Thursday, April 10, 2008

China Wants Your Money

And they'll do what it takes to get it. That's right, I'm talking about Energy Subsidies.

In the last few years, China has gone from being a net importer of steel to the world's largest exporter of steel. "How?" you might ask. I'm sure large subsidies from the government didn't hurt, nor did the cheap labor and few (if any) environmental restrictions.

The report describes how the Chinese government is paying a large chunk of the energy required to produce steel, which distorts the market greatly in China's favor.

Am I saying this is a bad thing? Well, it sucks for American production, but you can't blame a country for doing what it's gotta do to make it. I am wondering, however, what will happen when the people of China want to start living (and spending $) like us westerners.

Right now China is artificially keeping down the living standards of their people, in part by pegging the yuan (their currency) to the dollar at a low low rate. This does wonders for their manufacturing economy, but it means the workers work harder for less real spending power.

What will happen when they finally throw off the shackles of their oppressive government? I'm very interested, as right now the government is intimately interwoven with the economy, and I don't know if the system can survive in it's present state without the government. At the least it will be a painful transition, at worst, a nightmare. Only time will tell.

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