Brendan Byrnes: I think one of the things that's playing out right now is the United States and China, rivals but also partners in many ways... how do you see this relationship shaking out, and what does that mean for companies that you might look to invest in?
Bruce Greenwald: You can see that China's model is still a manufacturing-led growth model. You look at the five-year plan, they're going to do high-end devices. They're going to do biotechnology. They're still going to export it all.
They think they're going to continue to manufacture, and that means that the rest of the world has got to import it all. Lots of luck with that. It didn't work for the Japanese in the end, because they decided they were going to grow dramatically in a dying sector.
It's not going to work for the Chinese in the end, but in the meantime, since the imperatives for them to grow given the political and other stresses of that society are very large and they don't seem to be making a major effort to develop a powerful service sector in medical care, in education and things like that, I think what you're going to see is increased pressure to export.
I think the appreciation that we've seen in the yuan is going to stop, and conceivably reverse, and that means they're going to try and do it at the expense of the United States. They are not an engine of growth for the rest of the world. The measure of their impact on the rest of the world is their trade surplus or deficit.
In a deflationary environment, when they have a huge trade surplus, it means they're sucking demand out of the rest of the world, and that's going to be an adversarial relationship. It's going to be harder and harder for the Chinese to sustain, and it's just going to be ugly.
Brendan Byrnes has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.