Excellent, Francesco. This shines a light through the fog I see every time somebody says "China will save us all!" But I just had an idea, brought on by your reference to auto sales: why doesn't China offer ITS cash for America's clunkers, provided of course the trade-in is for a Chinese-built car?

Well, I suppose an obvious retort would be that that would be trading one clunker for another. But seriously, the US "cash for clunkers" program has been wildly popular, to the extent that US funding for it ran out months ahead of schedule, and automakers (not only American ones) are loving every minute of it.

China could offer some of its embarrassingly large foreign reserves and in return:

- help the US economy, which helps China;
- help the world's automakers;
- earn many brownie points from Americans (and the world's automakers);
- burnish its 'green' credentials.

The case put more succinctly:

After reading China leads an Asian charge by Francesco Sisci (Aug 19) aquicke proposes, more or less seriously, that if China truly wants to aid global economic recovery, it could help fund the US's wildly popular "cash for clunkers" program, which ran out of funds months ahead of schedule.

The program subsidizes the trade-in of old gas-guzzling cars for more environmentally friendly models. It has pushed up car sales in the US and helped the world's automakers through desperate times.

In return for its cash, China would be: Investing in US economic recovery while sidestepping sensitive issues like Chinese ownership of, or investment in, US companies; earning big brownie points from ordinary Americans (much better PR than buying T bonds); buoying its green credentials; and demonstrating true global leadership.

Could it work? Would Americans stand for Chinese involvement in one of the US's own socialist programs? What do you think?

Francesco Sisci responds:

[Due to a glitch this is the only way I can move Sisci's response into this thread from its present placement in the Greater China category - aq]

Dear Allen, this was basically the idea behind the story David Goldman and I wrote almost one year ago. But it is delicate and sensitive issue at the end. The Chinese are afraid the Americans do not want the Chinese buy American companies. Look what happened with Unocal or Rio Tinto. Of course american clunkers would different, wouldn't be? Besides, can Chinese run American companies? The Japanese tried and failed in the 1980s? and the Chinese are behind the Japanese in running foreign companies in many ways. Lots of questions on the floor and no answers. Unless some one is willing to hire me for some answers.

- fsisci

aquicke wrote:
Well, I suppose an obvious retort would be that that would be trading one clunker for another. But seriously, the US "cash for clunkers" program has been wildly popular, to the extent that US funding for it ran out months ahead of schedule, and automakers (not only American ones) are loving every minute of it.

China could offer some of its embarrassingly large foreign reserves and in return:

- help the US economy, which helps China;
- help the world's automakers;
- earn many brownie points from Americans (and the world's automakers);
- burnish its 'green' credentials.

Don't tell me you are serious about this Alan. Stop kidding.

What exactly will China get from this? Nothing. Let's see:

"help the US economy, which helps China". Exactly how has the "clash for clunkers" program helped the US economy other than benefiting the men in black suit in Detriot? The auto industry is not making or breaking the US economy.

"help the world's automakers". Sure, but why should China help these automakers, mostly American automakers? What will China get in return from these automakers?

"earn many brownie points from Americans (and the world's automakers)" I don't think China needs to earn any brownie points from the Americans or the automakers (this craked me up. Automakers? Why does China need to please those automakers? Is China desperate to have them set up factories in China or something?). To the Americans China is as bad as a country can be and no matter what China does, as long as it remains authoritarian/undemocratic, refusing to take orders from Washington the American public will keep hating China the way they do today. But, it is OK for the Americans to not like China just like it is OK for the Chinese, Russians, Iranians and many others to not like the US. Nobody is going to die because of loss of love here.

"burnish its 'green' credentials." Exactly how? If I were the Chinese government I would be spending the money we have developing green technologies and investing on those Chinese companies like BYD who are working on creating green technologies. Why should we waste the Chinese tax payers' hard-earned money to help some Americans to buy better, newer cars when the only beneficiaries are the folks who bought the cars and the automakers?

Alan, seriously, you must be kidding.

Juche,

Half kidding. It WOULD be great public relations - guaranteed front page headlines, even if the US gave the thumbs down. The program is front-page news as it is, due to the funds running out. Americans - those who "hate everything Chinese" - would have to recognize China as a force for something other than evil. And China has squillions of reserves: what does it do, just go on buying more American debt, about which it is clearly uneasy? Yes, it would be just a drop in the ocean, and yes, there are no doubt economically better ways it could spend the money, but it would be an excellent way for China to announce itself as a global rather than an insular force (without sticking its finger up America's nose) - which is the thrust of Sisci's article.

Too late!

U.S. Says Program Will End on Monday

By Dana Hedgpeth
Washington Post Staff Writer
Friday, August 21, 2009

The federal government, acknowledging that the "Cash for Clunkers" program was running out of money, declared it a success Thursday and killed it off, effective 8 p.m. Monday.

After just a week, the program, which began July 24 and was expected to last until as late as Nov. 1, ran out of the $1 billion originally appropriated by Congress. An additional $2 billion was approved two weeks ago, and it was supposed to last until Labor Day. Now that's almost gone, too.

In his radio address on Thursday, President Obama said the program, designed to stimulate auto sales and production and get gas guzzlers off the road, had "been successful beyond anybody's imagination. And we're now slightly victims of success because the thing happened so quick, there was so much more demand than anybody expected, that dealers were overwhelmed with applications."

I can grantee you that Chinese government would be toppled
in no time if Chinese government were to finance "Cash
for Clunkers" the way it is for Americans.

But, a "cash for clunkers" for cars imported from China would
be a different story. It could be for all fuel efficient
GM, Honda hybrids imported from China, or BYD's E6.

This would better use for those trillion dollar T-bills.
Since most of cars sold in US are imported anyway, US can
get rid of some of debts, and China can benefit from more jobs.

I'd be first one to buy a BYD E6 in California.
(Btw, my BYD stock has more than doubled since I recommend
it here a year ago.)

www.treehugger.com/files/2009/08/byd-e6-...0-warren-buffett.php