Prime Mnister Wen JiaBao talk about China's US Treasury Purchase

I am a little bit surprised the market did not take his word as a serious warning that China might take a strong stand against the presure from US to force RMB appreciation. It also sounds like a warning to the sounds in US to inflation away the debt and off the crisis. Given he gave these comments in an interview with Financial Times in his European trip, it appears China has try to position itself to play the balance between Europe and US.

Recently, more and more voices in the US are talking about use inflation to get out of the crisis. The idea is not new, which Fed Chairman Benanke had exagerated to use helicopter to drop money from the sky. The Fed is carrying out what is called QE (Quantitative Easying). Geoge Soros in a later Financial Times article also mentioned to increase the money supply and hopefully to quickly reduce it after the economy get a boost. Of course, everybody is hoping that the Fed can quickly reduce the money supply so to control the inflation. However, given the level of debt the US government and hoursehelds, it is hard to believe the economy will really rebound in a sustainable way. So what you do then, just keep the money supply and let the inflation go up. That is what China do not want to see happening and I guess Chinese government start to realize there is a high possibility it actually might happen.

The recently development between China and Europe given the above background. I read an article recently regarding how US is trying to coordinating inflation and currency devaluation with Europe, so it can get out of the crisis while keep dollar's international position. China might have the capability now to help Euro becoming the new world currency by totally selling US assets and distroy dollar value. It is really stupid for Gathener to accuse China manipulating currencies. If you know Chinese, you would rather play nicely. He might find he bullied the wrong guy in the school. On the other hand, I am tired of hearing all these talking about RMB apprecation. If you truely understand the social and economy structure of China, you would not think RMB is under valued, at least not that much. The recently rapid deterating of job market, industry production and export in China is a very good evidence. Of course, who cares people living on the other side of the earth is in the hell as long as we can live in our MacMansion and drive our Hummer.

It is too bad, there is really no easy solution. The path to recover will be painful, to both Chinese and American. I would expect some of the manufacturing jobs might start to moving back to US, especially if the oil price goes up again. If both US and China play fairly and nicely, there will be a new balance to the industries and trades, which might last many more years to come. Both China and US are great countries. US has the most advanced technologies. There are endless of creativity in the numourous acedemics and industries in the country. I am very confident we will be out of this mess and once again take off on a more pruductive path, just as when electricities, automobiles, computers, semiconductors and Internet were invented. China, as young player in the world, with a lot of resources, if it can steadily change to a more open and free society, could bring in much much more to the world, not just cheap clothes and toys, but also advanced technologies and ideas. However, as a Chinese, I know, we have a long and difficult way waiting for us.