Because the United States showed just a little sign of life and challenged China's dumping of tires in yet another unfair trade practice, the main stream media screams absurdities.
What really happened? China was dumping tires to U.S. markets in order to destroy and capture yet another good by producing under cost, flooding the market to drive down prices temporarily and plain put U.S. tire makers out of business.
Leading economists have urged the United States to use concrete measures instead of empty words to ward off possible losses in China's holdings of US treasury bonds, which have already surpassed $800 billion.
The call comes amid widespread concern that US countermeasures to battle the financial crisis are creating another credit bubble and failing to regulate financial markets.
"So far the US government and the Federal Reserve have failed to provide China with any details of how its countermeasures against the financial crisis will not lead to serious capital losses to China's holding of its treasury bonds and foreign reserves," Yu Yongding, a renowned think tank economist with Chinese Academy of Social Sciences, told China Daily.
In past global slowdowns, the United States invariably led the way out, followed by Europe and the rest of the world. But for the first time, the catalyst is coming from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since World War II.
While Roubini warns on oil price increases breaking any potential recovery, we note China's robust growth is causing oil prices to rise.
China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.
China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg.
That's a little disturbing, but there's a really funny punchline to this story.
Does everyone remember Geithner's comedy act in June? In case you don't:
Speaking at Peking University, Mr Geithner said: "Chinese assets are very safe."
China Investment Corp. (CIC) plans to invest soon in U.S. taxpayer subsidized investment funds of toxic mortgage-backed securities, which it sees as a safer bet than buying into the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF).
This is the name of China's new investment strategy. China has the largest foreign exchange reserves in the world at $2 trillion. It is all ready flexing it muscles and vast financial reserves buying up natural resources all over the world. Now, China's strategy has been clearly and explicitly stated by China's premier, Wen Jiabao:
“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,”
Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.
Looks like history could be repeating itself. Now we've known for some time that the Chinese were getting weary about buying and holding US-Dollar demominated government securities. They've been pairing back from the longer dated maturity paper to shorter ones.
Slowly but surely, they want to move away from American debt. All that money we've been shoveling their way, a byproduct to our trade imbalance, has gone into things showing their diversification plan, from farm lands in Africa to purchasing major steaks in mining firms to buying precious metals and oil. Now it seems, according to one Li Liangzhong, want to extend into further real estate purchases in the US.
Shocks of all shocks, the USTR is filing a complaint, along with the EU, against China for trying to hang onto the raw materials which make steel in order to boost their own production.
We are going to the WTO today to enforce our rights, so we can provide American manufacturers with a fair competitive environment and put more American workers back on the job," Ambassador Kirk said. "China is a leading global producer and exporter of the raw materials in question, and access to these materials is critical for U.S. industrial manufacturers. The United States is very concerned that China appears to be restricting the exports of these materials for the benefit of their domestic industries, despite strong WTO rules designed to discipline export restraints.
The Baseline Scenario blog has some interesting insights into U.S. Treasury Secretary Geithner's upcoming China trip.
So what should we expect from Geithner’s upcoming China trip?
Not much.
China refuses to talk politely about its exchange rate and rebuffs all sensible diplomatic initiatives on this front – they have held the IMF at bay for nearly 2 years on this exact issue. The rhetoric is that their fiscal stimulus will bring down their current account surplus without need for significant exchange rate appreciation. This is smokescreen.
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