UK begins borrowing in Chinese Yuan — dangerous thing to do?

The Treasury of the United Kingdom has noted that it has begun trading bonds in the Chinese Yuan.

Why is this a concern? The concern is two-fold: one, the currency and economy is centrally planned and manipulated in the People’s Republic of China. Not only is this in direct contradiction of the free-market model of the Western world — and not only is this validated by the Western world by sovereign funds trading in yuan; but this is also a concern of the authoritarian regime having a bigger centrally-planned grasp on Western economies, that is supposed to be relatively free from governmental controls past base consumer and business regulation.

Further, a serious concern is the manipulation of the currency itself by the Chinese government. Quite often, it depresses the yuan compared to the United States dollar, to inflate the US’ trade deficit with the PRC. Inso doing this, while it may be doing it strictly for the sake of manipulating its debt compared to the US currency, the reserve currency of the world, as it sits today — is the United States Dollar; and devaluing its currency compared to the US Dollar manipulates its value across the board. Is the United Kingdom taking a willing part in letting the PRC government manipulate its own currency and economic status by taking the yuan on as an informal reserve?

Further Reading:

– China’s currency dream gets U.K. lift
http://money.cnn.com/2014/10/09/investing/china-yuan-uk/index.html?hpt=hp_t3

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China set to surpass the US Economically This Year — Wait, not so fast…

US-China-Economy-2011

US and China – 2011. Courtesy: WSJ Click for Larger.

While it’s true that the economy of People’s Republic of China [PRC] is indeed set to surpass that of the United States “soon,” [some estimates even say by the end of the current year] — that’s really not that important.  Here’s why:

The United States has held the top economic spot in the world for well over 120 years.  It turns out, if you count everything but sheer “mass money,” America still is the largest economy — and still will be for quite some time.  Here’s why:

Firstly, the Chinese market and economy is manipulated and controlled directly by the Chinese government.  While a lot of what goes on in China that involves international trade or business goes on in “Special Economic Zones” [which are areas that involve far less government intervention than anywhere else], its relatively safe to say that the Chinese economy, as such, is otherwise centrally planned and managed.  The world knows this, and this is something born in mind in any economist, businessman/businesswoman or otherwise when considering the economic power of the PRC.

Secondly, PPP.  Fareed Zakaria aptly demonstrates that the Purchasing Power Parity of the United States still far exceeds that of the PRC.  Indeed, Fareed’s demonstration of the same loaf of bread in China being bought for $1.66, compared to that of $2.39 on average in the States.  Further, his example of the cost of utilities, on average being a third the cost in the PRC compared to a similarly sized home in the US also further demonstrates the US’ superior PPP standing.

Quite so, when one analyzes the PPP of the US and China, China could combined its PPP with that of JAPAN and still not exceed that of the United States.  Indeed, China’s still not able to bank on its PPP — it has to pay for everything at the prevailing exchange rate — not the rate based on its PPP, unlike the US.  And this is just one singular example.

So… is China really overtaking the US economically?   In the words of Tom Wright at the Wall Street Journal, “Yes and No.”  You decide.

Further Reading:

– Tom Wright.  China’s Economy Surpassing U.S.?  Well, Yes and No – The Wall Street Journal Blog

– Chung-Tong Wu. China’s special economic zones: five years later – Asian Journal of Public Administration

– Fareed Zakaria  Is China really about to overtake the US? – Fareed Zakaria 360 – Global Public Square

China shields North Korea from reports, citing them “divorced from reality.”

Having not posted recently, I figured this was as good a topic as any to cover…

The People’s Republic of China, through its representative in China’s Mission in Geneva, said of a UN Report on Human Rights abuses in North Korea; that the reports of Human Rights abuses in the Democratic People’s Republic of Korea are “divorced from reality,” placing themselves in the way as a shield to the atrocities reported of North Korea, particularly their prison camps.

The report itself, made by a panel of jurists commissioned by the United Nations, specifically pointed to reports from political prison camps; and indeed, by those fortunate few who have escaped and are able to give eyewitness [and, further, often physical evidence] accounts to the regimes tactics of political imprisonment.

The government of the DPRK has stated that the reports are “a fabrication by hostile forces,” the standard-issue rhetoric when North Korea speaks in relation to critical statements made of it.

By Beijing’s willful “shielding” of North Korea’s human rights abuses, it makes one wonder if they may not take further action to shield their ally — and how far they may go to do so.

Further Reading:
UN Report on North Korean Human Rights