China does not have a financial black hole to fill. It has sufficient surplus funds and earnings that is able to directly support its real economy. China builds more products than it currently is able to sell. During the down-turn of the economy - instead of laying off workers, China is using the surplus funds to keep them employed. This helps to address the issue of excessive production capacity. It also prepares the country to build a good foundation for economic growth before the market recovers by itself next year. China has planned a fiscal deficit of 950 billion yuan for 2008 . After deducting 180 billion yuan of fiscal deficit last year, nearly 800 billion yuan in fiscal deficit can be regarded as genuine new funds for the economic stimulus plan. But unlike the US China can afford it since the country has been saving up money - surplus funds. China has also lend a lot of money to the US government. Now the US government has to pay back the loans made by China. China is earning interest and the US has to pay interest plus make payment on the money it borrowed.

This move will be able to raise the GDP growth rate by up to 3 percentage points. Even if other economic activities contribute only 5 percent in economic growth rate, the goal of 8 percent GDP growth rate can be achieved, supported by these investments and other consumer activities.

How the Foreign Exchange Rate affect Californians?

China has $2.2 Trillion dollars in their foreign exchange reserves and Japan over $1 Trillion, the Euro zone - a combination of European countries has $539 Billion, Russia has $423 Billion, Saudi Arabia has $395 Billion, Taiwan $332 Billion, India $285 Billion , South Korea $254 Billion, Brazil $233 Billion, Germany $184 Billion, Singapore $182 Billion , Algeria $145 Billion , Thailand $132 Billion. etc. The US only holds $82 Billion. So the US is not hedging - protecting its savings by holding foreign currency.

What that means is that the rest of the world has used their savings to buy dollars and they are saving them or they use them to purchase products from the US or from each other. Now that the US economy is weak the US consumers have lost jobs and they feel the pinch. They can't purchase products they way they used to do. This does not please the world since they made good money selling us their stuff. The US used to be a great buyer of international goods. When you look a the "Made in China" label or "Made in India" labels you can see why they earned so much money. The US still has a large GDP of $14.4 Trillion.

However now that China is starting to have a strong economy the countries are starting to sell products to China and to each other. So now China is thinking about selling their dollars and Next