February 20th 2010

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Articles from this issue:

COVER STORY: Lord Monckton interviewed on global warming and the ETS

CANBERRA OBSERVED: Kevin Rudd grows cooler on global warming

EDITORIAL: Obama: from euphoria to nightmare in 12 months …

CHINA: Three economic events that will change the world

FOREIGN DEBT: The unacknowledged elephant in the room

NATIONAL AFFAIRS: Rudd and Henry politicise Intergenerational Report

OPINION: Can Abbott rescue Liberals from 'Ruddbullism'?

INTERNATIONAL POLITICS: In the global power shift, whither Australia?

MEDICAL ETHICS: Euthanasia laws - coming to a state near you

MEDICAL SCIENCE: Abortion laws: seeing what we kill

UNITED KINGDOM: Britain's lords vote for liberty

CIVIC VALUES: Consumerism's destructive impact on faith and family

TECHNOLOGY: Computers, TV and a shrinking attention span

Global conning (letter)

Fundamental cause of population shortfall (letter)

Julia Gillard vs. Tony Abbott (letter)

AS THE WORLD TURNS: Christian teacher forced out over Muslim pupil misbehaviour; Adult-child cultural reversal; Decline of the stiff upper lip

BOOK REVIEW: DIVERSITY: The Invention of a Concept, by Peter Wood

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Three economic events that will change the world

by Ian H. McDougall

News Weekly, February 20, 2010
Three epochal events in China, without precedent in modern economic history, have swung the world's balance of economic power decisively towards the Middle Kingdom: 1) China has foreign exchange reserves of US$2.4 trillion, far and away the largest in the world; 2) China is the world's biggest exporter, overtaking Germany; and 3) China is the world's top car market, overtaking the United States.

First, China has amassed a staggering US$2.4 trillion in foreign reserves, an increase of US$453 billion in 2009 alone. By comparison, the total foreign exchange reserves of the 27-nation European Union at the end of 2009 were US$648 billion. China's 2009 increase in foreign exchange reserves was more than the total reserves of all but one nation - Japan, with reserves of US$1.074 trillion. The United States, by comparison has foreign exchange reserves of US$84.5 billion.

The foreign exchange reserve is the total of a country's gold holdings and convertible currencies held in its banks, plus special drawing rights and exchange reserve balances with the International Monetary Fund (IMF).

US writer Steve McCann commented: "Two-thirds of China's foreign exchange reserves are estimated to be held in dollars. They are able, by mere threat of liquidating or dumping the dollar, to hold the world economy hostage. China will not do so, as that would trigger a massive global economic collapse. But this leverage is sufficient to intimidate and cause other counties, such as the United States, to accede to Chinese demands, for example in foreign and military affairs." (American Thinker, Jan. 26, 2010).

No wonder, when United States Treasury Secretary Timothy Geithner addressed a "town hall" meeting of university students in China recently, they laughed at him when he defended US foreign exchange and economic policies.

Second, China has overtaken Germany to become the world's top exporter. The Shanghai Daily reported (Jan. 11, 2010) that overseas shipments surged 17.7 per cent from a year earlier, "another sign that the nation's economy is sparkling amid widespread global torpor".

China's exports rose for the first time in 14 months in December to US$130.7 billion, giving a total for 2009 of US$1.2 trillion, China's General Administration of Customs said in January.

This eclipsed the 816 billion euros (US$1.18 trillion) for Germany's exports last year forecast by its foreign exchange organisation BGA, or the Federation of German Wholesale and Foreign Trade, according to the Associated Press.

Germany has done particularly well out of its China trade, with its machinery exporters being the "go to" suppliers for factory equipment to top Chinese manufactures. Germany is still far in advance of China for higher-valued exports, compared with China's strength in selling shoes, furniture, toys and low-tech goods abroad.

China's Customs said December exports were the fourth largest by value on record, surging 55.9 per cent to US$112.3 billion.

The rebound in exports surprised most observers. Many economists expected an increase, but none so high. The rebounding exports will further boost China's foreign exchange reserves. Last year, China's trade surplus decreased 34.2 per cent year-on-year to US$196 billion, China's Customs said, as exports slumped 16 per cent due to the global financial crisis. Now exports have resumed growing strongly.

Third, China's auto market overtook the United States in 2009 for the first time. Domestic sales of cars, sports utility vehicles, mini-vans and multi-purpose vehicles hit 10.26 million units last year, surging from 6.4 million units in 2008, said Rao Da, secretary-general of the China Passenger Car Association (China Daily, Jan. 9, 2010). The growth is also the highest in the country's auto history, with total automobile sales surging 44 per cent year-on-year to 13.5 units in 2009. Car sales in the US plunged 21 per cent year-on-year to a 27-year low of 10.43 million, more than 3 million units behind China.

In 2010, automobile industry consulting firm Sinotrust predicted that vehicle sales would reach 15.13 million units this year, with year-on-year sales growth of 15.2 per cent.

Commenting on China's massive foreign reserves, McCann added: "... China is able to further position itself to dominate the world economy. At present the Chinese government is making massive investments in raw materials and advanced technology around the world. The ultimate aim: to hold the rest of the developed world hostage in acquiring the raw materials and technology necessary to foster economic growth. China will be in the position of dictating the price of commodities."

Instrument of state power

Alarmist though this may seem, the eventual outcome of China's economic policies leads inevitably to this conclusion. China has no commitment to free markets and international trade beyond maintaining a quiescent population and, with it, keeping the Communist Party in power. China's leadership sees trade and investment as an instrument of state power. It's a lesson Australia's leadership must learn if we are to retain our economic independence and eventually national freedom of action.

With Indonesian products, particularly garments, undercutting Chinese products in its home market, it will be instructive to see just how far China's commitment to "free trade" stretches.

All you need to know about
the wider impact of transgenderism on society.
TRANSGENDER: one shade of grey, 353pp, $39.99

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