" We all know that international relations are just a game of blackmailing antics delicately masqueraded with diplomacy."
Wow, we took two weeks of vacations. Unbelievable, I didn't have the time to come up with a short 500 word post last Monday. I wish I could justify myself with something like 'quality over quantity' but this paragraph is just a filler itself. Now onto the most important things.
There are two terms that have been bothering me for quite some time now, 'emerging economy' and 'developing country'. China, India, Brazil and even Mexico have been stuck with these distinctions for years, eventually one of them ought to reach the surface , oughtn't it? The gerund couldn't stay forever and China seems to have its eyes on the surface.
If you’ve read us before (who am I kidding? click here) you probably remember us likening China to a penis; quietly waiting for the right moment; always eager to arise. Well the moment might just be this one. Europe finds itself amidst one of its worse crisis in postwar times, and conversely China's economy keeps growing faster than that mole I haven't got checked out. China has $3.2 trillion in foreign reserves, by far the biggest fund in the world. Added to that, Europe is also China’s biggest export market. So Europe needs money, China has it and on top of that Europe’s success is on the best interest of China, so it would be more than natural for them to help each other out in these difficult times, right? Right? Wrong!
We all know that international relations are just a game of blackmailing antics delicately masqueraded with diplomacy. Everything has a price, China wouldn’t just give away its money without getting something in return. China has been seeking the market economy status for some years now , and being recognized as one by Europe would probably be a condition to invest on it. China has been victim of protectionist European policies over the last years but the current situation might just change that. Other developed economies such as New Zealand have already given that status to China and Europe is so close to having no other choice. Be sure that this status update —puts on sunglasses— will get a lot of 'likes'.
There are many things that can be done with China's foreign reserves—and boy would we love to discuss them all. For now, it can quietly wait and see how events develop, but in the future a decision should be made and a wrong one can lead to disaster, because in economics when it comes to making decisions there is never a right answer, just wrong ones.
China has already $1.2 trillion US Dollars of its foreign assets in US treasury bonds and selling them would hurt the already wounded American economy. Europe and the USA are already competing for China's giving hand and now more than ever China has gotten the long sought leverage needed to make some important decisions around here. Whether China will use its leverage to do the 'Dance Puppets, Dance!” maneuver or the old 'You want it? Start making out with each other' move is yet to be seen, but one thing is certain, China has seen the surface and it likes it.