An interesting (and long winded) geopolitical article on China: http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/06/12/the-geopolitics-of-china.aspx

Of interest is the writer's claim that China is actually dependent upon the rest of the world, and needs them to buy their stuff, rather than the opinion usually stated around here that we are in desperate need of China. Thought you all might be interested.

I've always said it was this way.

China has an economy of cheap labour. And guess what - any country can produce cheap labour products such as baskets or screws. Western economies are highly advanced and specialised, and though prone to competition and trade deficits, they can nevertheless produce technologies that economies such as China can not, ie computer chips and modern weaponary.

For every Japan, or USA, there's a dozen China's out there. In extreme circumstances, such as war, a country like China would be at a severe disadvantage, whereas Western countries can substitute their cheap Chinese imports with a several dozen other markets.

An interesting (and long winded) geopolitical article on China: http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/06/12/the-geopolitics-of-china.aspx

Of interest is the writer's claim that China is actually dependent upon the rest of the world, and needs them to buy their stuff, rather than the opinion usually stated around here that we are in desperate need of China. Thought you all might be interested.


I certainly wasn't one of those that said we need China, I have always said they need us as much as we need them.

I've always said it was this way.

China has an economy of cheap labour. And guess what - any country can produce cheap labour products such as baskets or screws. Western economies are highly advanced and specialised, and though prone to competition and trade deficits, they can nevertheless produce technologies that economies such as China can not, ie computer chips and modern weaponary.

For every Japan, or USA, there's a dozen China's out there. In extreme circumstances, such as war, a country like China would be at a severe disadvantage, whereas Western countries can substitute their cheap Chinese imports with a several dozen other markets.

China sends more to the US other than cheap little gadgets. Many manufacturing process, especially chemical ones, get their raw materials from China. They own the market, and no other piss ass country is going to start making any of those soon.

Ibudin, Halo,

It wouldn't be such a sad situation if we took all the production capabilities out of our own country. I was just involved in buying for my company production equipment at a liquidation auction for a company that is closing down its doors.

You know the difference between the US and China? In the US, if your company goes under, no one gives a crap about you--even if you have a great product. Rules are rules, so they say. But if a company is in trouble in China, the government and fellow companies will offer all possible aid because they're willing to help each other--sadly, in a goal to outdo the Western world.

CPUs, high-precision semiconductors are slowly being moved overseas. We have VERY LITTLE production capability in the US now. The fact that our government doesn't care about saving producers shows my earlier point--Western civilizations don't care if you've built a time machine--they'll still watch you burn and die, and that will be the US's fatal flaw if they don't change this.

You can say all you want about cheap little gadgets. As far as computer components go, we only build the CPUs in the US still, and even that is about to be moved overseas slowly.

The fact is we've put ourselves in a dangerous position by eliminating our production capabilities, and now we send scrap metal, wood on ships to China, and the ships that we sent with raw materials come back in advanced forms as it is with iPods/iPhones, laptops (MacBook Pro), refrigerators and more.

Doesn't it sound like we've become a third-world country? Just imagine getting what you want if China wants to cut the US out. It's a very frightening prospect because we might not even have basic goods like toilet paper.

Halo, you are underestimating China's production capabilities. I visit China every month as part of my job. Sure, you can criticize little things about China, but the fact is that they get things done. It's not clean, elegant, hell, or even safe. But they get it done.

We're very vulnerable in production. We can't eat computer chips. We still build the brains of the computer, but we don't make the arms, legs, hands, feet, torso of it now. What good is a brain when it can't move?

I would be very worried about our production. We need China just as much as they need us. But the problem is that if China, lets say twenty years down the road wants to stop the boats from bringing us all the stuff that Wal-mart carries, China might be in a position to say, oh-we need the goods for our own use and so we're stopping the boats and keeping them here. What do we do?

The only way out of this mess is to work on our production. But nobody wants to do production because there's no incentives. The government doesn't let rules slide even when the economy is bad.

I certainly wasn't one of those that said we need China, I have always said they need us as much as we need them.

I think this is an extremely dangerous line of thinking.

In 2007, China exported $1.218 trillion in goods. How much of that did we consume? $321 billion, or roughly a quarter of what they exported. While we're significant, we don't make or break them.

Now, consider what they export. These are their top exports in 2007:


Electrical machinery & equipment
Power generation equipment
Apparel
Iron & steel
Optics & medical equipment
Furniture
Vehicles other than railway
Inorganic & organic chemicals
Toys & games
Plastics & articles thereof


Do you see anything there that any industrialized nation wouldn't want? We aren't their sole consumer of these things.

Not only can they survive without our money, they're going to have to anyway. On top of feeling the pinch of not having real-estate-ATMs, the dollars we do have are worth a lot less this year. We don't have a saber to rattle here, because we're already buying less from them lately anyway (They were down to our #3 source of imports in April).

Now, look at the things we import from China. We cannot easily get those things from our other trade partners, and we cannot currently manufacture them ourselves.

Explain how importing more timber from Canada or cars from Mexico is going to replace being able to afford clothing, for the average family?

The asymmetry of our situation is very real. I don't like it and I don't think we should just give up and accept it long term, BUT pretending that it doesn't exist is a recipe for disaster. That thinking leads to making or supporting rash decisions that will not be easily reversible when the true scope of the consequences becomes apparent.