Three Ways China May Handle Growing U.S. Debt 38 comments
William Patalon III
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Although there’s a veritable laundry list of obstacles that could blunt the U.S. government’s ongoing economic turnaround efforts, its single-biggest challenge may come from its single-biggest creditor - China.
When China announced a new array of stimulus measures earlier this month, this very important plan was overshadowed by China Premier Wen Jiabao’s concerns about the United States’ quickly growing debt load.
“We have lent a huge amount of money to the United States,” Premier Wen said. “Of course we are concerned about the safety of our assets. To be honest, I am definitely a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”
China has cause to be concerned: As of December, the most recent figures available, China held $727.4 billion in Treasuries - about 26% more than the $578 billion in U.S. government securities the Asian giant held at the end of 2007. More than half of China’s nearly $2 trillion in foreign currency reserves are tied up in U.S. Treasuries and notes issued by other affiliated agencies of the U.S. government - including beleaguered mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).
However, the value of U.S. Treasuries has dropped steadily since the government began selling record amounts of debt to finance its economic stimulus packages. Investors have lost an average of 2.7% in 2009, according to Merrill Lynch & Co. Inc.’s U.S. Treasury Master Index.
China’s leaders “are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher,” JP Morgan & Co. analyst Frank Gong told The Associated Press. “Inside China there has been a lot of debate about whether they should continue to buy Treasuries.”
And as the U.S. debt soars as the government works to halt the worst financial crisis since the Great Depression, China’s concerns about this country’s growing deficits - and its creditworthiness - are escalating in kind.
Depending upon how it did so, were China to stop buying U.S. debt - or even worse, to start dumping it - the economic fallout could be widespread, and perhaps even catastrophic:
- The U.S. dollar would drop 15%-20%.
- U.S. stocks would get hammered.
- Inflation would spike and interest rates on Treasuries would jump into the 8% range.
- And the economy would end up flat on its back - where it would stay, with no rebound on the horizon.
Detailing the Deficit
During the first five months of the 2009 fiscal year, which began Oct.1, the U.S. budget deficit hit a record $764.5 billion. Last month, President Obama outlined a $3.94 trillion budget plan that would take the deficit to $1.75 trillion by the time the fiscal year ends Sept. 30. The plan then calls for a $1.17 trillion deficit for fiscal 2010.
As currently projected, the U.S. budget deficit is forecast to run at about 12% of gross domestic product (GDP) - even worse than the perennially anemic Japan, where the deficit is running at 11%. And the debt picture is certain to get worse.
The Treasury Department has the government’s printing presses running overtime just to finance the $787 billion stimulus passed by Congress earlier this year. And in order to pay for all the stimulus, bailout and fix-it plans that are being put in place to arrest the U.S. economic decline, the U.S. government is assuming a murderous amount of debt: Over the next decade, the Congressional Budget Office projects that the White House budget will run $9.3 trillion in deficits.
That’s $2.3 trillion more than the Obama administration had forecast. But even the CBO projection could prove way too low: It assumes that the U.S. economy - after declining 1.5% this year - will turn around an advance at a racy 4.1% clip in both 2010 and 2011, a forecast that seems far too rosy, given the depths that the U.S. economy appears to have reached.
And that brings us to China.
Enter the (Red) Dragon
During the past several years, government-operated “sovereign-wealth funds” (SWFs) from virtually every major economic powerhouse around the world had been on a global shopping spree, buying up assets and bidding up prices as they did so.
China was no exception.
So when worldwide financial-asset prices began to slide - and then to nosedive - China abandoned many of its riskier holdings, choosing to boost its stockpile of U.S. Treasury securities. That underscores one marketplace truism: Despite Premier Wen’s reservations, the market for U.S. debt is the only market large enough, liquid enough, and stable enough to accommodate China’s large-scale investments.
That’s forced China to engage in a kind of global investor activism - although, so far, most of that activism has been aimed at one country: The United States.
About one-fifth of China’s currency reserves were tied up in Fannie and Freddie debt last fall when the two mortgage firms were placed under government conservatorship, The Washington Post reported.
In fact, as Money Morning detailed back in September as part of its ongoing investigation of the bailout of the U.S. banking system, that U.S. government decision to take control of Fannie and Freddie was driven not by worries about the fading U.S. housing market, but by concerns that foreign central banks in China, Japan, Europe, the Middle East and Russia might stop buying our bonds.
China clearly made its risk concerns known at that time, adding to the sense of urgency U.S. officials felt to make a move. Today, as U.S. debt continues to mount at an obscene rate, financial and economic risks also escalate. This could lead to a spike in inflation and interest rates - a double-whammy that could cause any recovery that’s under way to sputter and stall. That duo of higher inflation and interest rates could also hammer bond values, including the Treasuries held in such large quantities by China. So it’s no wonder the risk concerns China articulated back at the time of the Fannie and Freddie takeovers go double or triple now.
Indeed, when Premier Wen unveiled the spending measures earlier this month, he made the point of saying that China should seek to “fend off risks” by further diversifying its reserves.
“We have already adopted a guiding management policy of diversifying our foreign exchange reserves, and at present our foreign exchange reserves are safe overall,” Wen said. “Our first principle in managing foreign currency is averting risk. We have always adhered to the principles of foreign currency security, liquidity and maintaining value, and implemented a strategy of diversification.”
When it comes to U.S. government debt, that strategy will take one of three forms, and will have the following potential effects:
1. Quietly threatening to stop purchasing (or even threatening to “dump”) U.S. Treasuries, a form of “back-channel” communications that can generate results (just look at how China forced the U.S. government to place Fannie and Freddie in conservatorship). Because this is back channel, it stays out of the marketplace, so long as the U.S. government finds some ways to appease Chinese investors by somehow reducing risk.
2. Quietly slowing or stopping its purchases of U.S. government debt. If China does this effectively and systematically, the fact that it’s cutting back on purchases doesn’t surface until the plan is executed. If China is able to pull this off - and it faces long odds to do so - the fact that it’s cutting back on U.S. debt doesn’t roil the markets too badly, especially if it doesn’t leak out until after the fact.
3. Publicly dumping U.S. debt. Self-explanatory in nature - and also the most unlikely, if it wants to maintain its “friendly” status with the United States - this is the worst-case scenario, and is the one that ends up with the dollar and the stock market getting stomped. If China chooses this route, it’s also essentially cutting off its nose to spite its face. The reason: By publicly dumping U.S. debt, the Treasury market will also take a beating - meaning China’s remaining U.S. debt holdings would take a haircut of 20% to 30%.
The Marketplace Realities
International demand for long-term U.S. financial assets actually fell in January, reflecting China’s smallest net purchase since May, Bloomberg reported.
International investors sold a net $8.4 billion in U.S. corporate debt in January, the report showed. Net foreign purchases of Treasury notes and bonds were a net $10.7 billion in for the month, after purchases of $15 billion a month earlier.
Few analysts believe China will abandon its Treasury holdings altogether, as that would hammer the dollar, hurt the value of its debt holdings and ruin its political relationship with the United States.
Besides, it’s becoming increasingly clear that Beijing wants a voice in Washington. Yu Yongding, a former advisor to the Bank of China, said last month that China should seek guarantees from the U.S. government that its holdings won’t be diminished by “reckless policies.”
Premier Wen echoed that request last week when he called on the United States to “honor its promises and guarantee the safety of China’s assets.”
“I think what they’re trying to say right now is, ‘Don’t take any steps that would impair our ability to access your market,’” Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, told The Post. “The Chinese are starting to flex their muscles, they are becoming more powerful commercially and economically, and they want us to know it.”
The very possibility that China and other foreign countries would stop buying U.S. bonds already was enough to prompt the U.S. government to take control of foundering mortgage giants Fannie Mae and Freddie Mac.
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This article has 38 comments:
The Red Communist China cannot handle the civil war of their job-hungry populace if their US dependent export economy halts abruptly. That is to say the excess dollars they accumulate MUST be used in buying dollar denominated goods/services/US Treasury directly or indirectly.
Thus, the status quo will continue, unless the US consumer boycotts the toxic cheap products coming from very unscrupulous Red Communist China.
THIS IS AN IGNORANT COMMENT,
T BILLS AND PAPER MONEY ARE THE SAME EXCEPT THE BILLS PAY INTEREST AND HAVE A SPECIFIC LIFE SPAN (maturity)
We will continue buying Chinese because we can't supply our own people from our virtually nonexisistent Industrial base.
Meanwhile, the Chinese do not Have to buy our Debt.
Barron's latest on Foreign Debt Holdings shows a Drop, Small but a shot across the Bow perhaps?
"T BILLS AND PAPER MONEY ARE THE SAME EXCEPT THE BILLS PAY INTEREST AND HAVE A SPECIFIC LIFE SPAN (maturity)"
Now this is an idiotic statement.
1) China needs to keep value of yuan low to boost domestic economy and to finance trade surplus with U.S.
2) China buys massive amounts of USD debt to achieve that
3) U.S. uses newly raised cash to finance its import and consumption of Chinese goods.
I anticipate a lot of finger pointing in the near future:
1) China will blame the U.S. of its wreckless policies that led to the devaluation of their assets.
2) U.S. will blame China that the dumping of US treasuries is a deliberate act to sabotage the U.S. economic recovery efforts.
3) China will blame the U.S. for the whole global economic downturn.
4) The U.S. will blame China that the real cause of the downturn was China's manipulation of its currency that robbed America of its manufacturing base.
Next thing you know, we'll be reading in the papers about confrontations between U.S. and Chinese naval vessels on international waters.......oh wait.....that already happened.....
On Mar 25 12:11 PM User 143167 wrote:
> If China chooses to dump the UST publicly, they will also choose
> to change all of them into cash, not digital money and ship them
> away. It will be a massive bank run to all western financial institutions.
> If the Fed chooses to print 700billion paper money in a week, it
> will be a hyperinflation soon. Pick your poison.
That would set off a real firestorm in this country, and this Congress-- which has already demonstrated they can do a dog & pony show with the best of them-- would ban all Chinese imports in a heartbeat, with overwhelming support of the people. And that would be just the beginning.
China understands US politics and wants no part of a long economic war with the US. They arlready have real concerns about civil unrest if things keep getting worse in this crisis.
Sure, China could dump the dollar, or Chavez stop selling us oil, or the Koreans or Iranians create military crisis. But the reality is that:
1. The US will survive and adapt- we have too many resources and alternatives that can be brought to bear; and
2. The counterparty will suffer much more.
George Soros has made a couple billion being a doomsday monger- wouldn't it be nice if we could just focus on innovation and growth (which wouldn't be hurt by hundreds of billions of dollars going back into circulation) and send him back into retirement?
If we ever get to the stage that China concludes that the horrible losses that selling off our the bulk of their Treasuries would incur for them are not so bad as the near total loss of holding on to them as the values of those assets approach zero we will be in a world of hurt.
We would survive, I'm not say that we will have blood in the streets, but it would be a very tough ride for most Americans.
Keep in mind that the goals of investing are: one) don't lose the principal; and, two) maximize the profits. It now makes sense to look outside the U.S. for better markets. Markets that will hold up better then our own because of sounder banking systems and better monetary policy (number one), and, markets that will grow sooner and faster than domestic ones (number two). Reinvest here if we start to recover quickly, otherwise let your money wait out the storm abroad.
The reasons we buy so much from China is because 1. They are willling to sell just about anything we want to buy. 2. They design and make products exactly accroding to our specifications. 3. They sell these prodcuts at most attractive prices. "The customer is king", the asians always like to say.
Before we demand China to buy as much from US as we buy from them to balance trade, we need to ask ourselves whether we have a 'balanced attitude toward trade' toward the Chinese as our 'king'.
1. Are we willing to sell anything the Chinese wants to buy? NEVER.
2. Are we willing to design and make products specifically for the Chinese market? Depends. Usually NO.
3. Where there are competitions (Japan, Europe), are our products most competitive, best value, most desirable...etc? Depends.
So I say we can either dream on or we need to roll up our sleaves because WE have a lot of attitude adjustments to make and a lot of work to do before we can expect to have a chance to actually bring 'balanced trade' to become reality.
On Mar 25 01:26 PM Billy Gee wrote:
> Thank you to the author but I would suggest another use of the mercantilist
> bounty of the soverign wealth funds of China (CIC, SAFE and CITIC)
> that continues high growth rates. A twenty five percent annual draw
> dawn should be used to purchase U.S. goods and services and note:
> not asset purchase. The benefits to the Chinese population of medical,
> communication, transportation, food stuffs, educational, and myriad
> other products and services would be fulfilling the two-way promise
> of trade. U.S. job sustainability and growth would be jump-started
> to fuel an economic upturn to cut debt accumulation by the U.S. government
> and strengthen the U.S. dollar. This is the only sensible solution
> and how can the Chinese ministers argue with this if they want to
> continue to strive for a better life of their populace?
They may end up with maybe a 12 to 15% haircut this year, a few hundred billion dollars, so what, in a war that is peanuts, ask Gearge Bush.
Think of there power position in 3 years when the USA is on its back.
>"America will survive"
this is far from where we have been, do you really want to live on bread and water or thrive and flourish.
On Mar 25 04:05 PM Mr. Big wrote:
> The U.S. and China have (had?) a symbiotic relationship:
>
> 1) China needs to keep value of yuan low to boost domestic economy
> and to finance trade surplus with U.S.
> 2) China buys massive amounts of USD debt to achieve that
> 3) U.S. uses newly raised cash to finance its import and consumption
> of Chinese goods.
>
> I anticipate a lot of finger pointing in the near future:
> 1) China will blame the U.S. of its wreckless policies that led to
> the devaluation of their assets.
> 2) U.S. will blame China that the dumping of US treasuries is a deliberate
> act to sabotage the U.S. economic recovery efforts.
> 3) China will blame the U.S. for the whole global economic downturn.
>
> 4) The U.S. will blame China that the real cause of the downturn
> was China's manipulation of its currency that robbed America of its
> manufacturing base.
>
> Next thing you know, we'll be reading in the papers about confrontations
> between U.S. and Chinese naval vessels on international waters.......oh
> wait.....that already happened.....
But the Asian financial crisis in 97 caused a massive devaluation in Thailand and several ASEAN countries, that affect Korea and Malaysia as well, only Taiwan, Hong Kong and Singapore were unaffected
On Mar 25 01:36 PM Brain Damage wrote:
> I think Korea is not included in the BRIC mostly because it is considered
> to be an (almost) fully developed country already, and well ahead
> of the other 4. That doesnt mean we should neglect it - BRIC is after
> all just another nice little acronym/denominator that will run it's
> fashionable course. Heard much of the Asian Tigers recently? ;)<br/>
On Mar 25 04:05 PM Mr. Big wrote:
> The U.S. and China have (had?) a symbiotic relationship:
>
> 1) China needs to keep value of yuan low to boost domestic economy
> and to finance trade surplus with U.S.
> 2) China buys massive amounts of USD debt to achieve that
> 3) U.S. uses newly raised cash to finance its import and consumption
> of Chinese goods.
>
> I anticipate a lot of finger pointing in the near future:
> 1) China will blame the U.S. of its wreckless policies that led to
> the devaluation of their assets.
> 2) U.S. will blame China that the dumping of US treasuries is a deliberate
> act to sabotage the U.S. economic recovery efforts.
> 3) China will blame the U.S. for the whole global economic downturn.
>
> 4) The U.S. will blame China that the real cause of the downturn
> was China's manipulation of its currency that robbed America of its
> manufacturing base.
>
> Next thing you know, we'll be reading in the papers about confrontations
> between U.S. and Chinese naval vessels on international waters.......oh
> wait.....that already happened.....
Hundred years later, US were hook into Chinese cheap goods, Chinese were happy to sell cheap goods to the American, now you see a 2 trillion imbalance, whats next?
Oh where , oh where did they purchase them from?
Mary, Mary quite contrary.
A lot depends on China's domestic stimulus plan. If this one works, other concerns may even become less than secondary, especially if the US plan to stimulate domestic spending does not work.
And then there is history to consider. China has never been a friend of the western hemisphere - raped by the colonial nations in the 19th century, mistreated by Japan in the 1930's-40's. Add to this the political tensions of the Cold War, you have to arrive at the conclusion that China's sympathies towards the West were limited to the economic trade relationship and a mutual win-win situation.
Then, consider the human factor. Any Chinese worker who lost his job will put the blame on the USA because it was there where the financial crisis started. All this is not good, not good at all...
RMB has been steadily gaining vs USD. Although the increase isnt large enough to make any speculative gains in the 5 year horizon.
> China is buying commodities as fast as possible before they do "stop"
> the purchase of UST's and will sell them back later to recoup their
> loses when the dollar gets routed. Its a buy and hold strategy!<br/>
>
> They may end up with maybe a 12 to 15% haircut this year, a few hundred
> billion dollars, so what, in a war that is peanuts, ask Gearge Bush.
>
>
> Think of there power position in 3 years when the USA is on its back.
>
Expat makes an important point here.
Indeed, China is loading up on commodities. Big time.
Perhaps they are prepping for the eventual "dumping" of UST?
The Chinese know that no matter what happens, they are going to take a big haircut on their USD holdings. The trick for them now is, pick the less lethal poision and to hedge as much as possible. So we know they are hedging by purchasing commodities. So which of the two poisons are they going to choose?
1) Keep buying USTs and help the US economy recover....but potentially tripling or quadrupling USD exposures. They will maintain good U.S. relations but tensions will be high because China will be increasingly worried about U.S. default, while the U.S. focusses on potentially reckless spending over the next 5 to 10 years. In a way, China will be financing massive U.S. long term spending/bailouts. If things go south, China's fall will be hard and their survivability (i.e. without needing to request external aid) would be in question.
2) Cut your exposures and stop buying UST (or even dump them). This will hamper US recovery efforts and may instill hyperinflation. Worse case scenario is that the U.S. market and economy collapses. Maybe the Chinese recover 50 to 70% of investment. Although the resulting appreciation of the yuan may make Chinese savers feel a lot richer, unemployment will skyrocket as foreign investment pulls out of the country. Social unrest will be commonplace. China may potentially be alienated from the western world. Trade surplus will shrink big time.....as their competitive advantage (cheap labor) is signficantly diminished. Trade will also be disrupted in the short and medium term as the global chaos resulting from the destabilization of the U.S. economy and financial markets takes place. The commodities war chest would definitely help cushion the blow, though. In such a scenario, China will be hit hard, but they will survive and perhaps be stronger in the longer run on a relative basis. But it would be a very painful process for them....as well as everyone else in the world....and they will be alienated (except maybe Russia will still be their ally).
It's hard to tell which extremes the Chinese would pick or perhaps they will choose something in between (i.e. slow down on USD debt purchases and diversify to other currencies). But we have seen hints that they are trusting the USD less and less. To me, I believe they are leaning towards abandoning the USD and are trying to strategically maneuvre into themselves to do it (i.e. buying commodities and pushing for a new reserve currency). It's a bit of a chess game.....it's all about the positioning and luring the opponent into making the wrong move.
Oh well.....time will tell. The U.S. has a big wildcard..... the military.
Yanks tend to think back to their most recent traumatic event (ie, last weekend's NFL game). The Chinese, even of lowly background, maintain a sense of history that stretches way back.
Doubtful that the Yanks can teach the Chinese anything basic about making money. Of course, if they copy of advanced technology of manufacturing bubbles, and they start a new financial security to export their bubbles here, we're sunk.
On Mar 26 02:59 AM Spook wrote:
> It occur to me suddenly. A century ago, British were hook into Chinese
> tea, Chinese merchant kept selling tea to the British, the British
> kept paying in silver, pretty soon, the British government realize
> that they were paying a lot of silver to the Chinese, in order to
> get these silver back, the British start selling opium to the Chinese,
> next thing you know was war.
>
> Hundred years later, US were hook into Chinese cheap goods, Chinese
> were happy to sell cheap goods to the American, now you see a 2 trillion
> imbalance, whats next?
On Mar 26 09:31 AM Kraut wrote:
> Wen Jiabao made it clear in his "Worry" Speach that China's domestic
> concerns have absolute priority while everything else is of secondary
> concern.
>
> A lot depends on China's domestic stimulus plan. If this one works,
> other concerns may even become less than secondary, especially if
> the US plan to stimulate domestic spending does not work.
>
> And then there is history to consider. China has never been a friend
> of the western hemisphere - raped by the colonial nations in the
> 19th century, mistreated by Japan in the 1930's-40's. Add to this
> the political tensions of the Cold War, you have to arrive at the
> conclusion that China's sympathies towards the West were limited
> to the economic trade relationship and a mutual win-win situation.
>
>
> Then, consider the human factor. Any Chinese worker who lost his
> job will put the blame on the USA because it was there where the
> financial crisis started. All this is not good, not good at all...
>
>
On Mar 26 10:50 AM Mr. Big wrote:
> On Mar 26 02:07 AM expat in China wrote:
No company or government should be required to purchase anything off a list. An independent, market-oriented assessment should be made cost/value. US products are quite uncompetitive in medical/healthcare compared to many EU sources, just as an example.
By the way, please get your facts straight. CITIC is not a SWF.
On Mar 25 01:26 PM Billy Gee wrote:
> Thank you to the author but I would suggest another use of the mercantilist
> bounty of the soverign wealth funds of China (CIC, SAFE and CITIC)
> that continues high growth rates. A twenty five percent annual draw
> dawn should be used to purchase U.S. goods and services and note:
> not asset purchase. The benefits to the Chinese population of medical,
> communication, transportation, food stuffs, educational, and myriad
> other products and services would be fulfilling the two-way promise
> of trade. U.S. job sustainability and growth would be jump-started
> to fuel an economic upturn to cut debt accumulation by the U.S. government
> and strengthen the U.S. dollar. This is the only sensible solution
> and how can the Chinese ministers argue with this if they want to
> continue to strive for a better life of their populace?
the global trend is, US dominance is diminishing in all aspects from economy to military as other nations catch up and share the pie chart.
if the US intend to retain its status as #1, but can not rely on out growing its counterparts, its only option is destroying others before they have a chance to reach maturity. although this need not necessarily be done with the military. banning China from WTO was an effective way of "destroying" their growth potential. now that have failed, military advantage is the only edge the US can rely on.
alternatively, in the interest of world peace, the US can simply accept its role as #2 in the near future. i believe, to avoid a war, the next step in China's foreign policy is to educate the american public to accept that being #2 is OK.
As far as buying from a list: the world's largest economy offers the best of products in every field and your your list comment is mind less and insulting. Perhaps we can start with software being purchased rather then stolen.
On Mar 26 11:52 AM User 360916 wrote:
> This is not a sensible solution -- in fact it is non-sensical solution.
> What do you do for a living? Curious.
>
> No company or government should be required to purchase anything
> off a list. An independent, market-oriented assessment should be
> made cost/value. US products are quite uncompetitive in medical/healthcare
> compared to many EU sources, just as an example.
>
> By the way, please get your facts straight. CITIC is not a SWF.<br/>
According to US Senate hearing on the Big 3, the world's biggest econ (USA) failed to offer even 1 of the top 10 best quality cars.
And yes, lets talk about stolen software. I believe P2P networks have been a major source of this kind of activity. Although I am not sure who DL'ed the most software.
Major operating systems such as SUN, Apple and Microsoft are freelycopied in China with little or no repurcussions. There are major CAD programs that no one has to pay for. There are major word processing programs, drawing programs, presentation programs etc. that are freely stolen. Meanwhile the Chinese people suffer because they arn't allowed the benefits of the purchase or pharmaceuticals, medical tehcnology such as ultra sound and advanced X-Ray systems as well as common diagnostics to detect and prevent diseases. There are are a myriad of products that are blocked from entry into China that would benefit the average person but this does not seem to be of any concern for the the central planners and the fortunate elite. This is sad because the U.S. has been a loyal customer and friend to the Chinese since before World War II. The U.S. admires the Chinese people and hope our trade can continue
On Mar 26 05:12 PM dybydx wrote:
> Billy Gee,
>
> According to US Senate hearing on the Big 3, the world's biggest
> econ (seekingalpha.com/symbo...) failed to offer even 1
> of the top 10 best quality cars.
>
> And yes, lets talk about stolen software. I believe P2P networks
> have been a major source of this kind of activity. Although I am
> not sure who DL'ed the most software.
On Mar 26 09:29 PM Billy Gee wrote:
> "dybydx", Your comment about failing the "the top 10" for autos is
> shallow. The JD Powers Survey for 2009 of Auto Dependibility is
> ocuupied by four U.S. producers: Lincoln, Cadillic, Buick and Cadillac.
> Thus it is time for the central planning bureaucrats to try and some
> how block these automobiles from entering China and also to try
> and copy their technology.
> Major operating systems such as SUN, Apple and Microsoft are freelycopied
> in China with little or no repurcussions. There are major CAD programs
> that no one has to pay for. There are major word processing programs,
> drawing programs, presentation programs etc. that are freely stolen.
> Meanwhile the Chinese people suffer because they arn't allowed the
> benefits of the purchase or pharmaceuticals, medical tehcnology such
> as ultra sound and advanced X-Ray systems as well as common diagnostics
> to detect and prevent diseases. There are are a myriad of products
> that are blocked from entry into China that would benefit the average
> person but this does not seem to be of any concern for the the central
> planners and the fortunate elite. This is sad because the U.S. has
> been a loyal customer and friend to the Chinese since before World
> War II. The U.S. admires the Chinese people and hope our trade can
> continue
>
> Billy Gee, get out a little...travel...see the world. Your ignorant
> comments about what the Chinese have and have not are really very
> sad, because I see you desperately wanting to participate in the
> world (which is good), but limited by what you read (not so good).
> After one trip to China, the accuracy of your statements will improve
> (assuming you're not simply a blowhard, which is always a possibility).
>
The US gov has a long history of producing reports on everything about China ranging from econ, human rights to military affairs. Majority of which are doctored and no one in those respective professions take them seriously.
Take your economic commission as an example. Their report made it sound like the Chinese econ was specific tailored to invade the US way of living. This hardly reflect the opinion of any credible group of economists and scholars.
If you take those reports seriously, you probably havnt been to China.
As I've illustrated before, China is signalling its expectations to the U.S. Its latest suggestion of a basket of currencies is part of this process. This is not seeking to dethrone the U.S. $ - which would be unwelcome to both the U.S. and China as the biggest foreign holder of U.S. $s. Rather, China is asking the U.S. to take a demotion by sharing its throne with other currencies. If central bankers cooperated, such a shift could be accomplished without massive disruption of trade or currency relativities.