China has $1 trillion in foreign reserves

[Sadena Meti]

http://news.bbc.co.uk/2/hi/business/6106280.stm

Interesting story. The figures are staggering. If China got bored, they could hammer the US economy overnight by selling off their bonds.

And the number is just going to grow. Looking up some other figures, that currently equates to 5.6% of the US GDP. Not much from that perspective, but give it a few more years and at the rate of growth (the reserves are doubling every two years) by 2010 they will "own" 25% of the US economy.


Not sure what any of that means in long term geopolitics, but it is some interesting information to absorb.

http://newsimg.bbc.co.uk/media/images/42265000/gif/_42265514_china_reserve_gra416.gif

[Dr Mindbender]

I'm looking forward to China taking over as #1. We may still be under a capitalist ruling class, but at least they cant make a bigger fuck-up of the job than the american beourgiouse have done.

[Nothing Human Is Alien]

Interesting story. The figures are staggering. If China got bored, they could hammer the US economy overnight by selling off their bonds.

Yeah, but then they'd be fucking themselves cause the U.S. is their major customer.

[Dr Mindbender]

Originally posted by Compañ[email protected] 06, 2006 07:20 pm

Interesting story. The figures are staggering. If China got bored, they could hammer the US economy overnight by selling off their bonds.

Yeah, but then they'd be fucking themselves cause the U.S. is their major customer.
According to this is it's actually Japan. Which isnt really surprising, considering the logistics alone.
http://english.people.com.cn/english/20000...000120X126.html (http://english.people.com.cn/english/200001/20/eng20000120X126.html)

[chimx]

i think 60% of american debt is owned by foreign nations. of that, chnia owns 40% of it.

[Janus]

Yeah. China is definitely becoming a major economic powerhouse and their relationship with the US is definitely going to cause tensions in the future as China expands and tries to enter more international markets.

[Nothing Human Is Alien]

According to this is it's actually Japan.

You're right. I meant to say that it was a major customer, not the major customer. China is really tied up in Japan and the U.S. If they lost either of those markets it would hurt seriously hurt their economy.

[Alejandro C]

The American economy is setting itself up to lose everything. It's just like all Americans have credit card debt. They don't have anyway out of it and they will just keep borrowing more. But some day its gonna come back and bite us in the ass. Just like these bonds will eventually do. Its this short sided thinking and ignoring of the future that will unquestioningly bring a fall to the American economy and through that American power. China is the likely successor, but with the way things are run here its not exactly a given that they will replace America. China certainly has much better long range thinking but the culture and infrastructure problems are going to take a long long time before they are ready to assume any position of power.

[SPK]

Originally posted by rev-[email protected] 06, 2006 09:47 am
http://newsimg.bbc.co.uk/media/images/42265000/gif/_42265514_china_reserve_gra416.gif
China has been buying up dollars over the past years to prop up the value of the us currency. If the dollar depreciated vis-a-vis the Chinese yuan, that means the vaunted amerikan consumer would have to shell out more in dollars to get the equivalent of one yuan. And that, in turn, means that all of the goods the us imports from China, and there is a lot of them if you ever check out your local WalMart :lol: , would be more expensive. The Chinese government does not want its key export markets harmed, since its economy is still primarily export-driven. The internal, local market is growing, but still not big enough to keep the Chinese economy expanding at its current rate, which is close to 10%. The speculation is that the CPC regime there fears a major economic slowdown, since increasing wealth is about the only thing they have to legitimate and validate their rule. The regime is not democratic, butchered untold numbers of people at Tiannanmen Square, has massively increased class divisions, and is riven with corruption, so they should be worried.

This buying up of dollars has enabled the mind-boggling deficits that the usa currently has. The federal government gets to borrow more money, i.e. print it, because China (and others) are buying lots of treasury bonds -- i.e. sending the usa money to get a promised amount of dollars in the future. What is the government here borrowing money for? The war in Iraq, among other things. This increases the federal budget deficit. China's policy also enables, of course, the tremendous increase in the balance of payments problem, i.e. the trade deficit. To buy all of the goodies manufactured in China, the usa sends them dollars, and right now there are about eight-hundred billion more dollars flowing out of the country than coming into the country, every year. That situation would be bad if the government didn't print more money, since the usa would eventually run out of currency reserves -- then, boom, no more dollars to buy China's goodies (this situation has arisen historically in other countries). So the purchase of treasury bonds, and the printing of further dollars, is critical to maintaining that trade imbalance.

One thing is a given. China may have one trillion dollars in reserves, but they sure as hell aren't going to get one trillion dollars of goods or services directly out of that, beyond the maintenance of their export markets. If the central bank there tried to dump their dollars, the value of the us currency would collapse globally, and that would significantly reduce the true value of China's remaining holdings -- once dollars start getting sold off, many other central banks would quickly follow suit, in an attempt to realize their returns or at least break even. There would be too many dollars on the market to find buyers, and what sucker would want to buy dollars at that point anyway?

China has been attempting to reduce its holdings by purchasing big-ticket items in the usa, with dollars from its reserve. CNOOC, a Chinese state oil firm, attempted to buy out the amerikan oil company Unocal a few years ago. The government here, amidst spasms of xenophobic nationalism, did not approve the merger. This obviously makes many countries that have significant dollar holdings skeptical that they will be to make actual investments in the usa with that money. Those countries include, for example, major oil producing states in the Arab world (which have lots of dollars from the recent run-up in oil prices) that are not likely to get a friendlier reception than China did.

This situation is rife with ironies and is clearly not sustainable. If there is any country that is going to give the usa a real kick in the teeth – I mean something way beyond the impending defeat in Iraq – it will be China. They could knock the usa out of the imperial game the way that the usa knocked out Britain and France during the Suez crisis in 1956. :D

(edited for grammar)

[Tekun]

Considering the nature of capitalism, I'd say were due for a depression of the global economy
Though with wars springing up like American foreign fuppets, the American economy is likely to stay strong, however if the hostilities cease and the global economy becomes unregulated, a depression is fathomable

[red team]

Originally posted by SPK
They could knock the usa out of the imperial game the way that the usa knocked out Britain and France during the Suez crisis in 1956.

Not likely because:

China’s Gini coefficient, a measure of income inequality, has reached 0.46, higher than that for the US.

Any economic slowdown would mean mass rioting and a collapse of the government.

Further, pension funds are being underfunded or outright stolen while In 25 years, it is estimated that the percentage of the population over 65 will jump from 7.5 percent to 30 percent—a consequence of the “one child” policy introduced in the 1980s.

Further instability and social tensions for those entering retirement age.

Source: wsws (http://www.wsws.org/articles/2006/nov2006/china-n07.shtml)


Considering the nature of capitalism, I'd say were due for a depression of the global economy
Though with wars springing up like American foreign fuppets, the American economy is likely to stay strong, however if the hostilities cease and the global economy becomes unregulated, a depression is fathomable

Here's an interesting link related to all this: Dollar Collapse (http://dollarcollapse.com/)

[Fidelbrand]

Originally posted by red [email protected] 09, 2006 04:46 pm

They could knock the usa out of the imperial game the way that the usa knocked out Britain and France during the Suez crisis in 1956.

Not likely because:

China’s Gini coefficient, a measure of income inequality, has reached 0.46, higher than that for the US.

Any economic slowdown would mean mass rioting and a collapse of the government. [/quote]
Of course not. The CCP is very firm in its control, mass rioting will not happen, not to say PRC government collapsing. :lol:

[SPK]

Originally posted by red team+November 09, 2006 03:46 am--> (red team @ November 09, 2006 03:46 am)
SPK
They could knock the usa out of the imperial game the way that the usa knocked out Britain and France during the Suez crisis in 1956.Not likely because:

China’s Gini coefficient, a measure of income inequality, has reached 0.46, higher than that for the US.

Any economic slowdown would mean mass rioting and a collapse of the government.[/b]
Well, in certain security situations, the Chinese government could conceivably be forced to take action against the usa -- halting the purchase of treasury bonds or suddenly dumping its dollars onto the global market -- irrespective of the short-term negative economic effects on China from such a move. They might feel obligated to take that risk, if, for example, the ruling elites in the usa decide to move against the PRC around the issue of Taiwanese independence. For that matter, competition for oil reserves globally is now very intense, with Chinese firms gaining concessions in a number of countries that amerikan firms have historically avoided (Sudan is one example). The amerikan bourgeoisie attacked Iraq in an attempt to gain control of oil fields there and withhold those resources from their putative allies in Japan and western europe. They certainly wouldn't hesitate to do the same thing again, if they though the usa could militarily win; China might retailiate in the economic sphere, if its interests were impacted.

In any case, the current, massive economic expansion in China cannot last forever. The basic dynamics of capitalism dictate that there will be a downturn at some point. If China can't or won't buy further dollars at that point -- the central bank there already has one trillion dollars with which they can't do much and that will simply lose much of their value, even with interest -- then the effect on the usa is the same as with the other scenario. The federal government will have a much harder time funding the deficit and trade imbalance, particularly if the burden of propping up the dollars has not by that point shifted away from China and onto other "partners".