| China's economy is growing at a breathtaking pace, and has amassed forex reserves worth more than 1.5 trillion USD. Recent statistics have shown that the trade surplus in Jan 08 was 19.5bn USD, up 23% in USD terms on a yoy basis, but pls keep in mind that the RMB has appreciated against the dollar and hence, the surplus in real terms wasn't that much higher than in Jan 07. Besides, the Jan 08 figures are below the Dec 07 figures of 22.7bn USD. I wonder why the Chinese government doesn't increase government spending in an effective way to tackle its myriad problems. What are they doing instead with their excess piles of money? In the past, they invested it in low-yielding U.S. assets, and just recently, they sank a few billions of USD in their investment in Blackstone. Is there nothing better to do with the hoarded funds? I understand that the Chinese government wanted to cool down the economy, and therefore had to restrict its spending. But with almost all economists forecasting a slight decline in net exports (not only in USD terms due to RMB appreciation, but also in real terms) and in the face of a protracted downturn in developed countries, wouldn't the government now be well-advised to consider using a portion of its reserves to develop China's infrastructure, improve its education and healthcare system and so on and so forth? That - imho - would also require involving foreign companies, and thus drive the global economy. Or am I totally wrong on this? |
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