China Rising – IMF and World Bank Slipping
Source: http://feedproxy.google.com/~r/smallcappulse/feed/~3/3Vu3_dXFBhw/Posted on Tuesday, June 9th, 2009 | In Market Commentary, Small & Micro Cap
June 8, 2009 – A developing story in China that we think should be watched closely is its steadily increasing role in financing projects throughout the world and providing financial assistance to foreign governments in the place of the IMF and World Bank. China has been shrewdly positioning itself as a global leader economically, and as it increases its investments and loans around the world, it will have an increasingly larger sphere of influence on a global economic scale. Keep in mind that China is highly critical of the U.S. mounting debt, and has not been coy about its view that the dollar should no longer be held as the worldrsquo;s reserve currency.
The U.S. isnrsquo;t helping itself out on the issue, turning to China more than ever for more help in purchasing its debt. We donrsquo;t see this dynamic reversing any time soon and this is another reason we are bearish on the dollar.
Most recent in terms of examples of economic assistance, China is helping finance Philippine infrastructure projects with a $1.8 billion fund. Another shrewd aspect of Chinarsquo;s global economic assistance is that it is coming with less usurious terms than the World Bank and IMF (which have historically been a key tool for the U.S. to create leverage in foreign economies), thereby developing stronger relationships with strategic countries in strategic geographies around the world. This is a phenomenon that really started gaining momentum under the Bush administration while Bush myopically focused on Iraq, and it will be interesting to see how the Obama administration counters China ndash; if it can, given the fact that it has a full plate dealing with the current recession.
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