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Video: China: An economic reality check for the US

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    >>> back to politics and foreign policy . china is an easy target for mitt romney as he tries to woo voters who are frustrated over the unemployment rate and slow recovery here at home. here is romney in ohio last month.

    >> well, on day one i will label china a currency manipulator and that will allow me to apply tariffs where they steal our intellectual property and kill jobs.

    >> james is a national correspondent for "the atlantic" magazine and author of " china airborne" and has lived there for many years off and on. and vijay is a correspondent for "the economist" and author of "need, speed and greed." both have spent a lot of time in china . thanks so much. what is your take, because you come at this not from a political perspective, of what mitt romney says about what he would do about china and about what we really need to do about china . i think you think there's a disconnect.

    >> two things are almost certainly true. one is if governor romney becomes president romney , he will not do what he's saying on the campaign trail, just because almost every candidate runs against china being tougher on them but when they get in office it's more or less the same policy. second, the bigger problem for america may be china 's troubles in the next year or two rather than its just unstoppable success because you know the economy there is having lots of strains, political system is under strain. it's a little bit different from the way he's portraying it.

    >> vijay, the slowdown in their growth rate , they still are growing faster than we are, but the phenomenal growth rate has slowed considerably and that becomes a problem eventually for us.

    >> it does. the world will be envious of a 6% growth rate which is considered a slowdown in china . but they have a lot of people to keep fed. so for them it's a real crisis. i think coming to the point about romney , not only will he find it difficult to implement, for example, branding them a currency manipulator on day one. that's something he said many, many times. if you actually look at what's happened to chinese exports, the account surplus used to be 10% gdp at its peak, less than 3% last year. currency has appreciated 30% in real trade weighted terms. in other words, the actual facts don't support the assertion. a lot of that has to do with the fact we're at the end of cheap china . china wages are going up, regulatory burden is increasing. it's becoming a middle income country, not just the sweat shop to the world. china itself is grappling with the transition from being again a sweat shop economy to being more of an innovation economy. that's a very difficult transition. that's part of what's the challenge in china .

    >> similarly, the obama campaign , let's do a little fact-checking on that. this is their new ad out today attacking the romney campaign for outsourcing.

    >> what a president believes matters. mitt romney 's companies were pioneers in outsourcing u.s. jobs to low wage countries. he supports tax breaks for companies that ship jobs overseas. president obama believes in in-sourcing. he fought to save the u.s. auto industry and favors tax cuts for companies that bring jobs home. outsourcing versus in-sourcing. it matters.

    >> so we're talking about the whole bain attack. they think it's working. the polls seem to indicate it's working. but the reality of that?

    >> certainly if you look at the bain record during romney 's time there, it had big successes and some failures. i think this is sensible for the obama campaign to promote. also, it's true that during the last year or two of president obama 's watch, manufacturing has had some kind of recovery in the united states . whether or not he can take direct credit for that is a whole more complex issue. but this is the natural, anybody in the president's position would be making this ad.

    >> is it fair to attack -- is it accurate to attack mitt romney for outsourcing from his days at private equity ? i know that's a complicated question.

    >> there's a couple things that the ad is problematic. one, there's a decision between offshoring where you send factories overseas, and outsourcing which can be to an i.t. company down the road. so the ad conflates those two things. the second thing is during the time when he ran bain , they did make investments in companies that were good at outsourcing but take a broader perspective. if the u.s. were to pass a law saying we don't want any offshoring or outsourcing, what would actually happen is that american companies would become less competitive. versus foreign competitors. this is not a realistic proposition.

    >> the stronger point they made in some bain ads is that romney got a lot of profit even when the companies were failing. i think that probably is powerful.

    >> to be continued, i hope you will come back. thanks a lot.

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