The reality of China
via chinahush.com
More from the Price of Progress department. Click through to see the other pictures, many of which defy belief.
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More from the Price of Progress department. Click through to see the other pictures, many of which defy belief.
Harvard author and professor with the really cool Scottish name Niall Ferguson talks about debt, the rise of China and the end of the American Empire here.
Kudos to the gang at Wired for making this story easy to understand. One thing we should all take away from this is that the Chinese are deadly serious about solar power and seem to be intent on conquering the field, despite the deep recession in that industry. For all the noise about limitless, green energy I just don't see the factories tolling up over here to make it happen. And that's a shame. Can't we build these things and also drill, baby, drill at the same time?
Robert Fisk talks about plans in Tuesday's Independent to move away from using the dollar for oil trading. Supposedly in cahoots are the oil-wealthy Arab states as well as China, Russia, Japan, and France.
If this were to take place rapidly the shockwaves would be tremendous. We could expect other commodities to follow suit and be traded in whatever new unit would take its place. Would America keep a vastly-devalued dollar or buy in at unfavorable terms into the new currency? In either case we could expect to see huge price increases in anything "hard" such as gold, silver, oil, and industrial metals. The US government would have no choice but to stop borrowing like a fool and make real cuts in spending. By that I do not mean cuts in the rate of increase in spending - I mean real dollar cuts! This will inevitably create the kinds of social dislocations not seen in the US since 1865, or earlier.
On the other hand, a world in which an America is brought down a peg or two will not be a pleasant place. Look for old alliances of powers to be revived and new ones to form, made more complex and terrifying by the modern ability of medium-sized powers (and annoying but determined small ones) to hurl death itself thousands of miles away from their borders.
These days were inevitable. In 1945 it is safe to say that the US had 90% of world GDP. Such a situation - and the prosperity and advantages it engendered - could never be sustained indefinitely. Still, it is worth remembering and cheering ourselves, if only slightly, that America has a $14 Trillion economy - far more than China and Japan combined. Indeed, the US economy is easily three times that of Japan. Nor does America face the daunting problems of Europe, China and Japan as those three civilizations contemplate the folly of their simply failing to breed.
If we can rediscover vision, will, and a return to republican principles (note to nervous friends: I did not say Republican principles) then America will continue to enjoy freedom and prosperity.
If not, I hope you are honing up on your Mandarin.
The Chinese Ministry of Finance said Tuesday that it would issue 6 billion yuan worth of government bonds in Hong Kong, a major step to internationalize its currency at a time of concern about the dollar.
The yuan bond issue, the equivalent of $879 million, will “promote the yuan in neighboring countries and improve the yuan’s international status,” the ministry said on its Web site.
“The first step toward internationalization is regionalization,” Shi Lei, a currency analyst at Bank of China in Beijing, said during an interview. “China wants to develop the offshore market in Hong Kong.”
While domestic banks like Bank of China and the Export-Import Bank of China have issued yuan-denominated bonds in Hong Kong for a couple of years at the encouragement of Beijing, this is the first time that government bonds, comparable to U.S. Treasury securities, are to be issued. The sale is set for Sept. 28.
In July, the People’s Bank of China, the country’s central bank, started a program for local companies to settle trade in yuan, but it has so far spurred little trade. Zhi Ming Zhang, an analyst at HSBC in Hong Kong, said the government bond issue might show foreign investors they could rely on the yuan.
“If I’m doing trade with China, where am I going to park this money?” Mr. Zhi asked, referring to the yuan. The yuan-bond market needs security and liquidity to make such settlements attractive, he said, and government bonds will provide security and a pricing benchmark. The next step, he added, would be to increase the number of Chinese issuers and investors in the yuan.
Experts estimate that China holds about 75 percent of its $2 trillion in foreign reserves in dollar-denominated assets, but since the global financial crisis began, that position has made Beijing uneasy. Since the beginning of 2007, the dollar has slipped more than 20 percent against the yen, and more than 12 percent against the yuan, and investors are concerned as the United States continues to pile up debt to finance its huge stimulus package.
In March, China’s prime minister, Wen Jiabao, expressed concern about the dollar’s slide and encouraged the United States to ensure its stability.
While the bond issue announced Tuesday is a step toward making the yuan a global currency, the size of the sale is small compared with those of U.S. Treasury securities, and the time it will take to establish the yuan internationally remains uncertain.
“There is no timetable,” said Mr. Shi, the Bank of China analyst, adding that developing the market would take “at least three to five years.”
In another move to make the yuan accessible to investors, BOC Suisse Fund Management, Bank of China’s asset-management arm based in Geneva, said Friday that it had received approval from the Swiss financial regulator to create a new set of funds, nearly half of them denominated in the Chinese currency.
Very clever. Not going for broke.
The United States opened the door Tuesday to giving China a greater role in the world economy and senior positions at the leading international financial institutions, a tacit recognition of the growing role China is playing in the U.S. economy. Zhou Xiaochuan, governor of the People's Bank of China, said during two days of high-level talks in Washington that Obama administration officials had agreed that emerging economies - including China - should enjoy a "greater voice and representation" on the international financial scene. He added that U.S. officials had promised to support "qualified candidates from China being given full consideration" to assume high-level positions with international financial institutions such as the World Bank, International Monetary Fund and other global economic bodies.
Not sure about interdependence - I think this has been a relationship looking for a new equilibrium point. Amidst all the hand-wringing it's important to note that China is still a rising power; in many important ways it hasn't arrived yet. The US GDP still dwarfs that of any other country, and exceeds those of Japan, China, and Germany combined.
July 4, 2009: It's become fairly common in China, for managers or government officials to now be held responsible for incompetence that leads to people getting killed. This leads to prison sentences, and even execution. If you have good connections in the government, you can still get off. But that is harder and harder to do. The growing public anger over poor government performance is making it difficult for the riot police, even with army reinforcements, to deal with multiple cities having large riots and demonstrations. The corruption is so pervasive, that senior officials despair of ever reducing it to tolerable levels.
India is getting nervous about China's growing power (economic and military) in the Indian ocean. China has economic and military connections with Pakistan, Myanmar, Sri Lanka and many African nations. For example, most of Pakistan's weapons are Chinese, and there are over 10,000 Chinese in Pakistan working on economic projects. There is $4 billion in Chinese investments in Pakistan, and that is expected to more than triple in the next year. China is doing the same thing in Africa, and trying to do it in Myanmar (run by a paranoid dictatorship) and Sri Lanka (which has long had tense relations with India.)
With over six million Chinese graduating from college this year, and the recession decreasing the number of jobs available for them, the military has made a big deal out of offering good jobs in the armed forces. The college grads are joining as enlisted troops, with the opportunity to become officers after a few years. Currently, most officers come from military academies or officer training schools. Over the last decade, the Chinese military has been reducing its strength and increasing its standards. In most parts of China, you need at least a high school diploma to join. And the military is trying to increase the number of officers with a college education.
About 1,300 troops, each, from Russia and China will conduct counter-terror exercises later this month.
All we hear, usually, about China is that it's going to take over the world - probably before you get up tomorrow. Not understand as well in the US are the weaknesses of China, its internal pressures and neighborhood rivalries.
This Monday, the U.S. International Trade Commission, in a 4-2 vote, recommended the imposition of punitive duties on Chinese-made tires. This "Section 421" case now goes to the desk of President Obama. If he gives his OK and the special duties go into effect, some foresee a trade war with China. One analyst, Daniel Ikenson of the Cato Institute in Washington, called the case "High Noon for U.S. Trade Policy."
Perhaps the confrontation will not be that dramatic--the free-trade community often employs dramatic images in its warnings--but the decision will be consequential nonetheless. For one thing, President Bush turned down all four Section 421 cases sent to him by the Commission. Obama's acceptance of the panel's decision, therefore, would mark a change in American trade policy toward Beijing.
We'll see...
