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It appears from this 1.3 trillion holdings by China that they got us in a corner in case we turn on them by backing Japan in a conflict between China and Japan. Obama just reassured Japan that we would back them in case of a conflict with China over those islands in the east China sea. So what could China do to hurt us with those security notes(if they can hurt us). If there is a way that China could do us some real big damage then there is the possibility that we would throw Japan under the bus to save our skins. These are just thoughts coming from someone that doesn't know a lot about how treasury notes work. But I do know that China and Japan are eventually going to clash over the islands that they both claim.
Even without the national debt, future still goes to China. They are going to be a super power with a large middle class, enormous buying power, and increasing influence. America cannot stop China from becoming the main competitor. We have to learn to live with China in this new geopolitical and economic reality.
Problem here is the US is the largest consumer of Chinese goods, if they give us the ax they will be axing themselves. I'm not sure China will ever become #1 due to this simple concept. Will Americans become the cheap labor force in the future? Will we be working for 50cents/hr at a Nike sweatshop in lower Manhattan in the future? I doubt it.
Problem here is the US is the largest consumer of Chinese goods, if they give us the ax they will be axing themselves. I'm not sure China will ever become #1 due to this simple concept. Will Americans become the cheap labor force in the future? Will we be working for 50cents/hr at a Nike sweatshop in lower Manhattan in the future? I doubt it.
China already has increasing internal demand. GM sold more cars in China than in America a few years back. China is going to be the major market for many things they make and we make. Instead, America is now trying to attract Chinese students, immigrants, tourists. It makes sense for our companies to locate there if our market is in China.
Americans may not become the cheap labor force anytime soon but labor will be relatively cheaper as wages stagnate and Chinese wages go up. It doesn't have to be lower manhattan. The equivalent of lower manhattan in china doesn't have factories either. The American south has already attracted many factories including the ones migrated from the north. In the future, our poor will be suited for working in factories. But this depends on many things. How much demand? If the demand is low, we won't see much economic development. Labor cost will still be higher here, though our cheapest areas might be cheaper than China's most expensive labor areas. Hong Kong used to be a cheap labor place, but now it is more expensive than many first world nations. Lots of places in china will become expensive. So things will be more complicated.
Even without the national debt, future still goes to China. They are going to be a super power with a large middle class, enormous buying power, and increasing influence. America cannot stop China from becoming the main competitor. We have to learn to live with China in this new geopolitical and economic reality.
Actually, this isn't true. China is hitting its high water mark right now. Some things to realize:
1) China's GDP growth numbers are not reliable at all. The Nobel economist Lester Turow made a simple observation a few years back, namely that China's alleged GDP growth is roughly twice the increase in its electrical production. This is an economic possibility, given that you need electricity to power all the additional machines, computers, and housing units that GDP growth requires.
2) At this very moment in history, China has the highest working-age population that it ever will. It will undergo a very, very steep plunge due to the demographic nightmare of Mao's One Couple One Child Policy. To give you some shocking numbers, China is projected to lose roughly 200 million workers between now and 2050, while the United States will gain roughly 50 million. Think about the tough sledding the Japanese economy is facing as the result of aging population and now put that effect on steroids. That's what China is facing right now.
3) Roughly 25% of the Chinese GDP is tied up in construction. But now we're looking at an overbuilt real estate market that is staggering. Entire cities have built that sit empty. Places such as Shanghai and Beijing are looking at years in unsold inventory. Plus you have a shadow banking system built on speculation that makes the credit meltdown we experienced in the middle of last decade look like a short-term balance sheet issue.
4) China is essentially a commodity economy, and the commodity has been cheap labor. Yet with annualized increase of roughly 25% in labor costs, more and more manufacturers are shifting operations to countries India, Vietnam, Singapore, and Bangladesh. Those manufacturers could do so incredibly easy, and they're doing it even as we speak.
5) Yes, your laptop and iPod are assembled in China right now. But that's not the same thing as being a center of high-tech manufacturing. In the case of China, roughly 95% consists of parts being shipped in, assembled, and being shipped out again.
6) Somewhere around 8-10% of the Chinese GDP leaves the country every year in terms of capital flight. If those with that kind of money had faith in the future of the Chinese economy, that number would be much lower. If I recall correctly, a recent survey of Chinese billionaires showed that roughly 45% were planning on leaving the country in the next few years.
So I would ignore the trend lines. China's gaudy numbers are likely not accurate, in any case will not last very long into the future, and there will be a serious reckoning. To me, the new reality we'll have to face is that of China desperately trying to hold on to what they've managed to gain, while keeping an increasingly restive population in check. They are in a race against time, a race that they are fated not to win.
Actually, this isn't true. China is hitting its high water mark right now. Some things to realize:
1) China's GDP growth numbers are not reliable at all. The Nobel economist Lester Turow made a simple observation a few years back, namely that China's alleged GDP growth is roughly twice the increase in its electrical production. This is an economic possibility, given that you need electricity to power all the additional machines, computers, and housing units that GDP growth requires.
2) At this very moment in history, China has the highest working-age population that it ever will. It will undergo a very, very steep plunge due to the demographic nightmare of Mao's One Couple One Child Policy. To give you some shocking numbers, China is projected to lose roughly 200 million workers between now and 2050, while the United States will gain roughly 50 million. Think about the tough sledding the Japanese economy is facing as the result of aging population and now put that effect on steroids. That's what China is facing right now.
3) Roughly 25% of the Chinese GDP is tied up in construction. But now we're looking at an overbuilt real estate market that is staggering. Entire cities have built that sit empty. Places such as Shanghai and Beijing are looking at years in unsold inventory. Plus you have a shadow banking system built on speculation that makes the credit meltdown we experienced in the middle of last decade look like a short-term balance sheet issue.
4) China is essentially a commodity economy, and the commodity has been cheap labor. Yet with annualized increase of roughly 25% in labor costs, more and more manufacturers are shifting operations to countries India, Vietnam, Singapore, and Bangladesh. Those manufacturers could do so incredibly easy, and they're doing it even as we speak.
5) Yes, your laptop and iPod are assembled in China right now. But that's not the same thing as being a center of high-tech manufacturing. In the case of China, roughly 95% consists of parts being shipped in, assembled, and being shipped out again.
6) Somewhere around 8-10% of the Chinese GDP leaves the country every year in terms of capital flight. If those with that kind of money had faith in the future of the Chinese economy, that number would be much lower. If I recall correctly, a recent survey of Chinese billionaires showed that roughly 45% were planning on leaving the country in the next few years.
So I would ignore the trend lines. China's gaudy numbers are likely not accurate, in any case will not last very long into the future, and there will be a serious reckoning. To me, the new reality we'll have to face is that of China desperately trying to hold on to what they've managed to gain, while keeping an increasingly restive population in check. They are in a race against time, a race that they are fated not to win.
It wasn't Mao's one child policy. It was Deng.
China has already loosened its population policy. Many families now have more than one. It's been like that for a while in practice. Before 2050 there would be a new wave of young people.
Actually, this isn't true. China is hitting its high water mark right now. Some things to realize:
1) China's GDP growth numbers are not reliable at all. The Nobel economist Lester Turow made a simple observation a few years back, namely that China's alleged GDP growth is roughly twice the increase in its electrical production. This is an economic possibility, given that you need electricity to power all the additional machines, computers, and housing units that GDP growth requires.
2) At this very moment in history, China has the highest working-age population that it ever will. It will undergo a very, very steep plunge due to the demographic nightmare of Mao's One Couple One Child Policy. To give you some shocking numbers, China is projected to lose roughly 200 million workers between now and 2050, while the United States will gain roughly 50 million. Think about the tough sledding the Japanese economy is facing as the result of aging population and now put that effect on steroids. That's what China is facing right now.
3) Roughly 25% of the Chinese GDP is tied up in construction. But now we're looking at an overbuilt real estate market that is staggering. Entire cities have built that sit empty. Places such as Shanghai and Beijing are looking at years in unsold inventory. Plus you have a shadow banking system built on speculation that makes the credit meltdown we experienced in the middle of last decade look like a short-term balance sheet issue.
4) China is essentially a commodity economy, and the commodity has been cheap labor. Yet with annualized increase of roughly 25% in labor costs, more and more manufacturers are shifting operations to countries India, Vietnam, Singapore, and Bangladesh. Those manufacturers could do so incredibly easy, and they're doing it even as we speak.
5) Yes, your laptop and iPod are assembled in China right now. But that's not the same thing as being a center of high-tech manufacturing. In the case of China, roughly 95% consists of parts being shipped in, assembled, and being shipped out again.
6) Somewhere around 8-10% of the Chinese GDP leaves the country every year in terms of capital flight. If those with that kind of money had faith in the future of the Chinese economy, that number would be much lower. If I recall correctly, a recent survey of Chinese billionaires showed that roughly 45% were planning on leaving the country in the next few years.
So I would ignore the trend lines. China's gaudy numbers are likely not accurate, in any case will not last very long into the future, and there will be a serious reckoning. To me, the new reality we'll have to face is that of China desperately trying to hold on to what they've managed to gain, while keeping an increasingly restive population in check. They are in a race against time, a race that they are fated not to win.
You forgot one thing. China has a huge environmental problem that is so big it is hard to imagine.
Actually, this isn't true. China is hitting its high water mark right now. Some things to realize:
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You make good points, not to mention a lot of Americans continue to boycott anything from China. Food, toxic materials and anything made out of toxic materials. Their Human Rights and Animal Rights history is terrible. It's a pretty big market here in the US to have items that aren't made in China. US companies use that as a marketing tool because they know there is zero regulation in China and that the products are cheap and hazardous.
And as was pointed out above, they have environmental issues. One being smog. Hong Kong is trying to figure out a way to deal with it, one professor there suggested installing huge sprinklers on the top of skyscrappers to make it rain (using captured rain). Rain does clear the air, but wow talk about issues.
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