No Sign Of Stimulus, Or Global Growth, China’s Economy Sunk By (Euro)Dollar

Najib Tun Razak was elected as Malaysia’s Prime Minister in early 2009. Taking office that April amid global turmoil and chaos, Najib’s first official visit was to Beijing in early June. His father, also Malaysia’s Prime Minister, had been the first among Asian nations to open formal diplomatic relations with China thirty-five years before. Celebrating the milestone might’ve been the proposed purpose behind the state call, but that’s not what anyone was talking about.

The invitation was extended at the behest of the Chinese Premier, Wen Jiabao. At the top of their agenda, besides the official festivities, was a bilateral trade agreement. China and Malaysia were going to conduct trade bypassing the US dollar. The Wall Street Journal reported:

China has been promoting the idea of replacing the dollar as the global currency, suggesting that a basket of currencies less linked to the fate of one economy would make more sense. It also has been talking about using the yuan for trade settlements, starting gradually in the region and then expanding farther abroad.

Malaysia was equally as eager, small wonder given the nature of the times. Should we be surprised that a worldwide dollar shortage, which is all that the Great Financial Crisis had been, provokes a search for alternates? Given how the US and Europe had been the epicenter of the monetary earthquake, Asia only experiencing what seemed collateral damage, hitching fortunes to the unbreakable Chinese growth engine appeared downright prudent.

It was Wen who laid out China’s first rationale for this line of thinking during the absolute depths of the panic. In March 2009, the country’s number two said they were concerned about US stimulus. Seriously. “We have lent a huge amount of money to the U.S., Of course, we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

The US was going to be printing money to get out of the monetary event and that wasn’t the action of a good partner, let alone the central pillar of the global dynamic. If only.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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