CHINA WATCH

Here is an important story:

China to Open Fund to Invest Currency Reserves

Here is a great paragraph:

Some analysts say the formation of the new agency means China is moving away from heavy reliance on investing in United States dollars through Treasury securities, and that could affect American interest rates, which remain low in part because of China’s huge bond purchases.

The Chinese will be going after the raw materials that have powered their economic engine. It is through their economic reforms that the political powers have retained control over the government.

“They’re not going to be looking for financial assets, but energy assets and natural resources, minerals, things China desperately needs,” said Jing Ulrich, an analyst at J.P. Morgan.

China needs the same raw materials that the US economy requires and that probably will result in a conlict between both nations in obtaining these materials and in the way we play out the excercise of our competing interests around the world. Since the Chinese government controls a significant portion of the American debt through its purchase of billions of dollars of Treausry bills, they will excercise an unseen influence on American policy. Failure of the Chinese to continue to finance our debt will result in increased US inflation and unemployment, somethng no administration can afford. Look for China to exert influence in oil producing regions worldwide and Africa.