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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: LLCF who wrote (51224)5/16/2006 6:10:57 AM
From: Earlie  Read Replies (1) of 116555
 
DAK:

Given its size and clout, it behooves all of us to try to understand where China is going. For most of us, this isn't an easy task as accurate information sources are not easily found or tapped. That said, the Chinese government does appear to be bent on accomplishing a few things that are of longer term importance to the country as outlined in their recent congress. Better use of commodities, more equitable distribution of wealth between urban and rural areas, reduced pollution, more conservative banking (good luck to them on this one), slower growth, etc. (the topic of large US debt paper holdings didn't make the public announcements but one can surmise that it was a topic in the back room discussions). (g)

China is now the second largest holder of USA debt paper. Evidence suggests that until recently, the Chinese government considered the attainment of rapid growth to be more important than worries about the quality of that mountain of paper (which makes sense given the importance of the country's exports to the US). Over the last year or so, this attitude appears to be changing. China's emissaries are roaming the globe, looking to buy darned near anything that has real value and that might be purchased/exchanged for US currency (read US debt paper). Who knows for sure, but it makes sense to me that they don't want to be a huge bag holder.

Best,
Earlie
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