The august New York Times opines today that "China’s currency manipulation" ought to top the agenda for the Obama-Hu meeting this week, even as an accompanying Times op-ed by Professor Mark Wu contends: "When it comes to lost jobs, the negative impact of China’s currency, the renminbi, is less than one might think."

Myself, I was struck by a recent feature in the business pages of the Times that makes a crucial but often overlooked point about China, namely, that the real problem is not so much China’s currency, nor even cheaper labor costs in China, but rather China’s industrial policy—specifically, the way Chinese banks provide credit to growing firms, especially in areas such as technology, clean energy, and the like.

Case in point: Evergreen Solar. The Massachusetts-based firm is closing down at home and packing for China, taking 800 jobs with it. But it’s not moving because the renminbi is cheap, nor is it relocating because it can hire cheap workers, since the solar-panel manufacturing industry is not very labor intensive. Instead, reports the Times, Evergreen is moving to take advantage of cheap credit in China. Here’s the crucial passage from the Times story:

"China’s real advantage lies in the ability of solar panel companies to form partnerships with local governments and then obtain loans at very low interest rates from state-owned banks.

"Evergreen, with help from its partners—the Wuhan municipal government and the Hubei provincial government—borrowed two-thirds of the cost of its Wuhan factory from two Chinese banks, at an interest rate that under certain conditions could go as low as 4.8 percent, Mr. El-Hillow said in August. Best of all, no principal payments or interest payments will be due until the end of the loan in 2015."

Why didn’t Evergreen borrow money at home? Because it couldn’t get bank credit and the federal government—capitalist to the core—wouldn’t help, as Michael el-Hillow, the president of Evergreen, explained:

"Evergreen did not try to go through the long, costly process of obtaining a federal loan because of what it described last summer as signals from the department that its technology was too far along and not in need of research and development assistance. The Energy Department has a policy of not commenting on companies that do not apply.

"Banks in the United States were reluctant to provide the rest of the money even at double-digit interest rates, partly because of the financial crisis. ‘Therein lies the hidden advantage of being in China,’ Mr. El-Hillow said."

Indeed, the failure and collapse of the American banking system, which no longer wants to provide financing for capitalist ventures—the result of the 2008 crash—means that capitalist entrepreneurs have to turn to a communist country, which operates a robust banking system, including making venture-capital loans available. Why doesn’t the United States have a state-owned national bank in place to provide federally guaranteed loans to entrepreneurs? Why doesn’t the United States have an industrial policy like, say, Germany’s? Ask Ayn Rand.

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