Monday, June 9, 2014

The "All Else" Part 8, China...

For part 8 of my "All Else" series I will consolidate the next several items on the list of things I pay constant attention to. They would be: the UK, the Bank of England, China, the Bank of China, Japan, and the Bank of Japan. My reasoning for fast-forwarding here is obvious. We're talking major economies and the central banks that manage their respective monetary policies. Therefore, my previous exposés on the Fed, the Eurozone and the ECB go a long way toward explaining why the UK, etc., are important to monitor.

Of course China, being home to the world's largest population, the world's second largest economy and, to no small extent, the world's manufacturing labor force, is a special case. "China" is that five-letter word (preceded by "made in") that occupies the stickers that occupy the bottoms of several, if not all, of the physical items within your arms' reach at this very moment. Imagine if China wasn't the China we think it to be---the low-cost producer (or assembler) of low-cost goods to the world. Well, let's just say things wouldn't be so "low-cost", which means other things wouldn't happen (i.e., you'd have less money to spend on other things). 

Also, imagine if China wasn't the China you probably don't imagine it to be, yet is. I mean, imagine if China wasn't such a massive purchaser of global goods and services. Last year alone Chinese consumers bought up $120 billion worth of U.S. goods and services. Just last fall I told the story of my wife's and my trip to West Yellowstone, Montana, and how the place was bulging with Chinese tourists. 

Make no mistake, while China is huge to us buyers of low-cost stuff, it is equally huge to U.S. suppliers of goods and services. U.S. exports to China grew 7% last year alone, while imports from China grew by only 3.3%. While some herald that as a great success, I'm entirely agnostic. The simple fact that China remains inspired to sell us low-cost stuff, means there's plenty of global demand for U.S. dollars. I.e., they take our U.S. dollars and buy from, or invest in, the U.S.,---or they buy from, or invest in, other countries who desire those dollars to buy from, or invest in, the U.S. Plus, if China's leaders mean what they say in terms of their "rebalancing" to a more consumer, as opposed to export, driven economy, those of you who are concerned about "trade deficits" (I'm not) should celebrate---as that should further narrow the gap (as the Chinese people become bigger consumers of globally produced goods and services).

Bottom line: China's economy is very important to pay attention to...

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