Some Initial Thoughts on Watching the Economic Collapse from China

As I mentioned in previous posts, I returned to China recently for further research on my interests surrounding The China Boom. You likely already know that the United States economy is very dependent upon the financing it receives from China and other countries whose economies are experiencing record growth. China has become a leading creditor to the United States, and that is an uncomfortable position in which our country has placed itself. It does make for a fascinating study, though, concerning the changing dynamics of our global economy. I look forward to unveiling my findings to you through my articles and videos. In fact, I have so much that I want to share about my visit and I plan to do so over several posts.

I had the unique perspective of observing some of the economic meltdown that was occurring in the United States from the other side of the world. While I was away from home, Lehman Brothers, Merrill Lynch and AIG all collapsed. I was given a particularly interesting perspective in regards to Lehman Brothers. When it was announced this global investment bank had failed, I was in Hong Kong. The news that day was filled with photos of Lehman employees exiting their offices with boxes of personal items in hand. There was a great difference between Hong Kong and the U. S. however. As the educated and experienced business men and women exited their offices, other banks and investment firms were waiting to scoop them up with new job offers. Despite the words of warning we often hear concerning the superior education received in many Asian countries (and some of it certainly is warranted), there apparently is a shortage of personnel with the specific skill sets needed for investment banking in Hong Kong.

With our markets so intertwined, this news from America made headlines every morning in China. There was understandable concern in the Chinese media regarding how the strain on the United States economy would impact China. Attempting a quick, preventative measure from the effects overseas, the Chinese government immediately infused billions of Yuans into their banking system. They also immediately lowered their benchmark interest rates. As we have seen almost every day since the collapses began, other countries around the world have followed suit by taking measures (sometimes drastic) to protect their financial systems from the aftermath of the problems in our country.

Most of the news reports have focused on the doom and gloom of our economic situation, and there undoubtedly are serious problems that will be with us for some time to come. I do not want to underplay the severe repercussions that our businesses and homes will be feeling. However, there are some positive developments to this crisis with respect to the balance of trade. As the dollar weakens, American products become more attractive abroad and it makes more sense to manufacture various products right here instead of paying the costs for overseas investments. The possibility of new jobs and a higher level of exports must be remembered as the other side of this financial coin.