China, South America and the importance of October’s IMF decision

Posted: May 27, 2015 in Uncategorized

China just signed a currency swap agreement in Chile on top of the currency swap with Argentina signed in October 2014.

It also signed agreements with Brasil and Peru for an advanced study of a transcontinental railway.

This will allow more agricultural trade with Brasil (it will also help Brasil to become the “hegemon” in South America.

On the point of view of China, this agreement comes on top of the proposed Silk Road between Europe and China and ports constructions in Pakistan and elsewhere.

It is not an aggressive move towards the US – but more a statement of “peer status” – not submission.

It has a strategic importance as the seas are US dominated – for all the China Sea dominance – China is still far from being able to project power very far its coastline.

But it is a clear way to say to the USA – we are the “other” superpower.

It also helps economically China – as China is slowing down – these massive projects keeps the industry (and Chinese) busy. Also it is preparing for the economic shift from low cost producer to high end producer.

But all this strategy is based on the IMF October decision. China needs the Yuan to be part of the world reserve basket (currently USD, Euro, British Pound and Yen) in order to finance all these projects.

As the US teaches – once you can print the money you need – no amount of financing (or mega-debt) can trouble you!

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