December 19, 2007 (LPAC) -- China's state policy is to cooperate with the United States, a Chinese economist with many connections to the Beijing banking authorities said in a discussion with Executive Intelligence Review magazine today.

Efforts earlier this year to try to get the U.S. to lessen its pressure on China through 'unofficial' channels did not have the effect China wanted, therefore, statements about cooperation, as Lyndon LaRouche made in California, are all the more important and welcome since this is what China wants to do, he said. The economist said that in a discussion with professors and students after he delivered a lecture on economics earlier this month at Beijing's famous Tsinghua University, LaRouche's proposals were well received.

China is well aware that while the U.S. Treasury Secretary Hank Paulson and other officials are putting on enormous pressure for China to up-value the yuan. However, it is not the allegedly "undervalued" yuan, but rather the collapsing U.S. dollar which is really creating tensions in the current wild financial situation.

The dollar collapse is a big problem for China, the economist said. Already, inflation is high and getting higher fast, and one local "joke" in Beijing is that while the yuan is appreciating so fast externally -- against the falling dollar -- internally, it is depreciating faster! The massive liquidity being generated by the huge trade surplus with the U.S., and the falling dollar, is a key source of the internal inflation.

In July, Prof. Xia Bin, now head of the financial institute at the Development Research Center of the State Council -- who was one of the economist's students -- made a statement that China should "be smarter in setting the issues" and use some of its foreign reserves as a "bargaining chip" in talks with foreign governments, by which he meant the United States. This was made as an "unofficial" statement in an attempt to get the U.S. to lower some of the political and economic pressure on China, but the view in Beijing is that this did not have the desired effect. Paulson and President Bush had very strong negative reactions. Therefore, the economist said, he does not think China will use this kind of "confrontation" -- mild though it was -- again.

Offers for collaboration, as LaRouche made, are therefore all the more welcome in China.