President Obama’s National Economic Adviser Lawrence Summers has just landed in Beijing along with Deputy National Security Adviser Tom Donilon, Asia Desk NSC senior director Jeff Bader, and National Security Council Spokesman Michael Hammer. The China Daily reports this morning:
The arrival of two high-ranking US officials in Beijing [it's really four] on Sunday signals the willingness of the two countries to push for more positive development in bilateral ties. . .A timely exchange of views on core issues of mutual concern is conducive to effective cooperation as well as to ironing out differences and hurdles standing in the way of ties between the two big towers. The talks between the US officials and their Chinese hosts are widely expected to address bilateral trade as well as global and regional security.
All good. It’s important for US officials to get over to breathe the air, meet the people, and see the furious digging and construction going on all over China. While Summers has been to China, I think [and could be wrong] that this is Tom Donilon’s first trip. He needs more than four days — but he’s an intense workaholic, so four is more like ten.
One of the things that I’d be worried about if I were them is that the Chinese are learning the American secret of reserve currency magic in their management of the mooncake market.
Like the U.S. dollar — which despite the global frustration with American economic policy, over-consumption and under-investment — Chinese mooncakes, or the idea of them, are in huge demand.
When the season hits, everyone in China — which is a fifth of the world’s population — wants their slice of the mooncake racket.
Not to eat, mind you, but to give and get and re-gift and re-gift and to pretend to want.
The French have a “French national mooncake” (pictured on bus above) to build on the popularity of the France Pavilion and Moet Hennesy Restaurant at the Shanghai World Expo. The French Pavilion is France’s most visited tour attraction in the world — more than the Louvre and Eiffel Tower. France’s mooncake has the three colors of the flag, but their are a couple of Chinese blogger sites warning “not to eat” it. Well, from my discussions, it seems that most mooncakes are more seen than eaten anyway.
Haagen-Dazs has a mooncake — and Starbucks. And of course, just about every Chinese establishment has some version of a mooncake for purchase, for gifting, for shipping with notes of congratulations for making it to another mooncake season.
But like any currency that takes the place of gold or silver or other commodities that used to underlie the solvency of national legal tender, the mooncake business has generated a currency of vouchers — where instead of just giving and getting mooncakes, families can give and get “mooncake vouchers.” Paper. . .for mooncakes.
The notable phenom, however, is that some Chinese government officials and senior Party leaders have observed that there are many more mooncake vouchers floating around then there are mooncakes connected to them — and yet the voucher business is thriving, trading is going on. In fact, it’s reaching such a frenzy that some are wondering whether or not that many mooncakes even really need to be cooked up.
Production seems unrelated to demand.
Mooncake vouchers are beginning to develop all of the characteristics of a new reserve currency, not yet globalized, but perhaps on its way — given that mooncakes are big in Southeast Asia and possibly now in France.
There is an illogical trust in mooncake vouchers which seem to defy economic gravity and have great value despite their inflation far beyond the underlying dessert.
Chinese economic Mandarins are reportedly fed up with the dollar even though options out of the dollar are limited. Behind the scenes frustration with being trapped in the US dollar which is still buoyant but unpredictable led to rumors that the Chief of China’s central bank was trying to escape the country and defect to Canada. These rumors proved to be untrue — but many folks in Beijing and elsewhere wondered.
So, perhaps mooncake vouchers are a trial balloon — part real bubble and part experiment — in creating an institution with reverse currency power.
Everyone has to buy in to mooncake vouchers even though many folks don’t really want the mooncakes themselves — and for a few decades at least, one can continue to inflate and inflate further the number of vouchers without every having to pay the piper.
Larry Summers and Tom Donilon should be worried that the Chinese are going to make a play sooner than later to challenge the dollar’s reserve currency status with their own home grown mooncake vouchers.
(Smile. I’m sure that there are many logical fallacies in what is above — offered in fun.)
But still, Summers should investigate.
Leaving Beijing today and back in DC on Monday. Hope you enjoyed the fun. And if you didn’t — eat some mooncake.
– Steve Clemons