Non-deliverable forward contracts show traders are betting the yuan will reach 7.0070 in 12 months, a gain of 6.9 percent from the spot rate, and 6.95 by the end of 2008.This would put the exchange rate at 6 to 1. China's economy next year would be almost equal to Japan on an exchange rate basis.
The government should revalue the yuan by as much as 20 percent, according to a report circulated inside the National Development and Reform Commission, Market News International said.
The Center for Responsible Nanotechnology has an article about China and quotes some papers discussing China's weaknesses
Any business or country has vulnerabilities. China is not unique in this regard.
In terms of things built on sand, the same could be said of any technology or business startup. Google had and continues to have vulnerabilities, but fast growth and momentum are powerful assets.
High growth companies can do things and are given money and business deals because of their fast growth. The most recent example is Facebook. They got $240 million for 1.6% of the company from Microsoft.
This is more than Facebooks 2007 revenue. The $240 million likely funds Facebook through their IPO, when Facebook will get even more money and will be able to further strengthen their actual business and revenue and profit generation.
Year and year China is getting $40-70 billion/year in Foreign Direct Investment.
Keep that up for 3 decades + and a lot of that is not a "pyramid scheme".
The longer you can keep it going then the more the sand can be turned into cement.
As for China fooling foreign investors. Profits for foreign companies in China are booming. The promise is being realized.
China's middle class is rapidly expanding. So domestic supporters are being "fooled" with real lifestyle and economic gains.
China does not need to force its military budget to the percentage levels of the Soviet Union. They have enough deterrence and even if China's economy is twice the size of the USA. The US military will not be shrinking. It would be idiotic to build more military to try and win a military conflict with the USA or Russia or China. They all have reached military critical mass and more stuff will not win the day. A
completely new technological and strategic approach is another story, but just bigger budgets is not the measure.
The evidence that I have seen shows that Chinese leaders have a rational future vision for China and by and large are trying to make choices for the good of the nations future. There are problems and they are being addressed.
It is in the interest of all people to want China, USA, Russia, India and the other nations to succeed and continue to succeed.
Just as in the last century the US can be the big winner but that does not mean the UK, Canada or others have to lose.
Economic competition can and should be win-win.
It would be in the interest of the USA to help China fix its problems with the environment and corruption. Big unrest and loss of central control in China could make us long for the days of only having unrest in the middle east.