"Ending the Chinese currency-manipulation gig will, of course, have a secondary effect: It will cut the Chinese down to size, economically and politically. "

I do not know what kind of stuff you are smoking right now? "Cut Chinese down to size, economically and politically"??? Amid this world wide economic great recession. It would be much better if we dropped this kind of jingoistic, chauvinistic and idiotic craps and move forward together based on sound economic and financial policies.

As a matter of fact, Chinese will be the only winner and comes out of this recession much stronger in both relative terms and absolute terms, whether the west choose a cooperative climing to the top together, or instead, a all man for himself and racing to the bottom economic game.

In this competitive devaluation game and inflating out of debt game the US Fed is pursuing, Chinese M2/M3 are growing faster than US -- i.e. we are printing more RMBs than your fed's legandary printing press. So you cannot really inflate your way out of your debt holes by trying to damage your creditor and bank -- China.

Last time I checked,

1. Chinese economy grew 6.1% while domestic retail jumped 15% even though export dropped 26% (at the same time US economy dropped 6%). GM China just had the historic best quarter, while GM US was bankrupt. lol...


2. the State Concil of China (together with the largest top 7 Ministryies ) yesterday issued a mandatory Buy China order which mandates all Chinese provincial government must purchase from domestic suppliers unless they are not made in china, regardless of the competitive pricing;

3. Chinese government dropped us treasury holding by 5 billion (to 763 from 768) last month as a warning shot to US treasury; at the same time, in the last 6 months alone, Chinese have converted between 200 to 300 billions deflated greenback toilet paper into strategic oil/copper/iron ore/ commodities reserves, and natural resouce deals all over the world.

It tells the world loud and clear:

a. Chinese economy can be decoupled with the rest of world and especially can be decoupled with US. Do not be so full of yourself -- In dollar terms, EU is the No.1 export market for China and US ranks a distant 2nd with Japan and the rest of Southeast Asia.

b. Chinese middle-class is much bigger and domestic demand is much stronger than expected and the reorientation of Chinese export economy into a technology/knowledge based, domestic driven one is much shorter than the 10 to15 years the westerners expected.

The argument, that Chinese economy Chinese 2 trillion reserve does not hold strategic leverage and "owe the bank millions, the bank has a problem" does not hold water here. The fact is the "Chinese bank" does not have a problem with calling US Fed/Treasury's bluff anytime. Ask yourslef, why Messr. Geiner shut up about Chinese currency manipulation? Why Pelosi shut up about human rights and instead make a trip to talk environment instead on 20 years anniversary of 6.4?

China's rise will inevitably bring the United States' unipolar moment to an end. China has always been the pre-eminent world power in the human history except the last 200 years or so. That is probably a little too long for you to think about or too far for you to see since most Americans are used to have visibility of next quarter rather than next century.

James, you've just lanced ( pun intended ) another of widdle wancie wewis' unceasing attempts to find any data point, no thats too kind, any opinion piece, to be spun to the absolutely only possible conclusion, "Abandon all hope ye who enter here" and BUY GOLD!
GOLD! Why you can get it at German vending machines now!
GOLD! What are your post-Apocalypse plans, eh? Grubbing for worms, or be the new 1% ruling class that owns GOLD!
GOLD! They ain't making much more of it, ya know.
GOLD! Send it in, we'll send ya back cashmoney ( at least 10 cents on the dollar ).
GOLD! I have just one word for you, son, GOLD!
GOLD! That's gold, Jerry, gold! ( for Seinfeld fanatics )

yep you sure are smoking something

THAT SO CALLED GROWTH YOU ARE TALKING ABOUT IS THE

DUMPING OF PRODUCTS USING A MANIPULATED CURRENCY

I too can do that

It's called exporting your UNEMPLOYMENT to pacify the masses

Oh, you do that with guns and tanks don't you!!!

A nice 30% VAT on all things chinese would be great

and WE DON"T NEED YOUR STINKIN MONEY - so quit buying our treasuries

and put bama wama in a box

Well, Fac Yu too.
Last time I checked:
- China was a harsh totalitarian state that still has no regret stifling dissent with violence, not allowing true free speech, censoring ( or trying to ) the Internet, Such societies are are very good at any type of innovation.
- all of their export markets are in the same mire the US is. You're counting on EU? Vanna, buy this gentleman a clue and direct him to the states of various EU economies.
- China is still a far cry from the US economy. US economy is larget than China and next three combined.
- the average yearly wage of Chinese is miniscule. It will be a long time before they can sell their lead-soaked cr@p internally. Yes, their savings rate is high. So what- 20% of 5000/year or less is puny.
- China has NEVER been a pre-eminent world power, they have historically been isolationist and invisible.
- Only one military power can project that power anywhere in the world, the US. Building up a navy is a very long process, China won't have much of one for a very long time.
- I will say Ii do love me some Chinese food however. The kind we make here in the US though.

None of this to say the US is not going to go through a long painful debt unwind and deleverge ourselves, but I'd hold off on the fireworks for now.


-

Wow. Lots of emotion and ignorance. Now I know where the phrase "don't be a Fred" came from.
China has a growing huge population that will be consumers. They have a good savings rate (ie doesn't this equal weath?). They own us when you look at the security assessments ( "there is nothing left they want"). Military? http://www.heritage.org/Research/AsiaandthePacific/wm1001.cfm .

So,

China has fully infiltrated our intelligence and know all our secrets. Ask any spook, and they will tell you that right now, today, there are hundreds of professional attacks on our infrastructure all coming from known locations in China. They have state supported groups.

China will be able to overpower us in their own waters
....which they don't need to because...
China owns much of our debt (http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership) which means they have incredibly political sway (pronounced OWN US).

So, calling names aside, I am concerned. China is hurtin' in many ways right now, but big picture, they will crush us when their plans come to fruition.

Ray McGill

http://www.ft.com/cms/s/0/16e9f3e8-5944-11de-80b3-00144feabdc0.html

Ray,

I have great respect for the Chinese. I lived there and have studied their history and their present in some depth. The Chinese can have a bright future.

I am simply debunking the popular notion that China has all the trump cards. They don't. They are quite vulnerable, and in the medium term, their influence is likely to wane somewhat.

And this is, in part, what much of this dollar posturing is about.

The reasons why people get so outraged about my expressing this counter-consensus view is something to ponder.

Yes. I think we are both agreeing, and I definitely defer to your Chinese knowledge. They have some massive issues to resolve in both short and medium term. My points were pointing more to the endgame. Despite the short/medium term issues (which are huge), do you see the same endgame? I am suggesting that despite the bumps in their road, they still will own the US. (Buffet's Thriftsville and Squandersville turned into a horrifying reality)

Ray McGill

What I am saying is that it is up to the US. If the US continues to allow China to manipulate its currency and run up massive trade surpluses at the expense of the US then you are correct. If the US does not get hold of its military procurement, then you will be correct. It's up to the US. One would have to believe that the US is a nation of morons if they allow this to go on indefinitely.

Things are likely to change, and when they do, current dynamics and the balance of power will be greatly altered

Fred -

I've seen Mr. Yu once or twice before when articles mention that China might not actually be in the bestest nation of all time. He doth protest too much. A short geography and history lesson suggests a high probability that the current unity enjoyed by China may be short lived. Pat's answers were excellent on alot of the relevant points.

Funny how russia and china are the brazen yappers of this group. No where can I find any similar statements (much less just a statement) from India prime minister Manmohan Singh. Im sure Medvedev and Hu Jintao tell Manmo to keep quite and stop saying "But I like U.S.". In any case, totally agree on all points in article. Let the political games begin!

James is correct. One overlooked but relevant item is that China needs the U.S. consumer market for its exports. Conversely, many U.S. companies are merely "reimporting" many of the goods that they are having manufactured in China. A drop in U.S. consumer purchasing power means fewer jobs in China as we have seen all the shuttered factories recently. Sorry, but there is no decoupling. China must spend its reserves domestically to create state sponsored jobs to prevent civil unrest from all the uneducated rural workers who have flocked to the cities over the last ten years. Yes, China's economy is in better shape but ,without a meaningful export market, their growth will be muted, their currency is not freely traded and they will continue to hold U.S. dollars after all the posturing. Communist societies have a way of turning inwards on themselves and stagnating. That time is on the horizon.

not sure what i can make of this title i came up with, but i like it, and i like this article -

the dollar, as they say on "so you think you can dance" is buck - oh, it "is" the buck ;-)

and yes, i'm also very "up" on gold and silver; but for varying reasons, and in conjunction with the dollar...

but the part of the article is liked best was:

"The Chinese...have been expanding M2 at a breakneck pace of around 25% in 2009...

"Chinese officials have accomplished this monetary expansion (in a way US government officials cannot) by directing state-owned banks to embark on a reckless corporate lending binge designed to counteract the severe economic contraction underway in its export sector...."

i "liked" it best 'cause to me it's the most important -

from:

non-enforcement/respect of intellectual property rights (yes, i know, mexico, india, and the kid down the street from where i live do the same thing) to:

creating/allowing the creation of corporations with full state monetary and political backing, to:

continually asserting control over their own currency, while demanding how and what should be done with ours,

china, i think, sees "itself" as "the" corporation of the country - all else, within its borders, are subsidiaries...

if true (just the impression i get), i don't necessarily think that's "wrong" - each country to its own (peaceful) ways -

but let's recognize it...plus applaud our own corporations (and many of ya'll know i have lots of gripes about our own companies' behaviors) and DEMAND that our own currency be kept in a way that keeps our store of value, including: "in god we trust"

There are plenty of theories to go around, but considering which country has savings, is producing, well-employed, and making products high in worldwide demand.... vs. the country which is spending beyond its means, significantly unemployed, asking for bailouts, and having its government create jobs to beef up economic numbers, I think the first country clearly wins this economic battle.

James' article and several comments followed typify the wishful thinking regarding China's rise.

It is not a disaster for China if Chinese decide to consume their own goods instead of sending them to US. And I found the claim of understanding China simply because "I have lived there" to be ridiculous.

The simple fact is that all educated Chinese speak and at minimal can read some English but virtually no American can read or speak Chinese. So there is information imsymmetry. In China, you can access 99.9% information in English media, while Americans can not read Chinese but instead of relying on their corporation controlled media, which naturally is more interested in feeding the public's wishful thinking (exemplified in this article) about China to make a buck, instead of educating them about the reality of China...

And just what is your evidence that the U.S. ISN'T a nation of morons?