No Strategery Here

No Strategery Here

July 23, 2005

Several subscribers have asked me the same question regarding China’s revaluation of the yuan this week. Is it possible that the US policy makers who pushed China to abandon their fixed exchange rate against the dollar did so for the secret purpose of intentionally destabilizing and undermining the growth of the Chinese economy.

Possible? Yes, but highly unlikely. My experience in and around the White House is that they have very little time to sit around and devise clever schemes. They spend most of their day reacting to pressures that arise from outside the government (oil prices, Iraq, terrorists, economic and financial news) rather than driving change. A President only has time and energy for a small number of strategic drives. They tend to focus on those. In President Bush’s case, he told us in January what the defining topics were for his second term; tax reform, social security reform, tort reform, and homeland security. That’s exactly what he is doing.

The one possible global exception to the above is China. Chinese politicians have shown that they have a longer-term point of view that we do in the US. (They of course do not have to worry about being reelected, do they.) That viewpoint gives them the patience to wait out western governments on strategic objectives. The Hong Kong handover was an example. Taiwan will be another. A third is their multi-objective approach to Chinese energy policy, simultaneously pursuing initiatives in Russia, Iran, Venezuela, Japan (the disputed gas deposits in the Sea of Japan), the US (Unocal), and other countries.

A factoid worth remembering. All nine members of the Chinese Politburo (China’s highest-ranking political committee) are trained engineers.

The biggest damage terrorists have done in the the US is not what happened on september 11, 2001. It is what they have done to our thinking. Instead of devoting our resources to checking each other’s boarding passes we should be focusing on our relationship with China. china, not bin Laden, is going to be the topic that dominates political and economic discussions for the next 50 years.

JR

John Rutledge

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