Wednesday, June 17, 2009

China Stimulus: “Buy Chinese”. It’s about time

China has imposed a requirement for its stimulus projects to use domestically made goods -- a move that could strain ties with trading partners after Beijing criticized Washington's "Buy American" stimulus provisions...Projects must obtain official permission to use imported goods, said an order issued by China's main planning agency and eight other government bodies....Beijing Orders Buy China for Stimulus Projects, Joe McDonald, Yahoo Finance, 6/17/2009

It's a move that was recommended by a serious financial writer in Asia Times six months ago. China's model for the past twenty years has been the mercantile approach of maximizing exports and foreign exchange holdings. They are not doing themselves any good by holding onto trillions of dollars, however good they must feel about all the stuff they sell to Americans. It's a funny thing about having a lot of money. Really rich countries, like rich people, don't hold onto it for a simple reason. If you have a pile and do nothing, somebody, a thief in the night, the government, or inflation, will come and take it away from you. Investing in their own people might be the best thing China has done in half a century.

The converse of that in the United States would be for a dramatic decrease in government spending, heavy private investment, reining in of consumer expectations, and a dramatic reform of tax systems at the federal, state and local level. Putting the house in order, though, is not what the current administration has in mind. Their expected partner in crime, however, appears to be making another choice.


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