There is an article (linked via Drudge) that discusses China’s role with Europe. The Chinese premier, Wen Jiabao, is visiting Europe. With all of the problems with Greece and the other “PIIGS”, the euro is in some trouble, but China is saying that it will support the euro.
The article quotes the Chinese premier as saying, “China is a long term investor in Europe’s sovereign debt market.” He goes on to say, ” In recent years we have increased by quite a big margin our holdings of government bonds. We will consistently continue to support Europe and the euro.”
Assuming this did not get translated incorrectly and assuming he means what he is saying, this man is an imbecile. The Chinese government is still labeled communist. I’m not sure if that is true anymore when it comes to economics, but it is still mercantilist.
China has made wonderful improvements over the last 3 decades. When you are starting from just about the lowest point possible, it is not hard. Economically speaking, China is not really communist anymore. In some ways, China is more free economically than the U.S. (although still much poorer). There are less regulations on business in China.
Although China has improved, it is still being centrally planned by a bunch of morons. They continue to invest in currencies like the euro and the U.S. dollar. There is little doubt that there will be some form of default with both in the future. If there is not an outright default, the Chinese will be paid back with money that has been devalued considerably.
Why does the Chinese government have to “invest” all of this money? Why can’t they allow the citizens of China to have this capital? It would lower their consumer prices. It would help their standard of living. Instead, these complete idiots prefer to subsidize Americans (and apparently Europeans too). It may help their export sector, but they are hurting themselves far more by making things more expensive within China than they otherwise would have been. Instead, rich Americans get cheaper products at the expense of the poor Chinese.
The people of China tend to be huge savers. Even with relatively small incomes, they save a high percentage of their earnings. The same cannot be said for Americans. But the Chinese people are not reaping all of the rewards they should be from their frugality. Their stupid government continues to squander part of their savings. Of course, the same thing could be said for Americans who don’t save as much (relatively speaking), but still have a government that spends huge amounts.
China will be experiencing huge problems in the near future. The central bank inflated like crazy. There is a huge real estate bubble. There are cities there that are practically empty. China cannot escape the Austrian business cycle theory. They will have a bust. It is too bad. If the Chinese government would get out of the way and keep a stable monetary system, the Chinese people would become rich very quickly with their high savings rates.