Tom Au's  Instablog

China and Japan are both major dollar creditor nations. They are of similar economic size. They also have similar amounts at stake in the stability of the dollar. Yet Japan supports continued dollar dominance, while China is doing its best to undermine it.

Japan realizes that its post-war prosperity was based largely on U.S. prosperity. Also, the U.S, nuclear and defense shield. Without a prosperous U.S., Japan would not be as prosperous today. Therefore, it is willing to accept some short term pain for the aforementioned long term advantages.

China doesn't see it this way. It, too, has prospered mightlily from U.S. trade and technology flows. But China doesn't see these as being essential to its well-being going forward. It is ready to discard the U.S. like a cast-off lover, because it feels that it could advance faster on its own. If anything, Americ is just "in the way.' Basically, the United States is all that stands today between China and world domination.

Russia is an intermediate case. Right now, Russia sees America as the greater threat, and China as the better friend. But Russia shares a common border with China, and not with the U.S. When China becomes a bit stronger, Russia will feall its heavy hand on its backside. Then Russia will align with the U.S. Russia will spend the coming century "waffling" between the West and China.