Posted on 08/17/2011 2:43:17 PM PDT by Qbert
The weakness of the American consumer is having repercussions in China, which may stop buying more U.S. Treasurys as it focuses on internal consumption rather than exports, Stephen Roach, the non-executive chairman of Morgan Stanley Asia, told CNBC Wednesday
That could result in "higher interest rates and/or a weaker dollar, and we’re not going to be able to fund ourselves on the terms we have been funding ourselves externally," he said.
[Snip]
"This is China’s wakeup call," he warned. China can "no longer afford to stay the course of export-led growth that is hooked on the bandwagon of the American consumer."
Under its most recent five-year plan, China will be focusing more on internal consumption, Roach said.
When it focused on exports, China was sitting on "trade surpluses, current account surpluses, and massive accumulations of foreign-exchange reserves, two-thirds of which have to be reinvested in dollar-based assets," he said. "That’s what keeps them alive as the biggest foreign buyer of U.S. Treasurys."
But as China boosts internal consumption, domestic savings goes down and so does its foreign-exchange accumulation, Roach said.
(Excerpt) Read more at cnbc.com ...
This is where China’s economy will come apart. Their growth was based upon low (slave like) wages so their goods could compete worldwide. In order to spur domestic consumption, they will have to raise wages so that their populace can actually afford to buy their goods.
Raise the wages, and their exports can no longer compete. Bring on the social unrest in China!
You can't cut me off man, you can't cut me off. Who else will be my supplier? I need more than even Germany can provide, and they've got their own friends to support. I know you have another $100 billion stashed away. You gotta let me have it. I'm going crazy without it man...
Ahhhhh. Thanks dude. This is the last time. I promise... you sure you don't have any more you can spare?
..........not to worry, Geither will print ‘em and Bernanke will buy ‘em.....
Monetizing more debt, right pocket to left pocket...illusions of liquidity....
All gonna collapse soon.
China is bowing to the reality that its almost-rampant inflation is raising domestic prices and wages to the point that its products will soon not have an advantage over those of its customers. They're not focusing on domestic consumption out of the goodness of their hearts.
Remember, it is inflation that causes long-term trade deficits for the reason mentioned above. Japan and Germany have had the discipline to resist inflating -- China (and, of course, the U.S.) haven't.
One more thing, when you hear the Europeans hectoring the Germans to increase their domestic economy, what they're really saying is, "Inflate, dammit, inflate like we are!"
it seems that with China's population, it should never have to export anything. it should barely be able to keep production up with demand, but... generations of communist and government repression have seen to that
The way I read that table the U.S. is Red China's Number one trading "partner." So..
China May Stop Buying Treasurys as Growth Slows: Roach
but that's Great news!
We'll miss boat loads of cheap Chinese-made US Corporation goods shipped here for sale but the Chi-Coms will experience massive layoffs!
And as tens of millions more become unemployed Red China will have REVOLUTION! What a deal!
Maybe the Maoists will rise up, arrest and execute the corrupt Dengists! I like it.
BTW, it was Mr. Roach who seven or eight years ago wrote that you cannot recover from a recession depending so much upon "imported productivity" and the "income leakage" that it causes is not good. Ya think?
It’s a sad day when America weeps that we are not being bought out and our economy is not supported by a Communist country.
China is under no obligation to buy our debt and, frankly, their decision diminishes Democrat power so I support it.
Thank the "Free Traitors".
There is no shortage of them around here.
That's right, there is no place to hide. DC et al has screwed the pooch.
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