brooklynmonk

China’s Dependence on US Economy

In Uncategorized on April 7, 2012 at 9:36 am

By Antonio Graceffo

Reuters, The World Bank, The International Monetary Fund, and the UN Human Development Index, I found that most experts attributed the US effect on the Chinese economy to such issues as US trade imbalance, where China was completely dependent on the US as a customer, the fact that China has been buying up US debt, and the fact that China’s hard currency reserves are stored in US (not Canadian) Dollars.

This is a sequel to a previous report entitled “China, Canada, Britain, and the US as Economic Powers” which explains that ALL of the top rating agencies still have US listed as the number one economic power in the world, with China number 2 and Canada number 14.

Here is a link to that article

https://brooklynmonk.wordpress.com/2012/03/30/china-canada-britain-and-the-us-as-economic-powers/

China holds 16% or 1.15 Billion dollars of US foreign debt, making it the largest holder of US foreign debt. This debt is carried as an asset on China’s boos and is in part used to support the value of the RMB, the Chinese Yuen currency. If the US government were to be deemed insolvent, the value of this debt would drop to zero on China’s books, and the value of the Yuen would drop.

When the US economy drops significantly, there is the risk of US debt being decreased in rating by the rating agencies, which then decreases the value of the debt. Once again, this fact, China’s ownership of US debt would explain why a dip in US economy adversely effected China’s economy .

Trade Deficit

Another reason why China’s economy is very much dependent on the solvency or general health of the US economy is the US/China trade deficit.

In the month of March, 2012, the US imported 34.3 Million worth of goods from China but exported only 8.3 million of goods to China. As the US is a customer nation, when your customer loses his income, he stops buying from you. And this is one of the reasons that the US economic crisis effected China.

Currency Reserves

Another reason why a dip in the US currency adversely effects China is because China’s hard currency reserves or foreign exchange currency reserves are held largely in US dollars. As of 2011, China was holding 3.18 Billion of foreign currency reserves. This currency is used to prop up the Yuen. If the US dollar drops, then China has less value propping up its currency.

Antonio Graceffo is self-funded and needs donation to continue his writing and video work. To support the project you can donate through the paypal link on his website, www.speakingadventure.com

Brooklyn Monk, Antonio Graceffo is a martial arts and adventure author living inAsia. He is the author of the books, “Warrior Odyssey’ and “The Monk fromBrooklyn.” He is also the host of the web TV show, “Martial Arts Odyssey,” which traces his ongoing journey through Asia, learning martial arts in various countries.

Warrior Odyssey, the book chronicling Antonio Graceffo’s first six years in Asia is available at amazon.com. The book contains stories about the war in Burma and the Shan State Army. The book is available at http://www.blackbeltmag.com/warrior_odyssey

See Antonio’s Destinations video series and find out about his column on  http://www.blackbeltmag.com

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