[lbo-talk] The Long March From Yenan to Barclays

bhandari at berkeley.edu bhandari at berkeley.edu
Thu Jul 26 12:09:51 PDT 2007


Doug wrote:

"China is afraid of being priced out of world export markets and has to keep the currency's value down. It needs rapid growth to maintain social stability and provide employment. Changing the model to rely more on internal demand is a risk they're afraid to take."

Due to its size China is in position to subsidize its exports through currency manipulation. As a result of the socialist past, it has the infrastructure to become the workshop of the world and the tools for wage and price controls to practice mercantilism. But most of Chinese production competes with other third world production (the US furniture industry of course an exception), and with global production well below its potential levels and global unemployment high, the real damage of neo mercantilist Chinese ascendancy must be felt outside the US. Moreover, with profits repatriated to the US and the US awash with cheap exports, why exactly are US pundits crying about the coming war with China? Do people on this list really think China's purchase of US financial assets is the first step in the colonization of America?

Rakesh



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