Should China Bail

Lau Nai-keung of the China Daily has written a very good article on whether China should bail out of its US assets and investments. He predicts that US will cause a major world recession, which will bring China down with it.

Overall he makes mention of our major problems that in my opinion China has helped to cultivate. Here is a short list:

• The tab for the long-term promises the US Government has made to creditors, retirees, veterans and the poor amounts to US$43,000 billion, US$145,000 per US citizen, or US$350,000 for every full-time worker.
• In 2000, household debt broke 18 per cent of disposable income for the first time in 20 years. Credit card debt alone averages US$7,200 per household.
• The US now runs a trade deficit roughly 6.5 per cent of its GDP and the gap is widened every day.
• The US Government in turn uses this foreign borrowed money to finance as much as 90 per cent of the federal deficit which stood at US$412 billion last year.
• The federal deficit is expected to be running at about US$2 billion a day at the moment.
  

While most of these problems are self made, China by pegging its currency against the dollar at a rate determined by the government, has helped to create the large US deficit. In this respect, if China actually became a free market economy instead of artificially adjusting its economy to grow at an impossible rate, we might actually be able to avoid a crash of the American economy.

More importantly Mr. Lau brings to the forefront an issue of how easily China could bring America to a screeching halt. If the PRC was at some point to stop financing our debt we would be up the proverbial creek without a paddle.

On a more personal not with respects to him blaming America for all upcoming world problems I think that I have found my opposite.