For China’s foreign-exchange reserves a shopping list

I read that by the end of last year China’s foreign-exchange reserves amounted to $2.85 trillion. It seems now that not a day goes by without some mention of trillions of dollars.

Global GDP (GWP) as of last year was $62 trillion. U.S. GDP stands at about one fourth of that, nearly the same dollar amount as its current debt of some $15 trillion.

Now China evidently has trillions to spend, like no other country in today’s world. What if they were to start spending it, were to set about acquiring some of the world’s and in particular the West’s assets?

As if to help them get started in that endeavor the Economist magazine has come up with a shopping list:

They probably won’t purchase the year’s projected oil output. Even their growing domestic economy would be unable to make use of that much oil.

But what about buying up US farmlands and farm production, and the US businesses including Apple, Microsoft, IBM, Google and others not on the list?

All of these companies are highly profitable, and if the Chinese were to acquire them they would also acquire the profits.

And they could purchase all that and still have enough left over to purchase all of our professional sports teams.

What would keep them from doing so? Because they haven’t yet done this does this mean that our free market is not all that free?

If they did try and our government put a stop to their doing so would that then mean that in this one instance the Tea Partiers would cheer and come down on the side of government regulation of the market?

Anyway, a lot to think about. I wonder what it is that keeps the Chinese and their trillions away from our most prized possessions? What keeps them instead buying only boring US government paper?

And in regard to the 62 trillion dollar world economy, what does hold it all together? Perhaps it’s only hanging by a thread, in this instance the thread being China’s decision, so far anyway, not to go shopping.

Or perhaps there is something else that protects our way of life, something that keeps China’s growing currency reserves away from our most valuable assets?

But it may be simpler than that. The writer of the Economist article probably has it right when he concludes:

“These frivolous calculations illustrate the vast scale of China’s reserves but also the great difficulty it faces in diversifying them. Any purchase big enough to warrant China’s attention will also move the market against it. China can buy almost anything for a price—but almost nothing for today’s price.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s