Thursday, February 26, 2009

International Financial Outsourcing Center

Seen at the Beijing Airport:

Maybe the 'knowledge' workers of Wall Street are more expendable than they thought.


Purple said...

Blogger Indian Investor said...

First, in response to your reaction to the China board on outsourcing. If you were running the China Communist Party, the only thing you would care about would be delivering a high rate of economic growth. Which is easier, setting up these boards, and hoping to attract business from across the oceans, or just focusing on industrializing China's interior? Obviously the latter. But China depends on imports of natural resources, commodities and components in certain industries. Naturally they want to build a big forex reserve, which they use to pay for their imports from Africa, South America, Middle East oil, etc. Recently they've tried to settle their imports from ASEAN and their SARs in renminbi. This will reduce their dependence on their forex reserve.The only thing which prevents from pursuing their much desired "inclusive growth" strategy, and remain dependent on US exports, is the petrodollar recycling, which forces them to pay a ransom for their Middle East imported oil.

Secondly, about your most recent comment on Brad Setser's blog. When the world changes, many people simply deny reality. Brad Setser might not be alone. Setser wrote a paper on sovereign debt. In the paper he recommends that the US should intervene with China to stop them from buying Treasuries. He also advocates that the US should "talk" to other dollar holders, and convince them to continue holding dollars while the above is done.
The ostensible purpose of this exercise is the geopolitical fear that China can use its creditor status in future to influence US policy. Brad Setser compares the US being a creditor to the UK during the Suez canal crisis with China's current status. Obviously, he deliberately ignores a large chunk of China's export sector dependency on the US. Apart from advocating that China's Treasury purhcases should be disabled, Brad Setser's other main preoccupation is to replace the SWFs with "dollar deposits" - viz. China and oil exporters banking their surplus with New York Banks.You might have noticed Brad Setser pays little or no attention to my extensive proposals to increase US exports to various geographies, and just deletes all those comments as soon as he comes online.
Brad Setser is a paid asset of the banks in the council on foreign relations. What he is paid to do is write one essay every day arguing for a new radiodollar recycling scheme. New York banks will recycle China's surplus from its exports. Obviously, Brad Setser cares a thousand times more about the millions that banks give him every year to spin his lies, than about jobs for millions of Americans in a new export sector.
Brad's Setser advocacies have little or nothing to do with US exports, though he tries to indirectly make that promise, like all politicians.

February 28, 2009 1:48 AM
Blogger Indian Investor said...

Sometime back I went into the details as to how the US external sector can be built up, new jobs generated for Americans. For instance, I pointed out that a predominant chunk of US exports is sales of Boeing civilian aircraft. China has set up its own domestic aircraft manufacturing facilitiy whereas in India, even the domestic airliners all fly imported Boeing or Airbus planes. Similarly, there are several sectors that will be easy to achieve higher exports to in China and others more difficult. And I listed many more sectors for exports to India such as medical equipment, nuclear reactors, construction equipment, higher end transportation buses, etc with many details. Setser just selectively deleted all these comments about actual export possibilities. Presumably it was on the pretext that we're just theorizing on exports,and we don't really need to look at relevant ideas for exports.
Once China collapses much further, where will demand for US exports to China come from? So, when Brad Setser proposes that Chinese factories should be forced to shut down, as a result of US interventions his objective is simple and straight. Foreign investors mostly from the US will demand to buy up large sectors of the Chinese economy at throwaway prices. No sales of US exports can happen there meanwhile, because people will be lucky to even afford two meals a day there.
Then the US restrictions will be lifted, and China's exports will then grow 3 times more than they ever were.
Brad Setser's main experience is in IMF work on Argentina - what I described above is what the IMF did with a range of countries in South America all across to South Korea.This is also how Citigroup acquired a banking branch network and extensive presence from Peru to Thailand.

February 28, 2009 6:40 AM

Purple said...

Above comment is from Indian Investor, transferred from another comment section.

Purple said...

Comments are welcome, but please keep disputes with other bloggers to those sites.