If you lived through the Financial Crisis 10 years ago and the Great Recession which followed, the turmoil and trauma will be etched in your memory.
Stock markets were clobbered, banks wobbled before being forced into ‘shotgun marriages,’ while the PIG economies of Portugal, Ireland and Greece in the European Union had to be bailed out.
Liquidity quickly dried up to a trickle as consumer confidence evaporated. A decade later, the waves of what became a financial tsunami are still washing over the global economy.
Total debt is now hovering above the US$200 trillion mark, the Institute of International Finance reported, which is nearly a third higher than before Lehman Brothers collapsed, the catalyst of the Financial Crisis and the Great Recession.
To put that into perspective, $200 trillion would be a stack of thousand-dollar bills more than 13,000 miles high.
Could these vertigo-inducing heights spark a new bout of global chaos? Or, could the lingering effects of 2008 have ignited the trade war between the United States and China?
“In many ways, the seeds of the [dispute] were sown in the financial crisis,” David Dollar, a senior fellow of John L. Thornton China Center at the Brookings Institution, said in an opinion piece.
‘Lasting impact’
“The crisis had a lasting impact by accelerating China’s catch-up with the United States, undermining US fiscal strength, and slowing down China’s reform and opening [up policy].”
During the past three months, trade tensions between the world’s two largest economies have increased in a Cold War-style standoff with US President Donald Trump imposing tariffs on Chinese imports worth $200 billion on Monday.
President Xi Jinping’s administration responded within hours, slapping duties on American products worth $60 billion.
Firmly seated on the tit-for-tat carousel, Trump has even threatened to up the ante again by rolling out tariffs on the rest of China’s imports worth $267 billion.
Beijing would not be able to match that, forcing Xi to find more creative measures, such as targeting major American companies like Apple. In the end, the conflict will be brutal and bloody.
“I think Trump is very much a symptom and not the cause,” Dani Rodrik, a professor at Harvard University, told the Singapore Summit, a gathering of business leaders and academics, at the weekend.
“Whether Trump is president of the United States or not, in many ways we’ll be facing such tensions. These are broad-based reactions to the kind of economic policies that we’ve pursued in the last quarter century,” he added.
Apart from a ballooning trade deficit, there are bigger issues at stake for the US, such as containing China’s rise as it moves towards economic superpower status.
Xi, in turn, has helped fuel Washington’s concerns.
At the National People’s Congress in March, he told the rubber-stamp parliament of Communist Party officials that the country “had stood up, become rich” and was “growing strong.”
He then called on CCP members to help the nation stride “forward” and “take center stage” in the world.
‘Domestic audiences’
“Although his nationalistic remarks were primarily aimed at domestic audiences, they caused anxiety and fear in other countries, notably the US, as the Chinese strongman implicitly set out new ambitions for his country to become a global power and challenge the US as [a] superpower,” Dr. Xuan Loc Doan, a researcher and essayist, wrote in Asia Times.
To combat China’s growing clout, Trump’s administration has gone for the economic jugular, including the “Made in China 2025” program, as well as the Belt and Road Initiative, the centerpiece of Xi’s foreign investment policy.
Still, high-tech manufacturing has increased while at the same time reforms on opening up the economy have slowed. Local government debt has also mushroomed.
“Because of the financial crisis, China is converging on the US much more rapidly than anyone had anticipated,” Dollar, of the Brookings Brookings Institution, said. “Meanwhile, China [has] lost [a] decade of reform.
“[While] China’s government is in good fiscal shape, its local governments and corporate sector have taken on an excessive amount of debt and if the government has to bail any of that out, then its fiscal position would not look so good,” he added.
There it is again, the ‘D-word’ … so reminiscent of 2008.
For the Chinese they have all in a single mind decided to build China into a great nation. They realised that they own this to their future generation. They all work hard, determine to succeed. The US as the No. 1 squanders what it has in mindless war and invest in exotic products, wasting its fortunes in the process and now having to borrow to even out the book, it’s youthful energy dissipated. It does not now has the urge to compete. China has meanwhile made tramendous progressed in developing its economy, in science and technology, in spreading its influence to the 4 corners of the world. The US naturally found this gualling, being challenged and relegated to no. 2 position in some cases. That’s why this competition is not only about trade, also who is the dominant power and influence. It will be a Long hard dual.
Watts quoted Loc Doan: " Chinese strongman implicitly set out new ambitions for his country to become a global power and challenge the US as [a] superpower,” Dr. Xuan Loc Doan, a researcher and essayist, wrote in Asia Times."
Are these the words of Xi or are they the words of LocDoan ? The problem with biased and prejudiced writers is that they impute their imaginary beliefs to the words and behaviour of its leaders. And gullible readers will take it as gospel truth. Loc Doan even imputed that Xi said it is now time for China to take centre stage. This is complete nonsense and no true.
What Xi actually said are within inverted commas in the following quote :
“The Chinese nation … has stood up, grown rich, and become strong – and it now embraces the brilliant prospects of rejuvenation … It will be an era that sees China moving closer to centre stage and making greater contributions to mankind.”
https://www.theguardian.com/world/2017/oct/18/xi-jinping-speech-new-era-chinese-power-party-congress
China moving closer to centre stage is very different from taking centre stage. The era is from 2020 to 2050. Even by 2050 China will not be at center stage.
Distorting the words of Xi paints a negative image of China.
Qian Deng and Richard Truong is right on the spot. Yes, during the Bush/O’BomberMa years, the US politicians and media were bragging that the US was an advanced economy sitting on top of the food chain because its economy was concentrated in the hi-tech and service ( financial, research, brokerage, consultancy, etc ) sectors with the polluting manufacturing jobs outsourced to the poor economies like China and in SE Asia. This was applauded as the " end of history ."
All the politicians, media, and economists, then did not criticize the voluntary outsourcing by US economies. The outsourcing was applauded. China did not force the US companies to move to China. This was a natural result of capitalism so highly valued by the US politicians.
Now, suddenly for political reasons China is blamed for the outsourcing and for stealing US manufacturing.
As I said before, the BIGGEST THIEF in the history of the planet is the USA stealing from the rest of the world since Nixon took the USD OUT OF THE GOLD STANDARD.
The obvious motive, not so secretive, is that the US requires China to stop developing its own high-tech industry. This non-sense request has replaced the previous one that asked Chinese yuan to appreciate by 50% at least. This BS request lasted over 20 years.
When China refused to obey the currency request, she was accused of currency "manipulator". Now she refused to obey the BS about technology, she is.accused of unfair practice.
It’s time for China to say to the US "Go fxxk yourself!".
Please, US has been abusing the dollar system that were setup since WWII for decades now. How much has US flooded the world with its useless paper with all those quantitive easings to save its own ass???? What are the reprecussions this has on the economic well being of the rest of the world NOT JUST US??
Its also an open secret that for years in economic relations with China US was very content with dominate, yes, dominate – the high tech, finance, and service sector (which US now hypocritically accuse China of trying to upgrade to) and out source the low profit margin and polluting manufacturing sector to China, now the hillbillies who lost their low profit margin manuf. jobs came out to protest suddenly its all China’s fault? . This trade war rhetoric have been running for almost 2 years now and I have yet to hear one of the critical compnent even mentioned ONCE in US official media: Which country gained the biggest profit margin out of the two way trade, US which has many companies in China who sets the criteria for the products made, or China which mostly still exports to US via US companies but have little to no China company presence in the US? The absence of this critical component in any media "expert" discussions and Trum’s "fair trade" AT ALL tells me its US running a sham operation and trying to gain an unfair advantage or have other ulterior motives.
The financial collapase was not caused by China. It was self inflicted by U.S. China avoided most of the pains and continued its progress. If that meant China closed the gap, still a very wide one, between it and the U.S. that should in and of itself be a problem. But the focus then and now by the U.S. was to contain China. That did not start with Trump and will not end with his presidency. After all pivot to Asia initiated by Obama and Hillary Clinton fool no one with its true intentions
Gordon Watt,
Why wouldn’t just say "The US coming collapse (financial) is the main trigger of trade war, helped by war-mongers in the White house"