There are really only two stories out there today: the probable effects of the upcoming Obama presidency on U.S.-China relations, and the worsening China economy.

Both of these stories have been beaten to death so much over the past several months that very little remains to be said. I have certainly written ad nauseum on both topics. Some folks are coming late to the party on the Obama stuff, however, and as usual, such commentators are making some dubious predictions.

Those who compare Obama to Jimmy Carter and expect that he will poison U.S.-China dialog over human rights issues are way off target. Do five minutes on The Google and you will realize how silly that assertion is. Spend five more minutes researching Obama’s China advisors, and you’ll begin to see why "continuity" should be the watchword. The only sensible issue to discuss here is trade policy, but for those folks who expect some sort of Lefty, punitive, protectionist trade policy coming from Obama — well, I think they are way off.  I do worry that some in Congress will try to push some punitive measures, however, but with a global economic crisis, I think some of those bilateral issues will recede into the background for a while.

FYI, if Obama continues to be advised by steady experts like my SAIS prof David Lampton, China policy will be handled very well indeed.  I read recently that Obama’s number one criteria in making appointments is "excellence" (sounds a bit hokey, but OK), and his China team is certainly indicative of that. If anyone cares, the best thing about a guy like Lampton is that he parks his ideology at the door and comes at issues from a practical standpoint. Obama seems to be that kind of person as well, and I hope the same is true of the rest of his China team. I think we’ve all had enough of ideologues over the past eight years.

On the PRC economy, what to say?  The markets continue to be volatile, factories keep closing, speculative capital has dried up, capital controls keep being adjusted/tightened, and we are all sort of waiting around for something to happen.  The slowdown is big and it’s noticeable. We are certainly not going to be in a position to prop up the global economy; that reality is just starting to sink in with folks in Hong Kong, Singapore and other Asia power centers.

The latest is a big domestic spending package.  Not a big surprise, although how this breaks down will be quite interesting.  I guess construction companies here (and all over the world) that specialize in infrastructure and transportation will be hiring lots of folks in 2009.  We are also looking at big spending in health care and energy.

Interesting how the China spending package priorities sound an awful lot like Obama’s spending priorities?  There’s a story there somewhere, I will have to go look for it. Those seem to be good things to spend money on.

At the same time, it looks like the government here is tightening its belt. From China Briefing:

China’s budget for government agency spending will be capped at the same levels in 2009, reports the Ministry of Finance on its website.

In the past five years, agency budgets increased by average of 5 percent annually. China’s central government is now working towards cultivating a thrift society.

“The budgets for next year should be capped at the same amount as this year’s and every project would be looked at,” said the ministry’s website.

I expect that there will be a lot of gloom and doom blogging over the next 12-18 months.  I will probably participate in some of this, although I hope that I do not get sucked into this cycle.  Gets old after a while and is depressing. I saw this article today: "Bear in the China Shop" from the FT and leaped to a number of conclusions. Imagine my surprise when it turned out to be a story about the bankruptcy of a company that makes tableware. I guess I should start taking things more literally.

Hopefully there will be some more interesting stuff to blog on next week. Until then, enjoy the weekend.