It?s Not Just about Stir Frying: Chinese slang for speculating in the stock market. According to the US Treasury Department, if you look at the ownership of US Treasury debt by the numbers, foreigners still consider United States capital markets the place to be when it comes to liquidity, safety, and regulating their markets.

At the end of February 2004, Japan owned $607 billion of US treasuries, and no surprise, China was second with a $145 billion followed by the UK with $137 billion and quite interestingly, the Caribbean Banking Centre (Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, and Panama) with $74 Billion.

US Treasury purchase reasons vary, but we know that price competition from Chinese manufacturers (who buy and sell in a yuan pegged to the US dollar) has kept the Japanese and other central banks buying Treasuries to keep the value of the yen, the South Korean won, and other Asian currencies from climbing to the point that these countries would lose export share to Chinese companies.

Globally, high internal currency values can dampen exports. China, an ancient nation of sophisticated dynasties, is coming on strong in the new world order.

And the focus on China, of late, is growing and intense. Consider these facts about the Chinese economy and its citizens:

An extraordinary world-wide savings rate of an average 40 percent of their incomes has given rise to a fast-growing middle class with a real penchant for consumerism. By contrast the US population savings rate is at an all-time low; Bermudians fall somewhere in the middle ? yes, we do save.

They posses the economic clout potential of 740 million working-age adults looking to secure their financial future. And you thought soybean oil was for cooking!

According to Jim Jubak in a recent article in the street.com, even a minor shift in the individual behaviour of China?s estimated 1.3 billion people can change the global economy.

A recent estimate by Chicago agricultural forecasting firm AgResource stated that if every person in China consumed one more tablespoon of soybean oil annually, world trade in soybean oil would double.

They are no strangers to investing. In 1891 the first stock exchanges was set up in Shanghai, becoming the largest, wealthiest stock market in Asia until the war with Japan in 1941.

The end of the Mao era embraced the beginning of the new economic transformation and a new stock market. Chinese stock shares are categorised in A for domestic investing, B for foreign currency and investors, and C for state-owned companies and banks.

An estimated 45-50 Million Chinese have their own trading accounts, second only to US individual investor involvement and domestic demand among Chinese for their local shares is very, very high. China has become extraordinarily good at the use of technology for distribution.

We tend to make assumptions about other countries, perhaps even considering them somewhat backwards, and are always surprised and amazed when they are not.

Where have you been lately? The minute a country learns to maximise the Internet, they become global participants. The Chinese appetite for Western-brand merchandise and luxury goods is growing, fed by CNN and satellite TVs.

An estimated 300 million Chinese watched the last Super Bowl; routinely, 200 million tune in to see their own Chinese star centre Yao Ming, featured in the NBA?s Houston Rockets.

China has helped lower mortgage rates in the US and elsewhere. China?s influence in the US bond market extends far beyond its own purchases of US.

Treasuries and ?agency paper? issued by Fannie Mae and the other government agencies that dominate the market for mortgage-backed securities.

China manufactures about 80 percent of all toys sold in the US Just walk into the toy section of a Wal-Mart (oh, admit you were there), if you want proof that China?s emergence as a global economic power reaches deep into the lives of those who live and travel to the US.

Toys are cheaper at Wal-Mart, where an Etch A Sketch sells for just $9.99. The ramification of Chinese production in the case of a 40-year old American favourite is that in 2001, Ohio Art moved production of Etch A Sketch to China from Bryan, Ohio where manufacturing jobs paid $9 an hour, to where Chinese workers at the new manufacturing plant make 24 cents an hour.

To cut US manufacturing costs, more downward pressure is placed the pensions and health benefits of U.S. workers because most of the workers they?re competing with don?t get those costly perks.

More US people then shop at Wal-Mart to keep their budgets in line. And it becomes a circle. Chinese manufacturing demand has meant higher energy prices, especially at the gas pump.

China has helped generate the explosive growth in for-profit education. When the job market gets tough, the tough go back to school. UBS Financial Services calculates that about 17 million adults in the U.S. fit this bill.

Just think of all those people, who are embracing capitalism in a very big way. So, is what is happening slowly and inevitably that the West is exporting style, luxury goods, and individualism to the East, and we are becoming more homogeneous generic nations of WalMart shoppers? I hope not.

In a perfect world, could we, known by the East as the decadent West with our hip lifestyles, fashions, innovations, creativity, cars, and cache travelling, sell enough of our unique ?branding? to offset our own aggressive desire for more things ? big, small, indifferent ? just as long as they are cheap and plentiful?

By golly, might we, in the West, even achieve trade equilibrium in about ten years, instead of looking at some of the largest trade deficits (almost) in history?

Maybe we will even find ourselves catering to the Chinese tourist trade ? with 250 million middle-class right now, one tenth of one percent ? enjoying Bermuda each year would be mighty nice. This is the free enterprise system in action.

@EDITRULE:

CPA/PFS CFPb is a Bermudian, and VP, Investment Centre , Bank of Bermuda. She previously owned a United States financial services practice. She can be reached confidentially at 299-5578 or at marthamyronnorthrock.bm. The article expresses the opinion of the author alone, and not necessarily that of Bank of Bermuda. The Editor of has final right of approval over headlines, content, and length/brevity of article.

@EDITRULE:

Referencing articles from the street.com By Jim Jubak MSN Money Markets Editor and China:The New Frontier, Ernst & Young Retail News/Spring 2004