An empire is just like a stock. A stock can goes up from $1 to $500 a share and then from $500 back to $1. Likewise great empires such as Roman, Qin, Mongol and Ottoman saw their rise and fall in the history of mankind. Now we do not talk about empires militarily but rather economic powerhouse. Economy invasion is the most successful weapon used in the modern colonization game.

Everybody is happy with this method of colonization because no life is lost and you get to enjoy the nice taste of Coca-Cola, Starbucks Latte, McDonald’s burger and other products manufactured overseas – minus your money of course. One of the interesting and never-ending debates is of course the following: Will China becomes the next super power-house leaving United States eating the dust?

Somebody out there is screaming nonsense that China will ever achieve such a milestone. But China just made the headlines last week when it overtook Japan as the second largest economy in the world. And before that China kicked Germany for the third place, no? Do you know that United States is so bankrupt that the country’s real fiscal gap is a staggering US$202 trillion? That’s more than 15-times the official debts according to Boston university economics professor Laurence J. Kotlikoff.

Sure, the U.S. dollar is still the currency of choice but that’s because America is the most stable democratic country in the world. And this single reason is being abused so much so that U.S. can print the currency as and when it likes. But who can blame the powerhouse when even the largest oil-producing regions in the Middle East chose to use dollar in oil-trading.

And just because China’s economy is run by a communist government doesn’t mean the country cannot be the “most stable communist country” in the world *grin*. The next argument would be the Chinese are corrupt (guess you haven’t heard of a country called Malaysia), doesn’t have Social Security and health-care and whatnot. But interestingly the communist government seemed to know better than America’s senators and congressman in creating jobs *whoa*.

The cash-rich Chinese government is slowly reducing its U.S. government debt ownership. China, the top holder foreign holder of U.S. debt, is diversifying away from U.S. dollar in favour of Yen and Euro throughout 2010, not to mention gold. Even McDonald recognizes the Chinese-Yuan when it became the first non-financial foreign company to launch a Yuan-backed bond offering.

If the trends continue, U.S. dollar may slowly lose its shine with more companies and countries choose the yuan instead of dollar. However China needs many more years to achieve this vision. For the time being China still needs U.S. to buy its cheap products. China is working hard in improving its quality and burning midnight oils learning (or rather copying) U.S. technology. But hey, even Japan was a master in copying U.S. technology once.

Whether America is yesterday’s success story and China is the future remains to be seen. What we all know is China will not repeat its mistake twice after the collapse of the old empire. Didn’t China invented paper, compass, printing, gunpowder etc? Heck do you know that the famous U.S. oranges were once taken out from China to the New World to be planted and now known as Sunkist? So what shall you do? Teach your kids Mandarin. But then the Malaysian ruling politicians are busy asking such human-capital to go back to China (stupid isn’t it?).

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August 25th, 2010 by financetwitter

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