MADELEINE BRAND, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Madeleine Brand.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
U.S. and Chinese officials are meeting here in Washington today and tomorrow, part of what's being called the strategic and economic dialogue. President Obama welcomed the Chinese delegations, saying it's important for China and the U.S. to work together. On the agenda, joint action to deal with climate change plus trade discussions. The U.S. runs a $200 billon annual trade deficit with China, and managing that economic relationship is a challenge for both sides.
NPR's Tom Gjelten found one important piece of that trade story in a TV showroom.
TOM GJELTEN: Flat-panel TVs are on display from the floor to the ceiling at this Best Buy store outside Washington - dozens of them in all sizes and brands.
Unidentified Man: (unintelligible) it's a great TV.
GJELTEN: This TV showroom is a carry-over from the years before the recession, back when sales of flat-panel TVs were going through the roof. American consumers were on a spending binge. Paul Semenza is the flat-panel TV analyst for the research firm Display Search.
Mr. PAUL SEMENZA (Flat-Panel TV Analyst, Display Search): You had HDTV coming in, you had the general consumer spending environment. And then you had people buying new houses, big houses that they wanted to put big TVs in every room, you know, so it all fit together in this kind of warped way.
GJELTEN: In fact, inside this flat-panel TV story is a tale of what went wrong in the U.S. economy: too much easy credit, too much spending - especially on goods made in China, like most of the TVs in this showroom. As a country, each month, we were buying about $20 billion more in goods from China than we were selling to China. In part, it was because stuff from China was so cheap. The Chinese government kept the value of its currency, the yuan, artificially low. That meant U.S. dollars went further in China, could buy more things coming out of Chinese factories. Economist Peter Morici of the University of Maryland says it was unfair.
Professor PETER MORICI (Economics, University of Maryland): The Chinese yuan is so undervalued that it makes their goods about 50 percent cheaper than they should be on U.S. shelves, plus the Chinese government does a lot to subsidize exports. It's essentially pushing products into the United States well below their cost of production.
GJELTEN: So there was a trade imbalance between the U.S. and China. The Chinese earned hundreds of billions of U.S. dollars selling stuff to us. Much of that was invested in U.S. Treasuries; the Federal Reserve was borrowing that Chinese money. All that cheap credit led, among other things, to the housing bubble. Now we're trying to get out of this trap, in part by getting Americans from here on to save more and spend less.
Mr. LAWRENCE SUMMERS (Director, White House's National Economic Council): The rebuilt American economy must be more export-oriented and less consumption-oriented.
GJELTEN: That was Lawrence Summers, President Obama's top economic adviser, speaking recently in Washington. One thing that would help is for the Chinese to buy more of their own TV sets. If Chinese consumers had more money to spend, the Chinese economy wouldn't depend so much on American consumers. More demand could be satisfied in China. And the U.S. and Chinese economies would be more balanced.
And guess what? With respect to flat-panel TVs, it's actually happening. The Chinese government is finally spreading its wealth around. More of the flat-panel TVs assembled in China are staying in China. And it's largely due to the Chinese government's stimulus program. Nicholas Lardy follows China at the Peterson Institute for International Economics.
Mr. NICHOLAS LARDY (Peterson Institute for International Economics): The government began to hand out coupons to Chinese households in rural areas that entitled them to a significant discount on a fairly broad range of consumer durables - you know, everything from refrigerators, stoves, air-conditioning equipment, flat-panel televisions as well.
GJELTEN: Indeed. And the result is nothing short of astounding. Here's Paul Semenza of Display Search, citing LCD TV sales trends in China.
Mr. SEMENZA: 2008, 13 million; 2009, almost 24 million; in 2010, almost 30 million.
GJELTEN: This increased Chinese demand for TVs, if it's sustained, could mean the end of cheap TVs in the United States. The key element in an LCD TV is the flat panel itself, built with special glass embedded with transistors. And what's happening?
Mr. SEMENZA: The panel pricing has been going up the last couple of months. And we expect it will continue to increase through September.
GJELTEN: This is actually good. Overall, we want the Chinese to export fewer TVs, build more to sell at home, and buy more from the U.S. That would bring our trade more into balance. Both economies would be on a more solid basis for growth. So, should we applaud Chinese government economic policy? Only with one hand, says Nicholas Lardy.
Mr. LARDY: They have certainly done a lot to stimulate domestic consumption, but there's some areas in which they have still fallen short.
GJELTEN: Like on their exchange rate. Flat-panel TVs made in China are still too cheap. Peter Morici thinks it's time for the Obama administration to get tough with the Chinese.
Prof. MORICI: They've increased their currency market intervention. They've frozen their currency for the last 12 months. There was some cooperation up to last July but since, then the cooperation has really gone away.
GJELTEN: The question is how hard to push the Chinese. The U.S. needs their cooperation on climate change, in diplomacy, and at the International Monetary Fund. But if the U.S. economy is to be oriented more to exports and less to consumption, China will have to help by loosening its currency exchange rate, for example. It's a sensitive subject. And we'll see from these meetings today and tomorrow whether the two governments can discuss it.
Tom Gjelten, NPR News, Washington.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.