China has grown fabulously wealthy over the past 30 years, and especially the past decade. In the same period, the West has gone through a seemingly constant cycle of boom and bust, followed by the deep “recession” that set in a couple of years ago and shows no sign of ending any time soon.
How did China grow so wealthy while the West was hollowed out? The simple answer is by manufacturing all the junk the West can’t live without, at a cheaper price than anybody else. To buy China’s junk, which is now increasingly supplemented by high-quality, high-technology products, Western countries had to buy the Chinese yuan with their own currencies to facilitate international trade. Because China’s currency is not freely convertible, most of that foreign currency — the lion’s share of which, coming from the world’s biggest consumer, was US dollars — wound up in China, where officials had to decide what to do with the mountains of cash they were accumulating.
After the collapse of the Soviet Union — and just before the US decided it was going to be the world’s only superpower — one Chinese official must have had a bright idea: “Aiya! We can buy US bonds [debt].”
China then bankrolled the largest growth spurt in US history, while the US dug itself into the deepest hole any would-be empire has ever gotten itself into. About 20 years later, and after a decade of war, the creditor is coming back to bite the US in the rear.
China now has unprecedented political “influence” over the US. It is not complete, of course, but when you see US officials kowtowing every time Chinese President Hu Jintao (胡錦濤) shows up — US President Barack Obama bowed pretty deeply to Hu when he visited Washington — and begging China to not drop US bonds — something US Secretary of State Hillary Rodham Clinton did after Chinese Premier Wen Jiabao (溫家寶) questioned the safety of the US dollar — it gives you an idea of just how far the US is willing to bend over for China.
Like Bobby Fischer, China played an exquisite game of chess — and the US lost, even though China was by far the weaker of the two just three decades ago.
This strategy worked so successfully with the US that China is now looking to do the same thing with Europe. At least, that was the message Wen was sending on Wednesday when he told the World Economic Forum that China would ramp up investments in Europe despite the recent flight of capital from the eurozone by investors who are increasingly pessimistic about the future.
China looks set to buy Europe on the cheap. First Greece, Portugal and Spain; then Italy, and who knows who will be next.
Chinese officials did not help the US out of the kindness of their hearts, and their interest in the eurozone is anything but philanthropic. Beijing has already hinted that it would very much like the EU to give China “full market-economy status” in the near future, despite most of China’s largest companies being state-run, if it is to pour money into Europe and thus save the euro — quid pro quo.
That makes it two for China and zero for the rest of the world.
A few more years of this, and we should not be surprised to see China as the newest member of the EU — which would probably be a lot better for the rest of Europe than inviting in Croatia.
Meanwhile, the US might, as Bolivian President Evo Morales once said, find itself increasingly resembling a Chinese colony.
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