Backlash over China curb on metal exports

China's draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.

By Ambrose Evans-Pritchard, International Business Editor
Published: 9:52PM BST 29 Aug 2010

It is the latest sign of rising pressure after angry complaints by companies outside China that rely on this family of 17 metals for hybrid cars, mobile phones, superconductors, navigation, and a host of high-tech industries.

China's commerce minister Chen Deming said that Beijing would not back down over the export quotas. "Mass-extraction of rare earth will cause great damage to the environment, that's why China has tightened controls," he said, repeating the official line.

Beijing set off shockwaves in early July when it announced a 72pc reduction in rare earth exports over the second half of this year. The country has acquired a near monopoly, with 97pc of global output after under-cutting the rest of the world with Mongolian ores in the 1990s. The sudden cut-off since July has drastically restricted supplies to the rest of world.

The last US mine shut 14 years ago, discouraged by tough US environmental rules. The US General Accounting Office said China now has a "dominant position" with market power. "Rebuilding a US rare earth supply chain may take up to 15 years," it said.

Washington is examining claims that China's curbs breach World Trade Organisation rules by giving preferential access to Chinese companies. The US Trade Representative is collecting data from US firms to assess the basis for a legal challenge. There are strong suspicions that Beijing's aim is to force foreign companies to locate technology plants in China.

Baotou Steel High Tech Co said in February that it was building storage space for 200,000 tonnes of rare earth oxides. The company has since been told to stockpile metals by party bosses in Inner Mongolia. China Daily reports that Baotou and Jiangxi Copper are aligning their policies and now "virtually control" the market.

China claims it will need a growing proportion of these metals for its own industries, but US and Japanese officials say privately that Beijing's methods are not in keeping with the WTO ethos. Japan has already drafted a "Strategy For Enhancing Stable Supplies of Rare Metals" and has been stockpiling.

Rare earth metals are sprinkled in iPads, BlackBerrys, plasma TVs, lasers, wind turbines, hybrid engines, and smart bombs. They cannot easily be replaced, if at all. Neodymium enhances magnets at high heat, and cerium is used in catalytic converters.

Rare earth ores are not in fact rare, merely scattered and costly to extract. There are ample reserves in the US, Australia, Canada, Russia, and Greenland. A number of explorers are reopening mines but will not produce significant amounts until mid-decade.

Don't Get Fooled by Bernanke

by Brett Arends

Tuesday, August 31, 2010

When are investors going to stop getting suckered by Ben Bernanke?

The Dow Jones Industrial Average (^DJI - News) jumped nearly 200 points Friday after the Federal Reserve chairman's pep talk on the economy. Worldwide markets followed suit. And long-term interest rates rose on his sunnier outlook.

Yes, the Fed chairman seemed to rule out a double dip. And yes, he said he stands ready to pump more money into the system if it should falter.

But so what?

On forecasts, the Fed chairman is about as useful as a New England weatherman.

As for the talk of more quantitative easing: A close reading of Bernanke's word's make you wonder if he even understands the crisis at all.

Let's look at the forecasts first. "I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace," Bernanke said at Jackson Hole.

Good news? Some people clearly thought so.

But this is the man who four years ago predicted a "a leveling out or a modest softening" in home prices. (He also said households were in "reasonably good" financial shape, because their booming house prices were offsetting their rising debts).

Just over three years ago he said the subprime crisis "seems likely to be contained", adding that he saw "some tentative signs of stabilization" in house prices.

As late as April, 2008, with the great implosion just months away, he forecast "a return to growth in the second half of this year and next year." You remember that return to growth we had in the fall of 2008, don't you?

Last Friday he admitted the Fed had been as surprised as everyone else by the sharp downturn in the U.S. trade balance in the second quarter. So what's new?

When the time comes to write Ben Bernanke's biography, I already have a great title. How about "Behind The Curve"?

I don't want to be unfair. He issued caveats along the way. But so he did again last week. Nothing's changed. And maybe Ben Bernanke's economic forecasts aren't any worse than anyone else's. But that's hardly the point, is it? And even if they're no worse, are they any better?

And this isn't even the biggest concern arising from Friday's speech.

Bernanke keeps talking about bank lending and consumer confidence.

But how can anyone look at the most indebted nation in the history of the world and say it is suffering from a lack of credit? And why on earth should consumer confidence miraculously pick up when those consumers are broke and out of work? Is he suggesting we start handing out Vicodin? Should we legalize pot?

Bernanke knows that the real problem with the economy is a lack of demand. "Fiscal impetus and the inventory cycle can drive recovery only temporarily," he says. For a sustained recovery, he says, "growth in private final demand — notably consumer spending and business fixed investment — must ultimately take the lead."

In the past, the bulk of this has come from the consumer. But look at the numbers. American families, according to the Federal Reserve itself, already owe $13.5 trillion. That is twice what they owed ten years ago, and four times what they owed twenty years ago. For all the talk of people repairing their balance sheets, that figure has fallen by a grand total of 2.7% from its all-time peak in 2008.

Meanwhile, the unemployment figures are far worse than the government admits. (Bernanke himself said as much. "The small decline in the unemployment rate is attributable more to reduced labor force participation than to job creation," he said. Think about that for a second if your definition of "unemployed" doesn't include those who have ceased to participate in the labor force, what use is it?).

We can find the real numbers for ourselves. The Labor Department's own data show that among adult men of prime working age, 25 to 54, just 81.2% have a job of any kind at the moment. (The figure until the crisis was nearly 90%, and back in the fifties it was around 95%).

The Labor Department further admits that a further 7% of those men are stuck working part time — a sharp increase from two years ago, due to the financial crisis.

Put the two together and you discover that 25% of men of prime working age in America, one in four, today lacks a full-time job. Nearly one in five lacks any job at all. This is unprecedented in American history.

Millions of families are broke, up to their eyeballs in debt and unemployed. And they can't get credit, because lenders are at last worrying about whether they can pay the money back. The problem in this situation is not with the lenders.

In the circumstances, I'd be more worried if someone told me consumer confidence was booming.

If the economy gets worse, will politicians be able to do anything about it? Don't bet on it. Even if our political system weren't broken, we're in an election season.

Maybe the only one left who can act is Ben Bernanke. He stands ready to help by purchasing long-term Treasurys. Will it work? We had better hope so.

Obama is right to be hard-nosed on China

By Minxin Pei

Published: August 30 2010 20:41

When Barack Obama was elected president, Beijing thought that he would be tough on human rights and trade, but not on national security. A year and a half later, Mr Obama’s policy could hardly be more different.

Instead of pressing China hard on its poor rights record, Mr Obama has put the issue to the back burner. Secretary of State Hillary Clinton confirmed as much on the eve of her visit to China in February 2009. To avoid antagonising Chinese leaders before his own visit to Beijing in November last year, Mr Obama even postponed a private meeting with the Dalai Lama. On the whole, his administration has done precious little on the issue.

The story on trade is much the same. Despite mounting congressional pressure on China’s de facto dollar-peg, Mr Obama has refused to label China a “currency manipulator.” Indeed, except for imposing a few modest anti-dumping penalties, his trade policy is indistinguishable from that of President George W. Bush.

However, on national security, the Obama administration has shown a surprisingly hard edge, particularly in the past few months. Against Beijing’s protestations, Washington dispatched a large naval force to conduct joint military exercises with the South Korean navy in the Sea of Japan, as deterrence against Pyongyang. To counter China’s growing influence in Southeast Asia, the US has also resumed its aid to the Indonesian military, and recently sent a carrier battle group in an unprecedented joint naval exercise with Vietnam.

Washington also announced a controversial plan to sell civilian nuclear technology to Hanoi. In its recent annual report on the strength of the Chinese military, the Pentagon levelled harsh criticisms at China’s military modernisation programme and its impact on Asia’s balance of power.

Perhaps the biggest bombshell was dropped by Mrs Clinton in Hanoi in July. Speaking to the Asean regional forum, she all but declared that the US would not allow China to coerce its smaller neighbours. For the first time, Washington designated the South China Sea as an area where it had a national interest in “freedom of navigation, open access to Asia’s maritime commons and respect for international law”. This might look neutral, but Beijing (which recently signalled that it regards the South China Sea as among its “core interests”) must have felt stunned and stung.

Why has Mr Obama’s China policy taken such a turn? Beijing’s own missteps share part of the blame. Chinese leaders rebuffed early efforts to woo Beijing into a closer relationship. Mr Obama’s China visit last November was viewed as a debacle because Beijing limited his access to the Chinese public. China’s over-the-top reaction to America’s long-scheduled arms sales to Taiwan, and Mr Obama’s (belated) meeting with the Dalai Lama earlier this year, did not help. China also obstructed US attempts to impose sanctions on Iran and condemn North Korea’s sinking of a South Korean warship.

More important, Mr Obama has reverted to long-standing American principles in dealing with a rising great power. For while the US can confidently manage China’s mounting economic prowess, and count on economic progress to liberalise the Chinese political system, the world’s sole superpower can ill-afford to allow its new rival to become Asia’s hegemon.

In many ways, Mr Obama’s evolving China policy is more grounded in reality. By abandoning the touchy-feely rhetoric of “strategic partnership”, Washington’s balanced but hard-nosed new China strategy more accurately reflects the complex dynamics of economic co-operation and geopolitical competition that underlie its ties with Beijing. It is also a policy that should reassure China’s nervous neighbours that America is committed to maintaining Asia’s strategic balance.

In the years ahead, as Washington pursues this policy further, we should expect more frequent eruptions over security issues, even as the two countries keep close economic ties. In its essence, Mr Obama’s revamped China strategy is a continuation of Mr. Bush’s “strategic hedging” – a strategy certain to endure as long as China remains a one-party state, and continues a realpolitik foreign policy that challenges the America-led liberal world order.

The writer is a professor at Claremont McKenna College and an adjunct senior associate at the Carnegie Endowment for International Peace


Copyright The Financial Times Limited 2010.

Goodbye to Berlin

How Germany became a thorn in America’s side.

Noam Scheiber

August 30, 2010 12:00 am

In early February, the top financial officials of seven major industrialized countries gathered in Canada to mull the state of the world economy. To grease their interactions, the Canadians had created an intimate setting in Iqaluit, an Inuit town near the Arctic Circle. A planning document waxed on about fireside chats at a cozy inn and decreed that the attire would be casual. It touted an array of cultural activities to supplement the official meetings and even promised the summiteers matching parkas.

Many of the middle-aged technocrats embraced the spirit of the occasion, trading in their bankers’ uniforms for chinos. A photo of Mervyn King, the British central bank governor, shows him splayed out on a careering dogsled, sporting a childlike expression of terror and glee. But, amid all the A-list bonding, the Americans seemed slightly aloof. Treasury Secretary Timothy Geithner shuffled through the first day of meetings clad in a dour-looking business suit. (Though he did halfheartedly don a wool sweater the following day.) The U.S. delegation arrived too late to partake in the sledding.

The contrast could be interpreted as a sign of things to come. Geithner had been caught off guard by the reach of the Greek fiscal crisis. Heading into the weekend, he and his top international aide, Lael Brainard (now an under secretary at Treasury) were concerned that it could trigger a panic across Europe which, if uncontained, might spread to the United States and Asia. But, when they politely broached the subject with their European counterparts, they encountered a curious passivity. “As the meetings progressed, it was more, ‘Okay, what’s the plan?’” recalls one American official.

Much of the problem resided with the Germans. Though senior officials, like Finance Minister Wolfgang Schäuble, were sympathetic to a bailout, their political overseers in Angela Merkel’s chancellery were conflicted. The reality was that, as the continent’s dominant economic player, Germany would find itself heavily bankrolling any such effort. Instead, Merkel’s government preferred to place responsibility on the Greeks, arguing that, if they took the austerity measures the Germans were urging, the markets would calm and the turmoil would pass. “You had to have credible contributions by Greece,” says one German government official, adding that it was the only way the parliament might eventually approve a bailout.

The Americans were dismayed. “It’s fair to say ... we were hoping they’d be beyond the realm of thought experiments,” says an administration official. “That they’d be ready with a plan.” But, thanks to the German stalemate, the Europeans were in little position to act.

Nor is the European debt crisis the only issue that Washington and Berlin have tangled over of late. For months, top U.S. officials have begged the Germans to stay the course on their modest stimulus measures, fearing that a too-quick withdrawal would hamstring the European recovery and pose risks to the global economy. But the Germans have stood firm, rejecting the administration’s Keynesian logic with rhetoric that can sound gratingly reminiscent of Republican talking points. The Germans even dragged their feet over a stress test of European banks, complicating efforts to restore confidence in the continent’s balky financial system.

Welcome to economic stewardship in the age of German parochialism. For years, the Germans could be relied upon to play a stabilizing role in Europe, subsuming their national self-interest to lofty visions of continental solidarity. But, over the last decade, as German leadership has passed from the postwar generation of Konrad Adenauer and Helmut Kohl to a younger generation less compelled by the war’s memory and unbothered by the Soviet menace, the Germans have ceased to view Europe’s safekeeping as their historical responsibility. “It’s no longer Europe at any price,” says Ulrike Guérot, a fellow at the European Council on Foreign Relations in Berlin. “It has a price now, and they want to see the price tag.”

In normal times, an American president might be happy to leave the Europeans to adapt to this new German posture. But, with the global economy still fragile after the calamity of 2008 and dodgy-looking debt from the likes of Greece and Portugal giving the world’s banks another round of agita, the new, more inward-looking German mindset is creating anxiety in Washington.

At nearly 68, Wolfgang Schäuble is an old Christian Democrat of the Helmut Kohl mold—a product of the center-right politics that guided the country’s postwar integration into Europe. Though only twelve years younger, his boss, Angela Merkel, grew up in the communist East, where few were given to dreaming of Germany as the continent’s benevolent hegemon. German politicians of Merkel’s generation tend to be unsentimental. They believe ordinary Germans crave good jobs and sound pensions, not historical missions.

As in most matters European, one telling divide involves the French. German politicians of the Schäuble persuasion tend to think reverentially of their neighbor to the west. Their preferred metaphor for the relationship is “rider and horse,” with the French as the rider, the source of political leadership, and the Germans as the horse, providers of financial wherewithal. By contrast, Merkel and her ilk are less apt to think of the French as statesmen than as moochers and meddlers. In their eyes, “free rider and horse” might be more like it.

Even at the height of the cold war, the U.S.-German relationship was hardly seamless in the realm of economic affairs. For decades, the Germans cultivated a reputation as the tightfisted disciplinarians of the international system, leaving American administrations chafing at their Teutonic intransigence. But, as long as Schäuble and his predecessors were at the helm, Germany was reliably generous when it came to Europe, giving Washington one less geopolitical headache to worry about.

A succession of German governments made European integration possible by transferring enormous wealth to the continent’s periphery. “All through the decades after World War II, the leaders were saying to their German compatriots, ‘We must be ready and willing to pay the bills at the EU level. It’s our passage back into the community,’” says Jackson Janes, an expert on U.S.-German relations at Johns Hopkins University. Germany also set aside its geopolitical ambitions in favor of nato, whose forces it housed. In the late ’90s, Kohl gave up the deutsche mark for the euro, lending the country’s hard-won financial credibility to the continent’s lesser economic lights. This was not something that tickled the average German.

It’s only over the last ten years, with the Soviets gone and unification largely behind it, that Germany has become as content as it is prosperous. The distant past no longer weighs on its leaders’ every waking thought. On questions of Europe, German politicians have begun to resemble pretty much every other kind of politician: self-interested, opportunistic, and highly solicitous of public opinion. For example, one of the conditions the Germans imposed on their neighbors in return for accepting the euro was the so-called Stability and Growth Pact—a strict limit on the deficits a eurozone country could run. In 2002, after the Portuguese had violated the limit, the Germans insisted on a review process designed to prune their deficit. The following year, after the Germans had breached the limit, they simply told the nominal authorities in Brussels to buzz off. It was a move that rankled the rest of the continent—akin to watching your father take away your brother’s cigarettes ... and proceed to smoke them himself.

The new attitude pervades more than just the political sphere. Last year, the German constitutional court handed down a ruling challenging the validity of a prominent EU treaty on the grounds that it was undemocratic. As a practical matter, the ruling meant Germany was assuming the right to pick and choose which EU laws it would abide by, something no other European country has claimed.

Perhaps there’s no better barometer of this transformation than the German media. In the run-up to the monetary union in the late ’90s, German newspapers showcased arguments both for and against swapping the country’s deutsche marks for euros, even as the broader population was adamantly opposed. As the Greek crisis gained momentum this year, the media were almost uniformly against intervening, just like the country at large. “They all argued that Merkel is right, don’t pay for the lazy Greeks,” says Guérot. “It was hard to get a different argument across.”

On the evening of Sunday, May 9, officials from France, Germany, and Britain were holed up in Brussels haggling. The panic that had started in Greece was spreading across the continent, and the negotiators were desperate to stop the contagion. Every so often, one would join a conference call with senior financial bureaucrats from the United States, Japan, Canada, and elsewhere in Europe to update their progress.

This continued until around eleven o’clock, at which point the updates abruptly ceased. For the next few hours, there was silence on the Brussels end of the line. “Why can’t they make up their minds?” European Central Bank president Jean-Claude Trichet wondered aloud at one point. Nobody wanted to find out what would happen if the Asian markets opened before a plan was finalized. One participant recalls privately despairing that the world economy was toast.

If there had been a way to avoid this financial cliffhanger, it’s not obvious what it was. From the outset, the watchword at Treasury had been “humility”—it being a Geithner tenet that lecturing other countries on their own self-interest is futile at best, and often counterproductive. It was a view Brainard shared. She’d been the top international economic official at the White House during the Asian crises of the late ’90s and had pushed back when Treasury tried to micromanage the afflicted countries. Throughout the winter and early spring, Geithner and Brainard had generally held back, content to ask pointed questions of the Europeans rather than lobby for a particular outcome.

This seemed advisable. Back home, the coalition Merkel had formed the previous September was beginning to fray, leaving her party vulnerable heading into a major regional election. The Germans would plead that they couldn’t be counted on to help Greece because the country’s constitutional court might disapprove. Suffice it to say, they wouldn’t be opening up their wallets until they had no choice—and, even then, no further than they had to. “The U.S. administration played it quite well,” says Ted Truman, a former Treasury and Fed official. “Rather than writing op-eds saying—no offense—the Europeans don’t know what the hell they’re doing ... they said to the Greeks and our European partners, ‘We’re prepared to support [an intervention], but you have to decide your own business.’”

By late April, no amount of wishful thinking could hide the fact that Greece was plummeting, and the Germans reluctantly blessed a $150 billion loan package long championed by the French. The problem was that the turmoil now extended all the way to Spain—a major economy with debt socked away in banks on several continents. If Spain defaulted, it could mean a Lehman-like catastrophe. The Americans began urging the Europeans to enact further-reaching measures, not simply put out fires as they ignited. But, according to one American official, there were “political constraints.” If nothing else, the German parliament first had to endorse the Greek deal, no certainty. “I think there was always the hope that [Greece] would be it,” says Brainard.

Perhaps predictably, the Greek bailout did little to restore calm when it was announced on May 2. By the middle of the week, the European markets were convulsing. German voters could see that even their economy might be sideswiped. This at least gave Geithner and Brainard cover to weigh in on details, and they backed a French proposal for a continent-wide bailout fund. Soon, the Europeans were floating numbers across the Atlantic, and the Americans were shooting them down. “Geithner ... basically said, ‘You’re not in the ballpark,’” recalls an American official. “If the markets are expecting something on the order of X, it has to be X times Y.”

One German government official working in this area says he found the Americans pushy during this time. Bertrand Benoit, a spokesman for the German finance ministry, says the discussions were constructive: “Their views were made very clear to us,” he recalls, “but it wasn’t anything that we would interpret as being pushy or unwarranted.” Whatever the case, the practical effect was to nudge the Germans along. In the 24 hours between Saturday, May 8, and Sunday, May 9, Geithner and Brainard talked them up by a factor of ten. Barack Obama helped close the deal with a personal call to Merkel. The Europeans would mobilize roughly $630 billion, the IMF another $320 billion.

All that was left to sort out was the way the money would be structured. Merkel chafed at any rescue fund controlled by Brussels but heavily financed by the Germans. She favored loans bundled together from individual countries, which would allow the Germans to dictate terms because they’d be making the largest contribution. Bolstered by the Americans, the other European countries insisted it wouldn’t work. Finally, sometime after two o’clock in the morning, they struck a Rube Goldberg compromise: The bailout fund would be financed by bonds sold to private investors and backed by individual governments. As the strongest economy in Europe, Germany would be on the hook for most of the debt, but it would enjoy a measure of control. The Germans choked it down grudgingly.

In truth, they had reason to be skeptical. The exorbitant interest rates private investors had charged countries like Greece and Portugal reflected an outsize risk of default. Rather than bailing them out, a preferable solution might have been an orderly restructuring—foisting some losses on investors if the borrowers couldn’t pay. But, even if you think such a response was workable (and not everyone does), it takes time to arrange. By ignoring the problem for so long, the Germans left themselves no chance to pursue that option.

There’s a danger in making too much of any one episode, of course. “Countries having financial crises go through the same phases that people diagnosed with serious illnesses do: denial, rage, bargaining, and acceptance,” says Larry Summers, the top White House economic aide. “It takes time.” Perhaps it would be more surprising had the Germans been an exception.

But it’s more than just the recent debt crisis. A few weeks after the ink dried on the May 10 deal, Geithner and Brainard traveled to Europe to promote a version of the stress tests that regulators had inflicted on American banks last year. The exercise involves projecting how a bank’s balance sheet might perform if the economy were to weaken. This bolstered the U.S. financial sector by helping investors distinguish between healthy and unhealthy banks instead of shunning them indiscriminately. Geithner and Brainard believed European banks could benefit from a similar exercise, given that market indicators suggested investors (and other banks) were still eyeing them all warily.

One major sticking point was transparency. For the tests to be useful, investors needed a detailed, bank-by-bank picture of where the land mines lay. Though some in the government were cooperative, key German regulators resisted, particularly when it came to holdings of Greek debt. They invoked national laws saying they couldn’t force banks to disclose information.

German officials also suggested to reporters that the real problems were in Spain, where a real-estate bust had pummeled the banks. “The Spaniards were very upset about that,” says Jacob Funk Kirkegaard of the Peterson Institute for International Economics. “They felt actually the German government leaks forced up the bond yields of Spanish treasuries.” In fairness, the Germans were hardly the only ones talking down other countries’ banks. But, in a sense, that’s the issue: There was a time when the Germans didn’t behave like everyone else.

And then, there’s the matter of stimulus. The Americans and Germans spent a stretch of the spring debating the right time to close the stimulus spigot and start narrowing their deficits. The Americans, haunted by the Great Depression, worried that countries would cut back too quickly and relapse into recession. The Germans, haunted by their own interwar experience, worried that deficits would lead to a debilitating inflation.

On one level, this debate is nothing new: Policymakers in the United States and Germany have made variations on these arguments for decades. Likewise, as the Germans are quick to point out, they’re not reining in their spending as quickly as the rhetoric suggests.

But, on another level, it was one more instance of Germany turning away from Europe. After all, the point isn’t whether Germany is cutting spending at a modest pace—it clearly is. The point is that it’s doing so at a time when the rest of the continent—Greece, Portugal, Spain, and even Britain—have savagely shrunk their own budgets to reassure bond traders. German interest rates, by contrast, are soothingly low, meaning Germany can increase its deficits painlessly in the short run. In an ideal world, Germany might relieve some of the pressure on its neighbors by increasing spending, which would generate demand for their exports, bolster their economies, and generally help secure the global recovery. Alas, the Germans have been unmoved by such pleas. They’ve pledged to stand with the Europeans on fiscal austerity, prompting Geithner to tell them on one call that the approach sounded “a little bit like Hoover.”

The Germans have narrow, technical reasons for this position—some of them quite reasonable. But the more basic reality is that Germans no longer see their prosperity tied so closely to the continent. One increasingly common refrain in Germany these days is a call to focus on brics, not piigs. The idea is that, because its neighbors lag so far behind economically, Germany must look beyond Europe (“piigs” literally refers to Portugal, Ireland, Italy, Greece, and Spain) to markets in Russia and China (“bric” stands for those two countries, plus Brazil and India), where it has flexed its muscles of late. If other European countries want to follow its lead overseas, all the better. But Germany can’t slow down to help them catch up.

At the broadest level, the German experience of the last decade is an object lesson in the upshot of “normalization.” As Germany has become a more normal country—less burdened by guilt, more comfortable pursuing its self-interest—it has behaved in ways that are less helpful to Europe and, by extension, the world. But, on balance, the global economy stands to gain more from any normalization trend than it loses. After all, the other major candidate for “normalizing” is China.

Whereas the Germans were unusually enlightened, the Chinese have been unusually disruptive—manipulating their currency, stealing intellectual property, and generally flouting international norms. According to one view, that may be changing on matters of economics: The Chinese stimulated their economy aggressively when it counted, they’ve started letting their currency appreciate, and they’ve talked of encouraging their citizens to consume more imports. The question is whether China can save us before Europe buries us. And on that question, the jury is decidedly out.

Noam Scheiber is a senior editor of The New Republic.