China and America’s economies are closely interwined with each other in a lot of ways. China’s export sector is highly dependeng on the demand from America’s private sector, while America’s public sector is highly financed by Chinese (See Article from NYT). Such a balance, however, is vulnerable to collapse if China’s over capacity of production has no way out. The consequence of such a collapse is hard to imagine: cheap chinese goods have to be liquidated at lower than cost and companies suffer from loss in selling. The unemployment rate in both China and outside world would suffer and American government’s borrow cost would increase due to less reserve from China government. One thing seems to be clear that two countries are dependent on each other so much that if any one has a major economic shock the other is unlikely to be detached. Continue (继续)

The world’s greatest stimulus program in terms of scale, China’s government’s loose monetary policy, is likely to continue in 2010. According to a politiburo meeting held this week, the top 25 government officials confirmed the government’s intention to continue such a policy (See Article from WSJ). China government started its record 4 trillion stimulus program in Q1 of 2009. Such a policy seems to have saved China’s falling retail price (See Graph from Chinatells), fixed asset investment (See Graph from Chinatells) and import growth (See Graph from Chinatells). However, economists have expressed worry on the long term implication in such a policy particularly in inflation.

中国政治局最高领导在最近的会议上讨论了中国的经济问题，同时做出结论目前的经济复苏还很脆弱，所以今年第一季度开始的刺激政策在2010年应该还会继续。在这一波的刺激中，央行将利率下降并且政府大手采购，致使中国经济在全球萧条的背景下不至于受损太严重。

According to a report released by European Union Chamber of Commerce, China’s over capacity of production encouraged by the domestic stimulus program could bring more conflicts in international trade and drive down profit margin worldwide (See ARticle from WSJ). China’s production of Steel, Aluminum, and Cement had a record year of growth in 2009 thanks to domestic recovery. However, worry emerges from foreign countries that such a production boost might result in an over capacity of supply and flood the world market with cheap products. After all, Chinese producers need to find market through export with their increased capacity. Such a trend could cause collision between major trading partners in the international community. Continue (继续)

Adam Smith is one of the greatest Western Economists in history. His master piece Wealth of Nation has been translated to multiple languages and receives serious attention in a lot of countreis, including China (See Article from Times Online). One of the most famous quotes from the book is the ‘invisible hands’ from the market to allocate resource and beneft human society to a greatest extent. Few people, however, notice that Adam Smith does not believe that market can solve 100% of all the issues. In his another book Theory of Moral Sentiments, Smith stressted the importance of share the benefit of economic development and care for the poor. Such a view is greatly appreciated by China’s prime minister, Wen Jiabao. Continue (继续)