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Treasury Secretary nominee Jack -- said he will continue to push China to stop manipulating its currency in his confirmation hearings last week but my next guest doesn't think the Obama administration.
Will do anything to stop China and he says Beijing -- I'll take it seriously until we do join me now trying to expect Gordon Chang Gordon thank you for being it would -- -- -- Currency manipulation in a minute but.
-- China says this economy grew seven point 8% last year and is very optimistic for this year but you clearly are not convinced line.
Hi I'm not convinced because by far the most reliable indicator of Chinese economic activity is electricity.
And last year electricity output increased by four point 5%.
Because GDP growth is historically 85%.
Electricity that puts us at three point 8%.
And when you look at manufacturing survey's price indices corporate results.
It just shows the Chinese economy.
Low single digits so basically you believe the state is propping it up just continuing to pump money into it it's an artificially inflated -- this estate investments so you know China has as many ghost cities in high speed rail lines to nowhere that it needs but the problem is this is taking what trying to -- further.
From its only sustainable growth model which is one based on consumption and it's creating enormous amounts of debt China -- already has a massive debt problem.
They as they say.
Every province in China is a grace they don't need more debt.
So the question is that -- constantly say they want to -- change the economy to a demand domestic demand.
Not be so reliant on all of the exports have -- made any headway in that sense not really you know since 20082009.
The role of consumption to GDP has fallen it's now about 35%.
That's the lowest rate in the world.
You know the Communist Party because of these corruption concerns has this anti consumption campaign about not going to restaurants not drinking liquor all the rest of it.
That is hurt consumption over the last two or three weeks.
This really shows that when the chips are down the other party really does believe in state investment it doesn't believe in consumption.
So with the domestic demand not really -- very important for the governments keep the currency.
Down because the exports to become that much more important calm but this has been going on for a long long time have that.
You know when is it time for the US really challenge trying to -- Well it certainly was about 510 years ago.
-- fifth -- it is certainly now you know and it's good that Jack Lew says he's gonna do something about it but we got to remember that Timothy Geithner who is now Treasury Secretary in his confirmation hearings talked about China's currency and he did nothing.
President Obama as a candidate in 2007 was talking about this.
He did nothing in his firm having -- what can -- do because the Chinese to say that's great and carry on doing what they're doing well.
Last year China's trade surplus against the United States was a 136.
Of its overall trade surplus that gives -- enormous leverage.
That number is based on China's official export numbers okay and it's probably a lot higher because China has been fiddling with its export numbers.
So you know right now we have enormous amounts of leverage but only if we care to use -- the problem is that this administration believes that we can't do anything so it's not doing anything if you have that mindset of course you're not going to do anything effective.
And we'll have to leave it on map message but a strong message of that -- and -- thank you so much ending it thanks actually -- it.
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