So China isnt as strong as first believed... (Full Version)

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cyberdude611 -> So China isnt as strong as first believed... (1/23/2008 9:43:01 PM)

Even though China and India's economies are growing at a very fast rate, they still need us as much as we need them. This was proven Monday as the stock exchanges in asia, including China's, plummited on fears the United States economy could be heading for recession.

Many analysts claimed that China, India, and the EU's economies were strong enough to keep the world from following the United States into a recession or even a depression. This theory was "de-coupling" basically meaning such economies were not dependant on the United States. That theory is dead. It is clear that if the United States does indeed fall into depression or recession in the next few years, it may bring the rest of the world down with it and trigger a global recession. This was further confirmed as the sell off in the US was very short lived and actually lead to a reversal on Wall Street on Wednesday. The US Dollar also slightly increased in value.

http://articles.moneycentral.msn.com/Investing/JubaksJournal/WhereTheBearWillBiteHardest.aspx

This has many investors worried now who were trying to move their money out of the United States to a more stable economy. That more stable economy may not exist. It appears no one is going to be immune to a US recession.

Welcome to the new global economy! Remember the old days back in the early 20th century.... a nation has a depression and someone else will usually benefit from it? Not anymore. Everyone's economy is now linked like mountain-climbers.



Feric -> RE: So China isnt as strong as first believed... (1/24/2008 3:46:23 PM)

Actually, this has nothing to do with strength; it's about interdependence.

Because the U.S. is currently spending more than it earns and running up big deficits (the result of the prolonged wars in the Middle East) the U.S. treasury is sustaining itself via the sale of long-term bonds. The primary purchaser of these bonds is China. Should the USA fall into an economic recession (or worse, a depression) China's treasury bonds are worth much less--their economic investment is in peril.
China needs those investments to remain healthy, and it needs a healthy USA to purchase the bulk of its goods to fuel its own development as it crawls out from the hole the Red government dug for it.

The analogy of the mountain climbers is a bit misleading. Instead, think of the global economy as a giant engine. Each country represents a different piece. Working together, the engine produces power and everyone benefits. If one piece breaks down, the engine will still work, but not as well; eventually it will die. Therefore, it is in everyone's best interest that each piece be carefully maintained.



Termyn8or -> RE: So China isnt as strong as first believed... (1/24/2008 10:51:59 PM)

cyber, good point. While I do maintain that China could destroy our economy with the stroke of a pen, they won't.

They might is we got into an adversarial situation with them politically or militarily, but if that doesn't happen I think they will actually take the ride down with us.

The reason is that even if they do not act aggressively at all, but refuse to re-up on the bonds because they have some idea that this is in the best interest of their country, they are wrong.

The US is their biggest customer, and provides most of the fuel for their economy. Business 101.01 - if your customers cannot afford your products, just what do you think happens ?

So I guess I have to agree with the title of this thread. China cannot screw us over without screwing themselves over. Yes there are other markets, but no other like the US for them. The specifics of that are the topic for another thread though.

Boils down to this, China is doing what I would do if I were them.

And realize this, they have a good navy, which rivals ours in some ways. If they fly MIGs they probably have air superiority. They have short range missiles that are practiacally indefensible. And they have nukes. That is not mentioned much, but they do.

So maybe it's true, that China could kick our ass economically, maybe even militarily. But in either case they would be killing the golden goose. They are crippled by their own interests, pun intended.

The key to maintaining China is keeping trade going. China has been pretty quiet about this mideast debacle thus far. It was in their best interests.But that could change overnight.

I go now. Be well. (I don't say be good because I know better)

T



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