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Financial Nuclear Deterrence
By cpa | February 28, 2008
Yesterday, the newspaper’s news is worth a small taste: Premier of China Wen Jiabao met with United States Secretary of State Condoleezza Rice; China is willing to join efforts with the United States to maintain financial market stability.
This position holds that multiple profound.
With the end of the Cold War and the rise of the trend of economic globalization, big countries and major powers from the competitive relationship between the original military hostilities, and the economic sanctions of life and death, more evolved through political and economic means, in the competition in cooperation in the political reduce interference, the economic interdependence. In the capital market, China’s huge foreign exchange reserve into a large number of government bonds mainly to the United States dollar assets in the real economy, the United States is China’s major export market (after EU). Therefore, the United States of severe shock to the financial market is not conducive to China’s. This is why China has stated that to maintain (the United States and the world) the stability of financial markets a great starting point.
Conversely, in recent years China holders of the United States large number of financial assets, “a financial nuclear deterrent” strategic significance has been gradually reached, that is, when China’s military strength is still unable to counter the United States under the conditions through economic means, purchased large quantities of the United States financial assets, though the exchange rate issue will be a short-term profit and loss, but the United States financial markets and the dollar formed a similar “nuclear deterrent” psychological pressure.
This has made the United States in the next extended period of time, in the political, military, and other areas of China have become more difficult threat.
Despite contain China’s rapid rise is its long-term strategy, but the United States does not want to see such a fact: the United States on China’s volatile financial markets brought about by the tremendous impact, as well as the disappearance of cheap Chinese products to the United States the interests of consumers damage.
Therefore, China in the era of globalization, only with the United States economy more closely tied in the end is the convergence of the interests of both sides, China to the United States a large number of financial assets, “financial nuclear deterrence”, the United States may be offset China adverse political and economic threats, the possession of nuclear weapons as the ultimate superpower in the world, achieving mutual threat, but non-strategic balance of the conflict. This balanced with the interests of both sides, but also conforms to the interests of the world.
Another concern is: This is the attitude that the “safeguard” the word we deeply appreciate China’s national strength can quickly upgrade. On 10 years ago, China on the global financial markets is limited to the impact of maintaining the stability of the RMB exchange rate to ease the Asian financial crisis from worsening further. Today, however, China may have decided to “maintain financial market stability,” because the current United States and the stability of global financial markets means, and China’s monetary policy is not directly related to the need to inject liquidity of the market directly, as well as the purchase by The loan-to-crisis in the financial institutions stake, and China now have enough economic strength, has also been put to a specific action (the purchase of part of the shares of Morgan Stanley).
According to Chinese leaders this position, I expect will happen more similar injection of financial enterprises and the acquisition of United States equity acts.
Safeguard the financial stability of the market action on China, the political significance than economic significance, the United States financial institutions holdings stake, no doubt China has mastered the “financial nuclear deterrence” more initiative but at the same time, if the United States financial markets improved, and from a business perspective, China in enhancing deterrence, but it also would increase the financial institutions to the United States market and the influence of the right to speak, as well as a financial stake in the value-added.
The credit crisis has brought this opportunity and situation, in the imbalance between shots to help return stability of the financial markets at the same time, China also has been increasingly active strategic position, this is another sense of the term “peaceful rise.”
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