China Boom CMS

<p>What happened after 2001, and the big surprise, if I may so, is that the world economic growth was based on this extraordinary symbiotic relationship between China and the United States. The US was able to sustain high growth, with the exception of the post-September 11 recession, which was short and shallow recession. But, it was highly leveraged growth, and now, with the hindsight, we can say that this growth was fueled by very, very lax monetary policy, low interest rates, an almost irresponsible abundance of credit, a lot of debt, a highly leveraged economy, and cheap consumer goods provided by China, together with the financing for these imports of Made-in-China goods. So, China began accumulating huge trade surpluses, with the US even more than with the European Union. The trade surpluses became important with the European Union only later on, but with the US, almost immediately. At the same time, these surpluses were recycled through the reinvestment of currency reserves into US dollar-denominated securities, mainly Treasury bonds. So, this was rather extraordinary. You don&rsquo;t find in world economic history a precedent of the most advanced and richest economy running a structural deficit and becoming a structural net importer of capital from an emerging country. This is a very, very strange situation. Britain, at the apex of its empire, was a net exporter of capital. Britain was a net investor in the rest of the world. So, it is a very, very exceptional situation, and this was certainly one of the recipes of the boom.</p>