The Balance of Power Shifts Toward China

An unreported (in the once mainstream media) disclosure by China has taken the international financial world by shock and surprise.  China declared that its foreign exchange reserves had increased to $2.4 Trillion in 2009, a gain of $453 Billion in one year.  It is estimated that the reserves will rise by an equal amount in 2010.  

The significance of this astounding statistic cannot be underestimated.

By comparison the total foreign exchange reserves of the European Union (27 countries) was $648 Billion in 2009.  China's one year increase alone was higher than the total reserves of all but one nation, Japan ($1.074 Trillion).   (United States: $84.4 Billion)

(The foreign exchange reserve is the total of a country's gold holdings and convertible currencies held in its banks, plus special drawing rights and exchange reserve balances with the International Monetary Fund.)

Two-thirds of China's reserves are estimated to be held in dollars.  Thus they are able, by mere threat of liquidating or dumping the dollar, able to hold the world economy hostage.  China will not do so, as that would trigger a massive global economic collapse.  But this leverage is sufficient to intimidate and cause other countries, such as the United States, to accede to Chinese demands, for example in foreign or military affairs.

However, China is able to further position itself to dominate the world economy.  At present the Chinese government is making massive investments in raw materials and advanced technology around the world.  The ultimate aim: to hold the rest of the developed world hostage in acquiring the raw materials and technology necessary to foster economic growth.  China will be in the position of dictating the price of commodities.

That situation,  combined with import restrictions and the manipulation of the Chinese currency, will allow the Chinese Government to continue this massive growth and potential world dominance.

Meanwhile in the United States, there is an administration and Congress in place pursuing economic and spending policies which go hand-in-glove with the long term plans of the Chinese.  It is either deliberate or done out of ignorance, as the Chinese are unabashed in making their intentions public.

The shocking growth in the exchange reserves of China cannot be ignored.