Michael Hiltzik: Learning to live with China

Economic nationalism -- or is it merely xenophobia? -- is nothing new on these shores. It crops
up whenever America's hegemony as the world's No. 1 economy appears to be threatened by an upward-scuttling challenger.

As my column for Monday observes, today the challenger is China, heir apparent to the role of America's global counterweight once occupied by the Soviet Union and Japan. As in those earlier cases, the global contest provokes American leaders to questioning our adversary's motives (economic, political and military), its moral adequacy, its designs on our way of life.

Among the more unnerving manifestations of China's expanding economic role is its interest in making investments in the U.S. Some of these have been rejected on strategic grounds, some as the result of pure political posturing. Zachary Karabell, the principal of investment firm River Twice, a frequent guest on CNBC and the author of "Superfusion," a new book about the U.S.-China economy, argues that the best way to tether China's interests to ours is to welcome its investment yen.

In this context, it's worth remembering the Japanese experience. When that country began buying up iconic American assets such as Rockefeller Center with the dollars it earned from a favorable trade balance, bookstores filled with tomes heralding the death of American global dominance.

How did that work out? The Japanese bought at the top of the market, and American sellers laughed all the way to the bank. The Rockefeller Center investment landed in bankruptcy court. Today, more than two decades after the Japanese ascension, its economy is struggling along. Its exports to the U.S. have shrunk to less than one-third of our No. 1 trading partner ... China. Will history repeat itself?

The column begins below.

When President Obama embarks on a round of bilateral meetings with the Chinese leadership in Beijing today, he?ll be laboring under a heavy burden of history and politics.

Many in the U.S. will want him to place human rights issues -- a preoccupation of the regime?s critics dating to even before the Tiananmen Square protests 20 years ago -- on the front burner.
The rest of the talk-radio agenda would have him meeting the Dalai Lama (that won?t happen until after the current trip), threatening a trade war over one commodity or other and discouraging China?s putative search for a global reserve currency to supplant the dollar.

Zachary Karabell isn?t among the agitators. An investment manager and commentator who first visited mainland China in 2002 while setting up a China-U.S. growth fund for Fred Alger Management, Karabell believes the two economies have become entwined in a web of mutual interests.

Read the whole column.

-- Michael Hiltzik