Chinamerica in 2010

The last decade saw the tight economic embrace of the US and China. Niall Ferguson of Harvard University and Moritz Schularick of Free University in Berlin coined a word for this state of affair: Chimerica. Along this line, maybe the word Chinamerica is just as well.

They theorize as follows. China produces, America consumes; China saves, America borrows. And China keeps it going by pegging its currency yuan to the American dollar.

They are only half right.

It's not China that produces; it's foreign companies in China that do. They count 60% of Chinese exports. This means foreign multinationals own hundreds of billions of US dollars, pehaps trillions, of productive assests in China.

On the other hand, China only has paper assests in US treasuries. Every time Chinese companies try to get some real assets, American politicians are in uproar.

Therefore, the so-called financial imbalance is not a one-sided affair and it's to China's deteriment as well as to America's. To really remedy it, China should spend its 2 trillion dollars buying real productive assets in the US or buying out American multinationals in China. It would balance the Chinamerican relationship either way.