People now blame China for everything. Food up? China is too hungry. Fuel up? China is using too much energy. Now, China is even getting blamed for the price of Christmas trees.
“Chinese Demand Sends Christmas Tree Prices Soaring,” says the headline. Followed by:
“A combination of rising Chinese demand and the biofuel boom is pushing up Christmas tree prices in Germany. Producers say they just can’t keep up with demand from Asia’s economic giant.
“According to the German timber industry’s umbrella organisation, the HDH, demand for Christmas trees is rising due to increasing exports and the growing number of single-person households. Meanwhile the supply of trees has decreased because several thousand hectares of tree plantations in Germany have been given over to more profitable uses, such as lucrative biofuel crops.”
So the Chinese are greedy for Christmas trees too!
In the Middle Kingdom itself, prices are rising so much that government officials have decided to do something stupid. They’re holding prices down. The NY TIMES:
“That fear of inflation – not to mention political and social unrest – has led Beijing to prevent the country’s mostly state-owned oil companies from increasing diesel prices at the pump in pace with global oil prices. Raising fuel prices for farmers, whose incomes have lagged behind those of city dwellers and who need diesel for their tractors, is one concern. Lower diesel prices also essentially subsidise every manufacturer in China’s elaborate export machine.
“Low diesel prices frequently make trucks more cost-effective than trains, which pollute less. Sales of large freight trucks in China outpace those in the United States by a wide margin. Demand for diesel at service stations is so great, and supplies are so tight, that rationing and shortages have become common. Truck drivers idle for hours only to be allowed to buy as little as five gallons of fuel.”
Let’s get this straight. China holds the price of fuel down so that its factories can continue making cheap products for the United States. The United States, meanwhile, prints dollars so that its consumers can continue buying cheap products from China. Then, China accumulates dollars – its trade surplus is nearly a quarter of a trillion this year. Then what happens? What do they do with the money?
Ah, this is where it gets interesting. There’s a new trend in global finance. Both the exporters – like China – and the oil producers – such as Saudi Arabia – have to figure out what to do with the loot. They need to find a way to use it without destroying its value. So, they are creating their own Sovereign Wealth Funds.
Markets and Money