The importance of Sisi’s visit to India to build economic blocs for Egypt with the BRICS group
Asian countries represented successful experiences at the level of economic blocs, hence Cairo’s quest to be part of global blocs of an economic nature, as this represents confidence in the ability of the Egyptian state to advance its economic sector. Recently, the Egyptian desire to be part of From the BRICS group, which is an economic alliance that includes Brazil, Russia, India and China, and was established in 2006, and South Africa joined it later in 2010.
The BRICS Forum is an independent international organization that works to encourage trade, political and cultural cooperation among its member countries, taking into account that Brazil, Russia, India, China and South Africa represent nearly a quarter of the global economy, and contributed to more than half of the global growth in the past years. About 30% of what the world needs in terms of goods and products, while its citizens represent 40% of the world’s population. The BRICS countries have adopted many initiatives to support cooperation among themselves in various fields, including the establishment of a development bank with a capital of $100 billion to finance development projects in the member states.
President Abdel Fattah El-Sisi’s visit to India is a national strategic visit in the first place to facilitate Egypt’s entry and accession to the BRICS international economic grouping with the help of China and India. The countries of China and India, and Egypt is trying through these relations to enter the giant BRICS gathering, which contributes to strengthening Egyptian cooperation with the countries of the ASEAN group and its geographical and regional scope, through many axes and ways to develop cooperation with Egypt and those countries in various fields, especially economic, investment and development in light of The distinguished development experiences of India, China and those countries in achieving comprehensive development, as well as their progress in small, medium and micro industries, in addition to the convergence of all of them compared to the vision of Washington and the West towards a number of issues of common concern, primarily the Middle East issue, the Palestinian issue and efforts to combat terrorism.
On the occasion of President El-Sisi’s visit to India, this was not his first visit to India, as he had already visited India in 2016 as part of an Asian tour, during which he met his counterpart, Indian President Bernab Mukherjee, Prime Minister Narendra Modi and senior officials in New Delhi.
We find that President El-Sisi’s current visit to India confirms that President El-Sisi possesses great political and economic experience, through which he can open more investment and economic fields for Egypt, looking forward during his visit to benefit from the economic renaissance of the state of India, and the rapid growth rates achieved by India. And growing, and Egypt here can benefit from this accelerating Indian experience, which will have positive effects on Egypt in several areas, such as: increasing exports, raising production rates, opening investment fields, and advancing the Egyptian trade and economy forward, given that India is one of the best countries in the world in terms of application. Democracy has achieved economic development in recent years, effectively penetrated the field of technology, and the Indian product occupies a strong global position with high quality, despite its population exceeding one billion and 200 million people, but it has been able to achieve self-sufficiency after its massive agricultural revolution.
Egypt and India have distinguished political relations, in addition to the trade and economic relations that have witnessed remarkable growth over the past years, despite the slow growth of the global economy.
It is expected that President El-Sisi’s visit to India will witness a list of new joint projects that India can implement in the new administrative capital, including a project to establish a medical city on an area of 350 acres, which includes the establishment of a number of hospitals and nursing schools, as well as the establishment of an Indian university specializing in medicine, according to what has been done as an agreement with the Indian side.
In my opinion, President El-Sisi’s visit to India is an important political and economic achievement that affirms Egypt’s presence as a pillar of stability and development in the region. For Egypt to present its economic program to facilitate its entry into the giant BRICS economic group with the help of China and India in the first place, in a way that facilitates the process of attracting foreign investments to Egypt and promotes economic advancement and improves the living conditions of the Egyptian people.
Here, it is worth noting the importance of President El-Sisi’s visit to India, in advancing Indian tourism to Egypt and increasing the number of Indian tourists coming to Egypt. and experiencing rapid economic growth. The Indian market also has many opportunities for the growth of our exports, especially in the sectors of chemicals, plastics, fertilizers, fruits and agricultural crops such as cotton, handicrafts such as textiles, leather, marble, granite, dairy products, metal industries, iron and steel, crude oil, and others.
Egypt will seek to activate the agreement between the Egyptian and Indian governments to increase the volume of trade exchange to $8 billion, knowing that Indian investments in Egypt are estimated at about $10 billion.
In this context, we find that Egypt and India have six trade cooperation agreements with India, namely: an agreement to develop intra-trade, an agreement to establish a joint committee, an agreement to encourage and protect mutual investments between India and Egypt, an agreement to avoid double taxation, and two memorandums of understanding in the field of trade and technical cooperation. And in the areas of small, medium and micro projects, and an agreement for a joint work plan to develop trade and joint investments between the two parties.
There is momentum in our relations with the Indian side, and a common desire through President El-Sisi’s visit to India to develop them to a higher level, given the existence of intense political cooperation between the two countries, and continuous interaction at the level of leadership and ministerial level, where Indian Prime Minister Narendra Modi met with President El-Sisi on the sidelines of meetings The United Nations General Assembly in New York in September 2015. The Indian and Egyptian sides are interested in strengthening their relations with regard to issues of combating terrorism, strengthening economic partnership and common regional issues between them. India’s relationship with Africa through the Egyptian side.
There are 50 Indian companies operating in Egypt, with a total investment of about $3 billion. About half of these companies are joint ventures or wholly owned subsidiary companies of Indian investors, while the rest of the companies operate through their representative offices and implement projects for government agencies.
Among the largest Indian companies investing in Egypt is TCI Sanmar (whose investments amount to about one and a half billion dollars), and the company announced the opening of a new production line with investments amounting to $200 million, in addition to other giant Indian companies with branches in Egypt, such as companies Alexandria Carbon Black, Dabur India, Egyptian-Indian Polyester Company and Skip Paints.
Indian companies are also implementing several projects in the fields of railway signals, pollution reduction, water treatment, irrigation, shock prevention devices, and others. And the Indian company Hetero, a major company working in the field of medicine, launched a joint venture in May 2015 to produce a drug to treat hepatitis C, which was highly appreciated by the Egyptian government.
Among the projects that were carried out through the Indian grants to Egypt were distance education and distance medicine projects in the African continent, based in Alexandria University, a solar lighting project in the village of Agwain, and a vocational training center for textile technology in Shubra, Cairo, which are projects that have already been completed, in addition to To another project under implementation to establish an information technology center at Al-Azhar University.
Here we find that cooperation in the technical field remains an important part of our bilateral relations with the Indian side. Since 2000, more than 600 Egyptians have benefited from Indian technical and economic cooperation programmes. Many Egyptians have been trained under various programs such as India Technical and Economic Cooperation Programme, India-Africa Forum Summit and CV Raman Foundation Fellowship. Many Egyptian diplomats joined the foreign diplomats course at the Indian Foreign Service Institute, and many Egyptian scholars and scholars benefited from the grants of the Indian C.V. Raman International Foundation for African researchers.
At the level of cultural cooperation relations between India and Egypt, the Maulana Azad Indian Cultural Center was established in Cairo in 1992, with the aim of enhancing cultural cooperation between the two countries through the implementation of the cultural exchange program, in addition to its interest in spreading Indian culture through Indian and Urdu language courses, yoga and dance courses. And seminars, film shows and exhibitions organized by the Indian Cultural Center, the Center also organizes many cultural festivals.
One of the results of the Egyptian-Indian joint cooperation in the field of education is the allocation of 110 grants by the Indian Ministry of Foreign Affairs to Egypt within the framework of the Indian technical and economic cooperation programme.
In the field of scientific cooperation between India and Egypt, we find that both the Indian Council for Agricultural Research and the Egyptian Agricultural Research Council work together in the field of joint agricultural research according to joint cooperation agreements between them. There are also programs for cooperation in the field of science and technology that take place every two years between the two parties.
What can be concluded here, from the Egyptian moves on the level of foreign policy, is that Cairo avoids defining its relations and partnerships at the political, economic and military levels, which reflects prudence in decision-making and prompts Cairo to enter into partnerships and international economic blocs such as BRICS and others, which transforms Egypt economically and rapid development to broader horizons, with the aim of making Egypt an important figure in all regional and international equations on the basis of standing at the same distance from everyone, and moving in accordance with the requirements of the national interest and international law.
How Saudiconomy, is an economic-transformational miracle?
What is happening in the Global economy? The outlook seems entirely iffy, in the state of flux and bewildered with negative outlooks. The answer is, “Disturbance”. If we analyze the global-environment with respect to economy, we find it clouded with discussions pertaining to hawkish vs. dovish trends of central-banks, rising inflation, hyper-inflation, tanking GDP growth, Russian-Ukraine conflict, energy-crises, broken supply-chains, unemployment, recession-fears, supply-shocks, lower demands, inverted yield-curves, liquidity crises, banking debacles and many other ensuing economic-ramifications etc. all have become talk of corridors and towns.
In my opinion, the global economy seems in shambles, extrapolated perceptions assumed by analysts out of Jackson Hole meetings and other developed-countries’ central-banks are creating disturbances in financial-markets. Simply, the world is devoid of any solid vision, which could steer it towards betterment and prosperity. Major financial newspapers are dreading with inflation impacts. Ask any banker across the globe about his or her medium-term economic-outlook & you’ll get an ugly picture painted.
Welcome to Saudi Arabia, the year 2022 the country surpassed a mark of a trillion-dollar economy according to both IMF and Oxford Economics coupled with GDP which grew at 8.7% in 2022. The annual CPI in Saudi Arabia increased by 2.5% and inflation averaged at 2.47% in 2022 which is “absolutely nothing” against double-digits’ inflation worldwide.
So paradoxically asking, what is happening in Saudi Economy? The answer is, “Growth”. If we analyze Saudi economic ecosystem, we find it filled with positive economic-vibes where the discussion is all about hike in industrial-production, foreign-investment-inflows especially huge industrial-investments, mining-investments which aim to unleash the potential of natural-resources, infrastructure-investments, giga-projects, achievement of economic & financial targets on time, flourishing private-sector, multiplying Non-Oil GDP etc.
Taking global-view, H1+H2 of 2022 were clouded with immense geo-political tensions, with ultimate economic-ramifications. But KSA has remained insulated of all global economic-vagaries, which attests the resilience & robustness of Saudi economic framework which is strengthened by Saudi leadership. The fiscal-year 2022 attracted significant foreign capital-inflows, which proves that Saudi Arabia has successfully positioned itself as a desired-destination of global financial-capital amid the ongoing global-turbulence. Saudi Arabia has successfully averted economic-effects of current geo-political turmoil, in terms of utilities, food-security and inflation-containment etc.
The question arises, how did KSA achieve this economic excellence & resilience in really a short time-span? The answer is, a Vision is being implemented and realized by Saudi leadership with sheer commitment and enabled by Saudi youth. This trifecta is indeed a global successful case-study of how major economic-transformations can happen in a short-period of time.
Delving into more details, the fundamental reason is, in 2016 Saudi Arabia had devised a brilliant Vision 2030 under the leadership of H.R.H King Salman and this was a road-map drawn by H.R.H Crown Prince Mohammad Bin Salman, as a forward strategic-economic framework. Under this brilliant vision, uniquely-crafted “Vision Realization Programs” (VRP) were designed, each tasked with a particular niche to smoothen the regulatory-processes, incentivize deployment of local-resources and ultimately attract private-sector & foreign-investments. All these VRPs are showing satisfactory-progress and many of these VRPs have over-achieved brilliantly.
Another driver of this economic-success is a significant-emphasis on optimizing potential of “Non-Oil GDP”. It is the Non-Oil GDP, which ultimately provided an impetus and incentivized Saudi Private-sector to act proactively. The fuel for sky-rocketing “Non-Oil GDP” is actually the giant private-sector of KSA, whose potential is being unleashed by Saudi government via launching a partnership-program namely “Shareek” which aims to intensify the potential of SAR 5 trillion of domestic private sector investments by 2030. The aim is to maximize the private-sector contribution up to 65% in Saudi GDP by 2030.
One of the attributable reasons of this economic-miracle of Saudi Arabia has been a constant emphasis on Higher Education & Research. For instance, scholarship programs for Saudi students proved to be a stellar success. Today we see countless highly-qualified Saudis, possessing valuable global-experience are now steering many organizations in both the public and private sector of country. Their competence coupled with determination, passion & loyalty for their leadership and the country paved the way for Saudi Arabia to result such an economic-success. Nature Index which tracks scientific & intellectual contributions globally has ranked Saudi Arabia, 1st in Arab World & 30th globally in 2022, which manifests emergence of high quality scientific-output by Higher education ecosystem.
Saudi Arabia was one of the countries, which made headlines across global-media due to smart Covid-management, leaving behind many developed economies. For instance, King Abdullah Port has bragged the 1st-position leaving behind 370 global-ports in a globally-renowned index, Container Port Performance Index – 2021 by World Bank and S&P Market Intelligence, which analyzed performances of 370 ports in post-Covid broken supply-chain scenario. Similarly, Jeddah Islamic port and King Abdul Aziz port have bragged 8th and 14th position respectively.
Saudi Arabia’s Sovereign Wealth Fund, Public Investment Fund has emerged as one of the smartest-SWF leaving behind many decades-old SWFs with stellar investments. The PIF (AuM = 620 USD billion) with its in-built strong potential has taken lead in investing locally in Saudi Arabia. In any country, a monetary-system always carries immense importance in proper functioning of an economy & solidifies its robustness. This important task is being carried out diligently by Saudi Central Bank, SAMA, which is brilliantly regulating Saudi financial-sector.
Saudi Arabia is taking a lead in developing state-of-the-art infrastructure. Each of the giga-project is adding gross-value of billions of SAR directly to economy and is providing thousands of jobs. I call them; “Super-infrastructure” because they are being developed with a super-vision, led by super-teams, giving super-results and yield a super-future. Recently Knight Frank which is a top-notch and a century-old UK-based real-estate consultancy firm has evaluated the 15 giga-projects up to 1.1 trillion dollars.
Indeed, Saudi success story of economic-transformation and diversification embodies sheer brilliance, commitment and determination, which has manifested wonders in less than a decade as appreciated by the Managing Director of IMF in the recent WEF sessions, in these words, “They (Saudis) are using the increase in revenue very effectively to create the investment environment for future growth for diversifying the economy,”
Economic Strangulation Policies to Impact Kashmir Socio-Economic Dynamics
For decades, India has implemented coercive economic policies in the estwhile state of Jammu and Kashmir, a region that has been the subject of a longstanding dispute between India and Pakistan since their partition in 1947. Despite ongoing efforts to suppress the aspirations of the Kashmiri people, including economic deprivation, one of the most significant examples of India’s economic coercion in the region has been the imposition of an economic blockade.
In 2019, the Indian government further intensified its efforts by revoking the special status of Jammu and Kashmir, which had granted the region autonomy to determine its economic policies. This move was accompanied by a curfew and communication blackout that effectively isolated the region from the outside world, further exacerbating the economic hardship faced by the people of Jammu and Kashmir.
The blockade has had a devastating impact on the economy of IIOJK. The region’s tourism industry, which was a major source of revenue, has been decimated. The Indian government has also seized control of the region’s industries, including its mineral and agricultural resources. The region’s apples, for example, are a major source of revenue, but Indian authorities have blocked their export to the rest of the country, causing huge losses to the farmers.
India has also used other economic measures to exert control over the region. For example, the Indian government has placed restrictions on the movement of goods and people across the Line of Control (LoC) that divides the region between India and Pakistan. This has made it difficult for businesses to import and export goods, as well as for people to visit their families and friends on the other side of the LoC.
In addition, the Indian government has used financial measures to suppress dissent in the region. Indian authorities have frozen the bank accounts of individuals suspected of involvement in anti-India activities. This has made it difficult for these individuals to access their own funds, as well as for others to conduct transactions with them.
India has also used its control over the region’s financial institutions to exert pressure on the Kashmiri people. For example, Indian authorities have pressured banks in the region to refuse loans to individuals suspected of anti-India activities. This has made it difficult for these individuals to start businesses or invest in their communities.
The application of economic strangulation policies in IIOJK is expected to have a substantial impact on the socio-economic dynamics of the region. These policies are aimed at restraining economic activity and growth, and they are likely to result in various harmful consequences for the people of Jammu and Kashmir.
The primary effect of these policies will be an increase in poverty and unemployment rates. As businesses struggle to function and create employment in an environment of economic uncertainty, a considerable number of people will find themselves out of work and grappling to make ends meet. This is likely to intensify the existing social and economic disparities in the region.
Another probable outcome of the economic strangulation policies is a decline in the living standards of the people. As economic activity slows down, prices of essential goods and services are likely to surge, making it difficult for individuals to obtain the basic necessities of life. This could potentially result in a surge in social unrest and political instability in the area.
Additionally, the economic strangulation policies may lead to a decrease in the overall standard of healthcare and education. As the government diverts resources away from these sectors to impose economic sanctions, hospitals and schools are likely to face reductions in funding and staffing, thereby leading to a deterioration in the quality of these essential public services.
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So far, the impact of India’s economic coercion on the people of IIOJK has been devastating. The region’s poverty rate is estimated to be around 30%, and unemployment is rampant. The lack of economic opportunities has led many young people to join freedom fighters, which have been fighting for Kashmiri independence from India for decades.
India’s economic coercion has also had a profound impact on the mental health of the Kashmiri people. The curfew and communications blackout imposed by India in 2019, for example, left many people feeling isolated and helpless. The lack of economic opportunities has also led to high levels of stress and anxiety among the region’s youth.
The international community has condemned India’s coercive policies in IIOJK but is not willing to pressurize India over human rights violations. The United Nations has called for a peaceful resolution of the Kashmir dispute, and has urged India to respect the human rights of the Kashmiri people. The Organization of Islamic Cooperation (OIC) has also expressed its concern over the situation in the region.
Pakistan has been vocal in its condemnation of India’s actions. The Pakistani government has called on the international community to intervene in the dispute, and has urged India to withdraw its military forces from the region.
One of the recent policies of economic strangulation in IIOJK by India is the implementation of new land laws in the region. In October 2020, the Indian government issued new land laws that allow non-residents to purchase land in the region. This decision has been met with widespread condemnation from Kashmiri political leaders, who argue that it will lead to demographic change and the loss of control over their land.
Kashmiri leaders from mainstream political parties have also rejected the decision of the Indian government to levy taxes in the region without representation. The slogan “No taxation without representation” has been used by these leaders to argue that the Indian government has no right to impose taxes on the people of the region without their consent.
The argument put forth by these leaders is that the Indian government has violated the basic principle of democracy, which is that the people have the right to elect their own representatives who can make decisions on their behalf. By imposing taxes without representation, the Indian government has effectively denied the people of IIOJK their democratic rights.
The Kashmiri political leaders have also argued that the Indian government’s decision to levy taxes without representation is a violation of international law. The International Covenant on Civil and Political Rights, which India is a signatory to, guarantees the right of all peoples to self-determination. The Kashmiri leaders argue that by imposing taxes without representation, the Indian government is denying the people of IIOJK their right to self-determination.
The Kashmiri leaders have also pointed out that the Indian government’s decision to impose taxes on the region without representation is a continuation of its policy of economic strangulation in IIOJK. They argue that the Indian government’s actions are designed to suppress the aspirations of the Kashmiri people and to maintain its control over the region.
Overall, the impact of the economic strangulation policies in IIOJK is likely to be extensive and severe, affecting not only the economic but also the social and political structure of the region. The people of Jammu and Kashmir are likely to face various challenges in the upcoming years as they strive to adjust to this new reality, highlighting the need for the international community to closely monitor the situation and take action to support those affected.
U.S. Is Threatening to Default China Debt Repayment, What Will Beijing Do?
Under Xi’s decade-long rule, China’s holding of US Treasury debt has been consistently declining, last year it fell by $173.2 billion – 17% of the total holdings of the US bond by China. This was the largest annual reduction in six years when the Chinese holdings were reduced by $187.6 billion in 2016. Experts reckon China will continue to reduce its holdings of US Treasury holdings in 2023. However, clamoring for selling US debt as soon as possible is growing by the day in China.
Financial experts say the ramifications of the continuing US-China political rivalry are now increasingly being manifested in arenas other than geopolitics – in the speeding up of the Renminbi’s exit from the dollar. International Capital Statistics (ICS) released by the US Department of Treasury this February show China’s holdings of US treasury bonds stood at $867 billion at the end of December last year – a month-on-month fall for five consecutive months. Viewed from escalating political hostility, this decline is a new low since Xi Jinping was installed as the party general secretary at the CPC 18th Congress in October 2012. Remember, this was also the time when the Obama administration had launched its China containment strategy, called the “pivot to Asia” policy.
Analysts point out, though the reduction in China’s holdings of US bonds last year is normal when compared with the overall 6% decline in the holdings of US treasury bonds in overseas countries, what is alarming is the decline in China is more prominent. Following the rapid raising of the interest rates by the US Federal Reserve Bank (FRB) last year, the 10-year Treasury yield – an indicator of US long-term interest rates, rose from about 1.5% at the end of 2021 to nearly 4% by the end of December month last year. Soon after the US Department of Treasury made public the ICS for the year 2022 on February 15, a Nikkei Asia analysis on its Chinese website stated, the sharp decline in China’s holdings of the US Treasury bonds was to avoid losses caused by rising interest rates.
Yellen: We Won’t Allow China Get Repayment Benefits
More interestingly, citing a large US bond management company the cn.kikkei.com article further pointed out the US sanctions on Russia after the outbreak of the Russo-Ukraine war as one of the leading factors behind China’s move to reduce holdings of US Treasury bonds. “China has raised its vigilance against similar measures being taken when the confrontation between China and the United States deepens in the future,” cn.nikkei.com wrote. As has been widely reported, top US officials including Antony Blinken and Janet Yellen have repeatedly said the US wouldn’t hesitate to sanction Chinese entities if Beijing aids Russia in the war against Ukraine.
A similar argument has been put forward by the mainland Chinese professor of economics Cao Xing last Sunday. Weary of the US game-playing on debt repayment (to China), Professor Cao said it’s time for China to clear its US debt. Earlier in February, when US Treasury Secretary Yellen in a stark statement said, “China cannot be allowed to get the benefits of repayment,” Cao described the blunt remark as symbolic of the US determination to politicize the issue. In his popular signed blog “Professor Cao Xing,” he wrote: “The debt scale of the United States has exceeded the debt ceiling of $31.4 trillion. On top of this, the ongoing banking system crisis has put everyone in the US financial sector at risk.” Cao went on to add.
Will US Actually Default China Debt Payment
At another level, a serious debate is unfolding among global fund management strategists in the US on the likely ramifications for the global economy in general and China in particular, if the United States debt default on the People’s Republic. In the opinion of Arthur R. Kroeber, a Washington-based independent economic researcher, and Editor of China Economic Quarterly – a publication of a global economic research firm, GaveKal Dragonomics, a big political drama promises to take place in the next few months over the federal debt ceiling – the GOP strongly opposed to raising the ceiling on the one hand, and the US Treasury defaulting on its debt on the other hand.
Disagreeing with those who argue the US Treasury bond “political drama” is merely politicking, such as Arthur Kroeber, professor Cao not only takes every word uttered by Secretary Yellen very seriously (that she won’t allow the US to pay up the Chinese debt), but he is also quite apprehensive that Yellen’s real purpose is to pressure and trick China into increasing its holdings of US debt.
Furthermore, the Wall Street Journal disclosed in a report the US deputy assistant secretary of the Department of Treasury for Asian Affairs, Robert Kaproth, visited Beijing in February last week to discuss macroeconomic and financial issues. Speaking about Kaproth’s visit, Professor Cao has revealed the “secret” mission Kaproth undertook to Beijing actually had only one agenda, i.e. to hope China would increase its holdings of US debt, but China obviously did not make any concessions.
Renminbi versus US Dollar
According to experts in China, the gradual yet continuous decline in China’s holdings in US Treasury bonds is increasingly causing concerns in the United States. In the past decade or so, China has reduced its holdings of US debt by 34%; China currently holds $859.4 billion US debt which is at the lowest since 2009. Analysts in China say, the US fear is China will drastically reduce its US debt holdings to as low as $100 billion. Earlier on, before the visit to China by Blinken became a casualty to the “spy balloon” drama, Treasury Secretary Yellen was to accompany the Secretary of State.
Yellen’s chief mission to visit Beijing in early February was to resume discussions with her Chinese counterpart, Vice Premier and China’s economics tsar Liu He – left off in Yellen-Liu meeting this January in Switzerland – to “deter” Beijing from further selling its holdings of the US bonds. It was precisely to achieve the agenda of preventing continuous decline in China’s holding of US bonds that Yellen had announced US will not let China enjoy benefits of “repayment.” It is this naked display of the US determination to default on the Chinese debt which might lead Beijing to create a substitute system to dollar by internationalizing the renminbi.
By Defaulting, Is US Aiming At Regime Change In China
In short, as Kroeber has wondered, the consequences of the US debt default may not be threatening regime change, instead it will be damaging enough to destabilize the renminbi. It is pertinent to mention, in the event of a global meltdown caused by the US federal government shutdown (if it happens, it will occur in coming June), unlike during the 2008-2009, this time Chinese economy would be hurt a lot. For two reasons, back in 2008-2009 the Chinese Communist Party quickly unleashed a massive debt-financed economic stimulus program; second, fifteen years ago, the country’s debt level at 140 percent of GDP was rather low, but today its debt has soared to 300 percent of GDP.
Finally, experts in China are fully aware of the limitations to internationalize the renminbi, just to mention a few: unlike the US dollar, the renminbi is by far hugely insulated from global financial shocks, and to bring money in and out of China requires permission from Beijing (a.k.a. capital controls); like the US dollar is considered the world’s lynchpin currency, the renminbi is not; the renminbi accounts for just 2.8 percent of global official central bank reserves as compared to 60 percent and 20 percent for the US dollar and euro, respectively. Without a doubt, therefore, Cao and many Chinese experts are clamoring for an easy and quick way out: since the US has made it clear Washington won’t repay Chinese debt even if it has the money, the best solution for Beijing is to at once clear all of US Treasury bond holdings. But can China, do it?
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