Only one word is enough to describe what happened to the global stock market: Boring!
Dow Jones went up 38 points and closed at 9,544 with even lower volume than the previous week. Most traders have gone for vacation to enjoy the summer holiday and I don’t expect any significant move from the stock market until they return some time in September. On the other hand, the Asian markets are losing ground. Shanghai lost 100 points and closed at 2,860, trying not to breach below the key support at 2,800. Hang Seng Index also lost 100 points and closed at 20,098, also trying to stay above the key support level of 20,000. Japan’s Nikkei was the only bright spot --- it went up 295 points and closed at 10,534 because the nation of a population of 100 million was expected to have a new ruling party to take over the government in the upcoming election. Although I’m not a political analyst but the vegetative state of Japan’s economy cannot be cured by any political parties. I don’t expect the Nikkei is going to turn around any time soon.
A lot of economists are doubtful about the current economic success of Communist China. Despite the declining exports, China is expected to maintain GDP growth of 8% this year. When the officials from the Chinese Finance Department went to visit to Washington last month, they were greeted with unprecedented respect by all the high profile politicians, from the Secretary of State Hillary Clinton to the Secretary of Treasury Tim Geither to President Obama. They all praised China’s economic success and used a lot of Chinese proverbs in their speeches, asking for more “cooperation” between two countries. Why did the Americans suddenly kowtow to China? It’s because China is holding $200 billion worth of U.S. Treasury bond and the largest debtor of the United States. Better pay some respect to the person whom you owe him the most money.
Will China be able to save the world? I am not sure. However, I think China has a chance to save herself. A lot of experts think that China cannot survive since the country depends on exports. Exports have declined by 25% in China because of the collapse of economy in the Western countries, such as the United States and the developed countries in Europe.
However, we have to look at what they export --- China produces necessities like shirts, pants, clocks, watches, fridges, toys and glasses, everything you see, you touch and you wear every day. On the other hand, what do the Western countries export? Computer software, train compartments, construction equipments and aircrafts.
I don’t care how poor an average Chinese is, but I do expect he should be able afford to buy a pair of socks every year. But on other hand, who would buy a bulldozer and put it in the backyard next year? What China exports can be, or at least have a chance, to be purchased by their huge population because they are necessity goods. But the goods sold by the Western countries are capital goods, or consumer discretionary goods that nobody would frequently buy. Eventually, it is the developing China who would buy what the Western countries produce. That’s why there are so many Western leaders try to make friends with China today. In other words, if China collapses, the Western countries will suffer even more.
Will China survive the current global economic tsunami? I don’t know. But if China cannot make it, neither can the rest of the countries in the world survive.
The Presidents of the United States often end their speeches with the words “God bless America.” To survive the current economic turmoil, we’d better end our prayer with the words “God bless China.”
No comments:
Post a Comment