China, as anyone with even a passing interest in the way Beijing operates knows, thinks long term. Want to be big in clean energy? A 10-year plan will be on your desk within the month, sir. Need to gain access to basic resources? We will send teams to Africa, Central Asia and South America immediately, boss.
Over in the developed world things are not that easy with elections, quarterly reporting and 24 hour news driving agendas so short… sorry what was I saying?
Anyway Tim Scala, the macro-strategist from Sophis Investments said the Chinese have shown great patience dealing with the "children" that are America and the West.
“For the Chinese, dealing with us requires almost infinite patience, since they recognize our demonstrated lack of capacity for long-term thinking” Scala said.
“For them, they must feel as if they are dealing with children," he said.
"The adults are involved with the long-term restructuring of their economy, migrating from an export-driven, low-cost production model to a more stable consumption-driven economy where their own citizens buy from their own producers."
The US and Western world, on the other hand, act very differently and the Chinese know this and cut us kids some slack because hey, we're only kids.
“We often act at the expense of long-term stability by pursuing short-term, politically popular actions," Scala said. "Bluntly put, this super short-term thinking is almost childlike."
“A massive trillion-dollar stimulus policy coupled with a health-care initiative with costs virtually impossible to calculate, at the very time that we face record levels of debt, speaks volumes,” he added.
Chinese Show Patience and Wisdom
As last weekend’s announcement on the yuan and the currency's small rise against the dollar shows, the Chinese have learned how to keep the US amused over a 24-hour news cycle, Scala said.
“Since they are annoying us about our currency, let’s give them a piece of candy so that they remain quiet at the at the G20 summit," he said.
As the Europeans and US prepare to square up over austerity or further spending the Chinese can sit back in relative peace and enjoy the action.
“Even if the Chinese allow a slightly stronger yuan it would only have a marginal impact on short-term trade flows and would actually benefit China’s longer term objective” Scala said.
“When the Chinese infrastructure is complete, with roads and transportation linking the country, they will have developed a 'fortress economy,' insulated from the vagaries of Western instant-gratification policies like ours." “Until that time, China will continue to export to us, use the proceeds to buy our bonds (more candy) until they need to sell them to finance the development of their own economies.”
At that point we in the West might need to grow up as China could well take all the toys home with them.