China-US Economy Discussion

I am not an economy expert (or even entry level learner), and actually I don’t know too much about the discussion my reader Rimbaud initiated, with DB following the comment. But I think it worth some serious discussion. The decrease in value of US dollar and strong RMB trend IS an important issue to discuss, and so is the losing of wealth from China because of it. This is what I am going to do. Let me post Rimbaud and DB’s comments here, and then open for discussion. I think it will be an very interesting thread, and it will be very educational for me.

Hi jianshuowang,

A bit off-topic but I had to bring this to your attention:

http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html

So, the Chinese Central Bank has bought over ***$1 trillion*** of US Treasury Bills and other bonds and debt securities… yet with only a few billion dollars in capital? I live in the USA, and we’re suffering major inflation here as our dollar stays weak– which means that China is effectively LOSING ALMOST 1 TRILLION RMB on your US dollar foreign currency reserves (those US Treasury Bills) that you’ve been buying. What is your Central Bank thinking??? The best quote in the article, from a Chinese blogger: “It is as if China has made a gift to the United States Navy of 200 brand new aircraft carriers.”

I’m not sure how familiar you are with American slang, Jianshuowang, but in the USA, we would say that “the USA has played China for suckers”– i.e., the USA has tremendously screwed over China. Honestly, the transfer of wealth out of China now is worse than the Opium Wars, the Unequal Treaties and the Boxer Rebellion Treaty combined! The USA has essentially stolen perhaps $150 billion = 1 trillion RMB out of China, because the Chinese Central Bank has been investing the hard-won savings of Chinese people into US debt (mainly US Treasury Bills). Yet our economy is shake and on the brink of collapse– the USA (individuals and government) is deeply in debt, and we make it much worse since we still spend trillions on war weapons and the War in Iraq. In other words, the US economy is not viable over the next 20 years– we’re going to default on our debt. So you Chinese are losing over a trillion RMB on those T-bills you have bought.

Look, I’m sorry but I have to be honest here– why is the Chinese Central Bank being so tremendously stupid? You are essentially giving us Americans trillions of renminbi that you Chinese have earned from hard work– just giving it to us, for free, even though we Americans spend way too much and save too little. We don’t save for ourselves– so, you Chinese (via the Chinese Central Bank) have been giving us your savings.

We Americans are deeply in debt right now, our real estate sector is in collapse and we are entering a recession. Our schools are terrible, our infrastructure is crumbling and our manufacturing and knowledge sectors are in terrible shape– in other words, the United States is rapidly declining and our economy is slowly collapsing. Whereas, you Chinese work hard, have good schools, and are actually generating savings and wealth.

Yet then you waste your trillion RMB of savings and wealth, which you earn from hard work, and you give it to us profligate, non-saving American borrowers. So Americans are basically taking advantage of the Chinese, I mean honestly– your Central Bank has basically been letting the US steal over $100 billion of Chinese savings away! And with recent major inflation in the United States, all those T-Bills and bonds that the Chinese Central bank has been buying, continue to fall in value.

Even though I’m an American, I respect the Chinese I’ve worked with, and I hate to see you trusting the US system so much when our system is clearly broken. My advice to you would be as follows:

1. DIVERSIFY YOUR FOREIGN RESERVES!!! For goodness’ sake, if the Chinese people have extra savings, don’t invest those savings in declining, worthless US Treasury Bills, not even we American investors do that! Spread out your reserves– get some Euros, yen, Korean won, rubles and ringgit. Rather than buying up worthless US Treasury paper, also use your reserves to get raw materials (copper, coal, petroleum, gold, silver and land). In other words– get things with tangible value, not US Treasury paper. You can still buy some US dollar-denominated assets to prevent the yuan from rising too quickly– you want a slow, gradual rise in the yuan, not the kind of rapid rise in the yen that ruined Japan’s economy in the 1980’s– but get things that are tangible, not just financial paper.

2. Use the dollars that the Chinese Central Bank already has, to get things in the USA specifically that have real value– again, things like ships, ports, natural resources, factories, coal, food, even research labs with lots of technological expertise.

3. Get out of dollars as soon as you can. Every time the dollar gains a bit in value, take advantage of the gain to sell your dollars and make gains. Do this gradually so that the dollar doesn’t fall too fast, and you can get yourself out of dollars.

4. Remember that a few other countries (outside the USA) also use the dollar: Ecuador, Panama, Liberia, El Salvador, US Virgin Islands, East Timor and many Pacific islands. Use this to obtain dollar-denominated REAL ASSETS from them (natural resources and even land if possible) using the dollars you’ve built up. Again– get rid of your dollars gradually, using a method like this.

5. Exchange dollars for yen and buy up goods and resources in Latin American countries that use the peso, since the Japanese yen and the peso used in many Latin American countries, have not risen much against the dollar. So, your dollars can still get many yen– with the yen an undervalued currency likely to rise soon– and can also get many peso-denominated natural resources and other goods in Latin America, since the peso is one of the few currencies that has depreciated relative to the dollar.

Finally, 6. Please, when it comes to foreign languages, stop giving exclusive attention to English, and encourage Chinese students to learn other foreign languages. As I said, the USA (and UK for that matter) is in decline, but when your students know English and not other foreign languages, you’re essentially dependent on a declining system like the United States. So again, as with your foreign currency reserves– Diversify! Just make English an elective foreign language but learn others as well. I’d prioritize the following foreign languages:

A. German– the German-speaking Central European countries, Switzerland, Austria, Germany, E Belgium, N Italy and German-speaking regions in Eastern Europe– are now leaders in many fields of high-tech, especially in emerging Green Technologies, which will be the top technology of the 21st century. Learn German, the main language of the EU, and increase your trade and links with the Germanophone region of Europe.

B. Portuguese– among growing economies, Portuguese-speaking Brazil is by far one of the most encouraging and healthy, as well as an excellent source of raw materials. Portuguese would be very useful.

C. Hindi– Closer contacts with India and its own strong economy.

D. Spanish– Trade with Latin America, very rich in natural resources.

E. Arabic– The oil-exporting Arab nations will be among the wealthiest of the century, and obviously better business contacts can be quite useful.

F. Japanese and Korean– obviously valuable for trade close to home.

Again, I have to be honest here, because I feel that far too many Chinese are naive, and think that Americans are nice people who see the Chinese as “friends”: Most Americans either hate China, or fear and dislike you, and there is nothing you can do to change it. It’s not your fault– the reason for this is that the US media is full of anti-China propaganda and hatred. During the Beijing Olympics, when China was doing a magnificent job and being praised by the world, American news outlets basically spent the entire Olympics claiming that China cheated, claiming that China has a totalitarian and evil society, claiming that Chinese Olympic athletes are kidnapped from their families at age 2 and forced to train. It’s all false, but I’m telling you– this is what US media reports because they make money with it, and since most Americans get their information from the media propaganda here, they hate China.

There are of course, many millions of Americans who respect China and like the Chinese people, but unfortunately the majority aren’t like this– Americans can be extremely narrow-minded, provincial, xenophobic and even racist people at times.

So please, stop being so naive and be realistic, stop linking your entire economy and system to the United States so much. I like the fact that China is a humble power, hospitable, and does not interfere with other countries– that’s an excellent trait, and it will continue to serve China well. But at the same time, have some confidence, and stop pretending that the American system for education, business, technology and so forth is the best in the world. It used to be, but we aren’t the best anymore– we have some good qualities but also a broken, arrogant, small-minded system here in many ways. Just treat us like any other country– one to be respected, and treated hospitably, but just one country among many. DIVERSIFY your economy and system more and don’t depend on the USA so much, build up relations with the EU, Arab countries, Brazil, Latin America, India, Japan and other countries, and not so exclusively with the US itself.

Posted by: Rimbaud on September 5, 2008 4:25 PM

BTW, when it comes to investing your people’s savings in China, in general don’t give your savings to the USA with US T-bills and subsidize US borrowers. Instead:

1. Invest your savings in Chinese national infrastructure (roads, bridges, public transportations), in Chinese science and technology (and publish your scientific, technical and academic papers in Mandarin Chinese, you have to make Mandarin into an international language for publishing important ideas and findings, for Westerners to take China more seriously).

2. Also invest your savings in Chinese universities, provide seed capital to Chinese entrepreneurs to start more “Chinese silicon valleys,” invest in renewable fuel technologies and research (tidal, wind, solar, geothermal, fusion and hybrid/electric vehicles), a Chinese space program, the arts and so on.

3. In general, invest in and encourage the domestic Chinese economy instead of buying US T-bills.

Honestly, the way the USA has screwed over China with the loss in the T-bills’ value– it’s just like the Opium Wars all over again, except in this case it’s the naive Chinese Central Bankers who have just given the United States the equivalent of 1 trillion RMB of silver!

Posted by: Rimbaud on September 5, 2008 4:49 PM

I’d also strongly recommend these articles by the economist Henry CK Liu, with specifics on how China can productively “break the dollar hegemony” that is causing China so much damage, and leading Chinese citizens to lose so much wealth to borrowers in the United States:

http://henryckliu.com/page165.html

http://henryckliu.com/page166.html

He talks a lot about gradually shifting out of US T-bills and into the Chinese domestic economy, not just domestic consumption but domestic infrastructure, science and research (with good intellectual property protection and contract law), as I discussed above.

Posted by: Rimbaud on September 5, 2008 5:19 PM

WJS,

if you intend to open a discussion on this, you should probably start topic of its own.

Rimbaud,

China’s leadership has deliberately chosen to manage its currency against the USD and has thus gained early front-loaded benefits (export growth + job creation in the export sector). Now they are incurring back-loaded costs (currency losses, pressure on the PBoC to continue incurring currency losses to keep the RMB from appreciating amid the global slowdown). It seems as it this was an unwise decision.

However, we always have to put everything into perspective. While we believe China’s leadership is responsible for China’s losses, Victor Shih – a well-known blogger – reports that “officials [in China] blamed the United States and believed the controversial assertions set forth in the book “Currency War,” a Chinese best seller published a year ago. The book suggests that the United States deliberately lured China into buying its securities knowing that they would later plunge in value. A lot of policy makers in China, at least midlevel policy makers, believe this.”

I agree with you that the China’s leaders have made a wrong decision. The question now is, how do we solve this problem? And who needs to act first? Is it up to China now to act? Or do Chinese politicians take the position that the bad and deceitful Americans, who have taken the Chinese to the cleaners, must take action first to clean their hands and compensate China for the currency losses?

In any case, this is and will remain a very exciting issue, and there are many great blogs covering the intertwinement of economies and the excessive global flow of capital at great length.

Posted by: DB on September 5, 2008 6:03 PM

14 Comments

  1. Jianshuowang, thanks for bringing attention to this in a separate thread.

    Just an update for you– our unemployment report in the USA just come out today (our Friday), and it shows that US unemployment increased tremendously, losing about 100,000 jobs in August alone.

    Even this dismal report is an underestimate– unemployment data in the USA do not take into account “temp workers” or those who have become frustrated and given up looking for jobs, so the real job losses are estimated by economists to be close to 150,000 to 200,000 people. (The economic reports in the USA often use models that deliberately make the statistics look better than they actually are– the so-called “birth-death model” for unemployment is one example, and the GDP numbers are artificially elevated by failing to adequately consider inflation. It’s a lot like the Enron “cooking-the-books” scandal at the level of our government, and the press often fails to report on this– so it’s even worse in an election year.)

    In other words, the USA is very clearly in recession. China and Arab countries really do need to move their savings out of Treasury Bills and other dollar-denominated assets, especially debt instruments. Again, do it slowly so that you can gradually reduce the economy’s dependence on exports, invest in infrastructure– but by all means, don’t trust the dollar so much, spread China’s currency reserves out into a variety of other currencies, especially yen, ringgit, won, Euros, rubles and Swiss francs.

    Henry CK Liu’s articles on excellent, and he especially has provided a coherent plan on leaving the dollar and more sensibly investing China’s savings. Some of the solutions I wrote about above are similar to Mr. Liu’s ideas– transferring dollar holdings partially into yen and won (as the yen and won will eventually be rising unlike the dollar) as well as peso countries can preserve the value of China’s dollar holdings, since these currencies have thus far not appreciated much against the dollar.

    For example, in 2005 (just for argument’s sake), one dollar might have equalled about 105 yen and, say, 200 pesos (the peso is used by many countries in Latin America and varies from country to country). Now, the dollar has plummeted in value against the Euro and most other countries– but not against the yen (1 dollar = 107 yen), since the yen is being artificially held down by Japan’s central bank, with upward pressure. One still has to take into account inflation– but overall, exchanging some dollars for yen, with subsequent yen appreciation (and then perhaps exchanging a portion of the yen for RMB) would preserve much of the dollar’s original value.

    Similarly, the Latin American peso-using economies tend to be rich in natural resources, and in many countries, the peso has fallen against the dollar even as the dollar has fallen against the Euro and other currencies. In these cases, the Chinese dollar reserves still preserve much of their original value and get even more pesos than before, to purchase Latin American natural resources. Again, this only works for Latin American countries that have not had too much inflation– if inflation is high, then of course, something that cost 200 pesos in 2005 might cost 300 pesos in 2008. But some peso-using countries have had reasonably low inflation.

    I realize that China can’t allow the RMB to rise too quickly– this would jeopardize exports, so it has to happen gradually. But again, when China obtains foreign currency reserves, the key is to diversify the reserves, not just dollars but Euros and other currencies. (FWIW, most oil-exporting countries will now accept Euros and rubles, as in Russia– the Germans, for example, buy much of their oil in Euros.)

    But the Chinese central bank has to get serious about this, because the US Federal Reserve Bank plans to “deal with” the massive US deficits via hyperinflation. The plan is to lower US interest rates which would drive down the value of the US dollar even more, and spark massive inflation. This would, of course, hurt US consumers, since our savings would be worth little. But it would also hurt countries like China by “exporting inflation”– since with massive inflation in the USA, your dollars would be worth even less, and buy even less in the USA.

    In other words, the United States has driven itself deeply into debt through the foolish War in Iraq, spending far too much on weapons and poor fiscal management– but the USA wants to make you, the Chinese, pay for our profligacy by exporting inflation. Again– “don’t be taken for suckers.” Quietly, and gradually, but steadily move out of dollars, and refuse to buy up Treasury Bills if interest rates here are dropped too low. This will also put pressure on the US Federal Reserve not to reduce interest rates too much, as foreign governments would refuse to buy US Treasury Bills. But slowly, but surely, move out of US dollar-denominated assets. I’d strongly recommend almost any other currency basket– yen, won, Euros, rubles, ringgit and Swiss francs– as a better alternative.

  2. China is in fact facing three front battles from outside. The first is lowering USD valuation and rising RMD exchange ratio. The second is rising energy and raw material cost. The third is rising inflation and yet a weakening domestic consumption. China is currently on the suffering end of these fronts. I am not sure what will happen going forward. At least from the safe side, we can conclude that Chinese economy is going to go through a difficult period.

  3. Rimbaud said below, let me quote:

    “why is the Chinese Central Bank being so tremendously stupid? You are essentially giving us Americans trillions of renminbi that you Chinese have earned from hard work– just giving it to us, for free, even though we Americans spend way too much and save too little. We don’t save for ourselves– so, you Chinese (via the Chinese Central Bank) have been giving us your savings.”

    There are many clues to explain this:

    1) What made people think that the leadership of these banks are standing on the same side as the national benefits for all people? If these elites would be hugely rewarded financially and personally from using public funds to purchase US treasury bonds, what could have stopped them?

    2) What made people believe that Chinese leaderships might have enough leverage of not buying US tresury bonds even if their own concience told them not to? China’s economy, having been locked at the bottom of the economic food chain, i.e., OEM manufacturing focused, is very hard to outdo its own limitation of not abiding by external forces. A mere threat of increasing tariff to Chinese products or reduction of imports from China will be enough to put a golden handcuff on the Chinese leadership. A threat of reduction of imports from China by western developed nations will lead to a drastically reduced GDP growth. Chinese leadership is fully aware of that outcome. What I meant is, Chinese leadership may not have too many choices that we thought they would have. After all, China is a very export dependent country.

  4. One more thing jianshuowang– in my humble opinion, the single smartest thing that China can do to increase its global power, respect and strength, is to become a major global producer of international films, music and television in the Mandarin Chinese language. In other words– China should nurture its own “Hollywood” as well as massive production of music, TV, comic books, books, magazines and so forth in Putonghua.

    This may sound funny at first, but in fact, China’s international presence will be optimized if China becomes the world’s biggest exporter of high-quality culture. I noticed this after “Crouching Tiger, Hidden Dragon” (卧虎藏龙), the “House of Flying Daggers” (十面埋伏) and “Hero” (英雄) were shown in the United States and other countries– interest in, and respect for China, increased in the United States and abroad. People started studying Mandarin, becoming fascinated with Chinese culture and overall liking China. As the Chinese language spreads, of course, China itself seems more familiar, and with more people understanding Chinese, relations also improve, and people can communicate with the Chinese themselves.

    I agree with jqian above– China thus far has been far too dependent on low-tech, cheap, OEM-related work and exports. (Which may be motivating China’s purchase of US dollar-denominated securities, to keep the RMB low and support exports– although, of course, China can also manage a gradual rise in the RMB’s value, and continue to support exports, by purchasing securities denominated in Euros, rubles, rupees, yen, ringgit, won and Swiss francs, thus reducing exposure to problems with US dollar-denominated bonds and Treasury Bills.) But the solution for China really is focusing on high-value science, technology and culture, and producing it– for global export (with subtitles, dubbing and translation as needed)– in the Mandarin Chinese language.

    If China becomes a scientific and technology center, as well as a cultural center producing excellent films, TV, music and other cultural products– all produced, most importantly, in the Mandarin Chinese language– then China will become an attractive nation for the best and brightest people across the world. The Chinese nation and the Chinese language and culture will be seen as world leaders, and objects of interest and respect by important decision-makers worldwide, and China will become the global leader in technology, cultural exports, entrepreneurship, popular brands, fashion and other forms of innovation.

  5. At last, there are some serious topics for discussion on this blog. It goes to demonstrate that this blog is truly getting mature as each day passes.

    Having read through the article, which Rimbaud has pointed to, below are my views.

    China is clearly stupid for whatever reasons, especially when most people already knew those T-bills and mortgage bonds will surely plunge in value. However, I see 2 good things come out of this:

    1. China Central Bank is now under considerable pressure to reduce the commercials banks’ reserve requirements to encourage growth as the Chinese economy is showing signs of slowing.

    2. By buying these securities to support the U. S. Dollars, China help to stem the rise of the Yuan – [1] The Central Bank had been advocating a stronger Yuan whereas the Finance Ministry oppose a stronger Yuan to gain an edge for China’s exports. So now the Central Bank has to bend to the Finance Ministry. [2] The Bush Administration and Congress can no longer bash China for not having a stronger Yuan, as China can say to them, “Hey look here, I’m helping you and I now suffer big-time loss, what more do you want from me?”

    Whatever it is, I still say China is stupid because US politicians are an bunch of selfish and ungrateful lot; especially if there is a shift to the Democrats who always accused the Bush Administration of being too soft towards China and Obama had indicated on many occasions that he cannot wait to beat up China. So whatever good done during the Bush Administration it will be all wiped out clean and forgotten. It is not worth giving away the Chinese people’s hard-earned money to the “American International Bandits”, who also created the late 90’s Asian Financial crisis.

    I believe, the sub-prime/financial problems that are there all the times and now blown up are a ploy by the Bush Administration to cancel out their huge trade and budget deficits; as it is, the US Dollars’ recent rise proves this.

    While there are mistakes made here, I feel that all is not lost as China has puchased debt securities and not US Dollars directly. Any Adminstration taking over the White House will have to take steps, such as raising interest rate, to prop up the US Dollars to deal with inflation at home that is hurting the men on the street. While high interest rate will affect debt securities, the exchange rate may be in China’s favour. Afterall China can choose and time when to cash out. Up to a point, a strong US Dollar is good for all as it is still an instrument for trade, goods and services. However, a fine balance has to be mainained; and it is only greed that creates upheavals and sufferings for all.

  6. 1 – if the RMB increase it limit also the inflation on imported price (raw material, such as oil)

    2 – if the RMB incease it mean that the product china export are more expensive, (china earn more each time china export one product) but not enough to be relocalized in western countries, and if we want to transfer these product to another developing country he needs an industrial base. Thus most of the production will stay in China for long. Thus china may win more as the RMB increase… it just need not too be too quick.

    3 – if China sell to quickly is USD/american bound, this will cause the slump of USA and American economy… thus China foreign reserve will loose value, and china export will suffer a lot. Thus China has a lot to loose.

    4 – buy buying for so long USD, China has support USA, and has support her own growth…thus it was not stupid without that China will not be so develloped.

    5 – This kind of way of working (I buy your USD, You buy my product and invest in my country) is reaching a point in which it can not be sustain for long (as china economy is quite big now) thus China will need to focus more on internal consumption and less export to continue to grow.

    6 – what block China internal consumption ? the excess of saving from familly (if my memory is right around 40%) why chinese people save so much ? because of an unsure future (need to pay the education fee of my son, need to have money when I will retired, need to have money in case I am ill, etc…)

    7 – One way to decrease this fear is to increase the state social security system in china

    8 – Hu Jintao government is increasing the state social security system. yeah you are right, it is maybe not only to be nice with people but also because China need it to continue to grow.

  7. Chan Kin Seng and Smith both make excellent points here, 我同意. Especially Smith’s second point– China needs to be making intensive moves to switch from such an export-dependent economy, to a higher-value economy with domestic goods, software, technology and culture. Although, as Smith says, allowing the RMB to gradually rise rather than suddenly, so as to ensure that the export market is maintained and a smooth transition can occur. A good article on the practical issues here– http://blogs.ft.com/wolfforum/2007/02/history-holds-lhtml/

    Obviously, you all are probably aware of the decision on 星期六 here by the US government to bail out Fannie Mae and Freddie Mac. This represents a crucial opportunity for China– the People’s Bank of China will now, at least, not lose as much money as was worried on Fannie Mae and Freddie Mac failing.

    But there’s another side to this story– to bail out Fannie Mae and Freddie Mac, the US Treasury will be spending a *minimum* of $200-300 billion, and probably much, much more.

    That’s going to put the USA Federal Government’s national debt to above **$10.2 trillion**, and it will rise up to $11 trillion by late 2009!

    China has been buying up more of this US government debt than any other country, but this is potentially dangerous– I’ve talked to a number of economist friends, and I can just about promise you that this federal government debt will never be fully repaid. To do this, the US government would have to raise taxes and severely cut federal programs, and there’s just no practical political way to do it– politicians here would lose elections if they actually faced this reality, so the US government debt will keep growing and growing.

    By 2012– after US baby-boomers start retiring– the US government debt will be $15 trillion, and then $25 trillion by 2017! There’s no way we can pay this off here, which leaves two options:

    1. The US government will default on the national debt or

    2. (just as bad), the Federal Reserve will lower interest rates down to 1%, causing massive inflation and the value of the dollar to plummet. But with hyperinflation, US debts would be basically erased– and foreign government central banks (like China’s) would be hit extremely hard, and lose trillions and trillions in RMB!

    In other words– for either of those options, China gets screwed, because the trillions of RMB you’ve invested in dollar-denominated debt, is not going to be repaid– the US dollar will just undergo hyperinflation and a drop in the dollar’s value, which effectively will force China’s central bank (as well as Japan’s and the Arab countries) to pay for the US government debt, because when hyperinflation kicks in here, the value of your US-dollar denominated holdings will plummet. *That’s already happening*– because the interest rates here have been lowered to 2% (and going lower), inflation is extremely high in the USA, so dollar-denominated bonds are rapidly losing their value.

    So as the others are saying here– **you have to initiate a system to move out of dollar-denominated assets now*! As both Chan and Smith say, it has to be a *gradual* rise in the RMB, but you cannot continue buying so many USD-denominated assets– the Chinese economy has to evolve into a “high-value” economy with a gradually rising RMB but also high-quality, high-tech, intelligent goods, services and cultural exports.

  8. A couple other suggestions, in addition to the ones above:

    1. Wherever possible, try to get real, tangible commodities and resources instead of currency paper and treasury securities: copper, zinc, tin, magnesium, cobalt, oil, coal, steel, land, factories, pharmaceutical facilities, food, water resources, precious metals, diamonds, forests, lead, aluminum, ports, ships– these all represent real goods rather than currency paper that China can hold onto and physically use. Whenever the prices of these commodities drop, use the opportunity to exchange your Treasury Bills for real, tangible goods like these and build up reserves, because these are storehouses of value. (Obviously as stated above, some part of China’s savings will be in Treasury Bills and foreign currency, but again– diversify, in addition to dollars make sure to have yen, won, rubles, Euros, rupees, ringgit, Norwegian krone and Swiss francs.)

    2. Just in general, promote the Mandarin Chinese language as international language standard. China will never be understood, let alone respected, until 普通话 is a truly global language– that’s the chief factor in increasing global trade links and attracting smart people to study in Chinese universities.

    The Confucius Institutes have been excellent, as are other institutions to promote Chinese-learning. I’d strongly suggest providing Chinese characters and pinyin side-by-side in the learning materials (as well as on Chinese official documents, cultural exports and street signs). I’ve noticed from my own experience, that Westerners as well as Arabs are very intimidated at first by the hanzi, until they get used to them– providing pinyin side-by-side can help the Chinese characters and the language in general seem less mysterious and intimidating, and that will help more wealthy, intelligent Westerners learn it and take Chinese study more seriously.

    As far as *where* to establish the Confucius Institutes– I’d strongly suggest focusing on non-Anglophone countries in Europe, Russia, India, East Asia, South America and Central America. It’s really in these countries where the choice of an international language is made, since they have to decide what language to teach in their curricula. As schools across the world make 中文 into the main foreign language of study, this will increase the number of bright, entrepreneurial, motivated international students who will continue advanced study in China, thus helping China to become a global high-tech center and a place for entrepreneurs and innovation, especially in still-emerging fields such as aerospace (and space program work in general) and of course, clean environmental “green technologies.” Encouraging the best and brightest people from across the world to study in Chinese universities, and then to stay in China and start innovative, wealth-generating companies, is the cornerstone of Chinese success.

    Thus, I’d encourage focusing on establishing Confucius Institutes, and Chinese learning in general, in the following countries especially: India, the Philippines, Japan, South Korea, Germany (as well as German-speaking Austria and Switzerland), France, the Netherlands, Scandinavia (Sweden, Finland, Norway, Denmark, Iceland), Poland, the Czech Republic, Belgium, Spain, Portugal, Italy, Brazil, Mexico, Russia, Argentina and Chile. (In addition, as I mentioned above, diversify the foreign language learning of Chinese students, to include not just English– which should be an elective subject– but also German, Portuguese, Hindi, Arabic, Spanish, Japanese and Korean, as well as smaller but still useful languages like French, Russian, Italian, Turkish, Swedish and Gaelic where you can fit them in. China has such an enormous student population, that it shouldn’t be difficult to encourage different students to specialize in different languages, so that the Chinese can go anywhere in the world to speak the local language and increase business!)

    Obviously in addition to this, publish high-quality, breakthrough medical, engineering and scientific papers 在中文 as much as possible, and make 中文 into an international language for high-quality scientific and technical discoveries and inventions, as well as for international fields like fashion, sports, publishing, architecture, global media, art, business and cuisine. Also, produce high-quality, globally popular 电影,电视节目,音乐,书,杂质,漫画书,艺术,电视游戏,一般有创造能力的发明,都在中文。

    Chinese trade and reputation as a high-value economic and cultural center, will grow in the eyes of the world, only when 中文 itself because a truly global language– that’s an integral, absolutely crucial step in helping the Chinese economy to grow as well. Obviously, improving intellectual property protections (尤其专利和版权) and contract law is also important, though I’m sure this has been discussed elsewhere.

  9. Chan Kin Seng, I wouldn’t worry too much about Obama’s policies. In the USA recently, Obama formulated his full economic plan, and it’s actually respectful of China. I guess Obama is “neutral” in regards to China affairs, but most importantly, Obama’s economic policies would probably be better than McCain’s as far as helping to deal with the US national debt, so if anything Obama would be better for China (and the USA, obviously) than McCain would. The way the economy is crumbling now, Obama will probably be the next President in any case, but I wouldn’t worry– China will do fine, quite better in fact, under a Barack Obama Presidency.

  10. I’m really impressed by the kindful thoughts concerning China by this Mr.Rimbaud whom i don’t know. As i don’t know much about economy, let alone China’s, of which i’ve been informed is much different from those of developed countries, like US’s(as demonstrated in China’s uniquely functioning stock market these days). So i’m learning about these hugely-traded dollar reserves and hugely-bought T-bonds and rushing-in-investment and rushing-out-investments. And the interest rate factor in all that.

    A quick impression is that our country has a huge amount of US dollars without knowing how to spend. And if i heard right, those kind representatives in charge lost some value while making investments abroad. That, i don’t have a say or place to poke my nose of course. I heard those are called SOVEREIGN WEALTH FUNDS, aren’t they? So i’m letting those smart guys making decisions for us.

    I’m still learning. Thank you.

    And those 中文 ideas are quite creative and inspirational, thanks too. We’ll see about that. More confucious college, got it. Or is that confucius college? A bit confused here… I have a recommendation, Mr. Rimbaud: 《横行的英文》(or 《THE RAMPAGEOUS LANGUAGE OF ENGLISH》, this is my translation, since the book didn’t offer one, in its obviously oriented wisdom)(http://www.douban.com/subject/1971488/), if you can read Chinese, that is. I’ve read this book more than 1 time myself. Given the relatively abundand knowledge about English, the author still fails to convince me. Interesting book though.

    Strongly suggested. IF YOU CAN READ CHINESE, that is, again.

  11. Hi Mac, 你好,谢谢你有好的词。我现在还在工作,我快下班,我晚一点儿写对这个重要的书体更多。

  12. Until recently the RMB has been steadily appreciating against the US dollar and many people have seen it as a one way bet to buy RMB with dollars. This has resulted in more and more foreign money being converted to RMB further fueling the pressure on the RMB to appreciate.

    In order to keep this appreciation under control, the central bank of China has had to buy dollars (dollar denominated assets). If the inflow of speculative money is not kept under control, this money will flow into Chinese investments (property and the stock market) causing an asset bubble as occured in Japan. That’s why the central bank wants the RMB to appreciate–in order to discourage speculative investment in China. On the other hand, if the RMB appreciates too fast, Chinese exporters will face difficulties.

    Recently, it seems the central bank have tried a new strategy: halting the appreciation of the RMB in order to confuse would-be speculators and prevent further pressure on the RMB to appreciate. Also there has been pressure from Chinese exporters, who are afraid of declining sales due to the combination of the weak global economy and appreciation of the RMB.

    In any case, the central bank in China has a delicate and difficult balancing act:

    – they want to avoid investing in US dollar denominated assets that might decline in value

    – they want to control the appreciation of the exchange rate (too slow and there may be an asset bubble — too fast an exporters will hurt)

    I imagine that the appreciation of the RMB will restart after a few months. In any case, let’s hope they get it right.

  13. The view expressed by Rimbaud is an extremist one based on a false perception.

    In reality, no one forced anyone to purchase anything.

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