SeriousBull

Obama Message to China

Tags: China + Economy + Foreign Policy + Interest Rates + obama + Russia + Stocks

President Obama has now twice rankled the Chinese by making decisions that China believes are not supportive of its One China Policy. With his latest overture to meet with the Dalai Lama whom the Chinese government considers a separatist exile seeking support of an independent Tibet, President Obama is rubbing salt in a festering womb. Earlier this week the President asked Congress to approve an arm sale package to Taiwan consisting of Blackhawk helicopters, Patriot Missiles, and sophisticated radar/laser equipped military ships valued at $6.4 billion. Both these actions appear completely contradictory to Obama’s November Summit pledge for that explicit policy. No doubt China is likely to retaliate as they have publicly stated they would do over the arms sales.

For the US and our economy the arms deal comes as a welcome aide to jobs in the defense industry at companies such as Boeing, Raytheon and McDonnell Douglas. No doubt the Administration calculates that they can dissuade the Chinese from any serious retribution. But this move is akin to dumb George’s push to line the Polish border with missiles aimed at Russia. Fortunately, President Obama reneged on that foreign policy faux paux engaging the Russians to cooperate on the US’s Iran and Afghanistan policies as well as entering into a new nuclear arms reduction agreement.

So its high noon and China’s move. Already the JP Morgan Chase has piled on downgrading China’s market. Goldman is covertly quiet. Investors should watch closely. China holds a hot hand and could give the US interest rate trouble if they were so inclined. Such an economic rebuttal would derail the US recovery. Stay tuned.

February 3, 2010 - Economy, Markets