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This post was edited by abramicus at 2014-11-11 16:18|
China's "Project New Asian Century" collides with Obama's "Pivot to Asia", seen most poignantly in the two countries' attempt to gather support for their own visions of trade in the Asia-Pacific region.
Now, finally, the reason why China has been sacrificing its annual GDP growth rate, and even its year-on-year rise in foreign currency reserves, in order to support a revalued Yuan, becomes apparent.
China is transforming its currency into credit in a most ingenious manner.
When China buys from another country, it wants the other country to choose between being paid in a revalued Yuan or in an undervalued dollar. If it chooses to be paid in Yuans, then it stands a pretty good chance to be able to buy more from China with the same Yuans that it accepts, than it would be able to buy in dollars, a year from now, because the dollar would have devalued relative to the Yuan in a year's time. China is trying to induce its trading partners, especially those who have a positive trade balance with China, to accept payment from China preferably in Yuans than in dollars, which Yuans it can use to buy more goods and services from China a year from now, than it could with the same amount converted to dollars in payment. This falls in line with the consumer economy that China is trying to transform itself into. For this to work, China must be able to pay for its imports in Yuans. For other countries to accept Yuans in payment, China must ensure that the value of the Yuan will continue to appreciate against the dollar.
The problem is that for this to work, China's manufacturing sector will be forced to shrink, as its products vecome overpriced both inside Chna priced in Yuans and outside China priced in dollars.
To achieve a consumer economy at the price of being unable to produce indigenously to supply that demand falls into the trap of the Economc Hitmen, which ensures that China will be FORCED TO IMPORT, instead of forcing others to accept the Yuan in payment, and that such inducement to accept the Yuan in lieu of the dollar will exist only when the dollar reserves of China are still sizable. But in this model, the dollar reserves will be used up in the process of China supporting the value of the Yuan, which ensures the eventual collapse of this effort, from dollar exhaustion, causing the Chinese Yuan to have to devalue in the end, with zero dollar reserves left to support it, forcing China to borrow dollars to support the Yuan, thereby subjecting China to the servitude of indebtedness that took it so much effort to escape from in the 20th century.
Xi, tread carefully. Economic theories are a double edged sword. While it may portray itself as a defender of the realm, the advance guard of the people, it may end up being a traitor to the realm, and the Trojan Horse of the enemy who offered this "gift" to China.