What the hell is a private enterprise?

Chapter 546 Aircraft Carrier Economics

Faced with his doubts, Tang Wen patiently explained:

"The 1000 billion yuan loan from North Korea has not been used to deliver any physical goods; it's purely an accounting practice. Meanwhile, my purchase of steel and other materials is done through bank transfers. To cover this, we need to print money out of thin air. Doesn't this amount to over-issuing 1000 billion yuan, thus exacerbating inflation?"

Old Zhang nodded; he was still very clear about the simple fact that printing money out of thin air equals inflation.

"Now, if we package and sell this 100 billion into 12 billion US dollars of treasury bonds, it is equivalent to raising 12 billion US dollars at once. This will not affect inflation, and we can also obtain valuable foreign exchange."

The risks were handed over to foreign investors, and the country also received $120 billion in foreign exchange to purchase products and import technology. Wasn't that wonderful?

Old Zhang immediately raised two questions:

"First, why would others buy it? We don't have much foreign exchange reserves right now."

Secondly, both interest and principal still need to be repaid!

China's total foreign exchange reserves are only over 140 billion yuan, and they are all painstakingly accumulated from exporting cheap raw materials, handicrafts and other goods. The saying that 800 million shirts were exchanged for a Boeing passenger plane is an example of this.

$120 billion is equivalent to 10% of foreign exchange reserves, which is quite alarming.

Tang Wen:

"The reason for buying is very simple: the interest rate of 6.5% is higher than that of regular US Treasury bonds, so why not buy it? $120 billion is just so-so in the international arena. Now that we've joined the WTO, no one will question our repayment ability."

As for interest and principal... do you know Shi Juzhu? When he started his business, he barely managed to get a computer on credit to write code. Giving him 1 yuan back then would have been more useful than giving the Giant Group 1 million yuan now.

From Tang Wen's perspective, the original world line had only been in the WTO for one year, and its foreign exchange reserves had increased from 280 billion to 400 billion US dollars, creating a miracle of 40% growth in one year. Moreover, the proportion of trade income had increased significantly.

$120 billion can buy countless good things during the honeymoon period and the protection period for new WTO members, which is of great significance for industrial upgrading. However, even if the price doubles in a few years, it may not be possible to buy them all.

Moreover, foreign exchange reserves had increased several times over in five years, so repaying a small amount of bonds was a piece of cake.

Another point that cannot be ignored is devaluation.

Aside from the fact that the US dollar is constantly depreciating, there are also some unforeseen events that could cause a significant depreciation of the US dollar.

For example, the final naval battle between the Lost Empire and the Empire will definitely happen within 5 years.

Regardless of whether it's a win or a loss, the resulting exchange rate fluctuations cannot be ignored.

While it may not replicate the epic feat of the ruble falling from space into the Mariana Trench, it can significantly reduce interest expenses.

Old Zhang understood that Tang Wen's nonchalance about principal and interest stemmed from his optimism about the future of China and his belief that now was a crucial time for development.

While the loans to Gaikin appear to have increased as bonds, they actually bring valuable foreign exchange inflows to the country.

The Empire might even be pleased after the issuance, since issuing dollar bonds is a way to indirectly increase the dollar's acceptance. It wouldn't be surprising if they gave it a push or two.

Old Zhang, who had been bombarded with a lot of strange knowledge, left in a daze, while Tang Wen continued to ponder, stroking his chin:
Issuing dollar bonds also has a hidden benefit: recovering the returns on foreign investment.

According to later statistics, in the more than ten years after China's accession to the WTO, the rate of return on foreign investment in China was consistently above 10%, and this was the result of deliberate control by the government.

With a return of around 5% on dollar assets, the more foreign exchange a country holds, the more it effectively incurs a continuous loss of 5% of its foreign exchange reserves. In the early days when the country was heavily reliant on imported equipment, this loss was not a concern. However, after a few years, when cheap domestic goods began to be dumped abroad, the difference in returns from huge foreign exchange reserves became difficult to ignore.

Issuing bonds to raise US dollars and then investing in domestic technology and production lines is equivalent to artificially increasing the proportion of bonds held in foreign exchange. In 10 years, when there is too much foreign exchange, a large amount can be cleared by directly repaying the debt.

Having too little foreign exchange means not enough to spend, and having too much means not being able to spend it. Maintaining a balance in this way allows for flexibility and keeps the initiative in one's own hands.

As for the "non-commercial situation" where the empire wants to force the taking over of US debt?
This will happen before Gekin arrives, and it will happen again after Gekin arrives with super battleships and super carriers. Wouldn't that mean he came for nothing?

According to Tang Wen's prediction, China will have at least seven or ten carrier strike groups in 10 years. As the saying goes, "At seventy, one can do as one pleases," which means that with seven to ten carrier strike groups, one can do whatever one wants without caring about the rules.

Domestically, the indirect use of US dollars to purchase aircraft carriers in the US is essentially an enhanced version of tank economics, only with less risk and greater returns.

Tang Wen felt deeply confident in his economics skills, believing he was worthy of a direct PhD program at UC Berkeley. Turning to the ship girl who was happily stuffing a duck carcass into a thin pancake and chewing it, he said with considerable self-satisfaction:

"Do you think I should just graduate with my PhD early and casually become an economics expert, giving advice and suggestions?"

"Hmm? Is the Commander retiring?"

"Of course not, what we're doing now is just some small groundwork."

Tang Wen glanced at the calendar. It was December 15th, ten days until Christmas.

Just then, several messages suddenly appeared in my mind.

……

Itamar felt very strange.

Prism has recently been clamoring for revenge for General Charles, and has also reached an emergency agreement with the White House to lease and expand the Guyana Air Base. At the same time, it has also ventured into Peru, planning to establish another base in the western Amazon rainforest.

Meanwhile, construction projects at several bases in the northern part of Pakistan have not been neglected, with various materials and ships constantly arriving, seemingly poised to encircle and swallow up the rainforest.

At the same time, they also dispatched a number of reconnaissance aircraft—U2Rs.

This is normal; intelligence is always necessary data. However, based on the radar station's report, he discovered something suspicious:
First, the reconnaissance plane flew the wrong route and did not appear to have reached areas where anti-aircraft towers might be located.
Second, the flight altitude is incorrect, and the mission is more like... meteorological data and map collection?

The first point can be barely explained by avoiding being shot down, the second point seems normal... but it's not right, in short, there's something wrong with it that I can't quite put my finger on, but I can't quite put my finger on it.

Then one day, a report came in that a fire had broken out in the rainforest near Caracalla and was spreading very quickly, soon covering an area of ​​hundreds of square kilometers.

The locals were terrified, but fortunately, a nearby river stopped the fire from spreading further. After a day of burning, a significant temperature difference formed around the fire, and the high moisture content in the local air condensed into raindrops, causing heavy rain. Ultimately, the fire was brought under control by nature.

Locals expressed their gratitude, saying it was a gift from God. However, Itamar received reports that experts suspected to be from NASA and the Imperial Weather Service had been frequently seen entering and leaving Caracalla recently.

Itamar was also dissatisfied with the Empire's support for other proxies, which gave him an opportunity to reconnect with the Lost Empire.

At his behest, on a clear, moonlit night, Aveiro called out again:

"Lost Empire, we are reporting an emergency to you. A secret conspiracy against you is unfolding."

(End of this chapter)