There are two very important stories out of China. The first is more evidence supporting our claims that China is not even a trade ally much less an ally overall. China is blaming the United States dollar for the recent decline in global wealth:
The United States has plundered global wealth by exploiting the dollar’s dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.
The People’s Daily is the official newspaper of China’s ruling Communist Party.
Now the greedy morons on Wall Street and in Washington will tell you that we ought to be appreciative that foreigners hold so much of our debt. After all, they’re financing the deficit. But no one appears to be very concerned with the question I have posed numerous times over the last year: What happens when China decides to cut its losses by dumping a massive amount of its U.S. reserves? It would deflate the dollar to a value just higher than worthless–at least temporarily.
The second story signifies a strengthening of the alliance between China and Russia. They have decided to jointly build an oil pipeline. Here are some of the details:
Russia and China on Tuesday signed a long-awaited deal to build an oil pipeline from Siberia to China after talks between Prime Minister Wen Jiabao and Russian counterpart Vladimir Putin.
The leaders watched as Chinese state energy major CNPC and Russian state pipeline monopoly Transneft signed the deal to build the pipeline from the Siberian town of Skovorodino to the Chinese border.
The pipeline agreed on Tuesday would have a capacity of 15 million tons of oil per year and would be a branch of the main East Siberia-Pacific Ocean trunk pipeline, which is still under construction, officials said.
The length of the pipeline to the Chinese border would be around 70 kilometres (44 miles). The pipeline is then planned to link into the Chinese pipeline network to reach the oil hub of Daqing in northern China.
Russian newspapers on Tuesday also reported that talks were underway for a multi-billion dollar credit from the Chinese government to Transneft and Russian state-run oil company Rosneft that would help boost energy exports.
The Vedomosti daily quoted Sergei Sanakoyev, a government expert, saying Moscow and Beijing had agreed a contract to supply China with 15 million tons of oil per year in exchange for up to 25 billion dollars (20 billion euros).
But Vedomosti also quoted an official saying there was no deal yet.
It’s extremely important that we don’t let these events slip past us while our attention is focused on this election. This oil pipeline is a major strategic development in my opinion.