes Bloomberg.

The United Steelworkers based their complaint on the allegation that Chinese tires had cost a paltry 5,000 union jobs over a number of years. Which of course is bunk. The jobs were lost because US consumers increasingly refuse to buy the high priced tires, and because US tire companies have reacted to consumer demand and moved their production elsewhere. Only one fourth of the tire imports comes from China.

Understandably, the Chinese are deeply upset. China’s state-run news agency, Xinhua, writes, “This ruling came at a time when the U.S. economy is at an uncertain turning point from the worst recession since World War II.” Officially, China exercises restraint. “Observers said that the president needs his people to help make domestic reform smoother,” is as low as Xinhua wants to publicly stoop.

The verbiage from China’s Ministry of Commerce is stronger: “China expressed strong dissatisfaction and is resolutely opposed to this,” said China’s Ministry of Commerce (MOC) spokesman Yao Jian. “This does not comply with WTO agreements on subsidies. The U.S. used an incorrect method to define and calculate the subsidies, which has resulted in an artificially high subsidy rate, hurting Chinese firms’ interests.”

What China is likely to do is threefold:

One, China will drag the USA in front of the WTO. China will have the tacit or open support from other low-cost countries, including the EU (many low cost countries, such as Poland or Romania are EU members.) The world will also love to slap around a country that demanded free trade as long as free trade was good for America. Note that China mentioned “subsidies.” The bail-outs will come on the table also. WTO proceedings can drag on forever.

Two, China will take some tit-for-tat measures. On the table is a hefty tariff on US auto imports to China. During the first half of the year, China imported more than $1 billion worth of automobiles from the US. China could buy fewer Boeings and more Airbusses. If things get really bad, China could put a dent in the Chinese growth of the automotive ward of the state, GM. Europe will love it all.

Three, Chinese President Hu Jintao will give Obama a tongue-lashing when they meet in Pittsburgh at the G-20 Summit September 24-25. Obama will be gently or not so gently reminded that America’s largest creditor deserves a little better treatment, or the money could be moved elsewhere. Timothy Geithner will also be reminded that his announcement in June that “Chinese assets are very safe” is bunk. The greenback is on its way down. A EURO bought $1.46 today and it’s heading toward $1.50. Come to think of it, a falling dollar is the best protection against cheap imports from all corners of the world: The lower the dollar, the more expensive the imports. A truly free market needs no section 421.

Forbes writes: “The current round of disputes will undoubtedly end up in a trade war, and China, a country extraordinarily dependent on exports, will surely be the biggest loser.”

Don’t bet on it.

America is already involved in two shooting wars which it couldn’t afford would China not buy its bonds. America cannot afford two shooting wars and a trade war with its largest creditor.

In January, China’s auto sales for the first time in history exceeded America’s, making China the world’s largest auto market for the month. As we said, sooner than later, China is bound to outclass the US of A solidly. Xu Changming, director of China’s economic consultative center under the State Information Center, thinks that it is quite possible that China will overtake the United States as the World No.1 car market for all of 2009: “Chinese auto sales are expected to grow 4 percent to 5 percent from 9.38 million units sold last year, more than the estimated 9 million unit sales in the U.S. this year.”

“But this figure is not something we should feel proud of since the U.S. was just plunged into an economic recession,” Xu warns according to Gasgoo. “Once the recession ends, America can retake the sales crown by selling 16 million–17 million vehicles annually.” So even if China takes the crown this year, they might lose it, and then “China still needs at least four to five years to eventually catch up with the U.S. in the auto sales total,” said Xu. And he has reason for caution . . .
(Read More…)

An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Tokyo this week.

GM flirting with FAW: GM is holding discussions with major Chinese automaker FAW Group to form a partnership for light commercial vehicles, Reuters reports. The two parties have already registered a name with the State Administration for Industry and Commerce, which is the first step of Chinese joint venture courtship. GM already makes light commercial vehicles in China in a three-way tie-up with SAIC and Liuzhou Wuling. GM manufactures Buicks in Shanghai with SAIC, China’s largest auto maker. FAW, one China’s three biggest automakers, operates car manufacturing ventures with Volkswagen and Toyota. SAIC is also in a joint venture with VW. SAIC and FAW have been considered bitter rivals, although there are reports of a thawing. GM said its commercial vehicle venture in China sold 19.7 percent more vehicles in January than a year earlier, helped largely by sales of the Wuling Sunshine minivans.
(Read More…)

An overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. WAS is being filed from Tokyo this week.

India‘s car sales up: Just like neighbor China, India reports rising cars sales for January. Most car companies registered positive sales despite the withdrawal of price rebate schemes, India’s Economic Times reports. Tata Motors continued its negative run, with its passenger vehicle sales declining by 9 percent.

Toyota losses spreading: Toyota’s parts arm Denso and four other Toyota Motor Corp. affiliates are expected to suffer group net losses for the year ending March 31 as the automaker’s drastic output reductions battered businesses along the supply chain, the Nikkei [sub] writes.

Hitachi lowers volume of auto biz: Hitachi considers cutting in half the number of 85 marketing and production sites handling automobile-related equipment, the Nikkei [sub] says. Hitachi group company Clarion has already decided to close a factory in Hitachinaka around the end of 2010 and keep just one domestic factory open. In the US, where Hitachi operates Hitachi Automotive Products (USA) Inc. in the state of Kentucky and three other production bases, two locations may be closed.

Mazda sees red: Mazda expects its first loss in eight years for this fiscal year due to damage sustained from a strong yen and a sharp downturn in consumer sentiment, the Nikkei [sub] reports. The Hiroshima-based company now expects a net loss of ¥13 billion for the current fiscal year through March, compared with its previous forecast for a ¥50 billion profit.

Ford moving to China: Ford Motor Company’s Asia Pacific and Africa region headquarters, will be moving from Bangkok to China, Gasgoo reports. Bangkok will continue to serve as Ford’s ASEAN regional headquarters. In 2004, Volkswagen AG and General Motors relocated their Asia Pacific regional headquarters to China.

Small getting bigger and bigger: Underscoring China’s move from big to small, SAIC-GM-Wuling, a Chinese venture of GM and leading manufacturer of mini-trucks and mini-vans in China, reported all-time high sales of 75,168 units in January, Gasgoo writes. The record sales were largely on the strength of Wuling Sunshine, which remained the best-selling model and saw its sales volume hit 1.4 million units by the end of January 2008.

Not a good start for Deutschland: Germans bought 14.2 percent fewer cars in January 09  than in January 08.  Saab (-60.7 percent), Chrysler (-53 percent), Land Rover (-51.9 percent), Nissan (-51.1 percent), Jaguar (-31 percent), Skoda (-30.7 percent), Mercedes (-30 percent), Porsche (-24.7 percent) and Opel (-22.7 percent) were the big January losers in Germany’s car market, Automobilwoche [sub] reports.  Ford sold 25.9 percent more. Smaller importers such as Hyundai (+50.8 percent), Mazda (+27.2 percent) and Lancia (+13.7 percent) gained. The trend goes from big to small.

Out with a Bangle: After 17 years with BMW, U.S.-born Christopher Bangle resigns as chief designer of the BMW Group. The Bavarians go Dutch with Adrian van Hooydon. According to Reuters, Chris Bangle is “one of the most well-known and controversial people in the auto industry.” Bangle was the object of multiple online petitions calling for his sacking. After his 2002 redesign of the 7 Series sedan, the vehicle was voted one of the 50 worst cars of all times by Time magazine, along with such other infamous models as the 2001 Pontiac Aztek and the 1998 Fiat Multipla.

Never has the term “Red China” been more appropriate than in the last month. The U.S. is staring into China’s taillights. In January, the unthinkable happened. China dethroned the United States as the world’s largest car market. Not for the year. For one month only—so far. Even the biggest optimists (or pessimists, depending how you look at it) didn’t expect (fear) that China would outsell the U.S. before 2015.

The story unraveled during GM’s monthly sales call on Monday. Michael DiGiovanni, GM’s executive director of global market and industry analysis, dropped the remark that an estimated 790,000 vehicles were sold in China in January. Total U.S. sales in January were about 668,000, DiGiovanni estimated. Automotive News [sub] thinks Di Giovanni is an optimist. According to their tally, 656,881 vehicles were sold in January. DiGiovanni’s Chinese number was even news to China, where official counts are not yet available.

“This is the first time in history that China has passed the U.S. in monthly sales,” DiGiovanni said. “We are estimating that China is going to come in at 10.7 million seasonally adjusted annual rate in January. The U.S. industry, we estimate at about 9.8 million SAAR.”

What happened?
(Read More…)

As reported here, Daimler AG plans to increase its sourcing of automotive components from China nearly eight-fold within four years. The luxury car maker will buy $3.25b worth of car components per year in China. Now, BMW is itching to get in on the act. Not that BMW is new to buying parts in China, they have done that for years, mostly unbeknown to their well-heeled customers. BMW and Daimler are in talks to create a huge buying co-op. They want to create critical mass, and drop the bomb on their Chinese suppliers, the German Handelsblatt reports. By concentrating their buying power, Beemer and Benz intend to save €350m per year, in discounts alone. To assuage their American clientele, they say that they will also extend the stingy hand of their allied purchasing departments to parts suppliers in the U.S.A. However, with the dollar high and U.S. parts manufactures dead, or on the brink of extinction, the BMW/Mercedes buying axis is squarely targeted at China.  The “deeper discounts” news from Deutschland already has Chinese parts makers atwitter and alarmed. Here is why ….

(Read More…)