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Head On A Swivel – Financial Market Blog

I’ll take “the” future superpower for $1000 Alex

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China Making its Not so Subtle Move?

China has been dominating the front page headlines with its GDP growth (see Chart below) but there are other back page happenings that are very interesting as the world’s superpowers realign themselves. To be a superpower, among other things, you need to have a strong military, strong financial system, technology advances and improvements in your standard of living.

Case in Point:

Point 1 – Military Superpower: while US military spending accounts for 41% of the world’s spending, the Chinese is a distant second at 6% but they have increased their military expenditures nearly three times that of the US from 1999 to 2008 (194% compared to 67%). 

 Point 2 -Technology advances and eye in the sky: we note with significant interest that the US space program is scheduled to retire the shuttles this year and if there is a delay in getting Constellation (“next gen” shuttles) in the air the Americans will be hitching a ride with Russia or the Chinese (China is also planning moon landings and is expected to have the capability this decade).

Point 3 – Financial Super Centre: China is taking a major step in elbowing its way into the financial markets by having approved ‘in principle’ the creation of stock index futures, margin trading and short selling which will be implemented later this year. These are all tools that are commonly used  by sophisticated market participants. As China moves to evolve Shanghai in to an international financial centre they are also taking its first steps of a long road towards turning the Yuan to a fully convertible currency.  The US by far and away dominates as a reserve currency but the trend is down and the Chinese have been taking “basket currencies” to the IMF (nothing like kicking a dollar when its down!). 

Point 4 – Improving Standard of Living:    The Chart on page 5 says it all. A strong military, strong space program, implementing a super financial centre of trade, a fast and growing GDP.

Alex – I’ll take ‘the’ future world Superpower for $1000 – it use to be an easy answer! 

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Written by thehallmarketreport - Head on a Swivel

January 11, 2010 at 11:36 am

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