Tipping the scale to Asia

With US public debt currently standing tall at US$10 trillion dollars and reserves of US$70 billion, compared to China with a public debt of US$614 billion and reserves of US$1.5 trillion, the scale of economic power has been tipped. The US owes China at least US$500 billion in bonds.

China is now the emerging economic superpower, together with a growing presence of India. The US has been piling up debt while China has been piling up reserves. China will own more of the world, if they convert their dollar reserves and government bonds into assets.

Not only economic power, but now China wields an increasing influence as a major political power. Earlier this year, Clinton has made a comment on how the US debt to China will threaten security by selling their enormous reserves and bonds. Just weeks ago, the prophecy was partly fulfilled when the Chinese wanted to halt lending to US banks on fear of the widening crisis.

Nevertheless, the Shanghai Composite Index was not spared in this financial carnage, and fell 68% from its all time hight of 6092 on 16 Oct 2007 to 1922 on 17 Sep 2008. The recent influx of investment in China has caused the economy to be overpriced, especially when the US, a major trading partner is falling. It was time for a major correction. However, China needs to have a more critical look into eradicating corruption, that is fueled in part by the widening income gap. If China can address this issue, the nation will indeed prosper in an unprecedented way, and all those who are wise will ride on this wave.