Trend: China depends on external sources for energy and the US for exports.
Why Peter Zeihan of Stratfor doesn't worry about China.
Link: Friedman Writes Back » Further Thoughts on ‘The Russia Problem’.
First, it has to import half of its energy from countries well beyond its naval/air reach — the U.S. can shut that off in a day without firing a shot.
Second, the bulk of their exports are either direct to the U.S. or to states that ultimately send their exports to the U.S. The U.S. can get most of what China produces from elsewhere, so a trade war would destroy China in a matter of weeks.
Third, the Chinese financial system makes the Three Stooges look like Einstein. They’ve chosen to deal with their bad loans issue by saying it has been magically solved. Fourth, all of the economic growth is concentrated on the coast, where only one-fourth of the population lives, leaving the interior very susceptible to Long Marches.
Finally, the $1 trillion-odd currency reserves is an expression of capital flight, not political leverage. The Chinese know that getting a 2-3 percent return on U.S. T-bills is more reliable than investing that money at home. And they can’t dump them either. If they did the remaining value of their reserves would plummet, and they’d risk destabilizing their primary market — which would hurt them (as an exporter of nonessential products) more than Washington.
Comments