Relatively unnoticed in the MSM has been a sudden, even startling, turnaround in Chinese economic strategy in recent days. The Chinese are making it clear that they must move toward satisfying their domestic market and away from their export-driven growth model.
Here is the op-ed piece in yesterday’s People’s Daily. Note especially the last two paragraphs of the article:
Owing to the sluggish global market, more input in China’s domestic production will also give rise to the glut of goods. Therefore, in order to enable the expanded domestic demand to achieve an anticipated result, it is essential and imperative to input more in such fields as social security, medicare and health work, and education.
In other words, the main purpose of imput is definitely not to turn out more goods or to build more high-rises or skyscrapers, but to bring about more and more consumers with substantial financial strength, so that ordinary citizens in the country are better able to resist and defend against risks. Such an imput will eventually effect the long-term benign growth of Chinese economy, and China will be capable of making even greater contributions to the development of the entire world.
The Chinese Government has also directed Chinese banks not to lend to U.S. financial institutions during this ongoing financial crisis.
The Chinese see that the financial crisis in the U.S. will spread and will make their heavily export-driven growth model unsustainable. Logically enough, they are planning to move quickly toward satisfying their own domestic demand, especially for services and for a better quality of life.
The Chinese must also be having their doubts about investing in distressed U.S. companies or showing up with open checkbook at coming U.S. T-bill auctions. The prospect of an accelerating decline in the U.S. dollar will impel them to look for better places to distribute portions of their Sovereign Wealth Fund or surprlus Yuan.
More below the break….