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US has to accept changed world trade order
26
Feb '09
The Chinese citizens have been contributing to the prosperity and the free flow of consumer credit and help the US maintain a huge current account deficit with the Chinese government investing heavily by purchasing US treasury bills.

If the Chinese government was to stop doing so, the price of the dollar would fall drastically, leading to an unfavourable condition for US as well as global trade and which has the potent possibility of creating a trade friction.

According to the U.S. Treasury Department, China is the world's largest holder of U.S. Treasury bonds, with an investment of US $681.9 billion. Japan follows at second place with $577.1 billion of US bonds and UK with $360 billion.

Economic analysts aver that, if China was to sell even 1 percent of its holdings in US treasury bonds, the treasury market would nosedive and which would also in turn, bring down the value of the rest of the 99 percent investment.

As of December 2008, China's foreign exchange reserves registered $1.95 trillion, representing a 27 percent growth compared to that from 2007 and accounted for about 29 percent of the world's foreign exchange reserves.

People have grounds for optimism. US-China relations have been very stable for 30 years, and irrespective of the asymmetry the US has cooperated on a number of issues. But now the balance of power has tilted towards China.

Regardless of the will, the US now needs China's cooperation, no less than the cooperation China needs from the US, which requires the US administration to carry a different type of mentality, now that the equation has changed.

The United States was originally an unrivaled global hegemony in the past and is not accustomed to be on an equal footing with the other countries since 1945, which was never more evident then during the tenure of the previous administration.

The new government has come around to accept the fact that the world order has changed and it is losing its strengths due to the severe economic crisis, which has its epicenter within its borders.

But the moot question that arises is whether, the US will respect the sensibilities, understand their interests and take in to account the wishes of its overseas trading partners, in the new world order.



Fibre2fashion News Desk - China


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