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The US-China Talk Show...

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pointed questions in private...

I promise, I promise...

** a glimpse of future?

President Barack Obama opened Monday's discussions by declaring that the United States sought a new era of "cooperation, not confrontation" with China and that management of the U.S.-China relationship would be a major factor in defining the history of the 21st century.
...to reassure China that the U.S. will not let deficits or inflation jeopardize the value of Chinese investments.
...the United States has a plan to bring the deficit down once the economic crisis has been resolved. They said Bernanke discussed the Fed's exit strategy from the central bank's current period of extraordinary monetary easing, emphasizing that the Fed was being careful to guard against future inflation...
"We sincerely hope the U.S. fiscal deficit will be reduced, year after year," Assistant Finance Minister Zhu Guangyao told reporters after the Monday talks had ended.
** the underlined texts I think they do mean something. The US will ease QE once their econ is stabilised, but without an objective or clarification on what they meant by a stabilised economy... but this soothing sound is probably all they can give. On the other hand, the Chinese are telling the American what they are going to do, they are going to measure the American's "soothing sound" by an objective measure - they want to see a declining fiscal deficit.

From Bloomberg report...

The U.S. will ensure a “sustainable” deficit by 2013, Geithner said...
Obama said in a speech opening the meetings he wants to engage China in cooperation on a range of issues, beyond acting together to stimulate a global economic recovery.

“We must also be united in preventing Iran from acquiring a nuclear weapon,” Obama said. He cited nuclear proliferation, terrorism, piracy, global pandemics, climate change and civil war as other common threats facing the two countries. In her sessions, Clinton addressed both the Iranian and North Korean nuclear programs.
** not so sure about the Iran nuclear program because this is not in China's interest and they need Iran to be on their side. In addition, it's the Russian that is helping Iran in their nuclear ambition, not China, can't see how the Chinese can help unless the US wants China to stop trading with Iran.

... and 2013! Yes man, that's gonna take that long for the US and the world to recover, I think it's reasonable. But I personally would cut that short by one year, make it 2012 just so I can run one year ahead of everyone... to give meself a 12-mth handicap.

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  1. haunting's Avatar
    China packs its bags...

    As Australians we pride ourselves in not being racist, but the Chinese say we are racist – and when it comes to visa requirements there is no other way to describe us. I understand that Australia does not want to be flooded with millions of illegal migrants who come here as tourists, but we are dealing with an enormous market and a country that is going to play a much larger role in world affairs.

    The visa requirements for Chinese tourists need to be revised and made much simpler. Not only will that make it easier for the Chinese to come here, but it will show them what Australia is all about.

    Remember that behind the Obama doctrine, there is a swing of power to China. We simply can’t afford to have racist anti-Chinese tourist policies. The world has changed...
    ** just in case you don't see how tourism will help the Aussie economy - back in the 90s, Hong Kong went through one of it's most horrid economic downturn due to many factors, with the returning of power/rule to China from the British being one of the major ones. The properties were going through a big time slump and with the Asian contagion rampaging through the Asian region, the HKers were feeling totally helpless in dealing with the slump... until China came along and decided to loosen its gate, allowing a flood of Chinese tourists pouring into HK, gobbling up all the luxurious goods they could get their hands on and saved the HK economy in the process.

    If you think this is just a one off, well, let's watch Taiwan... China is doing a HK stunt for the Taiwanese economy right now. Taiwan's economy has been in the doldrums since the GFC and with the US pulling back its consumption of Taiwan's hi-tech goods, the Taiwanese economy has been struggling and life to an extent has become quite hard in the island... until they have elected a new President who is more China friendly and changes the whole political atmosphere between the two rivals. As a goodwill gesture, China has decided to help Taiwan out as she has done for HK, firstly by relaxing the travelling restriction between the two countries and secondly allowing Chinese companies to invest in Taiwan... the manoeuvre is still on going, so it's hard to tell if this will be as successful as what they had done back in the 90s, but already there are signs that the Taiwanese economy is recovering and is gaining momentum...

    ... now back to Australia, and over to everyone - are the Chinese tourists a good thing or bad? Your call.
  2. haunting's Avatar
    China's illusory power

    Of course, China could dump those dollars on world currency markets, but the resulting adjustments in currency values would be much more damaging to China’s export economy than any consequences felt in the US. That damage to China’s export economy would cause unemployment and likely social unrest of a scope and duration the Communist Party could not tolerate.

    It would be better for China to cooperate with the United States and undertake an orderly revaluation of the yuan to a level that eliminates its trade surplus over a period of three years. That would be plenty of time for everyone to adjust.

    In the end, China only has the leverage President Obama gives it.
    ** this the usual problem I have with the US-centric comments like this - they still think the US is in charged of the situation and is fully in control. The fact and reality speak much louder than all these chauvinistic opinions - if the US is still as strong as this professor has premised, the US will not go through so much trouble placating the Chinese through talks involving so many high ranking officials from the administration.

    A few years ago, what he is seeing now would definitely not happen. It would be a totally non-negotiable and a total dictation from the US to the Chinese... can people be this blind and not see who things had changed since?

    If the Chinese were to dump their US$ holding, he can bet this would happen - a complete chaos in the US system. There will be social chaos as well as a complete collapse of the banking system overnight, with hyper-inflation running out of hand rendering all forms of trade within the USA unmanageable - something like what Zimbabwe has been through not too long ago where the US$ value would probably decline by the hour or even minute...

    To the Chinese, their debt would be honoured by the USA and not all will be lost. They will take a big haircut on their US$ based assets but I can assure the good old professor that the Chinese will not suffer as much as the Americans... because they have a totalitarian system - it's much easier for the Chinese to manage and control a complete and total social upheaval.

    I would rephrase the following for him: "It would be better for the United States to cooperate with China..." and "the US$ only has the leverage the Chinese give them, and without the Chinese goodwill, the US economic recovery will be a long drawn out and painful experience for every American...".
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