Everybody collects something: be it stamps, rare coins, partners or autographs. Humans need something they can value, identify themselves with and own in extend. It’s common and not spectacular at all. But if one nation collects others’ debt and almost owns the greatest nation of our time, it is worrisome.
China is one of the lucky countries which didn’t suffer this ‘much’ during the financial crisis last year. Export decreased slightly, while unemployment and bankruptcies of little companies increased, but thanks to a well managed budget, China lists one of the greatest surpluses and Chinese don’t face foreclosures based on high mortgages. You can say, that the conservative point of view, with which Chinese treat money, prevented them to be carried away by the financial maelstrom.
What happened through the crisis was astonishing from my point of view: banks as well as companies turned to China to get financial aid, i.e. Cadbury, HSBC, Marks and Spencer, Tesco and Fannie Mae and Freddie Mac were supported even before the storm. Was the US government considered a stable source of cash for decades, it seems to be China’s turn to take over now.
China owns around $ 450 billion or ½ of 1% in outstanding US debt. Ergo $ 450 billion/ 365 days * .005= $ 6.1 million are paid as interest each day.
So why does China still pay for useless US securities instead of taking advantage of the American misery? I assume that such an action would cause a worldwide outcry and has probably a very negative effect on China. So what China does is way smarter: they tie the US closer and closer to transfer their own interests into action. They use western knowledge to develop their own goods and technology, till they reach the same level of comprehension. In return they’re considered a nice debt relief and receives appreciation.
As for my part, I find it more than disturbing, that one country has such a big influence and can put pressure on another one due to the other’s encumbrance. What many don’t seem to realize: There is nothing like a free lunch!
Eventually, while being patient, we are going to see, what China wants back in return. Smart as it is, it will most likely keep its demand small and won’t wake up the sleeping bear (US citizen).
So let’s have a look on the country, which appears so generous and honestly helpful: China celebrated its 30th birthday last year and seems pretty modern and west oriented on its surface. But looking back on its history based on dictatorships, which was taken over by a communistic political system, corruption, no freedom of speech, the suppression of Tibet for 50 years now and the 20th anniversary of the quashing of the Tianamen Square, etc., makes me wonder, how modern and pro-west China actually is.
To consider China a stupid cash cow is the worst assumption that can be made. Eventually this nation will achieve its goals silently: through investments, it ties Africa to it, spreads its philosophy, creates jobs and gets gratefulness in return; has the knowledge of the western society and doesn’t depend on it anymore and eventually can eliminate the US when it comes to fighting for scarce resources and raw material. The awakening will come and its loud roar will echo through the ensuing years, while China laughs out loud.