Miscellaneous News

[FairAndUnbiased]

Offload them to whom and in exchange for what?

The West has a lot of capital invested in China that would be seized in the event of theft on the scale of what happened with Russia. Furthermore, the West simply cannot function without imports from China - it's not shoes and toys, it's critical inputs to and irreplaceable components of high technology items. The West launched an economic war on Russia and shot itself in the foot, doing the same with China means shooting themselves in the head.

It's not that they're not stupid enough to do it, it's that China can do nothing to prevent or deter such stupidity and suicidal recklessness. The only thing it can do is be ready to impose its punishments when the lunatic finally snaps.

Definitely but offloading USD by buying out foreign USD debt with RMB is also a way to inflict damage. Let's say that freezing reserves or total sanctions is like shooting a missile or moving a tank division. It is obvious and harmful on a large scale. You do that in a war.

But buying out USD debt and exchanging it for RMB debt or long term contracts is a shaping operation with special forces before the war is declared. It levels the playing field by solving 2 problems simultaneously: China with too much USD and rest of the world with USD debt that forces them to use USD. Buy out their debt, and replace it with RMB debt, and both problems are solved + creates demand for RMB.

 

[AndrewS]

Offload them to whom and in exchange for what?

The West has a lot of capital invested in China that would be seized in the event of theft on the scale of what happened with Russia. Furthermore, the West simply cannot function without imports from China - it's not shoes and toys, it's critical inputs to and irreplaceable components of high technology items. The West launched an economic war on Russia and shot itself in the foot, doing the same with China means shooting themselves in the head.

It's not that they're not stupid enough to do it, it's that China can do nothing to counter such stupidity and suicidal recklessness. The only thing it can do is be ready to impose its punishments when the lunatic finally snaps.

In the medium-term, China should aim to develop Latin America, Africa, the Middle East and the rest of Asia.
These are safe locations for Chinese assets.

When these economies grow faster and the people become wealthier, it means a lot more options become available.

Theoretically, there are over 2 billion people in these areas, so eventually there should be sufficient depth and breadth of options.

 

[Equation]

In the medium-term, China should aim to develop Latin America, Africa, the Middle East and the rest of Asia.
These are safe locations for Chinese assets.

When these economies grow faster and the people become wealthier, it means a lot more options become available.

Theoretically, there are over 2 billion people in these areas, so eventually there should be sufficient depth and breadth of options.

Before or after the US lead Western nation regime change takes into effect in those countries?

 

[Abominable]

Before or after the US lead Western nation regime change takes into effect in those countries?

I think the idea would be to develop these countries so they are more resistant to regime change. Even if it happens and Chinese assets are at risk, you're more likely to recover them from Kenya than America for example.

The only issue is that it'll take decades for some countries to get to even middle income status. Its a long term solution rather than a short term one.

 

[ZeEa5KPul]

Definitely but offloading USD by buying out foreign USD debt with RMB is also a way to inflict damage. Let's say that freezing reserves or total sanctions is like shooting a missile or moving a tank division. It is obvious and harmful on a large scale. You do that in a war.

But buying out USD debt and exchanging it for RMB debt or long term contracts is a shaping operation with special forces before the war is declared. It levels the playing field by solving 2 problems simultaneously: China with too much USD and rest of the world with USD debt that forces them to use USD. Buy out their debt, and replace it with RMB debt, and both problems are solved + creates demand for RMB.

I'm sorry to be blunt but there's a lot of loose thought here. China's main problem is that is has a lot of promissory notes from the US government that state it will pay such and so USD to the holder of these notes at set intervals in the future. Inherent in this is that the US "honours" this obligation at its whim. The standard economic theory holds that borrowers wouldn't renege on their obligations because that would ruin their reputation with lenders - which just shows how limited and disconnected from reality standard economic theory is.

The theory doesn't acknowledge political differentiation between lenders, i.e., that the US reneging on Chinese lenders wouldn't harm its reputation with Japanese or European lenders, and certainly not with its own population (by far the largest share of lenders to the US government). Furthermore, the theory doesn't address captive lenders, which China is. We celebrate China's trade surplus with the US as a victory, but in reality what it means is that Americans are handing China more USD than Chinese are handing Americans RMB. What does China do with this USD? Lend it to the American government on the promise of more USD in the future.

What China needs to do is first stop the bleeding. Change the terms of trade with the US so that it doesn't accumulate mountains of USD that it can't offload except back to the US government. Russia has provided a beautifully simple solution to this dilemma - force payment in its domestic currency. China should follow this fine example and force the US to pay for Chinese goods in Chinese currency.

How would this work when RMB outside China is rarer than unicorns? Not China's problem... that's the beauty of it. That's the US's problem and it better solve it. Allow me to introduce you to one of my favourite scenes:

That's how it would work. Trade deficit? Fuck you, pay me in RMB. Capital controls? Fuck you, pay me in RMB. Financial collapse? Fuck you, pay me in RMB. Struck by lightning? Fuck you, pay me in RMB.

Once China does that, it can just sit on the US bonds it already does own and just wait for them to mature and use that cash to purchase tangible assets from anyone stupid enough to still accept USD.

 

[KYli]

Isn't this every developing nations wanted?

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[Abominable]

I'm sorry to be blunt but there's a lot of loose thought here. China's main problem is that is has a lot of promissory notes from the US government that state it will pay such and so USD to the holder of these notes at set intervals in the future. Inherent in this is that the US "honours" this obligation at its whim. The standard economic theory holds that borrowers wouldn't renege on their obligations because that would ruin their reputation with lenders - which just shows how limited and disconnected from reality standard economic theory is.

The theory doesn't acknowledge political differentiation between lenders, i.e., that the US reneging on Chinese lenders wouldn't harm its reputation with Japanese or European lenders, and certainly not with its own population (by far the largest share of lenders to the US government). Furthermore, the theory doesn't address captive lenders, which China is. We celebrate China's trade surplus with the US as a victory, but in reality what it means is that Americans are handing China more USD than Chinese are handing Americans RMB. What does China do with this USD? Lend it to the American government on the promise of more USD in the future.

What China needs to do is first stop the bleeding. Change the terms of trade with the US so that it doesn't accumulate mountains of USD that it can't offload except back to the US government. Russia has provided a beautifully simple solution to this dilemma - force payment in its domestic currency. China should follow this fine example and force the US to pay for Chinese goods in Chinese currency.

How would this work when RMB outside China is rarer than unicorns? Not China's problem... that's the beauty of it. That's the US's problem and it better solve it. Allow me to introduce you to one of my favourite scenes:

That's how it would work. Trade deficit? Fuck you, pay me in RMB. Capital controls? Fuck you, pay me in RMB. Financial collapse? Fuck you, pay me in RMB. Struck by lightning? Fuck you, pay me in RMB.

Where does America get RMB from? It just sounds like an end to exports to the west to me.

Once China does that, it can just sit on the US bonds it already does own and just wait for them to mature and use that cash to purchase tangible assets from anyone stupid enough to still accept USD.

Buy what exactly?

 

[ZeEa5KPul]

Where does America get RMB from? It just sounds like an end to exports to the west to me.

Like I said, that's America's problem. It can sell things to China that China is actually interested in buying - for instance, America's most advanced IP. China will hand over a goodly sum of RMB for that for two reasons:
1. It's something useful to China.
2. It's something the US can't take back later.
Meet those two conditions and China would be happy to buy.

Also, "end of exports to the West" is even less likely than "end of oxygen respiration." It ain't happening. It would be easier for Americans to stop breathing than to stop importing from China.

Buy what exactly?

Articles like the above, assets in countries whose skull China can point a pistol at, etc. Tax your imagination a little.

 

[Coalescence]

Like I said, that's America's problem. It can sell things to China that China is actually interested in buying - for instance, America's most advanced IP. China will hand over a goodly sum of RMB for that for two reasons:
1. It's something useful to China.
2. It's something the US can't take back later.
Meet those two conditions and China would be happy to buy.

Also, "end of exports to the West" is even less likely than "end of oxygen respiration." It ain't happening. It would be easier for Americans to stop breathing than to stop importing from China.

What if China uses that currency settlement to help the other developing countries as well? Like the other countries could ask for help with appreciation of currency, and all China has to do is increase the amount of RMB that can be obtain by exchanging with that country's domestic currency. This would need USD, JPY, EU to be non-legal tenders within China, however this would require a complete restructure of their financial economy and, a lot of policies planned and executed.

 

[ZeEa5KPul]

What if China uses that currency settlement to help the other developing countries as well? Like the other countries could ask for help with appreciation of currency, and all China has to do is increase the amount of RMB that can be obtain by exchanging with that country's domestic currency. This would need USD, JPY, EU to be non-legal tenders within China, however this would require a complete restructure of their financial economy and, a lot of policies planned and executed.

Of course not, that just adds to China's problems. Why would China allow USD payments - which would be either anonymous cash or electronic payments outside its purview - within its borders? That's madness, that just invites all kinds of politically and economically subversive activities.

I'm not sure what you mean by "help other developing countries"? I advocate China doing business with developing countries and showing some degree of forbearance when loans become too onerous, but certainly not sacrificing its own interest for the gratitude of some developing countries.