China has become the most trading nation in the world, according to last statistics. It surpassed USA, just as it did this as the biggest exporter that happened in 2009 (surpassing Germany). But more interesting is something else. China's foreign trade is almost half of its GDP. While US foreign trade is about 25% of its GDP. Obviously both economies are open ones, but it is also obvious that China is simply extracting businesses and income from USA (and from other nations too). Without this high trade, including the enormous trade surplus, China would not have such a good economic growth. I.e. China is not so much creating new economy and new markets, than is redistributing the old economy in its favor. And this process is deepening because more and more US businesses are going to China.

The whole economic system of the so called developed world is collapsing due to the chaotic globalization and uncontrolled free trade. China is taking step by step first places in all economic indicators and it is not so distant the time when it will take over the GDP leadership. But if the processes continue in the current redistributable manner this will simply mean that China will not create new GDP to surpass the USA, but it will collect some of the USA's GDP.

Politicians are blind. They don't see the tearing between production and consumption, whose symbol is the current boom in global trade. It is a destructive trade that ruins the old developed countries, and not a constructive trade that has built up these economies in past. The difference is very deep.

Constructive is a trade that keeps producers and consumers together. Every man is producer when going to work, and a consumer when going to the shop. Everyone woks and creates goods and at the same time - consumes goods.

Destructive is a trade when some people are only producers while other are only consumers. Today Chinese are producing, while Americans are consuming. This is not a stable situation and it can not be supported long by printing dollars. But while still working this system creates an enormous international trade and converts China to the number one trade nation in the world.

I.e. increasing the volume of trade in not always a good news. It is good with the constructive trade and not so good with the destructive.

When the destructive trade system collapses, the consumers will lose their source of goods, and the producers will lose their markets. Both sides will go worse...

China is winning one after another inevitable economic victories. In fact this was predicted decades ago when some scientist proved that with open markets the industry will move from developed to developing countries. In the meantime there was some political and non exactly economic obstacles that helped developed countries remain developed and have built up a good wealth. But now these obstacles disappeared and poorer countries are simply extracting wealth from the richer. The symbol of this extraction is the skyrocketing international trade. But the problem is that it is extracted not only the wealth, but also the system of creating it. And to be preserved the trade, that is impossible with torn producers from consumers, the money print is expanding - to create a virtual income with consumers.

But this can not last forever, because producers are receiving nothing for their production. At the end everything will collapse. And even the winning up to then victory after victory China, will be among losers.

The general philosophy is mistaken. Economic units (including entire states) must be kept whole and relatively closed - so they can survive by producing the consumed goods by itself. Of course very small units can not do this and will have to unite (for instance EU). But generally, the global open market system creates this - a still developing country to become an economic leader. And that will simply meant not that it has become a developed country. It will mean the former developed countries has fallen below it. It already happens. In Spain 56% of youth people are jobless. First and more vulnerable parts of developed world are already going out of the game... USA will be next.
Unless the neo-protectionism philosophy is understood and implemented.

Dobri
Feb 9th 2013