China’s Wealth Woes – George Wehrfritz

From Newsweek:

Sometime over the next few weeks, a shipment of lawn furniture, brake pads, lamps or the like is going to make history. The manufacturer, one among tens of thousands churning out product 24/7 in China’s humming coast-al cities, will fill an order bound for the United States, take payment in American dollars and add a 12th zero to Beijing’s foreign reserve”pushing the tally over the $1 trillion mark. Neither buyer nor seller will realize the transaction’s significance, and barring an unforeseen shock to the global trading system, China’s reserve will continue to rise by roughly $17 billion a month.

Beijing’s growing dollar hoard represents the most dangerous imbalance in today’s global economy. The United States is both importing heavily from China and borrowing heavily from the country to finance those purchases, pushing the dollar down and putting the two economic superpowers on a collision course. [Full text]

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