The Weakened US Go To the G-20 The article in question is about the changing landscape of the international economic system where China is courted more than the US for its ability to shore up other currencies like the US Dollar and the Euro. The reason for this perception is the fact that China holds nearly a Trillion Dollars of US treasuries and more than Two Trillions in Foreign Exchange holdings. This makes it the lender of sorts for countries needing capital. This was evident in the way the recent Euro crisis arising out of the Greek Debt Crisis was resolved only after the Chinese intervened and told the Europeans that they had no “animus” towards the Euro.
To quote from the article, “The euro crisis was revealing about the decline of U. S. economic influence. Secretary Geithner's late-May, confidence-building tour of the continent only served to illuminate the dollar's problem. ” (Melloan, 2010) The central premise of the article is that countries all over the world are increasingly turning to the Chinese to help them with bond purchases and as sources of Dollar financing.
This is the changed global economic landscape that is confronting the world at the moment. Before turning to the implications of this to global managers and the current economic climate, it is worthwhile to point out that it is the steady indebtedness of the US towards the Chinese because of cheap imports and shifting of manufacturing facilities to China that has brought about this situation. Hence, before jumping to conclusions about whether the days of the Dollar hegemony are over, it would be prudent to look for domestic solutions in the form of more savings and less consumption as a way out of this situation. The implications of the contents of this article on global and managerial finance is that over the next few years or possibly decades, the financiers can look towards China as a market for capital inflows as well as “hot money” i. e.
the pumping in of inflows aimed at currency and stock markets. Of course, the Chinese capital markets are not yet as deep or as developed as that of the US and other Western countries. However, this might change in the near future because the Chinese with the confidence of their significant holdings of dollar reserves can act as the lenders to the Western countries that are desperately in need of Dollars and Euros to tide over the crisis brought about because of the current economic slowdown. However, global managers of finance need to be cautious as well as the source of the current crisis can be found in the structural global imbalances brought about because the Americans were saving less and consuming more whereas the Chinese were saving more and consuming less.
Hence, there is a lesson for managers in the current economic climate and it would be worth the effort to look deeply into the causes of the current economic crisis as pointers to the future structure and influence in the global economy. In conclusion, it is by now an accepted fact that China has arrived as a serious player in the International arena. Hence, global managers who are already cognizant of the fact must devise their strategies to leverage upon the attractiveness of the Chinese market not only as a source of manufacturing cheap but also as a market for the goods manufactured by the West.
It is my opinion that this two way exchange of capital and goods between the US and China would determine the contours of the global economy in the coming years. References MELLOAN, G. (2010, June 25). A Weakened U. S. Goes to the G-20 . Retrieved July 31, 2010, from Wall Street Journal Online: http: //online. wsj. com/article/NA_WSJ_PUB: SB10001424052748704629804575325240077856192.html