Tripolar world--Rebalancing Global Power.

OK here we go...

Will China stop playing with it's currency value? The question of whether there will be a safe reevaluation of currency will help the global markets. Undervalued Chinese products are simply not helping the world economy as one would have thought.

IMF Chief speaks on the topic.

IMF Chief Discusses Leadership Role for Asia in Post-Crisis Global Economy IMF WORLD BANK ASIA APEC 2009 SINGAPORE The Managing Director of the International Monetary Fund, Dominique Strauss-Kahn, delivered the 2009 Monetary Authority of Singapore lecture on November 13 on the role of Asia in reshaping the global economy video includes Strauss-Kahn delivering his address to the Monetary Authority in Singapore.

How Obama Can Shape Asia's Rise

CHUNG MIN LEE

Twenty years after the fall of the Berlin Wall, President Barack Obama's Asia tour will conclude this week with a visit to South Korea—the world's last Cold War frontier. Even as he ponders critical next steps in Afghanistan, Pakistan and Iran, the president in Asia faces a region on the cusp of fundamental change. More so than any of Mr. Obama's predecessors, how his administration chooses to help shape Asia's rise throughout the first quarter of the 21st century is going to have a critical impact on America's own future as a superpower.

For the first time in world history, three major regions—North America, continental Europe and East Asia—are sharing the world stage. This is possible in no small part because the U.S. engineered the post-World War II pacification and reconstruction of Germany and Japan. Indeed, the eventual formation of the European Union and Asia's rise over the past half century would have been impossible without two critical ingredients: America's security umbrella and the opening of its markets to European and Asian goods. Having created this tripolar world, the U.S. and especially President Obama now need to focus on three core issues to shape the world for the next half century.

Your thoughts?

Obama seeks rebalancing, Asia warns of protectionism

The strategy calls for America to save more, spend less, reform its financial system and cut its deficits and borrowing.

"It will also mean a greater emphasis on exports that we can build, produce, and sell all over the world," Obama said in a speech earlier in Tokyo, his first stop on a nine-day Asian tour.

"We simply cannot return to the same cycles of boom and bust that led us into a global recession.

[edit on 15-11-2009 by SLAYER69]

Your thoughts?

[atsimg]http://files.abovetopsecret.com/images/member/cb20d577838e.jpg[/atsimg]

U.S. and China find themselves inextricably intertwined

BEIJING -- The U.S. and Chinese economies -- the world's largest and the fastest-growing, respectively -- have become inextricably intertwined, locked in a kind of mutual co-dependency that neither side thinks is particularly healthy, but which for the moment neither will move to break.

As President Obama begins his three-day visit to China on Monday, he finds himself in a country that depends largely on the United States as the most important market for its cheap goods. America, with growing budget deficits and a massive national debt, depends on China as the main holder of U.S. Treasury securities, with Beijing's stockpile officially estimated to be nearly $800 billion, and probably more.

China's Blunt Talk for Obama

BEIJING -- China's top banking regulator issued a sharp critique of U.S. financial management only hours before President Barack Obama commenced his first visit to the Asian giant, highlighting economic and trade tensions that threaten to overshadow the trip.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to "massive speculation" that was inflating asset bubbles around the world. It has created "unavoidable risks for the recovery of the global economy, especially emerging economies," Mr. Liu said. The situation is "seriously impacting global asset prices and encouraging speculation in stock and property markets."

That my friend is a very complicated issue...
One key Obama has been hinting at is for China to let the yuan strengthen.

China's low currency exchange rate keeps their goods and services priced much lower than their customers can manufacture a raw product. However the yuan is artificially kept low and if allowed to rise where it should be Chinese products would no longer become as attractive...

The APEC meetings almost didn't take place because of this... More important and performed out of the lime light was Washington's move to slap duties on various Chinese-made products today.

Chinese President Hu Jintao ignored the yuan issue in several speeches at APEC and focused instead on what he called "unreasonable" trade restrictions on developing countries.

An earlier draft pledged APEC's 21 members to maintain "market-oriented exchange rates that reflect underlying economic fundamentals." That statement had been agreed at a meeting of APEC finance ministers on Thursday, including China, although it made no reference to the yuan.

The APEC summit stalled and failed to accomplish any of their goals China refuses to budge and risks becoming isolated and served severe trade restrictions that could cripple their 8.5% growth predictions something that could tip their economy on a downward spiral.

All this proves China still doesn't understand a free trade market system All they care about is keeping the money flowing in even if that risks destabilizing the global market system

Another great thread from you, Slayer.

Post WW2 is over. Americans must stop looking backward for their future. We cannot depend on military (might or stealth) as a foreign policy.

If what is left of our economy is a service industry, then we would do well to ask other nations, how might we help you solve your problems? What is it that we can do for you? What is it that we can provide for you?

Maybe the corporate model should not be one of exploitation but cooperation. Not wealth accumulated for a few but how to make a healthier, wealthier world for all.

The luxury of internal struggle over matters of little consequence in a global world is no longer ours. We cannot act like spoiled children fighting over a toy, small children who live in the center of a universe composed only of them and those who should serve them, nor like a teenager who believes the world owes them something just for living.

The world expects better of us, to act as intelligent, responsible adults in a world filled with other adults.

Originally posted by DaddyBare
That my friend is a very complicated issue...
....
All this proves China still doesn't understand a free trade market system All they care about is keeping the money flowing in even if that risks destabilizing the global market system

Good points, DB!
I remember when European communism fell. How could nations whose citizens wanted but didn't have a free market economy understand what to do? Some in the world only saw these nations as places to go for cheap labor.

Also, I got to thinking, I remember when California agriculture was trying to break into the Japanese market. The Japanese would rather support their small farmer by paying a much higher price for his piece of fruit than to buy a cheaper version from California.

reply to post by SLAYER69


Cool and timely, Slayer!

The APEC summit sort of brings out all the dirty laundry!

Chile and Peru are having a snit because one spied on the other and because of this Peru is walking out?

China is up tight with the US because of protectionism. I did a search on US protectionism and came up with this: China strongly opposes U.S. protectionist tariffs on tires from China. The US did a recent tariff on tires! Big deal right? Well we also have several clauses in the Stimulus requiring Stim funds to be spent on US goods. Makes sense to me! But the Chinese (and Russians) are PO'd!

But then I noticed the Chinese have their own stimulus program going that if anything is more ambitious than the US's. And what is one of the requirements of the Chinese stimulus money? Why buy Chinese, of course!

Obama then made his grand entrance a day late after the other APEC members have already registered their complaints against the US. Obama then says:

The strategy calls for America to save more, spend less, reform its financial system and cut its deficits and borrowing. "It will also mean a greater emphasis on exports that we can build, produce, and sell all over the world," Obama said

Which really sounds good if you're an American! I think Obama has just had a major change of heart! After coming to office and borrowing tons of money from the Chinese, spending recklessly on Tarp, Stimulus, Cap and Trade and probably a 2nd stimulus to come. Obama wants to "save more, spend less, reform its financial system and cut its deficits and borrowing."

Now none of this is going to sound good for the other APEC nations as they want us to borrow more and buy more of their goods. And what is this "greater emphasis on exports that we can build, produce, and sell all over the world"? More protectionism ahead?

Great way to begin the conference!

The Chinese just spent trillions on their own stimulus which I believe was a huge risk! They are really out on a limb economically. The US and everyone else wants China to float the yuan or at least let it increase in value. Instead, China has priced the yuan against the dollar which is decreasing. The effect is that Chinese goods are becoming cheaper and more attractive to consumers in all nations thus in effect causing home businesses to suffer and shut down. Which makes the US want all the more to raise tariffs to protect US businesses which Obama just stated is now his goal!

Why is the dollar deflating? One of the biggest reasons is interest rates. Low interest rates are a key to economic recovery and probably will only rise incrementally. But the bad effect is it prevents foreign investment and keeps the dollar price down.

I don't see the US making any concessions at this conference but instead keeping the pressure on China to revalue the yuan.

Will the CO2/ Climate Change agenda go forward?

However, the latest draft of the leaders' declaration shows they had watered down the text on emissions cuts, dropping a reference to reductions of 50 percent by 2050, and pledging instead to "substantially" cut carbon pollution by 2050.

China won't participate and they are one of the largest contributers to global pollution. The US Cap and Trade is in serious trouble too so the Copenhagen group is likely to be disappointed with APEC!

[edit on 16/11/09 by plumranch]

It seems not too many understand whats really going on.

reply to post by SLAYER69


What is going on is that the world balance of power is being challenged by recent economic events and China's successes! Obama being the new guy with a lot of experience as a street organizer is on a learning curve. He does seem to be catching on but one of his problems is that he is always at least a day late as he was to this conference.

In terms of would power most countries would prefer an ongoing stable relationship such as it has been for that past half century or so. And that would be a US Navy in control of the World's seas. The way that happens is economically.

As I have mentioned, this is just a bump in the road.

Obama seeking China's co-operation

"These are the only two countries in the world that are truly globally engaged, but they are not doing things together," he says.

Encouraging it to be more active on the global stage, in concert with America, is a strategy to nudge China towards being a responsible great power.

But Chinese leaders themselves, getting used to their new status in the world, are cautious.

"China is terribly conflicted internally about what kind of role it should have in the world," Mr Shambaugh says.

reply to post by SLAYER69

"These are the only two countries in the world that are truly globally engaged, but they are not doing things together," he says.

China globally engaged because that has been its post Mao path. Development of world trade, hyperproduction, exports, stimulus, and inflexible centralist government. The US because it found itself in a position of global leadership during and after WWII.

China is doing an incredible balancing act to maintain its position both internally and maintaining its world markets to survive the recent recession. China must have a constant huge input of world payments to feed its hungry industrial and banking system.

As a result China is not likely to bend under US and world pressure to float or bolster the yuan.

The US is in a relatively healthy and stable position economically and militarily following the '08 market meltdown. Most economic measures have seemed excessive or unnecessary in retrospect as the economy keeps plodding along and improving.

China needs the US, specifically the strengthening US markets to buy its endless goods and the US needs China to maintain political and military stability in the region with its neighbors, not to mention the US dependence on China as a source of credit.

The inflexible Chinese central leadership will follow their tradition of vigorous negotiation while giving up little in concessions while the weak US administration will continue to look good and speak elegantly but get little in return. In short next to nothing will happen during this round!

The question is will the Chinese ever become a significant regional military power?

Originally posted by plumranch
The APEC summit sort of brings out all the dirty laundry!

For sure!
And what affects us in our daily lives is not that nations are "good or evil" but how goods (and services and intellectual properties) are traded and how currency is valued.
American citizens must be willing to understand the complexity of the world they live in and get beyond a microscopic focus on cultural issues.

plumranch, I had a thought. For land locked nations such as Afghanistan, would the US army be like the US Navy is on the seas? Of course the seas are international in nature (as well with airspace and space), whereas ventures on land involve national boundaries. For ex., in Afghanistan, could the US military be providing security for Chinese projects which will provide jobs and new infrastructure for the Afghani?

Please post more here, as I like your analysis on this important timely subject.

Also, I had another thought. For much of my life, Taiwan was the perfect foil for US attitude towards Communist China. Lots of sabre rattling at times, but not much talk in that direction nowadays. It seems that economics has been victorious in providing a way out of unification. The PRC and Taiwan will never unify, but economics will instead provide a mutual benefit for each nation.

reply to post by plumranch

 

The US is in a relatively healthy and stable position economically and militarily following the '08 market meltdown. Most economic measures have seemed excessive or unnecessary in retrospect as the economy keeps plodding along and improving.

China needs the US, specifically the strengthening US markets to buy its endless goods and the US needs China to maintain political and military stability in the region with its neighbors, not to mention the US dependence on China as a source of credit.

The inflexible Chinese central leadership will follow their tradition of vigorous negotiation while giving up little in concessions while the weak US administration will continue to look good and speak elegantly but get little in return. In short next to nothing will happen during this round!

The question is will the Chinese ever become a significant regional military power?

Compared to other countries our "Stimulus Spending" was rather small in comparison to our GDP. 5.6% As far as a global economy goes. There are only two possibly three real global economies. The US, China and to a much less extent Germany.
[atsimg]http://files.abovetopsecret.com/images/member/66382a9959e6.png[/atsimg]
Real Estate: China Bubble

Chinese real estate has been booming. Since 2000, year estate investments grew 200% in China. The Chinese Claymore/AlphaShares China Real Estate ETF (TAO), which tracks Chinese Real Estate went up more tan 70% since January 2009.

Now add to that:
1. The demographic nightmare that China will soon be facing.
2. The global financial crisis which continues and China which will see little choice but to loosen its monetary policy even further, slashing Chinese economical growth and result in massive unemployment, which will lead to social instability.

If there is one thing that Europa underestimates than it’s the impact of a bursting Chinese Real Estate bubble. The bubble has grown mainly on the residential side of the market, but with Beijing’s 4 trillion yuan or 586 billion USD stimulus package, the bubble also started growing on the commercial side in 2009. Remember that China pumped worth 12,9% of its GDP in stimulus packages in 2009. By way of comparison: Brazil invested less than 2% of its GDP in stimulus packages to support growth.

With 70 percent of real estate investment in China coming from bank loans, a dramatic drop in land values could send shock waves throughout the economy.

As much growth as China has done and is projected to do, they are walking a tightrope. On one hand they want economic growth and prosperity. On the other they are struggling with their internal problems of state control. As people become freer to explore themselves and their place in the world, there comes a point where that come into direct conflict with a strong central government.

Stay tuned


[edit on 16-11-2009 by SLAYER69]

]Does China perhaps have the upper hand in this relationship, as it measures another 8% growth in GDP against the limping US economy? Hardly so, if we consider the real implication of the familiar statistic that China now holds $800bn in US Treasury bonds.

Obama may ask Beijing to revalue the Renminbi; Hu may ask Washington to "focus on its own financial deficit", but the Chinese surplus rides on the American debt as if on the back of the Old Man of the Sea: neither can let go of the other.

And China's extensive growth over almost two decades is not only unhealthily dependent on foreign markets, but has been bought at the expense of a deteriorating environment and a worsening rich-poor divide.

www.guardian.co.uk...

I'm still not convinced China has the upper hand in all of this. Otherwise, they would have dropped the hammer awhile back and would have already claimed number 1.

Maybe there numbers aren't as good as they make it out to be.

reply to post by jam321


China's export policy is really a social policy, designed to maintain order.

If the Chinese economy continues to grow at or near its current rate and the benefits of that growth trickle down to 1.3 billion Chinese consumers, the country would become the largest shopping bazaar in the history of the world. They'll be driving over a billion cars and will be the world's biggest purchasers of household electronics, clothing, appliances and almost everything else produced on the planet.

But in fact China is heading in the opposite direction of "rebalancing." Its productive capacity keeps soaring, but Chinese consumers are taking home a shrinking proportion of the total economy. Last year, personal consumption in China amounted to only 35% of the Chinese economy; 10 years ago consumption was almost 50%. Capital investment, by contrast, rose to 44% from 35% over the decade.

[edit on 16-11-2009 by SLAYER69]

EXCELLENT thread,

This should be on front page

reply to post by desert

plumranch, I had a thought. For land locked nations such as Afghanistan, would the US army be like the US Navy is on the seas? Of course the seas are international in nature (as well with airspace and space), whereas ventures on land involve national boundaries. For ex., in Afghanistan, could the US military be providing security for Chinese projects which will provide jobs and new infrastructure for the Afghani?

When the US initiates a military action there is always an accompanying (politically correct) rhetoric to fit the situation tailored for domestic as well as foreign consumption. The rhetoric is the window dressing. What the US leaders are discussing with themselves and other allies and world leaders is quite different. What they intend to accomplish may be entirely different.

In Afghanistan could we "be providing security for Chinese projects which will provide jobs and new infrastructure for the Afghani?" I'd say, most definately, as China in this case is seen as a country we can work with. (China is a regional balance against the Russians.) If the US can facilitate a pipeline to get oil from Uzbekistan to Pakistan, India and ultimately China, so much the better.

I see the roll of the US as the strong military power to prevent the development of a local or regional unified power such as an Arab unified Taliban or an expanding Iran or even ultimately Turkey.

In spite of what you read and hear everywhere, the US isn't in Afghanistan to win a dramatic victory (such as originally in Araq), or for oil or for poppies. The US wins when it prevents the establishment of another regional hegemony, it wins when the local powers remain fractured and fighting amongst themselves.

Certainly we want the best for the Afghan people, we want them employed, productive and not in harms way but if the US can establish a centralized government favorable to the US and West, militarily self sufficient, not a regional threat and productive in the World economy then the US has accomplished its goals.

Also, I had another thought. For much of my life, Taiwan was the perfect foil for US attitude towards Communist China. Lots of sabre rattling at times, but not much talk in that direction nowadays. It seems that economics has been victorious in providing a way out of unification. The PRC and Taiwan will never unify, but economics will instead provide a mutual benefit for each nation.

Now that China has its own thriving economy and it can point to many of its coastal cities as shining examples of success, it has backed away from Tiawan repatriation.

Taiwan's quick industrialization and rapid growth during the latter half of the twentieth century, has been called the "Taiwan Miracle" (台灣奇蹟) or "Taiwan Economic Miracle". As it has developed alongside Singapore, South Korea, and Hong Kong, Taiwan is one of the industrialized developed countries known as the "Four Asian Tigers".

Besides, the US Navy heavily patrols around Tiawan to prevent any Chinese aggression. Right now China's navy is far too small to pose much of a threat to Tiawan. Navy's take a long time to build so that eventuality is a long way off.

China has much more imposing matters to deal with!

reply to post by SLAYER69


When one considers the real estate run up that the US experienced before the 2008 crash it puts meaning to these China stats:

Especially in Beijing and Shangai the situation is dramatic. In both cities, real estate activities have accounted for more than 30% of the GDP since 2000. In Shangai real estate activities even contributed more than 50% of the GDP. A GDP which is sustained for more than 50% on an inflated real estate bubble…

My guess is that the Chinese good old boy businessmen are using some of their stimulus money or money they should be investing in their own businesses to buy a nice flat or house somewhere or speculating!

What is called into question here is the Chinese system of loan allocation. It isn't based on our system of return on investment potential. The Chinese borrower doesn't have to prove his business investment plan like we do with our banker. In China loans happen based on who you know and your politics. You have to be connected, know the right people, be in with the right group to get your loan.

The result of this good old boy, political allotment of loan system is that many loans are non productive and essentially defunct in real terms. A business may have a lot of money coming in but the money doesn't pay the bills. The Chinese try to hide it but the figure is 20 to 25% of GDP!

I think the large Chinese balance of payments is what is keeping China in positive territory for now. A lot of money in, little margin for error and a small downturn is what will bring them down.

Then several things can happen.



[edit on 17/11/09 by plumranch]