Let's trade.

After reading in class about the trade partners of the US and their effects on the US economy, the question came to mind: how is trade affecting the economy of China? Further research has allowed me to discover several things: that China maintains an illogical foreign exchange mechanism, and holds a loose interpretation of the rules that define their licensing requirements. Using both an official exchange rate and a "swap center" rate, which is influenced highly by the black market, foreign exchange "rates" are not properly measured. The rules that define licensing requirements and inspections are very loosely interpreted, hindering what could potentially be a very profitable financial transaction for the central Chinese government.

Its hindrances have been ignored however as of late, as the failing economies of the European Union have beckoned for the assistance of the Chinese. As China's #1 trading partner, and as the European Union's second-biggest export market, their relationship is a very delicate one. In Spain alone, China owns 43 billion euros ($57.3 billion) in that country's debt — about a fifth of existing Spanish bonds. My question is, if China keeps on loaning its money out to countries in need, what happens when their pockets are emptied? There is no assurance that they will be paid back in full by the countries that they lend to. Much like the credit card companies (and the World Bank) enjoy lending out money in hopes of having a high payout, the risk is large for the lender as well.

I suppose that the LA Times' reasoning works out though:

"Liu Baocheng, a professor at the University of International Business and Economics in Beijing, said China's vows to help Europe could "win favorable opinions of the Chinese government's image and Chinese companies."

"China wants to show it is doing its part to stabilize the global economy and help partners in difficult times," he said. "They think the current financial difficulties experienced by EU countries will be over. The risk is not that high."

Helping yourself by helping others, seems a little selfish. But that's exactly how the world works. And apparently how China functioned in the past.

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