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News Why is European Union so irrational in regards to trade with China?

  1. Sep 20, 2012 #1
    The trade balance between EU and China is -156.3€ billions, yet today EU agreed with China (http://uk.reuters.com/article/2012/09/20/uk-eu-china-summit-idUKBRE88J0QR20120920) to avoid trade protectionist measures. They keep doing this because China keeps buying EU countries' bonds and has many euro-denominated assets. I honestly think EU is selling itself, by giving money and economic power to foreigners. And this could be handled differently even with the debt EU countries have. For example, Japan is the country who has the most public debt to GDP (230% in 2011 - http://en.wikipedia.org/wiki/List_of_countries_by_public_debt), well ahead European Union's. But the difference is that Japan's debt is mostly owned by the Japanese (http://www.usatoday.com/USCP/PNI/MONEY/2012-01-08-PNI0101biz-ask-stevePNIBrd_ST_U.htm), so the interest money goes to their citizens.

    The trade balance of China and US is also terrible for US. What is the West doing? Where does this irrationality come from?
     
  2. jcsd
  3. Sep 20, 2012 #2
    Interesting article I came across today:
    http://www.bbc.co.uk/news/world-us-canada-19667754
     
  4. Sep 20, 2012 #3

    SixNein

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    What is their trade debt holdings of foreign nations vs debt out?

    For example, $4.74 trillion of US debt was owned by foreign countries. And the US owns about $6.76 trillion of foreign debt.

    http://www.treasury.gov/press-center/press-releases/pages/tg1285.ASPX
     
  5. Sep 21, 2012 #4

    chemisttree

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    Everyone is out of ideas as to who will fund more massive spending debt. China is handy and so having them buy the debt allows the leaders in the West kick the can down the road a little longer. The US prints its own money so it can monetize its debt at the cost of inflation. The EU may make moves in that direction as well.
     
  6. Sep 21, 2012 #5
    Tosh5457:

    German 10 year bonds offer 1,5% per year, while in the same time inflation should be round 2% (now it's 2,2%)

    It means that effectively you would pay Germans 4,8% of your deposit in real terms for asking them to keep it for ten years. Do you consider that as a poor business for those in Europe??? (not mentioning gains from increased trade exchange)
     
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