China's forex reserves over 7 times that of India

[Known_Unknown]

The US does not have China by its throat or vice versa. Rather, both countries are dependent on each other not screwing up (The US a little less so by virtue of much larger economy). The US has a $14 trillion dollar economy. China holds almost $2 trillion of US$. That's a significant chunk. If China starts selling off it's dollar reserves in the market tomorrow (substituting them large scale for Euros, Yen, etc) then that will cause a large drop in the value of the dollar, thereby creating a ripple effect around the world. The global economy would take a beating, including China's whose $ reserves would diminish in value overnight. At the same time, when the US economy tanks, like it has now, China's $ reserves (which are mostly invested in US stocks and assets) would drop rapidly (as in this case, where the growth in their reserves compared to last year was negative).

Thankfully, because of this MAD scenario, neither US nor China would go down the path of economic confrontation. Their economies have been too intertwined since Nixon's opening up to the Chinese in the 1970s.

 

[EnlightenedMonk]

Thanks for putting it forward in a very simple and understandable way... Cheers !!!

 

[yang]

The US does not have China by its throat or vice versa. Rather, both countries are dependent on each other not screwing up (The US a little less so by virtue of much larger economy). The US has a $14 trillion dollar economy. China holds almost $2 trillion of US$. That's a significant chunk. If China starts selling off it's dollar reserves in the market tomorrow (substituting them large scale for Euros, Yen, etc) then that will cause a large drop in the value of the dollar, thereby creating a ripple effect around the world. The global economy would take a beating, including China's whose $ reserves would diminish in value overnight. At the same time, when the US economy tanks, like it has now, China's $ reserves (which are mostly invested in US stocks and assets) would drop rapidly (as in this case, where the growth in their reserves compared to last year was negative).

Thankfully, because of this MAD scenario, neither US nor China would go down the path of economic confrontation. Their economies have been too intertwined since Nixon's opening up to the Chinese in the 1970s.

Yes,what you said are totally right,China and US are on the same boat.
But you may underestimate China,your statistics is masured by USD,but not the real purchasing power,in China your cost of living is very low,but you can feast the same services as you do in America.And once I have seen a group of data,it shows that,on the real economy,China and US are almost the same,I don't mean China is very good,but just want to show that,the great deleverage of financial sector may have a bigger impact on US,as the tertiary industry is on a larger proportion ,and the financial crisis can make a great impact on the service sector.

 

[Known_Unknown]

Yes,what you said are totally right,China and US are on the same boat.
But you may underestimate China,your statistics is masured by USD,but not the real purchasing power,in China your cost of living is very low,but you can feast the same services as you do in America.And once I have seen a group of data,it shows that,on the real economy,China and US are almost the same,I don't mean China is very good,but just want to show that,the great deleverage of financial sector may have a bigger impact on US,as the tertiary industry is on a larger proportion ,and the financial crisis can make a great impact on the service sector.

According to PPP, the top 4 economies in the world are the US, China, Japan, and India. But does that mean that China and India are advanced or developed as US and Japan? Definitely not. PPP is a good indicator when measuring the standard of basic living, but it gets distorted when countries have large populations, making it seem that they're relatively well off. In absolute terms, that might be true, but both China and India have millions of poor people that barely eke out a living.

China just overtook Germany as the world's 4th largest economy in nominal GDP terms last year, but Germany has only 82 million people, compared with 1.3 billion Chinese. Your economy should be more than 10 times that to achieve an overall standard of living similar to that of the Germans. Same is true for India.

 

[Yusuf]

There will always be this debate between nominal and PPP based GDP. PPP is a better measure as it shows how much an equivalent goods or services costs. Some of the Advanced countries have their PPP based GDP lesser than nominal. That means they are spending a lot more than the rest of the world for the same goods or service.

 

[Known_Unknown]

There will always be this debate between nominal and PPP based GDP. PPP is a better measure as it shows how much an equivalent goods or services costs.

Only for basic needs. Goods and services are cheaper, because labour is cheaper, because standard of living is lower, and because most people live a hand to mouth existence, content to be paid a dollar a day than starve to death. You can't compare it directly to western countries. Sure, it's great for the middle classes, but not for the people on whose backs the economy is built-the legions of illiterate workers and farmers.

 

[chengdusudise]

Let's then ponder why China bought the treasury bills in the first place? Any economic pandit here or someone with further knowledge?

the politic reason is : we need to please american ,we want american to know we are not so harmful as you american think,if possible we want to be your friend. why?coz american is the only country which can disrupt our progress and give huge damage to us.so we have to please american to earn some more time to develop ourselve.
we export more goods to EU than to american ,however we bought far less treasury bills from EU than from American.

 

[Officer of Engineers]

I am sick of this.

Chengdu Assh@le, pick up an AK-47 and prepared to be shot or shut the freak up! You and Badguy are freaking cowards. Go onto the streets and shoot Uyghars and Tibettans and be prepared to be shot.

And I will dance over your graves when the CAPF put a round into your freaking heads!

 

[Officer of Engineers]

There will always be this debate between nominal and PPP based GDP. PPP is a better measure as it shows how much an equivalent goods or services costs. Some of the Advanced countries have their PPP based GDP lesser than nominal. That means they are spending a lot more than the rest of the world for the same goods or service.

Yusuf, no one will accept PPP dollars.

 

[hit&run]

I am sick of this.

Chengdu Assh@le, pick up an AK-47 and prepared to be shot or shut the freak up! You and Badguy are freaking cowards. Go onto the streets and shoot Uyghars and Tibettans and be prepared to be shot.

And I will dance over your graves when the CAPF put a round into your freaking heads!

:dance4::dance4: