Sunday, October 9, 2011

What part should China play in European debt crisis?

China Syndrome

Official party newspaper proposing three-pronged help for eurozone. 1. Buy bonds 2. Buy equities 3. Buy euros

Posted by stuartking @ 01:28 PM (1928 views)
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15 thoughts on “What part should China play in European debt crisis?

  • Oops, my suggested headline in wrong place! Meltdown here too! lol

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  • general congreve says:

    Why on earth would they want to do that? Oh, because they’re entire economy sits atop the apex of the global debt pyramid.

    I really fear for a global conflagration when this whole mess finally implodes.

    Politics and greed has a lot to answer for. Free and fair trade, sound money and sensible banking practice over the previous decades would have prevented these sort of imbalances building up.

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  • general congreve says:

    @2 – ‘their’ entire economy!

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  • Suggest all Eurozone members learn Chinese and learn respect for elders, perhaps also adopt one child policy and how to cook chinese food for their new employers.

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  • The Chinese government want to ensure that there is still a market for all the goods their factories are pumping out. In the long-term China will gradually have to export less and consume more internally; but a sudden withdrawal of demand is the worst possible outcome for China. Millions of manufacturing jobs would be lost; unrest would rise, and it’ll be Tiananmen Square all over again.

    Ideally they’d prefer not to intervene at all. It’s risky and there’s a significant chance that they won’t get their money back. They won’t be going near PIGS debt until the crisis is resolved. The article specifies that they would consider buying Euro-bonds (i.e. backed by Germany), but not individual countries’ bonds.

    @iguana: No, they couldn’t care less about such things. (1) Only learn Chinese if you think you might be doing business there one day, or if you have an interest in the culture. (2) The average age in Europe is higher than in China, so technically we’re their elders. (3) The one child policy simply won’t happen in the west. (4) Chinese diets are becoming more westernised.

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  • Iguana kow-tow to honourable Drewster.

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  • My guess is that if they do anything, it will be minimal..

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  • I think it would be a mistake to underestimate the Chinese. They are getting little for their investments in the USA, it would suit them to have an alternative. As for cash, they could buy Greece with their small change.

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  • @2 I think you are discounting that one nation’s debt is another nation’s asset – at least until it goes tits up. The Chinese have more than enough cash to sort out Europe, possibly at the expense of the US…. but that would suit them politically.

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  • so china wants to invade europe

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  • Stuart I’m sorry to have a go, but you seem to be developing into the latest in a line of commentators on here who prefer to express big opinions short on anything resembling evidence or analysis. I may of course be miscalling you on this but if so can you clarify

    I think it would be a mistake to underestimate the Chinese. Under estimate China in what way?

    They are getting little for their investments in the USA, Do you have specific numbers to substantiate this ?

    As for cash, they could buy Greece with their small change. Countries are now buying other countries? A first for me. How does that work? What would China buy Greece for? What is small change for China.

    I I think it would be a mistake to underestimate the Chinese. They are getting little for their investments in the USA, it would suit them to have an alternative. As for cash, they could buy Greece with their small change.

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  • i have heard in the states the chinese are almost being invited over by immigration the USA are desperate for investors but they are favouring the chinese for some reason. Political??

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  • In my opinion there can be a tendency for people justifiably frustrated with the debt bubble, the bank bailouts the financialisation of our country, to conclude that all must end in disaster in the West and that all is good in the East. Certainly comments (as here) often have that flavour.

    The difficult thing is to steer some course that accurately reflects what is going on. This involves work, analysis and an open mind. It also needs evidence. The tendency to express opinions with only a shred of very selective evidence is a huge temptation on a forum like this, but isn’t it a bit like spending on credit you shouldn’t have, something the west has become all too adept.

    One thing that does seem true of China from a Western perspective is that the disadvantages of its growth may now be outweighing the advantages. The shipping of industrial capacity and jobs to the east (something China engineered very skilfully) felt good when we were in a credit/consumer boom for the past 2 decades, but less good when now that western household credit lines have reached some sort of limit and we need something else to fuel growth.

    What seems to elude our leaders, more than anything else, is that we should not be playing for an ideal short term outcome, but the best longer term outcome, even if that means difficulties short term. The idea of instant gratification seems to be endemic in politics too! Our leaders, seem to believe that we only need to kick start rather than set about changing the system that is so clearly malfunctioning.

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  • general congreve says:

    @13 – Nice summary. So. do you agree we’re on a path to default then?

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  • Hi General, and a measure of apology for having had a go at you last week. If it’s worth anything it wasn’t meant that seriously. Anway this had me think about some of the frustrations and I think a great deal of it is to do with conclusions based on selective and partial evidence. – I hasten to add that I’m sure at times I’m as guilty of that as anyone here. And also a bit of an artificial polarisation of views which tends to stunt discussion.

    As to your questions, if we are to default there has to be a creditor, so to answer with a question: to whom would we default?

    A couple of asides I checked some data over the weekend and it seemed to suggest that the level of UK public debt to GDP is if compared over a 200 year time frame actually pretty low – we have also been in debt and often at levels elevated considerably above those of today. This is based on excluding the bailouts to the banks, which seems correct as these are counter balanced by assets essentially household debt which (which while far too high for my tastes) will I think in the main be paid off over time. Not that household debt is not hugely problematic pretty much guaranting a situation where we are more or less in a recession for years to come.

    Did you see Mark’s post today about China? An interesting data point in there about Chinese debt to GDP levels.

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