China is coming after America big time in the world markets, and we are sticking our heads in the sand. Recently there was a bit of a stir created among observers of the U.S. economy when the Chinese-produced car Geely was shown at an auto show in this country. It was clearly a sign of things to come, with some predicting that Chinese cars will be sold in the U.S. as early as the Fall of 2006. It's just the tip of the iceberg.

The car is simply the latest, most visible and tangible evidence of China’s willingness to take on U.S. businesses by competing in various world markets. The Chinese threat to U.S. economic stability is very serious and becoming more serious all the time. China has awakened in a huge way as a global competitor. Many writers have commented on the new Chinese strategy of global economic assertiveness. Nowhere have we at the Heathen Middle seen all of the elements of this influence articulated in a single writing.

Bill Ridley, the editor of the Energy publication 321 Energy captures the big picture this way:

“You name the commodity and China’s buying it and consuming it in HUGE quantities. Last year they consumed nearly half of the world’s cement, twice the world’s consumption of copper, and nearly a third of the world’s coal, 90% of the world’s steel plus nearly every other commodity you can think of has been in greater demand by China.” (Read more of his opinion here )

In recent years U.S. electric generating plants which operate on coal have had to buy on a volatile coal market which is driven in great part by Chinese consumption. This increasing cost has been passed on directly to the U.S. consumer of electricity. The long-term significance of China scooping up 90% of the world’s steel in any given year is yet to be calculated.

The real competition will come in the form of increasing demand for fossil fuel energy. The International Energy agency predicts that in the absence of many new government policies or accelerated deployment of new technology, world primary energy demand will rise by 59% from now until 2030. The IEA further predicts that two-thirds of the new demand will come from the developing world, especially China and India. That will put incredible pressure on already problematic world energy markets.

All of this is going on while economists here in the United States and elsewhere are expressing concern that a growing U.S. debt is troubling for the economy. The Federal Budget Office has predicted the U.S. deficit in 2006 may be the highest ever recorded for a single year at 477 billion dollars. (The debt of 413 billion in 2004 was the third highest annual deficit in the country’s history.) As of 1/18/2006, the total national debt amounts to $8,173,852,299,316.96. This is according to the U.S. Treasury Department’s Debt to the Penny website.

How much of this is held by China can become a bit sketchy. Estimates range from about 250 billion dollars, when one looks at only the U.S. treasuries held by China, to almost 2 trillion, if one adds to that all of China’s cash holdings. The purchase of U.S. debt by China has increased by more than 100 percent since 2001. Why should anyone care? It is crucial because the mere hint by China that they might sell off any large pieces of this debt could have a myriad of impacts on the U.S. economy. This could include rising interest rates, fueling inflation, increasing economic instability. This power, coupled with the massive power of energy and supply consumption now being expressed by China, gives the country a level of control of U.S. economic fortunes which is unprecedented and disturbing.

So long as our balance of trade with China is hugely weighted such that most of the money for trade flowing in their direction, one might guess China has no reason to upset this apple cart. According to the U.S. Census Bureau, our trade deficit has more than doubled to more than 15 billion dollars, since 2001.

As long ago as 2003 none other than Warren Buffett warned in an article in Fortune Magazine that: "America's growing deficit is selling the nation out from under us." He pointed out that (at that time) the world owned 2.5 trillion dollars more of the U.S. than we owned of other countries. That was before China's most recent big push to buy America.

If we attempt to create a more fair balance of trade and take strong steps to even the playing field with the Chinese, they may exercise some of their new economic strategies for the U.S. with troubling consequences. America must do everything we can to reduce the national debt and unravel some of this economic mess. Unfortunately the U.S. is being robbed by crooked politicians and greedy corporate CEOs at a time when the nation's future could depend heavily on our making some sound and frugal economic decisions and investments in the future.