There was no "gratuitous" support

From a interview with Gao Xiqing, president of the China Investment Corporation,

Americans are not sensitive in that regard. I mean, as a whole. The simple truth today is that your economy is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and … I won’t say kowtow [with a laugh], but at least, be nice to the countries that lend you money.

Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.

Everything this guy says in this interview has a lot of truth in it. Even the part quoted above has a lot of truth in it.

But “gratuitous support?” Give me a break. We all know why the Chinese lent the Americans so much money. It was a calculated policy to help their exporters. An insanely stupid policy perhaps. But calculated none the less.

They got what they paid for. History was put on hold for 8 years. Like the Great Wall of China, that was an impressive achievement. But I think it will look rather futile in the end.

Having said all that, the man’s complaint is basically valid. China has taken a lot of crap from ignorant people in the US who don’t realize how good they had it or how much of that was due to China’s intervention. The exercises of US power in Iraq and Afghanistan along with the attendant economic boom would have been impossible without China’s economic support.

However, doing the world a favor and getting hated for it is what being a superpower is all about. People are always going to see the downsides of a exercise of power by a another nation and they will never acknowledge the benefits. Just ask any American.

Edit: It should be noted that China is still shoveling money down the rat hole.

However, I think Brad Setser is overstating his case a bit. I think that when we finally get good data on the November and December we our going to find that China’s exports fell through the floor. That is going to put downward pressure on the Renminbi all by itself.

One notes that Russia has been running a current account surplus for a long time. During that period they followed China in trying to hold down the value of their currency. Now they are struggling to keep the Rubble from collapsing in value.

Having said that, it clear that China is still growing its reserves to some degree. The only question is by how much.

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