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China warns US of trade war

October 1, 2010

China has been irked by the US House of Representatives' approval of a bill to impose tariffs on Chinese exports. But Microsoft's Bill Gates and investor Warren Buffett, in central China, do not seem very worried.

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Chinese President Hu Jintao with Microsoft founder Bill Gates, whose admiration for China goes back a long way
Chinese President Hu Jintao with Microsoft founder Bill Gates, whose admiration for China goes back a long wayImage: AP

Bill Gates smiled at the journalists as he walked past but did not say a word. Charlie Munger, deputy head of the conglomerate holding company Berkshire Hathaway, had just a few words to say.

"In respect to currency issues, we don't think that Berkshire Hathaway should be telling the government of China or the government of the United States how to solve their currency negotiations. We’re delighted to leave those issues to the two governments without any advice from us."

Some Chinese media reports say American goods are losing their competitive edge
Some Chinese media reports say American goods are losing their competitive edgeImage: AP

Admiring Chinese progress

The US businessmen received the news of the bill being approved by the House of Representatives while on a visit to Changsha with Berkshire Hathaway founder, the American investor Warren Buffett.

They were there to admire the new electric buses designed by Chinese auto manufacturer BYD, in which Buffett has a 10-percent stake. The legendary investor was full of praise for his Chinese partners, for "the highway system, the building I see taking place, the industrial activity and really for the great cooperation between government and cities with companies to build enterprises in a very short period of time."

"You have compressed into a short period a degree of progress that many countries would dream about having in a century instead of in 15 years," he enthused.

"So, I look forward to seeing what really comes out of this in another 10 or 20 years. It's a rate of growth by a very major country that is unequalled and the beauty of it is that when a company like BYD comes along, and you have many great companies, the benefits spread around the world, you’re benefitting not just people in China, you’re benefitting six and a half billion people around the world."

Ritual pre-election spat

However, the US Congress might not agree with this view. This week the House of Representatives passed a bill expanding the powers of the Commerce Department to impose tariffs on Chinese imports.

The US regularly accuses China of keeping its currency artificially low
The US regularly accuses China of keeping its currency artificially lowImage: picture-alliance / Newscom

Beijing's reaction was unusually quick. A spokesperson for the foreign ministry said Washington should avoid doing anything that could harm bilateral relations. While the ministry of commerce rejected the accusation that Chinese goods were responsible for the US' economic problems.

This spat over China’s state-controlled currency often resurfaces ahead of any elections in the US.

However, it did not seem to bother Bill Gates, who had his mind on other matters: "What’s very exciting to see is what's going on here in Changsha in partnership with BYD. China has done a phenomenal job of manufacturing and volume and at low cost. But what we’re seeing with the electronic bus is being on the cutting edge of innovation, something that’s not happening anywhere else. The success of this should bring the cost down and improve the concept. It's very important for the world economy and for the environment. It’s wonderful to have this type of skill and dedication and speed applied to these important problems. So I congratulate you!"

The Chinese media have displayed self-confidence that would be worthy of Bill Gates' praise. One business newspaper in the south-western city of Chengdu commented that American products were becoming increasingly less competitive. It warned a trade war would just slow down the economic recovery in the US even more.

Newspapers in the capital meanwhile reiterated that China is the biggest growth market for US exporters. If tariffs were imposed, they pointed out, the bill would end up being footed by American customers.

Author: Astrid Freyeisen / act
Editor: Thomas Baerthlein