Quote Originally Posted by blazespinnaker
It's a good point, JC, however the chinese are not following a gradualist philosophy, even though they say they are.

If they were, would they be tripling their military spending? would they have an 11% growth in GDP? There is nothing gradualist about this at all.

Imagine, though, if you had a button you could pressure which could fire a salvo at your enemy at any point in time you wished. Wouldn't you like to load up the gun?

Purchasing treasuries at a massive rate is China loading up the gun. When they want to, they can send the US economy into a tailspin. Sure, it'll risk social unrest in China, but as we can see, China has ways of dealing with such a thing.

China wants power, and manipulating currency is their power. If they were to just float the currency, then they'd just be a cog in the international wheel of commerce. If they were christain democratic, I'm sure that would be a fine place to be. But, they are not. They are an overpopulated country which is emerging economy coming from the world of tiananmen square and the communist revolution of mao tse tung.
in economic matters they are gradualist in the sense of wishing to avoid any risk of social upheaval. god knows what their gdp really is, since so much is still the province of state owned enterprises. the chinese have the demanding task of finding employment for an enormous number of new workers as well as the underemployed working in aforesaid soe's. they have increasing outbreaks of local protest and even violence in the hinterlands, and the desire to increase development in the interior and the west to try to ameliorate the increasing income and wealth disparities, but which is resisted by cadres with their hands in the till along the coast. their development is reminiscent of a runner who has tripped and has to run all the faster in the hope of keeping his feet under his body well enough to keep from falling on his face.

of course they are ginning up their military. they expect to be at least a regional power and will no longer kow tow [think about the derivation of that phrase] to the 7th fleet. one day they likely expect to be more than a regional power.

they dare not destroy the dollar without risking shooting themselves in the process. yes, they will try to wean themselves from the american market, but that won't happen overnight. if there were a confrontation over taiwan, then, yes, they might go to war economically before risking war militarily. but short of something momentous [to them], it won't happen. they have too many people whose employment is conditional on their exports.