China - "non"-helpful?

Dr. Brad Sester claimed China had been "unhelpful" (in the effort of easing the world from this current mess), because China has just increased its tax rebates on exports and all that.

This actually gave me comfort about China's situation, and as it follows, the world's. Alright, China did not help the world directly. But at least it does not try to drag the world further down by drowning itself, which would by itself be a pretty darn impressive performance. And as I would argue later, not helping the world directly while helping itself is ACTUALLY helping the world indirectly. So I tend to replace the word "unhelpful" with "non-helpful", which carries a very different meaning.

What we have been most concerned (myself, I think Prof Stephen Ng-sheung Cheung as well, etc) is that China may blow its own hot head by thinking it could save the world. Fortunately, if Dr Sester is right, it is not. It is just 'selfishly' laying down and tries to get itself out of this mess with the best it can do.

That is a consolation, a pretty major consolation.

Because, if some third world country starts using its central planning mentality and starts to solve the problem of the world, the world should be scared. The people of that country, more so.

I cannot say the PRC government has done the right thing, at least not yet. But so far, it hasn't done some major wrong stuff, especially regarding the things that Dr Sester talked about it seems to be getting it right.

There is some debate in the comment section of Dr Sester's post, mainly with contributor twofish -- who argues China should mind its own business and should not mind what is not part of its business. I am with twofish, that China should mind itself first, and itself only. But I come from a perspective that twofish hasn't mentioned yet (perhaps it is so obvious in his mind that he didn't bother to mention),

• That China should first of all try to get itself out of the mess (which seems to have already been taking toll, check the latest Q3 GDP number and other stats). And do whatever it could to achieve this.
• If this means currency depreciation, let it fall. If this means VAT rebate, do it. If this means lowering profit tax, do it. Dr Sester may argue that it is too minute to matter, but at this era every tiny cent matters.
• Do only what is meaningful to the long term, and do what would help with the capacity utilization of its labour, equipment, whatever. But do NOT spend just for the sake of spend, because that is wasting resources. Since resource is scarce, you do not want to put them in to the wrong place. You especially do not want to pay $85bn for 80% of AIG and then add another $65bn for what? another 61% of AIG? how do you buy 141% of a company when there is only 100% in total?

This is what free economy is all about. Mind your own business, not others. Getting yourself out of the mess is doing everyone else a big big favour, by not dragging others down to hell with your mess. In the macro (global) context the units are countries, China, Japan, EU, US, Mexico, Brazil. If you find this hard to understand then think about this in a micro-level, China is your factory a few blocks away, US the walmart down street, HK a little 7-11 downstairs, free economy means every manager (CEO or Prime Minister) tries to make the best out of his own business. Socialism means some big brass dictates who is doing what and the factory should reduce production and raise price and that. That had been proven to be not working, by Mr Deng Xiaoping and Mr Gorbachev. Those in Beijing, I know you may not notice this little blogger here, and I know you are smarter than those who would need my little reminder, but just in case, please do not change the world into another People's Commune.

p.s. This may look like a counter for Dr Sester's post. But it really isn't. In a way, Dr Sester is doing what the Walmart manager is doing, trying his best to lift Walmart out of its mess. But I tried to look at this from a broader perspective, i.e. from the principle of capitalism and decentralized decision making, (and a non-zero sum persective) to argue that what he said is not exactly correct, in that China minding its own business is indeed an indrect help to the world.

p.s.2. About "non-zero sum". RMB depreciation, VAT rebate, wouldn't that means a gain in China is a loss in the rest of the world? (be it US the consumer or Vietnam the competing producer). Not really, not if the sum of consumption is not a fixed number. Looking at the world as a whole, the apparent gain in market share by China, is first of all, based on untilization of some idle capacity so there is really little incremental cost. Then the Vietnam's and Bangladesh's could also lower their currency, so could the US(!). Overall the world gains in (1) better capacity utilization (2) more importantly, net addition of a few people (those who had been able to keep the job and the capacity utilizaed) who can afford to consume!