Wednesday, 15 September 2010

the export power house's think tank

...warns the US ... and the rest of the world.

Ding Yifan, a policy guru at the Development Research Centre, said China could respond by selling holdings of US debt, estimated at over $1.5 trillion (£963bn). This would trigger a rise in US interest rates. 

China's authorities seem split over how to respond to moves on Capitol Hill for legislation to punish Beijing for holding down the yuan. The central bank has ruled out use of its "nuclear weapon", insisting that it would not exploit its $2.45 trillion of foreign reserves for political purposes. "The US Treasury market is a very important market for China," it said. 

These lines are part of an article in today's Telegraph on a Chinese think tank warning the US in case of a trade war to be the loser. It is almost as if the author is on a yellow payroll: or just naive: his lines read as if there was a democratic government in place in China right next to a totally independent Central Bank. Both is definitely not the case.

It is also misleading to talk about $1.5 or even $2.45 trillion as if those were stacked in a big bank's  treasury box. China has made extensive use of the huge surplus it worked so hard for by collecting hard currencies and defend its fancy paper money glued to the US currency's heels. Globalism allowed for one of its major participants to pay with rice and paper and suck up $s and €s; no wonder China's foreign investments jumped from $5.5bn in 2004 to $56.5bn in 2009 and is expected to reach $100bn in 2013; beware: those are the official figures not covering what China does not want us to know! And there is plenty of that.

China's path to lead the way  can be phased as follows: phase I, the time when China sucked up labour and offered cheapest products is dealt with, that is not to say it ever ended; phase II was to suck in know how and equipment under the cover of intensifying phase I; the neo-lib masterminds of all continents celebrated their bonanzas of soaring shareholder values by letting Chinese factories manufacture what then was sold with dream margins to the rest of the world. At the same time know how was not only given away, it was thrown at any Chinese face, interested or not!

Now China is entering phase III where the infrastructure and the resources are in place to run the show, become world market leader in producing more or less any of the mass and most of the future relevant products. High tech or low tech, anything. Just one example: railway.

And while Japan is desparate to devalue its currency (BBC) the Yuan is money to play with: play money..

Carpe diem!