The World’s Debt is China’s Wealth

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 30, 2012

Debt is never seen as a positive outcome, however there are times when someone’s incapacity to handle finances becomes wealth for others. A clear example is the current state of economics in both the developed and developing worlds, where indebted nations are the subject of hefty fees and interest rates on loans they cannot mathematically pay. In fact, the irresponsibility of politicians and bureaucrats to manage their countries monies has made them slaves of their own greed.

But for other countries like China, which has bought most of the debt from countries like the United States, a nation’s hell has become a bonanza. China’s leverage has allowed to accumulate a gigantic purchasing power, which many people also attribute to the Chinese management of their currency value. China, they claim, purposely devalues the Yuan, in order to keep its products at more competitive prices. China’s currency manipulation and the fact that its labor is one of the cheapest in the world allowed the country to accumulate large amounts of wealth.

Where is all that money going? To purchase land and resources all over the world. But China’s race to acquire land, mainly to plant food for its growing population, and to sell it to other countries, is not unique. Countries like Saudi Arabia and organizations like the UN are also investing their cash in large portions of land. The practice of buying land abroad is also known as the third wave of the outsourcing movement, although many call it a new form of neocolonialism.

The Chinese have gone everywhere they find open arms to effectively acquire property and infrastructure, sometimes hiding their purchases behind a veil of bilateral agreements or simply financial aid that is not expected to be returned. The Chinese government has built soccer stadiums in Costa Rica, offered millions of dollars to local governments in Brazil, bailed out the US in multiple occasions by purchasing its debt, and now, it is buying Europe up.

If anyone is in doubt about where do European bankers get all the money they’ve given to their corporate friends in so-called ‘rescues’ and ‘bailouts’, please look at two main sources. First, massive electronic creation of money; as in typing digits on a computer keyboard and charging the interests generated from those ‘rescues ‘to many generations to come, and two, Chinese purchase of European Union bonds. The latter is the same mechanism used by the United States to get cash flow or liquidity to maintain its gigantic empire going.

The Chinese couldn’t have come to Europe at a better time, because not even Germany, the sudden shiny house at the top of the hill, was able to handle the scandalous sovereign debt catastrophe that most EU members are into. Meetings and conversations already begun, with German Chancellor Angela Merkel and Prime Minister of China, Wen Jiabao, providing a quick pick into what they call the first fruit of their encounter, but which in reality could be a rotten fruit. The president of the Asian giant has confirmed that his country would continue to buy sovereign bonds in the EU, but also deeply analyze their risks.

After the meeting with German Chancellor Angela Merkel on official visit to China, Wen said Beijing would improve consultation and communication with the EU, the European Central Bank (ECB), the multilateral financial institutions and major countries to help the most indebted European states to cope with their problems.

In this regard, he said that China hopes that the EU can achieve a balance between fiscal austerity and economic stimulus, a formula that is the fundamental way to solve the crisis.

Cooperation with Germany and the EU as a whole, said the Prime Minister, should focus on boosting confidence. “We must let people see hope, oppose trade protectionism and promote collaboration to explore the markets,” said Wen.

Meanwhile, the Chancellor said that the euro zone has the political will to address the crisis. Wen and Merkel led today the second round of intergovernmental consultations between their respective countries, with the participation of seven German ministers, which accounts for half of Merkel’s Cabinet.

Following the meeting of the two, China announced the purchase of 50 Airbus A320 model, the value of 2,790 million euros ($3,500 million).

It seems that the Chinese financial rescue of the European Union has begun, except it is not to rescue Europe, but to rescue China itself. The deeper in debt  countries get with China, the more products they have to buy from that country and the lesser finished goods they will produce. China’s investments will yield not only access to markets with less regulations for its cheaply made toxic products, but also and most importantly, dependence.

China is on the way to becoming the landowner, the producer and the seller who no one will be able to contest.