With cash-strapped companies coming cup-in-hand to their equally cash-strapped governments, the world over is looking for Warren Buffett-sized checkbooks to help ease the credit crunch.
Increasingly, the world is looking to China and its $1.9 trillion in reserves.
Should China whip open its gigantic checkbook to bailout the global financial system?
Does it even want to?
China's been burned before with its investments in the U.S. financial sector. It has a 9.9% stake ($5 billion) in Morgan Stanley (MS:NYSE) that has been pummeled by the industry-wide downturn. And some Chinese leaders believe that the U.S. and Western Europe should clean up their own mess.
China will help. It has a vested interest in the health of the markets it exports to... the U.S. in particular. But it will want some guarantees this time around, such as political support in some very sensitive areas, like Taiwan.
If China can negotiate a deal, it will certainly boost its standing in the global financial hierarchy. That, too, comes with a price. It means that China will have to open its economic and financial systems to the world, which in this situation may be a bit dangerous.
Not to mention China's been long concerned with the amount of control it has over its capital.
If China does write a big, fat check to global markets, they'll expect other emerging markets, like Russia and Brazil to do the same.
The question remains, though: Would more cash even work?
No one can say for sure, but I think borrowing the cash from a major trading partner might be a smarter way to go that printing our way out of trouble... Even if that partner is China.
