China Stories: Good, Bad, Indifferent

There’s unusual depth to today’s flurry of China coverage, and that’s a good thing—mostly.

The New York Times gets the top seed in the bracket with a strongly reported look at China’s two-part strategy to maintain its export dominance: “fighting protectionism among its trade partners and holding down the value of its currency.”

The piece is a good one because it helps make real sense of the China story, which will only become bigger as the Treasury Department’s April 15 deadline approaches on whether to list China as a country that manipulates its currency. But the Times also gets points for looking at the international institutions that are supposed to be minding this store.

To maximize its advantage, Beijing is exploiting a fundamental difference between two major international bodies: the World Trade Organization, which wields strict, enforceable penalties for countries that impede trade, and the International Monetary Fund, which acts as a kind of watchdog for global economic policy but has no power over countries like China that do not borrow money from it.

There’s also this juicy nugget:

In addition, Beijing has worked to suppress a series of I.M.F. reports since 2007 documenting how the country has substantially undervalued its currency, the renminbi, said three people with detailed knowledge of China’s actions.

Add to that a news story about Prime Minister Wen Jiabao’s defense of his country’s currency and trade policies; the latest warning from Chinese authorities to partners of Google’s China-based operations; and the wisdom of Paul Krugman on what the U.S. should do about China’s currency (short answer: play hardball), and this is definitely a day where more is more.

The Wall Street Journal also uses the closing of the Chinese legislature’s session, and Wen’s annual press conference, to go big on China, flexing its enterprise muscle with a long look at some accounting chicanery.

As the Journal explains, the finance ministry changed the accounting method for some government spending this year, allowing China “to report a planned budget deficit below the symbolic level of 3% of gross domestic product.”

The difference in the deficit accounting hinges on the treatment of 260.82 billion yuan, about $38 billion, in local government spending that was “carried over” from 2009. According to ministry’s budget report, this money was allocated for projects in 2009 but wasn’t actually spent. Though the money will be spent in 2010, it is still being counted as part of the 2009 budget.

There’s a lot of detail here, but also, for me, a bit of head-scratching. Sure, as the Journal says, this kind of move “raises questions about transparency,” and, post-Greece, a pledge by China’s finance ministry to keep annual budget deficits below 3% of GDP takes on new importance.

But, as the paper says, “The accounting move simply shifts spending from one year to another, and so doesn’t mean that the overall trend of China’s government finances is worse than reported.” And, while most governments don’t do their books this way, accounting for spending in the period when the commitment is made is common under the accrual accounting that many businesses use.

Oh, there’s one more thing:

In the end, China’s actual budget deficit for 2010 could well turn out to be lower than either estimate, since they are both based on the finance’s ministry forecast of 8% in revenue growth, which is widely seen as very conservative. The ministry also budgeted for 8% revenue growth last year, and actually achieved an 11.7% gain. So there may be little lasting impact from this year’s accounting change.

Probably not a lot of lasting impact from this story, either. But it’s nice to see the Journal dig into the Chinese budgetary fine print, and the link to a copy of the budget report is pretty nifty.

The Financial Times plays the whole thing a bit flatter, with a news report on Wen’s pushback against international pressure on the exchange rate and some frenzied market coverage.

But the FT does have a short, but interesting piece on how countries in the region have been buying lots of submarines, fighter aircraft, and long-range missiles over the past few years.

Military analysts are warning that China’s increased regional power has caused its south-east Asian neighbours to step up their own defence purchases, raising the prospect that territorial disputes in the South China Sea could turn violent.

That all makes The Washington Post’s take on China a bit of a mystery.

The piece declares that the Chinese government “has embraced an increasingly anti-Western tone in recent months,” and runs down moves on a variety of fronts to support its case.

The shift has accelerated as China has emerged stronger from the global financial meltdown, with a world-beating economic expansion rate and a growing nationalist movement. China has long felt bullied by the West, and its stronger stance is challenging the long-held assumption shared among Western and Chinese businessmen, academics and government officials that a more powerful and prosperous China would be more positively inclined toward Western values and systems.

“[T]he long-held assumption … that a more powerful and prosperous China would be more positively inclined toward Western values and systems.” Hmm. Somehow, in the shuffle, I must have missed that meme memo.

This is where reported facts beat sweeping, not-particularly-well-supported generalizations by a wide margin.

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Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at