Tuesday, March 24, 2009

China is going on the offensive with guns & gold

While China is engaging in not-so-friendly military maneuvers with the US Navy and building their armed forces to expand their sphere of military influence:

After a decade of increases in defense spending that averaged 16 percent a year, China has the military means to enforce claims in the energy-rich and trade-heavy South and East China Seas -- and to challenge U.S. activities there, as it did March 8 when five Chinese vessels confronted the USNS Impeccable.

“China is looking to expand” its sphere of influence towards Guam and to the Philippines, says Tai Ming Cheung, a senior fellow at the University of California Institute on Global Conflict and Cooperation in La Jolla, California. “The maritime arena is one of the most fluid and strategic for China in terms of how it’s going to defend and expand and protect its interests internationally.” (Bloomberg News)

They're also looking to build the value of their currency and expand their sphere of financial influence:

China’s call for a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan this week urged the International Monetary Fund to create a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” said Mark Williams, a London-based economist at Capital Economics Ltd. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said. (Bloomberg News, by Li Yinpang)

While I'm concerned whenever the US military is engaged by another country, my bigger concern is the reserve currency. If the fiat US dollar's 38-year run as the world's reserve currency, then our current economic problems may only be the tip of the iceberg.

Tim White

1 comment:

Robert DeVylder Jr. said...

According to CNBC this morning, China is heading to a recession as bad if not worse than ours. Their crude imports are down 14% year to date and causing the Chinese government to jump into panic mode.