Many things have been said about how China is going to dominate the global economy for the next 50 years. This in a nutshell, is how they go about laying the groundwork. China already is a player in the commodities side of things, they are laying the groundwork for the rest of the jigsaw puzzle.
The first question to entertain is why are they keeping the yuan low while they keep registering tons of surpluses. This is key to buying up the world. Some may say that although they have surpluses, a lot of that are in US Treasuries. If USD falls, they stand to lose a lot. That is B.S. ... I think even a second year economics student at Beijing University would be able to see through that.
Although China has a lot of Treasuries, their buying has decelerated substantially. Some think that they cannot ever dump the Treasuries - yes they do not dump, they cannot even afford to dump as the derailment of the global economy can have massive ramifications.
Instead, they basically recycle the surpluses by lending or pumping funds into state-controlled firms, buying up anything and everything related to commodities and even ports related entities to ensure the logistics chain are under their control. That being the case, many have been wondering if the Chinese have been over paying, yes they have been and they know it, but they rather have it than to see their surpluses dwindling 20% every 2 years in value.
Next, is to make their big companies become global players. China Development Bank, which is not really a commercial bank but a sovereign entity, issues bonds and lends aggressively to help China companies to frog leap the rest. The prime example had been the phenomenal growth of ZTE and Huawei, ask any telco vendor person, they were also-rans 5 years ago. Now they are the top few in the world.
Back in 2004, CDB provided a $45 billion line of credit to Huawei and ZTE. Yes, $45 billion of vendor financing. This basically meant that if you were Singtel and Huawei tries to sell you their products, if you were mildly interested but may lack the necessary funding/budget this year ... Huawei will say no problem, 100% financing can be provided at attractive rates. These type of export financing schemes are done all the time by the more enterprising governments, but certainly not in the scale of China. Naturally the other global players are crying that these are unfair advantages.
Next, is cementing the global economic and political ties. You cannot be just owing and running businesses, you need to be needed as a major player all corners of the world. China owns Asia already, but they have gone out of their way to go big into Africa and South America, investing b
ig bucks, cementing political ties, granting loads of loans to various governments. Plus increase trade with them, China needs everything anyways .... What a friend.
Unlike the US or EU, China does not (yet) have a political agenda in doing all these, they are not aiming to protect the sanctity of the democratic world or pushing some political ideaology, which makes them easy to befriend the usual enemies of the Americans. China couldn't care less about the atrocities or dictatorships in other countries - you don't criticise my ways, I don't criticise yours ... (unless they get really really bad ... I guess.
Even now, China is making inroads into the troubled Greece, and possibly soon to Portugal and Spain, buy assuring them that China will buy their bonds.
It does not take a smartass to note that gradually China will own probably the top few players in every significant industry in the world. They tried doing that with banking and failed miserably, the timing was off and they made huge losses, but they can afford to make these kind of losses anyway.
So, you can shake your heads, but we all will have to work with them, one way or another, cause soon we all will be working for them, one way or another
The first question to entertain is why are they keeping the yuan low while they keep registering tons of surpluses. This is key to buying up the world. Some may say that although they have surpluses, a lot of that are in US Treasuries. If USD falls, they stand to lose a lot. That is B.S. ... I think even a second year economics student at Beijing University would be able to see through that.
Although China has a lot of Treasuries, their buying has decelerated substantially. Some think that they cannot ever dump the Treasuries - yes they do not dump, they cannot even afford to dump as the derailment of the global economy can have massive ramifications.
Instead, they basically recycle the surpluses by lending or pumping funds into state-controlled firms, buying up anything and everything related to commodities and even ports related entities to ensure the logistics chain are under their control. That being the case, many have been wondering if the Chinese have been over paying, yes they have been and they know it, but they rather have it than to see their surpluses dwindling 20% every 2 years in value.
Next, is to make their big companies become global players. China Development Bank, which is not really a commercial bank but a sovereign entity, issues bonds and lends aggressively to help China companies to frog leap the rest. The prime example had been the phenomenal growth of ZTE and Huawei, ask any telco vendor person, they were also-rans 5 years ago. Now they are the top few in the world.
Back in 2004, CDB provided a $45 billion line of credit to Huawei and ZTE. Yes, $45 billion of vendor financing. This basically meant that if you were Singtel and Huawei tries to sell you their products, if you were mildly interested but may lack the necessary funding/budget this year ... Huawei will say no problem, 100% financing can be provided at attractive rates. These type of export financing schemes are done all the time by the more enterprising governments, but certainly not in the scale of China. Naturally the other global players are crying that these are unfair advantages.
Next, is cementing the global economic and political ties. You cannot be just owing and running businesses, you need to be needed as a major player all corners of the world. China owns Asia already, but they have gone out of their way to go big into Africa and South America, investing b
ig bucks, cementing political ties, granting loads of loans to various governments. Plus increase trade with them, China needs everything anyways .... What a friend.Unlike the US or EU, China does not (yet) have a political agenda in doing all these, they are not aiming to protect the sanctity of the democratic world or pushing some political ideaology, which makes them easy to befriend the usual enemies of the Americans. China couldn't care less about the atrocities or dictatorships in other countries - you don't criticise my ways, I don't criticise yours ... (unless they get really really bad ... I guess.
Even now, China is making inroads into the troubled Greece, and possibly soon to Portugal and Spain, buy assuring them that China will buy their bonds.
It does not take a smartass to note that gradually China will own probably the top few players in every significant industry in the world. They tried doing that with banking and failed miserably, the timing was off and they made huge losses, but they can afford to make these kind of losses anyway.
So, you can shake your heads, but we all will have to work with them, one way or another, cause soon we all will be working for them, one way or another
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