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There's rural China and city China, and they have little in common. Having said that, most of the GDP is in the cities so it looks like the economy really isn't all that oil-dependent (of course, it's coal-dependent).

The IEA data is in MToe (million tonnes of oil equivalent) and the international fossil carbon markets tends to be priced off oil regardless of whether it's coal, oil or gas that is being considered.

It's not going to be a spike, but a prolonged shortage. So ability to adapt may be more telling in the long run than currency reserves. Besides, USA may simply print dollars as they are insanely accepted in most places.

The range of imports to reserves is about one hundred from China to the US or Western Europe. That is, if it comes to that, China can buy itself 100 times more time with its currency reserves. And the amount of money the US would have to print to balance that would crash the dollar. Also, China has reserves or the order of its GDP (!) so it can be several years' worth of oil purchases (at current prices).

As for trends I'd need time-series data ($0.03 per data point to access the IEA database gives you an idea of the order of magnitude of the price of data), and for social cohesion I don't even know where to look...

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Tue May 27th, 2008 at 05:50:04 AM EST
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I realise that it's oil equivalent -China has its own coal, so they won't import all that much when they can use coal.

Anyway, I'm sure they will be able to buy what they need. The question will be how all that plays out (if they use their reserves, they will no longer prop up the dollar, exchange rates will change a lot...). Still, it's clear that their huge reserves are an amazing cushion.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue May 27th, 2008 at 07:12:43 AM EST
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As much as both economists and politicians like to forget this, econometrics only gets you so far, and then politics takes over.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Tue May 27th, 2008 at 07:24:21 AM EST
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Also, if social upheaval disrupts the export machine what  will most large US retailers do?  And what are the possibilities of loss or destruction of foreign capital? In such a situation, what, practically, do their large reserves of US dollars mean?  They have a lot of nukes and delivery systems and the military and communist party are still the two strongest institutions.

They have not used a period of unprecedented prosperity  to develop more articulated social structures as far as I can see.  The rule of law and impartial justice are still pretty much new and foreign concepts. On what can they fall back?  The "Little Red Book"? another "Great Flop Backwards"?  It could get interesting.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu May 29th, 2008 at 01:07:19 AM EST
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to put in my twopenn'orth on the reserve's issue of China and the EU/US. I think you have it seriously wrong.
  • if EU/US seriously crash, $/EURO is worth nothing any more, so China couldn't buy oil from it
  • reserves doesn't say anything about the state's fiscal health. China is not communist any more. The current account surplus (which by the way is in the same order as Germany's) is not state income. The enterprises change their earned Dollars to RMB, which means, the state has the Dollar, but the enterprise has the RMB. To prevent inflation from too much RMB, the Chinese state sterilises a part of it by selling RMB debt, that means the Chinese state has lots of Dollars and lots of RMB debt. As recently the Chinese reserves increased much much faster than the current account surplus mostly due to speculators betting on RMB appreciation, quite a lot of these RMB are owned by foreigners. Of course the Chinese state could disown foreigners owning enterprises and RMB in China, but that would give other countries the perfect opportunity to do the same with the bonds hold by the Chinese state. Currency depression is an export subsidy, and not a cheap one.
  • the currency depression in China has led to negative interest rates. This has led to massive malinvestment, certainly much bigger than e.g. currently in the US. As you can see there, if suddenly the hot stuff, e.g. low interest rates or a depressed currency, vanishes, the malinvestment will not be profitable any more. China is in a serious trap and won't come out of it without real trouble. You may google 'Michael Pettis' to find a blog, where he speaks about such stuff. So using the currency reserve will not only devalue the currency reserve, but as well impose serious trouble in the Chinese economy, even without peak-oil.

  • countries who suppose to be reserve currency countries don't build up reserves. It doesn't make sense. Therefore it is not useful to put in the US and probably not the Eurozone into your picture
  • everybody can want to be the reserve currency, but in the end you are dependent on the trust of others, that you will deliver some decent goods for the paper you sell them for goods. I can't give a formula, how to build trust, but certainly the $ and the Euro are the currencies in which reasonable agents would invest more than any others (or currently mostly the Euro, as the $ currently is mostly bought for political reasons, but when there is peak oil, maybe some countries will still be happy to be a friend of the guy with the biggest cannon)


Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Thu May 29th, 2008 at 08:26:27 PM EST
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