Immigration and Chinese reserves

Posted by: Michael Mandel on May 28

While I’m putting together my big piece (whose name and topic will not yet be spoken), I did an immigration commentary for this week’s issue. Basically, an observation that in a world where goods, services, ideas, and capital move easily across borders, it becomes harder and harder to put up barriers to labor. Take a look, and let me know what you think.

And my comrade Peter Coy did a story examining the large foreign exchange reserve that China is maintaining. He concluded that China’s risk-averse leadership may want to insure that if there is an internal political or economic crisis, the country has enough reserves to keep the factories humming without depending at all on foreign lenders (remember that China’s factories depend on a lot of imported goods and materials, making the country the third largest importer in the world). Remember that the Chinese leadership have to consider the possibility of a situation where they have to impose internal peace by force (like Tiananmen Square) while keeping the factories running so that the workers are employed. They don’t want to be dependent on anyone else.

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Reader Comments

Lorenzo

May 29, 2007 01:45 AM

If China starts to use its reserves, that means that it is allowing its currency to float. Exchanging their US currency reserves for Yuan would severely devalue the American currency, and cause severe inflation in China due to the huge increase in the money supply which will increase the price of its goods. So with a devalued American currency and rising prices in China, it won't matter if the factories are humming because America won't be buying!!!!

Mike Reardon

May 30, 2007 09:03 PM

If China only uses US debt service for foreign purchase and investments and leverages its standing US reserves through international hedge funds can they stall the expected effects on the US dollar?

Jack

June 8, 2007 01:54 AM

Peter Coy claims that China's investment of $3bn won't amount to two dimes. That would equate to a loss of 99.9999999933333%. Why does he have such little faith in Blcakstone?

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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