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The China story is remarkable by any standards. A communist country which rebuked the idea of private ownership and limited the freedom of the individual has managed to achieve an economic miracle. China is now one of the largest owners of US Dollars in the world. The USA and the US Dollar, of course, are the symbols of private ownership and freedom.
Ask any suppressed person living in any part of the world where they would like to live and what currency they would wish to own.
----------- Equitymaster Research -----------
Well, China has a lot of the currency and, if the space that China occupies in the US media is an indicator of how much China owns of the USA, then China does own a fair bit of the US.
Prime Minister Wen Jiabao, at an interview after the annual meeting of China's Parliament, expressed concerns that the US policy makers would ensure that the US dollar was stable. The US needed to ensure the safety of China's estimated USD 1,000,000,000,000 of investment in US dollar denominated investments.
"We have lent a huge amount of money to the United States," Wen said at a press briefing in Beijing on March 13th, "I request the U.S. to maintain its good credit, to honour its promises and to guarantee the safety of China's assets."
Strange - this coming from a country that is under fire for not honouring the human right to freedom. China is also under fire for adding pollution to the global world. Not to mention the fact that many Made-in-China products are of suspect quality and have broken the trust that people had when they go shopping for things like milk powder to toys to drywalls used in constructing homes.
So is Prime Minister Wen's finger-wagging a sign of China's strength or a show of China's weakness?
Like their ads proudly proclaimed: the Citi never sleeps.
In the US, Citibank had tens of thousands of "producers" who sold home loans to many who could not afford to repay them. These loans were sub-prime and, in this economic downturn, cannot be serviced or repaid. Citibank now has billions of dollars of losses on its books from such loans. While the manufacturers of Citibank were happily producing products and selling them on to people who could never rely afford them, the risk control guys in the receivables section of Citibank sleeping on their job. They never asked the question: hey, will these guys ever be able to repay our loans?
So doesn't China sound like a Citibank?
China manufactured all sorts of products for all income levels and shipped them across to thankful customers - mostly in the US. The factories in China were humming away and the producers were happy. As was the government. Jobs were being created and the sales were piling up.
But, just as no one in Citibank cared whether the customers would ever be able to repay their loans, no one in China really cared whether the hordes of US Dollar bills they were accumulating were really worth anything.
Until now, that is. Prime Minister Wen is from the receivables department. He wants to makes sure that - rightfully so - China gets cash in real money, not in some worthless monopoly money.
But who is in trouble now: the guys who Citibank gave the money to or Citibank itself? Sure, the guys who took all that money and assumed it was never to be repaid are going through pain. Citibank is fighting for survival.
And Citibank is looking for a bail out. Sorry, a few bailouts.
So China is a Citibank and needed its own bail out package from the US.
The finger wagging of the bill collectors department has reaped its reward.
While in India, we are still wagging our little finger at Pakistan for the terrorist attacks of November 2008.