This staggering infographic illustrates on several axes the tremendous shift in global power between China and the US. The trade imbalance and Forex reserves alone are enough to give any US taxpayer or holder of American dollars significant trepidation. How can we maintain a symbiotic global balance between these two important global trading partners with this much shift in the center of gravity?
If you simply read The Economist occasionally and look at the economic data in the back, these figures are not too surprising. This is a very effective way to display the data. And those who are calling for China to devalue the yuan don't realize the implications it would have on China's ability and willingness to continue lending to feed our spending habits, especially at the government level.
Greg – I think you are right that the economic data is out there that illustrates the continual trends which have been underway. I think what's staggering is seeing the delta between Point A and Point B and how much the balance of power has shifted in 9 years. Although the Yuan is clearly undervalued, you are right that sttrengthening it (at least now) would have devastating results.
The number of global companies and billionaires out from free competions is more important than IPO and trade researves.
Ho hum…
Allowing the Yuan to float forces a lot of things to self correct. Yes Greg, it would be very painful and probably fatal at this point were it to happen in one fell swoop, but I disagree with the characterization that people want China “to strengthen the Yuan.” I don't want them to strengthen it, I think they need to stop artificially weakening it (or weaken it less).
Had it floated years ago, the multinational stampede there in the first half of this decade would have been muted. Whether that would have helped the US worker, or those in other LCCs more, I don't know.
That being said, as far as the stats go…
Are IPOs a measure of strength, or merely an indication of increasing surface tension in an emerging bubble? Even if you concede the stat's usefulness, an NYSE or LSE IPO is way more credible than an SSE or SZSE listing.
I also question the validity of the “large market cap” stat as well…another sign of a Chinese stock bubble? Revenue is more meaningful to me, and the results are much less damning.
Of the Global Fortune Top 100 in 2009…Sinopec (Oil), CNPC (Oil), State Grid (Domestic Power), ICBC (Banking), China Mobile (Domestic Telco).
I'm not worried about that list, but when combined with the FC reserves it makes me fear a bidding war for commodities and want to push alt sources harder.
The real issue that's not on the list is our national debt, as it makes unwinding the imbalance a wicked problem.
As for what to do to ride it out…buy hard assets…I like multifamily residential. Unless tent cities are en vogue, hard times will force people to trade down at the margins supporting demand for modest accommodations. Fixed rate debt will become less burdensome as interest rates / inflation rise. Value of the structures should float with inflation, providing a buffer for principal.
-Aaron
PS – One of the best economist covers ever showed container ships going from china to US loaded with goods, then making the return trip with IOUs.
Frank – I agree that IPO volume is relatively unimportant. But unless you or I are one of them (last time I checked neither of us were), the number of billionaires is also somewhat unimportant. But the trade reserves has serious implications for the global economic balance.
Great points, Aaron — on many levels. Thanks. I agree that competition for hard commodity resources (Cu, Al, Pt, Lithium) will definitely have an impact of wealth creation of nations over the next 10 years. Countries naturally rich in resources like the BRAC countries (Brazil, Russia, Australia, Canada) stand to do well when financial assets become of questionable value.
Jeff, yes the number of Millionaires makes much more sense. Here people talk about boosting domestic spending, but only talk. High flying property price and tax makes middle class more cautious with spending.
I am just now seeing your comment Aaron. I agree that over time the Yuan needs to be allowed to float more freely (as all currencies should). I just believe that the benefits to the US of such a shift would be far smaller than most, especially politicians, proclaim. Currency manipulation has become an excuse for what is really an exaggerated view that US manufacturing cannot be competitive (our workforce training, education, and regulatory and tax environment should be far bigger concerns).
I am just now seeing your comment Aaron. I agree that over time the Yuan needs to be allowed to float more freely (as all currencies should). I just believe that the benefits to the US of such a shift would be far smaller than most, especially politicians, proclaim. Currency manipulation has become an excuse for what is really an exaggerated view that US manufacturing cannot be competitive (our workforce training, education, and regulatory and tax environment should be far bigger concerns).