China Sucked Deeper Into World Financial Vortex and Vice Versa
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- Published on Thursday, 03 December 2015 22:30
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A Socialist Project e-bulletin .... No. 1194 .... December 4, 2015
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China Sucked Deeper Into World Financial Vortex and Vice Versa, as BRICS Sink Fast
Patrick Bond
On Monday November 30, the Chinese currency -- the yuan -- will join the dollar, euro, pound and yen as the world's official reserve currencies, as recommended by the International Monetary Fund (IMF). Are we reaching the fabled new era of multipolarity, and will it bring stability to a chaotic world economy -- "a win-win result for China and the world," as the People's Bank of China claims? Or instead, will this herald the amplification of extreme uneven development, worsening financial crises, and the abuse of Chinese economic surpluses, yet again, for the purpose of bailing out the corrupt, fragile world financial institutions and their elites?
In that... optimistic People's Bank statement, I take the name "China" to mean the neoliberal clique at the helm of Beijing's economic management and Shanghai's financial institutions, and the "world" to mean a very shaky capitalist system suffering periodic spasms in its hyper-speculative financial centers.
Since Wall Street's crash of 1987, these centres have enjoyed Washington backstops (the Federal Reserve Board and Treasury) that have themselves been the lucky beneficiary of Chinese purchases of U.S. Treasury Bills. Reaching the sum of $1.3-trillion in late 2013, that process has finally reversed, with about $100-billion in net T-Bill sales by China since then. But Beijing still holds about a third of its total foreign reserves in these investments, representing more than a fifth of all foreign U.S. T-Bill holdings. In turn, the $6-trillion in U.S. T-Bills is about a third of total U.S. foreign indebtedness.
China is joined at the hip with Washington's maniacal, money-printing Fed and Treasury. Its elites need U.S. borrowing power to translate to U.S. consuming power to translate to Chinese exports; that relationship appears too important to jettison.
