It sounds like history repeating itself: The United States faces a huge trade deficit with an Asian country, which is also under intense scrutiny for its interest in buying U.S. assets and having a currency many deem undervalued.
Today, that best describes how China is viewed. Two decades ago, Japan came under similar attack for its growing global presence, and that spurred all sorts of protectionist talk out of Washington.
The Japanese hysteria eventually died down as the country fell into a long recession. But don't look for that to happen with China, where its politics combined with its potential for growth may make it a far tougher force to reckon with going forward.
China has drawn the ire of many countries because of the vast amount of T-shirts, toys and everything else that it is exporting at lower prices than many local markets' products.
The United States' trade deficit with China hit $162 billion last year, making it the largest imbalance ever recorded with a single country. This year's deficit is already running 32 percent above last year's pace, and political pressure is heating up to put tighter restrictions on imports from China.
American lawmakers have blamed some of this on China's undervalued currency. They threatened to impose punitive tariffs on China if it didn't switch to a more flexible currency system rather than have the yuan trade at a fixed exchange rate that was pegged to the U.S. dollar — which has kept its export prices low.
In July, China announced it would gradually let the yuan rise in value against a basket of currencies, though some critics say that its move isn't enough.
And Chinese companies have come up against great resistance when expressing interest to acquire U.S. assets. Their bids this summer for American oil and gas company Unocal Corp. and appliance maker Maytag Corp. didn't ultimately result in any deals, but such interest was seen as a sign of greater Chinese ambition in the global marketplace.
All this China-bashing is reminiscent of the talk directed at Japan in the 1980s, when fuel-efficient Japanese cars were gaining popularity with U.S. consumers while the Japanese were buying up American companies as well as trophy U.S. real estate.
Back then, the U.S. trade deficit with Japan was ballooning, and there were many claims that Japan was keeping its currency artificially low to boost its exports. To fix that, U.S. politicians demanded that Japan either strengthen the yen, or face trade sanctions.
"What is being said about China sounds like the same speeches and arguments that were heard about Japan. Back then, we had senators protesting on the steps of the Capitol" about foreign-made goods, said Milton Ezrati, a senior economic strategist at the money management firm Lord Abbett.
But while China today looks a lot like yesterday's Japan — before its asset bubble burst and it headed into a prolonged economic slump — Morgan Stanley global economist Stephen Roach sees big differences. "In terms of the scale of their economies and financial markets, China and Japan are like day and night," he said in a recent note to clients.
Among the distinctions: Japan's equity-market capitalization amounted to 41 percent of the world's total market capitalization in 1989; by contrast, China's equity markets currently account for only 0.5 percent of the value of global equity markets.
He also notes that China has a much more outward-looking growth and development model than Japan. In 2004, exports and imports combined equaled 74 percent of Chinese GDP, more than three times Japan's 23 percent share.
That is why Chinese currency reforms take on much greater importance, Roach said, pointing out that the Chinese might have learned from the Japanese to resist U.S.-led political pressure for currency revaluation. Japan ran into trouble in the late 1980s, in part by abdicating control over the yen and letting the dollar-yen conversion soar from 259 in 1985 to 121 by the end of 1987. Many blame that for setting the stage for an asset bubble that eventually collapsed in Japan.
"The last thing China wants is to go down that road — placating U.S. politicians on the currency front while, at the same time, sowing the seeds of an increasingly dangerous liquidity bubble of its own," Roach said.
There are also significant political differences between the two. While the Chinese have been more open to foreign investment than Japan, there are some concerns that the communist political structure means that the Chinese won't embrace all kinds of foreign involvement such as an American company buying a big Chinese company.
In addition, Standard & Poor's chief economist David Wyss points out that China's huge population — which he estimates is 10 times as large as Japan's — means that China has the capability of taking over world production of just about everything.
So talking about China today as though it were Japan 20 years ago might not accurately size up the situation of this fast-growing empire. China's might just be beginning to build its power as an economic force.
To the dismay of many Americans, that will likely mean a bigger, bolder China to contend with for many years to come.