The Great Debate

(James Saft is a Reuters columnist. The opinions expressed are his own)

The bad news for holders of U.S. debt, in case you missed it, is that China has sold so many Treasuries that it is no longer America’s leading lender.

The worse news is that there is a new creditor-in-chief, and it is Japan, an aging country with its own government debt bubble to contend with.

China sold about $34 billion of Treasuries in December, taking its holdings to $755 billion, while Japan increased its purchases and now is in the top spot of the Treasury Department’s scroll of merit, with $768 billion. China’s holdings peaked in April, since when the trend has been gently downward.

From a demographic point of view, though, the United States making a long term borrowing plan based on access to Japanese funding is a bit like my daughter making a retirement plan that has me continuing to work when she stops at its centre.

Japan is a wonderful country with many strengths, but one salient feature of Japan is that it is aging, or should that be aging, deeply in debt and dependent upon very low rates to continue to make those debts manageable.

The key decision for global markets in 2010 will very likely not be made in Washington but Beijing, where emerging inflation and a property bubble may push China to begin reining in expansionary policies earlier than will suit the developed world.

After returning to a breakneck pace of growth with amazing speed, there are already signs that China is weighing steps to curtail the bank lending that has been a huge source of stimulus, helping to drive property and other asset prices sharply higher.

“We emphasize the role of the reserve-requirement ratio, although the ratio was internationally seen as useless for years and it was thought central banks could abandon the tool,” Chinese central bank Governor Zhou Xiaochuan said at a Beijing conference on Tuesday.

– Wei Gu is a Reuters columnist. The opinions expressed are her own —

China watchers are worried that excessive lending leads to massive overcapacity. However, the risk of Beijing pressing too hard on the brake is even greater. At least for now, China should be able to growing its way out of its bad debt problems.

Banking regulator Liu Mingkang recently told a conference that China’s banks should lend out 6-7 trillion yuan next year, equivalent to about one fifth of China’s annual output. Some think that is too much. However, these fears are overdone. Indeed, if new lending falls below 10 trillion yuan, bad debts will soar, private investment will be crowded out and the economic recovery may be derailed.

– This opinion piece was written by C.M. Sennot for GlobalPost. The views expressed are his own. It was originally published here on GlobalPost. –

The last time America had to borrow money to finance a war was during the Revolution and a cash-strapped Continental Congress took loans from France to fund a surge against the British.

That worked out pretty well.

But it’s hard to feel the spirit of 1776 in President Obama’s journey to China. He went as a representative of a borrowing nation to its primary lender amid a call for yet another costly military surge in the Long War that is escalating in Afghanistan even if it is hopefully winding down in Iraq.

– Peter Morici is a Professor at the Smith School of Business, University of Maryland, and former chief economist at the United States International Trade Commission. The views expressed are his own. —

From Berlin to Bangkok, governments are screaming about the falling dollar, because they can no longer rely on reckless American consumers to power their economies.

From the late 1980s to 2007, the global economy enjoyed The Great Moderation-low inflation and sustained growth interrupted by brief recessions. Driving global growth was an eight fold increase in the U.S. trade deficit, facilitated by a doubling of the value of the dollar against other currencies from 1989 to 2002.

– Nancy Birdsall is the president of the Center for Global Development. Arvind Subramanian is a senior fellow at the Center and at the Peterson Institute for International Economics and a regular columnist for the Business Standard, India’s leading business newspaper. The views expressed are their own. –

Efforts to cut emissions of the heat-trapping gases are gridlocked over a misunderstanding about what is fair. This misunderstanding is hindering climate change legislation in Congress and threatens to torpedo international negotiations in Copenhagen next month.

We propose a new way of thinking about climate fairness that focuses not on emissions cuts but on meeting developing countries’ energy needs in a climate-friendly manner. This simple narrative can provide a framework for U.S. legislation and open the way for international collaborative efforts to avert climate catastrophe.

- Phelim Kine is an Asia researcher for Human Rights Watch. The opinions expressed are her own. -

When 15-year-old Wang Xiaomei made the long trip from Gansu province to Beijing last year, she hoped to find justice for her family. Instead, she met with abuse.

First, Wang was abducted by plainclothes Gansu officials, who imprisoned her incommunicado for two months in a “black jail”—an illegal detention facility.

– Wei Gu is a Reuters columnist. The opinions expressed are her own –

Everyone agrees that China’s economy must be rebalanced, but few have bothered to delve into the costs. Japan’s experience has shown that even well-meant changes could sow the seeds for a bubble.

China cannot stay with its current economic model forever. But as the economy has become extremely unbalanced, to some extent even more so than Japan’s in the 1980s, rocking the boat too much risks tipping it over. Instead of rushing into changes, it would be better to make reforms gradually.

– Wei Gu is a Reuters columnist. The opinions expressed are her own —

China has finally given a green light for Disneyland to build a theme park in Shanghai. Negotiations that started when Bill Clinton was in the White House have concluded just before President Barack Obama is due to visit. The approval looks like a coup for Walt Disney Co, but it will take all of Mickey’s magic to prevent the park from becoming another government-financed loss maker.

Disney’s last theme park in the region was anything but a hit. Hong Kong Disneyland was created in 2005 in an effort to boost employment in the epidemic-stricken region, but attendance numbers have fallen short of target. This hits the Hong Kong government harder than Disney, because the former not only took an initial 57 percent equity stake in the venture, but also spent $1.75 billion building related infrastructure like a metro line and ferry piers.

– Wei Gu is a Reuters columnist. The opinions expressed are her own —

If current trends continue, China might swing to a trade deficit in the not-too-distant future. Given that China has enjoyed more than a decade of strong exports, this may sound a bit far-fetched. But even if it happens, this would not necessarily be something for the world to worry about.

Some economists have recently sounded alarm bells about the possibility of a Chinese trade deficit. They argue that if the Chinese current account surplus shrinks, it would leave Beijing with less spare cash to buy U.S. Treasury bonds. Then who would fund the U.S. budget deficit — and, by implication, U.S. consumers?