Posted 9:22 AM by Robert

The Most Important Export Of The United States II

There has been much speculation over the persistent United States trade deficit and the corresponding relatively high level of the dollar against Asian currencies. In that regard, it is interesting to ask how much a wealthy Chinese person might be willing to pay to escape from this political risk by placing assets in the United States and holding American currency:

BEIJING - Thousands of Chinese rioted in a dispute sparked by a lopsided roadside brawl, set fire to cars and wounded six police officers in an outburst likely to worry communist leaders in Beijing desperate to cling on to power. ....The violence was the latest in a series of protests which the Communist Party, in power since 1949, fears could spin out of control and become a channel for anger over corruption and a growing gap between rich and poor..... The local Chizhou Daily newspaper reported six policemen were injured by stones, news Web site www.sina.com.cn said.

"The crowd also attacked reporters, one of whom was burned by a firecracker, and they grabbed cameras out of the hands of anyone taking pictures," Wu said.

Around 7.30 p.m., power to the police station was cut and "criminals" started throwing fireworks inside, the Chizhou Daily report said.

The crowd, now numbering as many as 10,000, also flipped three parked police cars and set them ablaze.

The mob crashed through the windows of Wu's store, located just down the street from the police station, and began grabbing anything they could get their hands on. .... "It was raining hard that day. Otherwise, more stores might have been looted."

Hundreds of armed police in full riot gear managed to restore order in Chizhou around midnight on Sunday.....

The riot closely echoed one that erupted in Chongqing in western China last October.... Protests have become increasingly common in China, fueled by corruption and the widening wealth gap, but authorities are keen to quickly quash dissent and preserve stability.

There were more than 58,000 protests, many of them over land rights disputes, across the country in 2003, a Communist Party-backed magazine, Outlook, has reported.

I continue to believe that the element of developing third world political risk has been given far too little emphasis in most analyses of the United States trade deficit and the strength of the dollar.

Moreover, the questions raised in this arena lead to the potentially fundamental question: Is there a (possibly subtle and non-standard) form of Japanese political risk that has been, and is being, largely ignored in connection with the persistent Japanese trade surplus with the United States? My guess is that the correct answer is "yes."