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An Investment Banker on China

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The banker from the previous post also commented upon China Question (i.e. “is it a good idea to borrow so much money from China?) His answer repeated almost verbatim the answer I previously received from several of his industrial colleagues.

Without the US (runs the standard interpretation), China would have no market for its goods, and thus, for China to prosper, the US must also prosper.

He continued to remark that no other country has the raw purchasing power of America. Our GDP outstrips the next largest by a factor of three. Only the combined European Union has a larger economic output than ours.

(A graph, to illustrate. The Y-axis is in millions of US dollars.)

Poor China!

Poor China!

It’s clear that no other country has the power to fuel China’s growth. If they wish to rise their people from the depths of poverty they must do so through us. Who else can they sell to? Therefore, my friend triumphantly concluded, China will do nothing to sabotage our economy.

Tellingly, however, he made the statement: “We need them and they need us – maybe they need us a little less, but the fact remains.”

He winced when I noted that these figures are based on dollar-centric monetary system. There was a possibility, he conceded, that China may wish to supplant the dollar as global currency with another, or even its own.

But this was “at least five years down the line”, he declared.

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Written by pavanvan

August 23, 2009 at 10:51 pm

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