"of the people, by the people, for the people" but owned by China?

You are getting closer to the big picture, continue digging and hopefully, you'll post the next segment very soon. Some kudos to you, you are amongst the first to post about the link between the China's dept holdings and the current crisis.

Good luck.

Oh, do tell.

Of, forget it you're probably referring to remarks by Cheng Siwei, and the suggestion that the People's Bank of China was going to "diversify" some of its $US1.2 trillion in assets to give it less exposure to the US dollar, which cause something of a panic in the US. Yes?

ACB, I think it's more complex than that. I fact, USA also have a leverage on China now. If USA falls ... China has a huge sum of money worthing nothing and lose his customer. Moreover, the RMB is kept artificially low in order to favor the exports (the CCP is buying its political survival on growth). And thus RMB is not convertible. That means that the money of China is not usable for the country, and goes away as soon as earned, mostly as a lend to USA. Or as stock investments, where it can just vanish one day!!! China is wining a lot of money, but cannot use it for the country! After all, the customer is the king, not the seller. Imagine than tomorrow USA starts to ban Chinese products ... they will have a really hard time cos' they will have to reduce a lot their budget, but on the other hand China will have a really hard time to continue growing (internal market ... it's a joke ... the Chinese people are saving a lot and spend few). I would rather call that a dangerous tango rather than a 'who owns who game' ... of course, if one of the country can get rid it of the drawback without losing their advantage, they will really have a leverage. IMO, that's why both countries will increase their diversification in the future. USA will try to produce in other countries, and China will try to sell elsewhere and not to get only dollars for their work.

It's always more complex than it first seems. But one thing is for certain, it is easier for China to lever America using foreign dept than it is for America to lever using imports, if only because the US government does not have direct control over its imports but China does have direct control over its dept holdings.

Washington cannot ban Chinese imports without destroying the quality of life of it's citizens and destabilizing its retail sector, and China cannot crash the US economy without destabilizing its own domestic growth. However, history tells us that any move by Beijing is more likely to be a retaliatory move in reaction to action by the US (Economic, political or military), than it is to be an open act of economic aggression. Therefore the level is on China's side.

Beijing can use the foreign dept as a shield rather than as a club in order to dissuade American actions (You hit us, we will hit back). Meanwhile America's free market, open system and need to maintain a democratic mandate mean that it cannot use its imports as a shield because it cannot just cut China off, and it cannot use it as a club either for the same reasons. In fact the only thing that America actually can do is to sit by and watch Chinese exports go down as a knock on effect of its reduced ability to import them due to the weakening of the dollar.

When you get right down to it, that is not a very effective lever given that it would only happen if America first moved against China thus causing China to react because China would already be taking a hit from America's original action and would now simply be taking a bit more of a hit, but taking America down with it.

Ah ACB, your views are always very insightful. I know you won't reply, but I still try: where are you from? I couldn't help thinking that the Party is more interested by making the other countries shut up rather than giving this money to the people of China. However, it is true that they are masters in controlling the people ... subtle and merciless.

How do see the situation evolve in the next 20 years?

20 years time? Er, maybe you should come back in 15 years time and ask again.

Unless something dramatic happens, and speaking in general terms, ACB basically see China continuing to move forwards exactly as it is doing now. Growth will slow down and stabilize to a more manageable rate and wealth will gradually move inwards from the East and West coasts. As the coastal regions become more and more urban industry will be pushed further and further inland creating problems as it collides with farmland and rural populations (Basically, the wealthier coastal regions will get fed up with the pollution created by industry as the suburbs encroach on what are now out of town industrial zones, and will push them further and further inland).

ACB also predict that China will do what America considers to be unthinkable, it will develop a stable and educated middle class society without high level democracy. There will be more local democracy as the central government moves to combat corrupt officials and to make the regions less dependent and move adaptable in a changing world, but there will not be anythign more than token national democracy if only because it would never get anything done trying to micromanage a country the size of China democratically as a whole, but also because the Chinese people would rather have not too brutal dictators in charge than risk a rapid change to democracy that could bring instability.

Of course this isn't exactly a hard prediction to make. If you want something more specific then ACB is going to need a more specific question.

In the short term, though, ACB sees choppy water. The more the world economy slumps the choppier they will get. The world economic crisis is leading to a significant reduction in the purchase of non-essential goods from China - Children's' toys and mid range electronics especially - this reduction in demand is monumentally compounded by the fact that Chinese manufacturers run on VERY slim margins (Basically, they make almost no profit on an item for item basis and require high turnover to stay in business). Thus Chinese manufacturers are downsizing (Sometimes even skipping the province overnight) and are leaving their workers out in the cold. Literally in some cases due to the large number of workers who live in factory dormitories. This is leaving many Chinese angry and without the hopes for the future that they were promised by the government and is leading to urban unrest. Rural unrest China has in spades, but urban unrest is new and scary for Beijing because it is so much more visible and so much harder to deny. ACB see this getting worse and worse.

ACB also see problems when with Chinese graduates who have been promised a bright future in the new China wake up and find that the economic boom happened while they were too busy studying to take advantage of it, and that they are walking straight into a bust when they finish college. This is going to leave a lot of smart young people very angry indeed. Something that will be made all the worse by the fact that their families have practically invested their entire lives in their educations only to find out that they have the education but nowhere to use it. College graduates in China were hoping to escape the rice paddies, they are going to look for someone to blame if they are forced back to them. Again, because students are an urban creature their anger is going to be vented in urban areas. Lots of angry young educated Chinese in urban areas isn't a nice sight. Think of the Anti-Japanese riots, except that the targets of their anger (Both the students and the factory workers) is going to be any and all symbols of authority that they can throw a rock at.

ACB Your last comment goes into what I would write, and actually think about also. For weeks, we've been witnessing many different views by so-called China economic experts, about what will be he outcome for China. I've been saying, against everyone of course, that China would actually be the worst damaged Country by this crisis (for various reasons, I won't get into details now). I've also been saying that we would soon start to see hints appearing in the mainstream media about what's really happening now. People are dismissive, it's incredible and very scary.

http://www.newsweek.com/id/170305/output/print

To sum it in a simple way: What we are witnessing right now is Economic War, nothing else. The "crisis" is the US answer to what China started 7 years ago.

And also another trend to watch for, as I've been staying many times on other blogs (dismissed again of course by the intellectual elite): The white elephant in the room.

What's the white elephant in the room? it's the fact that a socialist model is being successful, creating wealth and challenging the democracy free market model. China might want to "rise peacefully" (I do consider this as an oxymoron btw), but inevitably, there will be an ideological clash, very soon. And again, this concept is penetrating the mass media now, and this is just the start, wait until Obama gets in function and the whole protectionist circus starts.

Please do not take what I say in a negative way, I am not pro US or Anti-China or anything else, I am just giving my opinion on what is going on right now. And I might be totally wrong of course, but let's just say, it's a guts feeling.

ACB agree and disagree with what you have said on a couple of points and at a couple of different levels, but ACB supposes that it is best to sum things up by saying that the US media traditionally portrays any kind of competition as if it were a purposeful threat. If a country has lower wages then the media accuses it of having a sweat shop economy, if a country has better infrastructure (Usually newer factories) then the media accuses it of attacking America's industrial heartland and Blue collar workers (Joe the plumber, as he has been so named), and so on. It's just how the US media works. It tries to change everything into an us and them situation and then it accuses the Thems of cheating in some way. It gets people riled up and it excuses the failings in the US system that have lead to it becoming uncompetitive in certain markets without actually having to admit that the US economy can actually be uncompetitive.

It's not war, it's just competition. The US has finally come up against a competitor that can match it for product, price and output, and it doesn't like it. China is doing what Japan did 30+ years ago, except thati t's doing it with both high and low end goods. Which is hitting American industry from both sides at once whereas Japan started low end and then moved to high end.

Yes, there will be an ideological, clash. In fact it began about 10 years ago. Only from where ACB is sitting the conflict and the confrontation are both US generated. China is trying to rise peacefully but in doing so it is coming up against the single greatest taboo in American foreign policy. That freedom/democracy are not prerequisites of prosperity.

According to US doctrine you require three things to be prosperous. An open free market economy, a free citizenry under a democratic government, and a consumer centered economy. In the bad old days the US would more of less refuse to have open relations with countries that didn't meet these prerequisites unless they were net exporters of oil/gas or soft fruits in which case exceptions were made. They also used their hard and soft power to get other nations to do the same. Largely this meant that nations who did not meet the criteria were cut off from the largest of the international markets and instead had to trade on local or regional markets. This kept them small and perpetuated the myth that the above were all prerequisites.

Then along comes China.

1) China has a non-interference policy. This means that it will do business with a country without demanding change or reform in return. This is in start contrast to the US which prefers not to trade without these things, and which uses aid as a lever to get countries to open up their economies to US investment and to get their governments to be more like it is.

2) Whereas the US's primary goal was to open up the economies of other countries to US investment so that large US companies could open up factories that would produce cheap goods to service the US economy, China's goal was to build up the internal economies of countries so that they might become IMPORTERS of Chinese goods. To this end China has invested significant amounts in building up the internal infrastructures of other countries such as road and rail networks irrigation systems. The countries imported Chinese knowledge and labor, their economies grew as their infrastructure improved, and they will begin to reach the level where they can import Chinese goods in a few years.

Both of these things have allowed China access to regions such as Africa, India and South Asia where the US has little influence. America sees this as being an agressive move when in reality it is simply commerce. China fitting into niches that US policy (or pride) won't allow it to enter.

One final note, China is NOT socialist. China is a single party state with a LEGALIST government. There is a very very big difference. China hasn't been socialist for years. It's got pretty one of the world's largest and freest free market economies and it has almost no tax or social welfare networks. If China were socialist then schools and hospitals would not be so very expensive to take advantage of. Basically, in China the poor are on their own. China has a poorer social welfare network than the US, which is saying something.

ACB forgot to put this in the first post, but on the subject of China being hit by the economic turmoils, you might do well to look at which sectors of whose economy are being hit, and why.

In the US the US the primary point of impact has been America's infrastructure. The core fo the financial sector was found to be rotten, banks and financial houses weren't just taken down, they were the cause of the fall. This caused a ripple effect all the way down the chain effecting businesses because they couldn't get credit, and consumers because their employers were hurting, which in turn has hurt businesses again because their customers are not spending.

America's businesses and consumers are sound in themselves but have been hit by the fallout from a rotten financial system.

In China, businesses are taking a knock on hit from US consumer woes. Americans aren't spending so much so Chinese imports are not in as much demand. This is hurting businesses who rely on external trade and their workers, but because the workers didn't have all that much spending power in the first place their knock on effects are much smaller than in the US. They never had a consumer lifestyle so China's domestic consumer sector isn't as badly hit as the US's is. People will hurt, but the fallout will be unrest rather than economic decline.

Also, in the midst of this China's infrastructure, its financial core is not that badly effected. It's taken a hit but crucially 1) It's secondary damage spilling out from the US meltdown, rather than a Chinese meltdown. 2) Because of 1 credit is still flowing in China.

In short, while America is being hurt because the core of its financial sector has collapsed and has brought other businesses down with it, China's core is intact and the primary damage to China is damage done through a loss of export revenue, rather than from any intrinsic failing within the Chinese economy other than an over reliance on exports.

Excellent reply ACB, thank you for taking the time to write it. If you allow me, I'd like to continue my line of thoughts, since you are showing an interest in it (I suppose, maybe it's boring the shit out of you, who knows ;) )

I think China is applying some very basic rules from the Sun Tzu book, basically along the lines of "deception" is the way to go. It just doesn't make sense to think of any super power today in our world and think they don't have any outreaching goals. China is on the verge of collapsing, mainly ecologically. What will happen when the water runs out ? When the desert reach the golden towers ? I know it seems far fetched, but it's the reality. And sadly, it's too late for China right now. Time is running out. And they know it. The cow has been milked to death, by the US yes (the classic hit/loot and run scenario they've been repeating over the last centuries around the globe).

You've got 1.3 billions peoples, a land on the verge to become similar to our worse ecological scenarios, rising seas, you name it.... China is a ticking bomb, on numerous and very varied ecological, social and economical fronts. And I'm sorry to say, but I don't envision any positive outcome on the long term. And no, It's not all about the economy.

In my opinion, this is the perfect storm that spells out in big neon letter: Expansionism for survival, in a couple of decades. The irony in all that is that the current mantra is "sustainability", but only, this comes 30 years too late, the damage is done and undoubtedly irreversible.

The big picture is way bigger than the current economic crisis, it stretches beyond it far away. It's a Geo-strategical issue of never before encountered size, and an overpopulation issue as well.

You just can't bring 1.3 billions people to a lifestyle level of the US middle class, it's just... not sustainable, planet wise. I think you know what I mean. We're headed for some serious conflicts around the corner, and we will witness it in our lifetime, be sure of that.

In September this year we've reached a critical threshold: For the first time in human history, we are consuming more than what the earth can produce on a yearly basis, globally. In 20 years, to sustain our current lifestyle and the population, the predictions point to a need to have the equivalent of 1.5 earths, in 50 years, 2 earths.

Think about this, it's real, it's no sci-fi anymore or some hippies freak visions. This is our world, right now. And now put this in the balance considering China's rise. China cannot rise, simple as that. It's unjust, it's horrible, it sucks. But that's the reality. India is in the same boat as well. Late comers in the race as we say.

Otherwise, the solution is for the western world to cut down their lifestyle, and get back to the way they used to live 60 years ago. It won't happen, people are not that smart, sadly.

Sorry for being so grim, but I think it's time for people to wake up about these issues.

Sorry, but ACB would have to disagree in the strongest of terms. China is not even close to a country on the verge of collapse. China is a very big country with many resources that it is barely tapping. There might be large populations in areas with not enough clean water, but there are also large areas with clean water that have very few people. China hasn't come close to exploiting all of its resources, let alone exhausting them. Central China, for example, is pretty much devoid of habitation. At least by the standards of the East and West coast. The water only appears to be running out because there are more people in one place than the well can cope with, but there are plenty more wells, and plenty more water to fill them.

Also, what makes you think that China is being deceptive? China isn't thinking like you would think, but this isn't it being deceptive, it's just China being China. There are some ropey business men out there looking to con customers, it's true, but China isn't even being sneaky, let alone deceptive. You mas wish to lay off of FOX for a while, it has effected your judgment.

The idea of China as an expansionist nation is also a joke. Most Chinese would look at you blankly and ask you what planet you were living on? China has been the victim of expansionism for hundreds of years, and for most Chinese China is the entire world. This means that not only do they see expansionism as being wrong they can't imagine actually expanding anywhere that isn't already part of China. You are more likely to see Chinese expanding into Western China than into the Western world. Asking a Chinese to be expansionist is like asking a George bush to live in a hippie commune. Not only doe sit represent everything that China isn't but it also represents much of what China dislikes about the rest of the world.

It would also help if you didn't compare Chinese aspirations to US aspirations. A middle class American consumes substantially more than most Chinese aspire to consume, if only because a middle class American consumes so much more than any other middle class on the planet. Just look at America's carbon footprint. Per head the average American consumes more energy and resources than anybody and emits more carbon and waste than anybody else. It might be unsustainable for Chinese to live like Americans, but it's only Americans who think that Chinese want to live like Americans. Chinese could live sustainable lives by following French or Japanese models, instead.

America consumes nearly 1/4 of the world's resources and it outputs almost as much carbon as China does despite being a fraction of the size. Maybe America should reduce it's consumption in order to allow other nations more room at the table, yes?

ACB You are starting to sound a bit like our fellow Fen qing friends. Please don't go this road.

• I'm really just stating my opinion and theories here, and as I said before, it's worth what it's worth, maybe just a huge pile of donkey shit, nothing more. I'd like to keep this conversation non personal and purely theoretical. Let's not make it personal, please. I'm just interested to discuss about some concepts and see how they resonate.

I've never watched Fox in my entire life, I am not American, so I don't give a crap about their country and what's happening there. I am just analyzing the global picture, nothing more.

I encourage you to look more into the ecological challenges that China is facing right now, to name a few: The melting of the Glaciers. Source and mother lode of all... Including the yellow river. No economic fix will solve this issue.

Research it a bit, you'll see what I mean.

Sorry if I sound off, English is not my first language, but believe me, I just want to discuss about this, I'm not here to provoke people.

http://www.newscientist.com/article/dn16106-chinas-disappearing-land-puts-f ood-supplies-at-risk.html

I'm telling you, it's no SF anymore. I hope you internalize the message, and this will help you do something about it maybe or not. And this is just the beginning ACB, and it's fucking sad. My wife is Chinese, half of my family and life is here in this land, I wish no harm to this nation, but I think it will face serious challenges very soon. Do you see what I mean ?

There is not much China can do it, like it or not it is stuck with the USD debt. If a fight broke out between the two countries, for whatever reason, and China decided to retaliate by selling dollars to hurt the US it would have to buy another currency such as Japanese Yen, the Euro or British Pound. This would increase the values of Yen, Euro and Pound in US dollars thus making their exports to the US far more expensive and potentially pricing their products out of the US market. Those governments central banks would respond by selling their own currencies and buying US dollars in order not to destroy their own economies. Like it or not the world as it is organized today revolves around the American consumer, they stop buying the world economy stops. This could be remedied if other consumers around the world would spend more and save less but that is another discussion.

Thanks a lot for your replies, ACB! I must say that China is an excellent competitor. However, I think that you are looking the world too much as a USA/others match. e. g., if you look at Africa, I don't have the figures but it is likely that the main partner of the continent is the EU. India is also to be taken into account in Africa.

This is hilarious and very scary at the same time...

http://www.mutantpalm.org/2008/11/27/golden-oldies-of-us-propaganda-red-chi nese-battle-plan.html

Looking at the recent world trip Hu made, I think some plans are still valid today after all...

"Then it talks about how Mao Zedong and Lin Biao (that didn’t work out) are going to conquer the world by invading the “rural countries” (Asia, Africa and Latin America) as stepping stones to the “city countries” (the U.S. and Europe):

Incredible stuff... ;)

No expansionism? China the underdog... Of course...

The dream still live on, big time. And to reassure you, no, there is no economic war going on, it's all just BS (you'll excuse me, going back to watch Fox now...).

name:

Ah, but you are forgetting several things. Firstly, China doesn't have to buy currency. It can buy gold, or stocks, or anything really. Secondly, China can buy into currencies such as the Yen or the Euro, without effecting their value all that much by buying into multiple currencies. It could spread the load across all softs of places. It could even buy back RMB. Either way, the dollar would fall but this would not be the main event. The main event would be the panic that it would set off in the stock market. A hit that big on the currency market would correct after a flap because countries like Japan would buy into the dollar to stabilize it, but the stock market panic would go on for much longer because instead of governments stepping in to stabilize things you would have speculators stepping in to make money, and investors running around like headless chickens trying not to loose money. Two conflicting forces, the first one attempting to take advantage of the second, would do much more lasting harm to the US economy. In fact whatever currency China did buy into it could probably use to buy up US shares on the cheap in order to sneak in more control over the US via the back door.

Bao:

You're probably too young to remember but back in the bad old day America thought like this about everybody and everything that wasn't home spun American. No, I take that back, America thought like this EVEN about things that were as American as Apple Pie. Paranoia and fear of outsiders was and still is a massive American trait. If you look back you can find videos like this warning against everything from Red Chinese and Russians trying to turn America Communist through the back door via the unions, to a resurgence of the British Empire.

It's true that China funded a handful of rebel groups around the world, and that it influenced several grass roots movements amongst farmers and landless peasants, but there was any actual threat of the PLA marking out across the world. To most Chinese of the time there wasn't even a rest of the world to march out across. china was the universe.

Besides, had Mao sent his troops overseas, many would have deserted or defected when they realized exactly how much better life was.