About Me

Aug 25, 2011

Can the United States and China Become One Economy ?

  Firstly, I’m not an expert on China. It’s still the case for an expert on US. So, I’m talking as an observer. Speculation is high that China and the United States are becoming one economy. The military relations have been up and down for years. Now, economic ties are at crossroad.
The recent political earthquake in Washington was over. But the aftershocks remain. China feels the need to diversify its Forex holdings faster than it should be. However, no other currencies but Dollar can absorb such a large amount of money. At the end of the day, dollar is still the best answer. However, sollar will be become cheaper and cheaper at least until the time US’s economy booms.
Dance until the music stops
The economic relations between the two countries are in holding patterns. Frictions over economic ties should be unavoidable, should the current trend continues. The world has been a zero-sum game and will continue to be.
It’s well known that China buys US debts to prevent the RMB from rising to a level she doesn’t want. There are people who argue that Globalization making economies more dependent on one another. Thus, it reduces the possibility of war
Joseph S. Nye made a different case. “But, while Britain and Germany were each other’s most significant trading partners in 1914, that did not prevent a conflagration that set back global economic integration for a half-century,”[1] he puts. They still went to war.
I’m not saying that China and US are going to war. The notion I’m trying to make is that it’s not really the case that they are becoming one economy. Military budget of both countries just keeps increasing. It means that war is still the last resort.
All players in Globalization game can’t win all, I once wrote. We can’t find losers for now. But it won’t be long. As far as I know, military budget expenditures of most countries are on the rise.  Countries that lose the game may go to war. Who knows? What if the United Sates loses the game? What if Russia loses the game? What if China loses the game? What of India loses the game? What would happen?
The world with which we are living is like the world in early 20th century. Each country is flexing muscle. We have yet to see either the winner or the loser. Again, we can all be the winners. The key different point is we are playing economic game, not war game.  As Chuck Prince, former CEO of CitiBank interesting said: We have to dance until the music stops. When will the music stop?
China-US ties are highly volatile. I’m not sure if they are becoming one economy. The thing worries me the most is that I believe the leaders of both countries are not sure too. From my viewpoint, they are preparing for the worst.  Influencing by both Chinese and Western cultures, I don’t want to see anyone of them fails.