President Obama visits India and Indonesia on his way to the G-20 Summit in South Korea and an Economic Forum in Japan. Here's what you need to know:
- This is an economic mission. Obama will announce in India significant deals with American companies like GE(GE_) and Boeing(BA_) to strut his economic stuff. For once, America seems to be getting the better of a deal.
- In advance of the G-20 summit, Obama wants to garner political support from all four countries for pressuring China to strengthen the yuan.
- India and Indonesia are getting flooded with speculative hot flows; Japan has been directly hammered by China through its purchases of Japanese bonds; and South Korea maintains a stiff upper lip in the face of an over-valued won.
- India, South Korea,and Japan (and to a much lesser extent, Indonesia) are the "countervailing power" countries the U.S. wants to woo and align itself with as it tries to contain China economically and militarily. This is a high-stakes strategy that risks Chinese ire.
- Both India and Japan have ongoing territorial disputes with China -- India by land, Japan by sea. South Korea faces a China-backed North Korea. All countries are getting hammered by Chinese mercantilism, while also benefitting from the China trade flows. All are uneasy about the rise of China.
- Selling sophisticated weapons to India, along with nuclear technology, is a crap shoot that ruffles Pakistani feathers and further destabilizes the region, but it pays for our trade deficit AND it sends China a message.
This post by Peter Navarro has been republished from The Street, an investment news and analysis site.