Excuse my total ignorance on the subject, but if this volitile market is to address a trade imbalance and fed rate cuts are designed to put pressure on China (Pure speculation btw) to float thier currency.

What do China actually produce that you would need to get by in everyday life?

China produces pretty much everything in the engineering and technology sector now so we are pretty much dependent on their manufacturing power for consumer goods. They're now the workshop of the world, the way Britian was in the 1800s.

For example, take your iconic consumer good, an iPod: it is branded Apple and designed in California but the components will all have been made in China and much of the assembly done there too. My partner works in semiconductors and has been to the factories in Ningbo and seen the teenage girls putting in all the tiny components (tiny fingers and cheaper than automated production which is what would be used in developed countries).

An iPod's an item of discretionary spending of course so to answer your question on what we would actually need from China: car and plane components, most plastic moulded goods (kitchen utensils etc), furniture, clothing (although a lot of that has moved to Vietnam, Laos etc now) and most microchips for computers or any microchip-based technology (including medical devices etc) now. There is basically only a small amount of manufacturing left in western countries. Think about it: when was the last time you bought something with the label "made in the UK" or Germany, other EU countries, USA etc?

Believe me, the world economy is completely dependent on Chinese manufacturing. If Western companies weren't so greedy a lot of this stuff could be done in Western countries using automated production but cheap Chinese peasants don't involve any upfront capital expenditure and it's the trendy thing to do right now so China it is. One thing to be aware of is that just because your computer says "designed in California" it doesn't mean it is made in California. It sounds obvious but most complex hi-tech goods are made of components from a wide range of contract manufacturing and supplier companies and most of those companies are based in China now.

It seriously amazes me that no-one seems to be aware of this in the West - the myth still persists that China just makes 'cheap tat' - nope, I'm afraid they make absolutely everything. If they shut off the trade channels in the morning, UK shops would empty in a matter of days.

virtually every low cost item containing plastic or metal, large number of electronic components, clothes...you know, the basics of 21st century life.

[quote name='Yoss' post='832683' date='Nov 1 2007, 11:08 PM']Excuse my total ignorance on the subject, but if this volitile market is to address a trade imbalance and fed rate cuts are designed to put pressure on China (Pure speculation btw) to float thier currency.

This posted twice for some reason...

Nasal hair trimmers...

In this forum we talk about 'reverting to mean' a lot - therefore if you look at the historic place of china in the global 'mean' you will find that until the late 1600's it was by far the largest single economic entity in the world and accounted for about 30-40% of the global production from a thousand years BC till that time.

The last 400 years and the decline of China's position in global output is what has been abnormal.

The USA is certinly waking up to the potential competition from China and is one of the reasons why they are getting so agitated with them holding so much of their foreign debt and not allowing the currency to float.

However, that's all current...what we have to look forward to is what will the world be like when actually the major economic power is China and focus moves from the west back to the East.

In 'Do Androids Dream of Electric Sheep' (turned into Bladerunner) Philip K Dick sets his distopyan future as one where China has reasserted their position in the world - it makes an interesting viewpoint and certinly influenced me over the years....

However, an interesting starter article is

http://www.nybooks.com/articles/18437

"Focus on China is overdue. For the last quarter of a century its economy has been growing by over 9 percent a year, increasing eightfold. However, it is not just this long-sustained hyper-growth rate that amazes and alarms the observer. It is the size of the economy which is growing. China's population is officially estimated at 1.3 billion, but is probably larger—one fifth of all the people in the world. This makes its rise much more important than that, say, of Japan in the 1960s. From the economic point of view its cheap labor is much more abundant, so its cost advantage will not quickly be eliminated. The size of an economy obviously matters, too, in measuring power. The Chinese economy, in terms of the purchasing power of the Chinese people, is about two thirds the size of the US economy.[2] If it continues to grow at 9 percent a year, it will overtake the US by 2014. Lee Kwan Yu of Singapore believes that the rise of China will shift the balance of power back to the East for the first time since Portuguese caravels arrived there in the sixteenth century."