Comment by fspeech | Hacker News Reader

Comment by fspeech | Hacker News Reader

"secure the natural resources it needs to grow"

This gets repeated a lot. Maybe Chinese propaganda make this point to justify its outward investments to the Chinese people. Statements like this then take on a sinister sheen when discussed in the West.

Commodities are fungible and China is rich in natural resources itself. Oil is the one thing it is insecure about yet the insecurity is much more about a potential blockade in time of conflict than insufficiency of suppliers. Yes it has interests to see more supplies so it certainly would encourage investments in natural resources but to control the resources? That doesn't even make sense in the modern (WTO) context. It can't even control rare earth exports when 90% of the supply is based inside China, how can it expect to control supplies outside of China?

China has a high savings rate and runs a trade surplus and by necessity it will export capital. There is no other way around it. The Chinese government right now finds it more attractive investing in overseas infrastructures than buying more US Treasury bills.

>China has a high savings rate and runs a trade surplus and by necessity it will export capital. There is no other way around it. The Chinese government right now finds it more attractive investing in overseas infrastructures than buying more US Treasury bills.

Why can't China now run a huge deficit like the US is expected / encouraged to do, thus becoming consumers of products built in the US and Europe, instead of the other way around?

You say there is no other way around it.

Actually there is, but China prefers to play unfairly (though I agree they wouldn't get away with it if our own business and political leaders weren't so corrupt and short-sighted).

>Why can't China now run a huge deficit like the US is expected / encouraged to do, thus becoming consumers of products built in the US and Europe, instead of the other way around?

Because banks and other Govenments believe that there is a ~20% chance that China will implode and have a popular revolution over the next decade for any given decade. That's Morgan Stanley's number, other banks may project different numbers. China is incredibly unstable relative to the US and European countries. Half of China, does not want to be part of China, and not in a joking, "Texas will secede" type of way. There's tons of poverty, not enough water, overpopulation. There's little democratic self correcting mechanisms.

When I said "no other way around it" I meant trade surplus must be balanced by outward investment, an arithmetic fact. I didn't mean they can't run a trade deficit.

As for why they don't have a trade deficit: to run a trade deficit domestic investment rate needs to exceed savings rate. They have a high savings rate. They are already accused of doing too much domestic investment to prop up the economy so an even higher investment rate is not a solution. They can try to lower the savings rate by increasing welfare spending.

As for why it may not want a trade deficit: China can't borrow in its own currency from foreigners like US, that is Chinese RMB is not a major reserve currency. To fund trade deficits with USD denominated market borrowing would expose its economy to mood swings of foreign investors.

Statements like this then take on a sinister sheen when discussed in the West.

That's because statements like that are nothing new if looked at from a historical context. E.g. there was this German word "lebensraum", meaning "living space", that was used to justify Imperial Germany's goals. https://en.wikipedia.org/wiki/Lebensraum

That whole lebensraum thing didn't end well, for anyone involved.

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