Saturday, April 24, 2010

Beef-storm hits Taiwan

US beef imports rear a very ugly head. Cow patties are on the menu, too.

Global Post, April 23, 2010

TAIPEI, Taiwan — Is the tongue an internal organ?

That's the timeless question that gripped Taiwan this week, as the issue of U.S. beef imports once again reared its ugly head.

The spark was Taiwan officials' statement Monday that U.S. beef tongues, testicles, tails and other choice bits are not "internal organs" and therefore not included in a ban on some U.S. beef products passed in January. This meant such imports would be allowed, albeit with close inspections.

That led to an outcry from opposition lawmakers, who accused the government of being sneaky, and splitting hairs.

Just a day later, Taiwan's government flip-flopped, saying it now "suggested" that Taiwan firms not import tongue and some other U.S. beef bits for the time being, until public worries are addressed.

The issue is ostensibly about health concerns over mad cow disease and its human variant. But it's been politicized by opportunists looking to bash President Ma Ying-jeou's government, as well as critics of Ma's governing style. America's top diplomat here said as much this week to Taiwan reporters in remarks aired on Taiwan TV.

"It's unfortunate that some people, for political reasons, are making this into a new issue," said William Stanton, head of the American Institute in Taiwan, which handles U.S.-Taiwan relations in the absence of formal ties. "I eat beef tongue myself, and I don't think it's a problem."

In fact, U.S. beef has become a political issue across East Asia. After North Korean nukes and the value of the Chinese yuan, it's one of the biggest headaches for American diplomats.

It all started in 2003, when a single cow in Washington State tested positive for mad cow disease. The brain-wasting disease is linked, through tainted beef consumption, to variant Creutzfeldt-Jakob disease (vCJD) in humans. There's no known cure, and it's fatal.

Japan, then America's No. 1 export market for beef, promptly enacted a ban on U.S. beef after the finding. Taiwan, South Korea and other countries followed suit.

Since then, the U.S. has insisted its beef is safe and pressured Asian countries to re-open their markets — with mixed success. Japan opened its market to some imports in 2006, only to tighten up again after banned bone parts were found in shipments from the U.S. Tokyo recently announced it would re-open beef talks with the U.S.

Taiwan's political beef-storm hit last autumn, when the government announced it had inked a deal with the U.S. to relax its ban and allow some imports. Protesters were furious that Ma's government had not consulted with the legislature or communicated with the public on the issue first.

Perhaps the most notorious of the anti-U.S. beef protesters was Chu Cheng-chi, a grad student in sociology at Taiwan's top school, National Taiwan University. Incensed by the government's move and frustrated at protesters' inability to change policy, he decided drastic tactics were in order.

So he went to Yangmingshan, a cowfield-dotted, scenic mountain area north of the capital, and collected a cow patty. He then took a video camera-toting friend to the Presidential Office, propped up a table, and proceeded to fix and eat (with ketchup) a cow-dung burger. See his film here:

Under pressure from protesters like Chu, ruling party and opposition lawmakers and the media, the government backtracked. The legislature passed a law keeping a ban on U.S. beef products believed to be most at risk for mad cow disease, including ground beef, skulls, eyes, intestines and other organs.

On the day that law passed, Chu got a large tattoo on his back with a clenched fist and the words "The people stand up," in Chinese.

In an interview this week, he insisted he really ate cow-dung, saying, "I decided we needed a more special and personal way to make our demands known."

He agreed that the beef issue had become politicized. But he said the latest flap again showed the Taiwan government's contempt for the public.

"They didn't talk to the legislature or people first. They didn't communicate," said Chu. "The people's feeling is that the government doesn't respect us, and that it's trying to sneak these products into Taiwan."

Chu ticked off a list of concerns about U.S. beef. He said there was no cure for vCJD, and that consumers couldn't avoid risks by skipping beef, since tainted beef parts could make its way into other products.

Moreover, he said, the large-scale U.S. beef industry, with its huge machinery and chemical fertilizers to grow cow feed, is environmentally unfriendly. "It takes up so many resources," he said. "It's such a wasteful product."

Meanwhile, U.S. beef exporters, powerful U.S. politicians in beef-exporting states and U.S. trade officials have grown increasingly frustrated with Taiwan and other Asian trade partners. Trade officials this week said they were "deeply disappointed" at Taiwan's planned inspection process, and other U.S. officials insisted American beef is safe.

No vCJD cases have been linked to consumption of U.S. beef. (Of three known U.S. cases of vCJD, two were "likely exposed" in the United Kingdom, and the third was "most likely" infected as a child in Saudi Arabia, according to a recent U.S. Centers for Disease Control and Prevention fact sheet.)

And American officials cite a 2007 ruling by the World Organization for Animal Health that U.S. beef was safe for export "provided that certain slaughter and beef processing conditions are met." They note that there's been no case of mad cow disease in any U.S. cow born after 1997.

But it's hard to convince the Taiwanese public, especially when they can watch a cow-dung-burger-eating protester instead.

Original site

Chinese chase porn star

Porn star prompts Chinese to jump "Great Firewall"

AOL News, April 21, 2010

TAIPEI, Taiwan -- In the past few weeks, thousands of Chinese netizens have successfully jumped the "Great Firewall," China's cyberblockade on sensitive Internet content.

But they're not after democracy, human rights or Taiwan independence websites. No, they're chasing a Japanese porn star.

The porn star in question, Aoi Sola, launched a Twitter site at the end of March. Her Chinese fans went nuts over the news -- but then realized Twitter is blocked in China.

No matter -- they've been distributing software among themselves that allows a user inside China to get around the "Great Firewall." Thousands have piled into Aoi Sola's Twitter site already, in a wave of interest that took the Japanese star by surprise.

"What sparked so much discussion about me by Chinese people? What happened?" she wrote, according to the Dongguan Times. "Please tell me."

The flock to Aoi's Twitter site shows how easy it is for determined Chinese to get around Beijing's cybercontrols. But it also highlights what types of content will actually motivate them to go through the trouble.

"In China you can get anything you want on the Internet, you just have to want to bad enough," said David Wolf, a Beijing-based tech industry expert at Wolf Group Asia.

The Dongguan Times ran photos of the star with an April 13 article headlined "Japanese 'top girl' opens microblog, 15,000 Chinese netizens 'jump the wall' to pay homage." The paper reported that users who needed a helping hand over the Great Firewall could get instructions by e-mailing

An e-mail to that mailbox got an automated response with detailed instructions in Chinese on how to access Twitter from inside China, plus links.

China's Great Firewall consists of sophisticated controls to block Chinese users' access to content deemed sensitive by the Beijing government. Such content includes excessive criticism of the central government, promotion of Tibet or Taiwan independence, anything related to the banned religious group Falun Gong and pornography.

Wolf said the most common means of jumping the Great Firewall are with a proxy server, which "masks" a user's location and activity, or with a virtual private network that creates a "private tunnel through the Internet." The latter is used by foreign banks and other firms in China to secure data transmission, he said, but it is not that easy for normal Chinese to get one.

"It's simple for someone with some minimal technical acumen" to scale the Great Firewall, said Wolf. "But that means that it's too difficult for most of China."

Aoi Sola's fans got up to speed quickly. In a post on her blog translated by, a writer purporting to be her gave a shout-out to the wall jumpers. "The 'Twitter incident' has caused reverberations in China and Japan. Speaking truthfully, this was a little unexpected, even for me,"'s translation read.

"Speaking 'without modesty,' I know that there are some Aoi fans in Asia," she wrote. "But when I directly faced the figures on Twitter, I could hardly hide my surprise. Thanks everybody for tweeting about me."

As of today, Aoi had more than 54,000 followers on Twitter. In one recent "tweet," she writes about an iPad purchase, in Japanese and English ("Listen!! I bought [an] i pad !! yeah! yeah!" she says).

Aoi has responded to the onslaught from the mainland by saying she's trying to learn Chinese and likes the proposal from one love-struck (or perhaps just lust-struck) Chinese for a fan club meet-up in China.

Josephine Ho, coordinator of the Center for the Study of Sexualities at Taiwan's National Central University, said the rush to Aoi's Twitter site reflected tight controls on sexual content in China.

"The reason there's such eagerness is because there's such a strong clampdown on sex and sex-related information, not only in China but also in Taiwan and Hong Kong," said Ho. "Sexual information is hard to get at, and Japan just happens to have a sophisticated porn industry.

"Japanese porn is very popular in all three Chinese-based cultures -- it's humongous, because Japan is very, very productive," she said.

Original site

The yuan diaries

Analysis: Your guide to understanding the yuan-dollar currency spat

Global Post, April 13, 2010

To get the scoop on China's currency, follow the "hot" money.

So says Shanghai-based independent economist Andy Xie, a highly regarded maverick who used to be Morgan Stanley's chief Asia economist.

Economists like Xie are locked in a fierce debate over the simple question: is the Chinese currency too cheap?

"Hot money" — or speculative foreign money — is the key to the answer, he says.

It's not just an academic tiff. If the currency is too cheap, that means Chinese imports are too cheap on Wal-Mart shelves. That's unfair to competing U.S. firms and means, politically speaking, China's a bad guy.

If the currency is fairly valued, that means Chinese goods at Wal-Mart are fairly valued, too. U.S. firms are just whining and should suck it up. All's fair in love and globalization. By this reasoning, China's just a savvy business rival.

U.S. political pressure was pushing the White House toward the first conclusion. It was about to label China a currency "manipulator" (read: a really bad guy.) But diplomacy appears to have won the day; a decision on that was postponed, and China in turn has hinted it will let its currency rise, at least by an itty-bit. The yuan-dollar level was on the table again Monday, when President Barack Obama met with Chinese President Hu Jintao in Washington.

That's not likely to end the economists' debate, though. To understand that, we first have to unpack a few suitcases of financial jargon.

For those who don't speak "Forex," here's the situation, as explained patiently by Nicholas Lardy, one of America's top go-to guys on China's financial system.

China usually sells a lot more stuff to America than it buys from America. China sells stuff for dollars and buys stuff with China's currency, the yuan or renminbi. That means China's firms end up with way more dollars than yuan. Follow?

The problem is, Chinese firms need yuan to pay their employees and suppliers and buy materials. So what do they do?

They go to China's currency market and swap their dollars for yuan. That creates a lot of demand for yuan. If you remember your Econ 101, a lot of demand should push up the price of the yuan, given a steady supply. In finance-speak, the yuan should "appreciate."

Here's where China's government intervenes. It pumps in extra supply of yuan and sells to all comers, at a roughly set price of 6.8 to the dollar, or about one yuan for 15 cents. "The natural tendency would be for the renminbi to rise," says Lardy. "The government doesn't want that to happen, so it steps into the market and sells the renminbi to keep its value low."

In doing so, China's government collects massive amounts of dollars, mostly U.S. Treasuries, to be more specific. Voila, China's ballooning "foreign reserves," which you've heard so much about. (Beijing's stash is now worth about $2.4 trillion, with $450 billion tucked away in 2009 alone.)

Now back to the debate. Wang Tao, the Beijing-based head of China economic research at investment house UBS, says the fact that China has to sell huge amounts of yuan every day means it's obviously too cheap. If China's central bank overslept one day, the market would drive the value of the yuan higher.

Sounds like an open and shut case. China is creating artificial supply to keep its yuan cheap and so help its exporters. "If the central bank was not buying forex day in and day out, the currency would have appreciated," says Wang.

But here's the catch, counters Xie: A big part of the demand for yuan is artificial, too — that's the "hot money."

Foreign speculators are betting the yuan is going to rise like stock in the 1990s. So they're rushing into China to buy the yuan at 15 cents a pop, hoping to sell it later when the price is, say, 17 cents, pocketing two cents per yuan profit. Sounds like chump change, but it adds up if you're swapping large amounts.

Meanwhile, speculators are parking their yuan in Chinese property. That's driving a massive property bubble, particularly in places like Shanghai. The country's in the grip of a speculative "mania," warns Xie, and "the day of reckoning will come."

He thinks "hot money" accounts for fully half of China's accumulated reserves.

UBS' Wang isn't as worried. She admits some speculators have bet on the yuan, especially since 2007. But she says China still keeps close tabs over foreign money flows, and has many controls. "It's not so easy to get in and out," she says.

That means small speculators may be able to move money back to the home country. But big institutional investors that could really distort China's currency market can't move money in and out of China the way they can in some other countries, says Wang.

Her investment house's latest estimate is that "hot money" accounts for less than 20 percent of China's accumulated reserves, or $480 billion at most.

So who's right?

Ask your nearest economist. And expect to hear three different answers.

Original site

Is the yuan too pricey?

The value of China's currency, the yuan, is one of the most hotly contested issues in US-China relations. The US says a high yuan is costing American jobs. But it also keeps consumer items, like TVs and computers, inexpensive. Will China soon adjust the value of its currency?

Christian Science Monitor, April 13, 2010

Washington agreed to postpone releasing a report that would have labeled China a currency manipulator. On Monday, Chinese Premier Hu Jintao and President Obama spent little time discussing this source of ongoing tension in US-China relations. Many analysts suspect that China will soon quietly adjust the value of its currency, the yuan.

Here's a short Q&A on this complex issue:

How does the value of China's currency affect the average American?

The value of China's currency, the yuan or renminbi, affects the price of Chinese-made goods sold in the United States by retail stores such as Wal-Mart.

A cheap yuan makes Chinese products cheaper in the US. A stronger yuan would make TVs, computers, and other things made in China more expensive for American consumers.

Goods from China now make up nearly 20 percent of America's imports. In 2009, top imports from China included electrical equipment, apparel, toys and games, and furniture.

But US manufacturers are hurt by a cheap yuan. They say Chinese goods are sold at a sharp "discount" in the US. For example, a Chinese-made chair should sell for $100 in the US if the yuan was fairly valued, but now sells for $75, they say – undercutting American competitors, and thereby costing American jobs.

Is China's yuan really undervalued?

Most economists say, "yes." As evidence, they point to China's massive foreign-exchange reserves and its huge trade surplus.

The rapid growth in China's foreign-exchange reserves means China's central bank has bought huge numbers of US Treasury notes and other foreign currencies to keep down the value of the yuan. Last year alone China's foreign reserves increased by $450 billion, to total $2.4 trillion.

China's trade surplus means it's selling the world far more stuff than it's buying. Some observers look at that growing gap and infer that Chinese goods are too cheap abroad – and therefore, that the yuan is also too cheap.

The International Monetary Fund has also said that China's yuan is undervalued.

But a few prominent economists dispute this notion. They include Goldman Sachs's chief economist, Jim O'Neill, and Shanghai-based independent economist, Andy Xie. Mr. Xie says it's wrong to conclude from China's trade surplus that the yuan is undervalued. And he says China's yuan may even be overvalued due to speculative "hot money" that's fueling a property bubble in China and putting sharp upward pressure on its currency.

"China is in a huge mania," says Xie. "The No. 1 issue isn't the exchange rate, it's financial mania."

But don't market forces determine currency value?

China's currency markets are not free or completely open. China's central bank intervenes in its currency market to control the value of the yuan.

Here's how it works: Chinese exporters accumulate US dollars or other currencies from foreign customers. However, they need to pay their Chinese employees and suppliers in yuan.

Chinese exporters go to China's currency market to swap their dollars for yuan. With thousands of firms doing this, the demand for yuan is high. In a free currency market, this would push up the price of the yuan as demand outpaces supply.

To prevent that from happening, China's central bank increases the market supply of yuan. It sells as many extra yuan as the market wants, targeting a rate of around 6.83 to the US dollar.

"It's a massive operation," says Nicholas Lardy, a top expert on China's economy at the Peterson Institute for International Economics in Washington, D.C. "For a big economy like China's, the scale of intervention in the market is without precedent in global history."

Why is China keeping its currency undervalued?

The short answer is that it keeps Chinese exports cheap. That helps Chinese firms make money and keeps China's export-driven factories humming. A cheap yuan also means political stability in a nation where tens of millions of Chinese peasants need jobs.

Economists say China didn't necessarily set out with the goal of a cheap yuan. In the late 1990s, the yuan was pegged to the US dollar at about 8.28 to 1. No one complained then, Mr. Lardy says, because the US dollar was strengthening.

The problems started around 2001, he says, when the US dollar weakened and took the yuan with it. The US and other trading partners watched with concern as China's trade surplus grew and its foreign-exchange reserves ballooned.

By that time, a powerful interest group had formed in China in support of a cheap yuan. This group included big exporters and politicians in China's coastal provinces, Lardy says. China's currency policy fueled export sales, and kept the money rolling in and the economy booming in those regions.

The US has been pushing China to revalue the yuan for years. When might China change its policy?

China has already changed its currency policy once before. In 2005, after a few years of pressure, it allowed the yuan to begin appreciating slowly. (Policy wonks call this a "managed float" policy.) From then until 2008, the yuan quietly gained more than 20 percent against the dollar.

China stopped doing this when the global economic downturn hit. It returned to a de facto peg to the US dollar. It did this to protect its exporters and ensure economic stability amid tough global conditions.

Now, economists say Beijing is waiting for clearer signs of a strong global recovery before going back to the "managed float" policy.

Lardy expects that China may begin allowing the yuan to appreciate against the dollar "in the next few weeks," and that we could see a 4 to 6 percent appreciation against the dollar by the end of the year.

"There are a lot of good domestic reasons for China to allow the renminbi to appreciate," says Lardy, including fighting inflation and helping create more service-sector jobs.

Xie also thinks Beijing may allow the yuan to appreciate this year, but only by a small amount. "China will not be able to make a change big enough to make Americans happy – it's impossible," Xie says.

Original site

Strait of confusion

Sure, ECFA is important. Just don't ask any Taiwanese to explain it.

Global Post, April 6, 2010

TAIPEI, TAIWAN -- It may sound like an infectious disease. But for Taiwan's government, ECFA is the tonic the island's economy desperately needs.

ECFA is a proposed trade deal — or economic cooperation framework agreement — between China and Taiwan. First mooted last year, it was in the news again in recent days as more talks were held at a swank resort south of Taipei. Taiwan hopes to ink the deal by June.

Too bad most Taiwanese can't figure out what it's all about.

"I don't really understand ECFA," said Julia Hsieh, 32, who works in the hotel industry in Taipei.

"I don't know what the real impact on Taiwan will be after we sign it. We already have a lot of economic exchanges now, so what difference will ECFA make? There's an advantage for the government, but not necessarily for normal people."

She's not the only one in the dark. According to a recent poll by Taiwan's pro-independence opposition party, 78 percent of Taiwanese are stumped by the deal.

That puzzlement is a problem for Taiwan's China-friendly president, Ma Ying-jeou. He wants the economic pact in order to seal his record as a peacemaker in the Taiwan Strait ahead of a 2012 re-election bid. But Taiwan being a democracy, he also wants the public on board.

So the government has launched a PR campaign to boost support for the deal, complete with hip ads shown on TV and the web. Last December it was a rap-techno video that put lyrics about banned Chinese agricultural imports to a throbbing dance beat.

A couple weeks ago the government released another ad, this one with a foreigner dressed as the God of Fortune, trying to get into Taiwan's locked doors.

Inside, a young man tries to convince an elder to support ECFA, saying that otherwise Taiwan could become an economic pariah like North Korea.

After much brow-knitting, the elder finally says "yes," the family cheers, the doors are thrown open and the Caucasian god of fortune strides in.

"The god of fortune means foreign investors," said a government official who was not authorized to talk to the media. "That's why we got a foreigner to play that part."

ECFA would lay out rules of the road for further cross-strait economic cooperation and tariff cuts. It's also expected to include an "early harvest" list of trade items to see the first cuts.

According to a government-backed study, the deal could help bring in nearly $9 billion in foreign investment and boost Taiwan's GDP. Pro-ECFA economists say the deal is Taiwan's ticket to the Asian free trade party.

"Every other country has signed agreements with other East Asian countries," said Liu Bih Jane, vice president of the Chung-hua Institution for Economic Research, which conducted the ECFA impact study for the government. "Only Taiwan and North Korea have been left out."

But the government's slick PR efforts don't seem to be paying off. According to the most recent poll from the pro-government TV channel TVBS, only 35 percent supported ECFA, down 11 percent from six months ago. Meanwhile, 32 percent opposed ECFA and the rest had no view.

The government's up against two big hurdles in selling the deal.

First is the distrust many Taiwanese feel about China. Despite its recent goodwill gestures, Beijing still has hundreds of missiles pointed at the island and an explicit goal of political unification. In a recent poll, 53 percent of Taiwanese listed Japan as their favorite country, with only 5 percent choosing China.

Mistrust of China was on display last week, as a small group of protesters scuffled with police outside the trade talks venue, and held up banners calling for a referendum on the deal.

The second hurdle is that talking seriously about ECFA involves mind-numbing jargon about rules of origin, WTO obligations, even the "Heckscher–Ohlin model" of international trade.

No wonder a lot of Taiwanese can't be bothered to figure it all out.

"It's a subject for professionals, most laobaixing [regular people] don't really understand it," said cab driver Chen Ji-hsin. "We don't know what it has to do with our lives, and whether it's good for us or bad."

Original site

Monday, April 5, 2010

The Red Scare

American manufacturers are raising a hue and cry about supposedly unfair competition from a new Asian rival, China

Newsweek International, August 11, 2003

Tom Hopson runs the last American-owned TV factory: Five Rivers Electronic Innovations in Greeneville, Tennessee. All the others have been killed off or bought out by Japanese competitors, and now Hopson says his plant, too, is near extinction due to a new Asian rival, China.

The threat became clear to him one day earlier this year, when he saw an Internet ad for one of his projection TVs right next to a Chinese-made model listed for $100 less.

Later a customer—Five Rivers assembles TVs for brands like Philips and Samsung—threatened to stop using his company unless it matched Chinese prices.

“We can’t understand how they’re cutting the price so low,” says Hopson.

In May, Five Rivers joined a petition asking Washington to slap tariffs of up to 84 percent on Chinese and Malaysian TV makers for allegedly dumping sets below cost. A ruling is due in October, and Hopson says he has to win, or his factory will be out of business by next summer.

This is not the first time American industry has raised the alarm about rivals from the East. In the late 1980s, the rise of another Asian economy scared America into believing it was doomed to be the world’s second superpower—and fueled a cottage industry of best sellers and magazine covers about Japan’s rising sun.

Now most of America is focused on terror, but within manufacturing industries, managers and workers alike see China as far more scary than Japan (or its copycat, South Korea) ever was. They say the Chinese are cutting prices much more dramatically, and seizing U.S. market share more quickly—yet also far more quietly—across a broader array of industries than any other competitor has before.

The backlash is now in full steam, driven in recent months by explosive growth in the U.S. trade deficit with China, which totaled $44 billion for the first five months of 2003, up 27 percent from the previous year. Since May, companies and unions in businesses from bedroom furniture to luggage, textiles and machine tools have all appealed to Washington to step in and stop “unfair” Chinese competition.

Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, says calls about China from his 14,000 member companies have been doubling every month for the past year. “For our smaller member companies, China has become by far the No. 1 trade issue,” says Vargo. “It’s all they want to talk about.”

However, bald protectionist tactics like tariffs and quotas run counter to the free-market fashion of the age. So the focus of U.S. protests has shifted to the state-controlled and artificially low price of the Chinese currency, the renminbi, which makes Chinese products far cheaper in the United States.

This tactic has gained allies on Capitol Hill, where New York Sen. Charles Schumer and Illinois Rep. Don Manzullo are leading a push to get the Bush administration to demand the floating of the renminbi. Officially, the administration supports more flexibility in the exchange rate, but it is not lobbying Beijing with enough urgency to satisfy U.S. manufacturers.

They say time is running out. “There’s not a day that goes by that [China] is not the centerpiece of conversation,” says Edward Tashjian, vice president of marketing for Century Furniture, which plans to join the drive for protection.

Trade barriers are falling fast under the deal that brought China into the World Trade Organization in 2001. U.S. textile manufacturers say the scheduled end of textile quotas in January 2005 could spell the end for their industry. “We’ve got to put political pressure on this administration, or we’re not going to survive the removal of quotas,” says Cass Johnson, senior VP of the American Textile Manufacturers Institute. “We’re literally transporting our manufacturing sector to China.”

The numbers are striking. Imports of Chinese and Malaysian color TVs leaped to 2.7 million units in 2002 from 210,000 in 2000, according to the International Trade Commission’s preliminary investigation in the Five Rivers case. Imports of wooden household furniture from China rose from $1.14 billion in 1999 to $2.89 billion in 2002. Imports of man-made-fiber luggage from China surged 262 percent in the year ending May 2003.

Kate Bronfenbrenner, director of labor-education research at Cornell University’s School of Industrial and Labor Relations, says calls are flooding in from small manufacturers asking for the latest data on U.S. production moving to China. “You can feel the panic there,” she says.

Of course, they’ve felt this before. Japan at its peak bought big swaths of the United States, including all the surviving TV factories other than Five Rivers. But the Japanese soon stumbled, and experts like William Overholt, author of “The Rise of China,” say competition has made the U.S. economy stronger. “We don’t have a crisis,” says Overholt. “What we have is a gradual adjustment of our economy that has been making us rich for half a century.”

The decline of U.S. manufacturing has been underway for decades, says Dan Ikenson, a trade expert at the Cato Institute, adding that the current protests have a “Chicken Little” feel similar to the one that accompanied the anxiety about Japan.

Such talk gets manufacturers hot under the collar. “Go down to North Carolina and talk to manufacturing workers,” says Johnson. “These guys are in terrible shape.”

While the Japanese might have undercut prices by 20 or 25 percent, the Chinese are undercutting them by 60 or 70 percent in some markets, says Vargo. China also has a much larger supply of workers, and weaker protections for labor and the environment.

“When you’re talking about Japan, you’re not talking about slave labor, you’re not talking about child labor and you’re not talking about sweatshop labor,” says Bronfenbrenner. While Japan rose to power in select industries like automobiles, China is rising in everything from textiles to computer chips. China can also launch new industries at an astonishing speed, says Vargo, like power tools, in which he says Chinese production boomed by as much as 1,000 percent in the past year. Says Vargo, “China can go from 0 to 60 almost overnight.”

The manufacturers are preparing for political battle. Their demand for a stronger Chinese currency and punitive tariffs would mean higher prices for American consumers and other businesses. New tariffs would also further undermine U.S. global leadership on free trade at a time when George W. Bush is already accused of hypocritically protecting steel and agriculture.

Now the manufacturers are threatening to make the China scare an anti-Bush issue in next year’s congressional elections. With pressure on Washington to hold the line on free trade, expect a hot fight.