It may be that the Chinese are worried about a more drastic slowdown in 2h 2008, in the US and also Europe this time.

“Ducunt volentem fata, nolentem trahunt.”

Though the yield is negative.

The upcoming confrontation between the United States and China over Taiwan is huge! Then you could add China’s pattern of supporting some of the most murderous anti-democratic regimes in the world in North Korea, Burma, and Sudan. According to Michael Ledeen, China has been enlisting support among its people through its nationalistic policies. See Michael Ledeen’s piece on this topic ( http://trade-wars.blogspot.com/2008/06/michael-ledeen-calls-china-facist-state.html )

Twofish: Then it is very odd that China is spending more money on the US military than on the Chinese military, holding almost $2 trillion in debt that would be worthless if something really bad happened to the US…

What they get in return for collecting about $1.3 trillion is US industry. They have already stolen up to 2.5 mnaufacturing jobs and they are currently working on stealing our appliance, automobile, aircraft, and mining equipment industries.

TwoFish: and sending tens of thousands of its future business and political leaders to be educated in the United States.

I agree that they take a chance of their people getting educated in American values when they send them to the US universities. But they are also gaining much technical know-how and are in a better position to steal our technology. The July 10 New York Times ( http://www.nytimes.com/2008/07/10/washington/10spy.html?_r=1&pagewanted=2&th&emc=th&oref=slogin ) had an interesting article on China’s systematic campaign of espionage. Here is a relevant quote:

“On the military side, Mr. Brenner said, China is especially interested in improving its naval capability against any threat from the United States and obtaining intelligence that might be important in a military confrontation in the Taiwan Strait.”

Howard

Lei Jing….saved 50 per cent of his income. ‘You never know what will happen,’ he said. ‘For Chinese people responsibility is very important.’ He had heard that it was common in the West for people to live beyond their means. ‘I think that must make them feel more anxieties and pressures.

That is why a country in the midst of an investment boom also has a 2-3% contribution to growth from net exports.

I believe that the pmi report that Alex referred to is from Li and Fung. They are available at: http://www.lifunggroup.com/research/china_pmireports01.htm

One difference between China and the United States that really is a cultural difference is that Chinese tend to think in terms of centuries. For the US, one year is a long them. If you want to pressure China to do something, you have to think in terms of decades rather than months.

Richman: They would like nothing better than to destroy the economy of their chief geopolitical rival.

Then it is very odd that China is spending more money on the US military than on the Chinese military, holding almost $2 trillion in debt that would be worthless if something really bad happened to the US, and sending tens of thousands of its future business and political leaders to be educated in the United States.

Other than Taiwan, there is really no geopolitical situation in which there is any basic conflict between the US and China, and China has no real interest at this point of displacing the US, even if this were possible which it is not any time in my lifetime.

I wish you were correct, but I suspect that you were wrong when you wrote in #20 that China, like Japan in 2004, would reduce its currency interventions if confronted by “serious pressure from other countries.” China has been under tremendous pressure from both Europe and the United States for more than a year and they have successfully resisted it.

The difference is that Japan in 2004 considered the United States and Europe to be a counterweight to Chinese domination of Asia. Therefore, Japan did not want to destroy the United States economy. While China sees the United States as standing in the way of its national ambitions. They would like nothing better than to destroy the economy of their chief geopolitical rival.

Howard

Building stadiums means lots of jobs for construction workers, hotel workers, travel agents, etc. etc. The roads and infrastructure for the Olympics will be useful long after this summer.

Neumann: We also have to recognize that growth at all cost will not work on the long run.

How else are you going to get China to Portugal’s levels if you don’t grow?

Neumann: But if China insists on growing “without moral obligation”, there is a price to pay for global trade.

I’m a bit more practical. Nations (China, the United States, Portugal, Germany) simply do not do things out of moral obligation, they do it out of self-interest. You can get someone to give you a few pennies by making them feel guilty but to get them to give you tons of money, you have to have them make tons of money from the deal.

If you don’t want to buy Chinese goods because it isn’t in your interest to do so, then don’t.

I don’t think so. What China mostly imports are raw materials and high technology capital goods. I don’t see those being replaced by local manufactures.

I think that China’s surplus has peaked since it can’t increasing the trade imbalance without bad macroeconomic effects and the results of depegging the RMB are starting to kick in.

In particular, rising oil and food prices give China a very strong incentive to appreciate the RMB in order to keep producer prices from increasing.