Chapter 2342 The opportunity to become a developed country!

At that time, stimulated by the long-term high growth of the Xiang Kingdom, everyone, from the government to the common people, was very optimistic about the future.

Therefore, many problems encountered in the development process are ignored.

First of all, the economic lifeline of the country is mostly controlled by foreign capital.

The Elephant Country itself had no industrial foundation, but it took advantage of the transfer of foreign capital to become an emerging industrial country.

The country has been producing cars since the 1980s, but to date it still does not have its own car brand.

The reason is that no matter how prosperous the country's industry may appear on the surface, its core is still a low-end supply chain of foreign capital. Except for the basic labor force that it can control, the rest of the equipment, technology, core components and even engineers are all from foreign companies, and none of them belong to them.

This is very similar to the early Daxia, which is why Daxia in the previous life would rather endure the pain of economic downturn and insist on industrial upgrading.

The bulk of the profits are in the hands of foreign manufacturers, and all that China can get is the meager profits that flow through the fingernails of foreign capital.

Just like the Pingguo mobile phone, for example, a mobile phone is sold for 1 yuan, and the profit can even be as high as 6000 yuan, but the factory responsible for assembly and processing can only get a profit of a few hundred yuan per phone.

In fact, the Xiang Kingdom back then had a choice: either tighten its belt, work hard for several generations, and build its own complete industrial chain; or, like the Four Asian Tigers, tap into its own advantages, take an export-oriented route, and become a cargo distribution center or financial center in the East.

However, the Xiang Kingdom chose to lie low.

Because the prosperity brought by the free economy is too addictive!

The Kingdom of Xiang relied on foreign investment, and the official and royal finances of all dynasties were very wealthy, and they never worried about money.

The men are all fat and juicy, who cares whether you at the bottom are living comfortably or not?

In order to retain foreign investment, the country can only allow its labor force to remain cheap, resulting in the quality of its citizens always being suppressed at the bottom.

All that the lower-class people of Xiangguo can leave to the next generation is the spirit of oxen and horses that has been passed down from generation to generation. In the foreseeable future, they have almost no ability to turn things around.

In fact, it is normal for Xiangguo to do so. After all, it can make money without doing anything. Why should it tighten its belt and make a transformation?

However, in the 90s, the hegemonic currency changed the weak trend of major currencies and began to become strong.

Under the system of pegged exchange rates, the currency of a country like China can only be forced to appreciate along with the currency of a hegemonic country.

Some people may ask, isn't currency appreciation a good thing? If money is more valuable and has stronger purchasing power, won't the people be happy?

This is not the case.

Currency appreciation is very unfavorable to exports, because foreigners need to pay more to buy things from the country, and the country's exports suffer a serious blow.

The U.S. is a country that is highly dependent on exports. If exports fail, the economy will naturally fail as well, and the people will have no happiness at all.

In this way, the country's annual growth rate fell directly from nearly 20% to negative growth.

The fiscal deficit began to show serious.

In 95, the fiscal deficit reached 8.3% of GDP.

In order to make up for the deficit, the country can only open more capital projects and borrow foreign debt. Because it does not have any irreplaceable industrial industries, it can only beg for foreign investment.

But the elephant country still has many legacy issues with its deficit.

Since the 80s, the United States has been investing unlimited amounts in public welfare. However, because the bulk of the profits are in foreign-funded enterprises and tax breaks are imposed, very little money actually ends up in government pockets.

In order to meet the ever-increasing needs of extravagance, the royal family and officials of the Elephant Kingdom had to keep borrowing.

So when the economy of Xiangguo was at its hottest, a strange phenomenon appeared. On the one hand, a large amount of hot money from all over the country poured into Xiangguo, while on the other hand, the scale of Xiangguo's foreign debt increased significantly.

By 96, the country's foreign debt had reached a staggering 9300 billion U.S. dollars.

That was in 96!!!

How much is Daxia's GDP?

The foreign debt of a country like China dares to pile up so high.

Naturally, inflation in the country will also rise accordingly.

But after all, the country's economy has been developing for so many years, so the people are not too worried about high inflation.

Even under the false appearance of a booming economy, many people still take out their money to invest in financial management and real estate speculation, hoping to live a luxurious life by making money from money.

The country is heavily in official debt and its financial transition is hot, creating an extremely exaggerated bubble.

However, at this time, the Xiang State government was already in a difficult situation.

If we want to reverse the economic situation, we must abandon the exchange rate policy of pegging the hegemonic currency and allow the currency of the elephant country to depreciate in order to expand exports.

But if the national currency depreciates, the debt will become larger, making the domestic economic situation worse.

In the end, the Xiang country officials decided to maintain the peg system as much as possible and raise interest rates.

However, if the official bank interest rate is high, it will inhibit investment and consumption, and also further deteriorate the country's economy.

At this time, the financial tycoons smelled the scent and came.

George Soros, the defeated opponent of Chen Mo, once the world's number one short seller and owner of the Atomic Fund, believed that the financial sector in the United States was overheated, but the country's financial system was as fragile as paper, making it a very suitable target for short selling.

So the story of Soros shorting the Elephant Dollar, which everyone is familiar with, came into being!

Although the Elephant Country officials mobilized all of their foreign exchange reserves and dragged the Lion Country into the battlefield, it was ultimately in vain.

Because Soros and other international short sellers have already figured out the foreign exchange reserves of the Elephant Country and know that the Elephant Country cannot withstand the short selling of so many short sellers.

At the end of June, when Xiangguo had used up the last 6 billion of its foreign exchange reserves, the situation became completely irreversible.

The U.S. was forced to abandon the pegged exchange rate system it had maintained for more than a decade and implement a floating exchange rate system.

Within a few hours that day, the currency of Xiangguo fell by more than 30%, almost causing the currency to collapse and Xiangguo to go bankrupt.

Soros and other big short sellers were not satisfied with shorting only the Elephant Country, and also swept across the entire Southeast, eventually leading to a financial crisis that shocked the world.

It can be said that what Chen Mo is doing now is what Soros has done ten years ago. The only difference is the target and the scale of funds.

In this financial crisis, the economy of the United States fell into a major recession, many banks and financial institutions collapsed, companies went bankrupt in batches, and the number of unemployed people reached more than 300 million!!!

A large number of rich and middle class people fell back into poverty overnight.

Every day, stockholders and investors jump off the rooftops.

As the currency of the Kingdom of Elephants has almost become worthless, prices in the Kingdom of Elephants have skyrocketed, thefts, robberies, and murders have occurred frequently, and the world-famous tourist destination has fallen into chaos.

It can be said that at this time, the Xiang Kingdom was only one step away from bankruptcy.

At this time, the IMF under the name of the foundation finally took action and expressed its willingness to provide large amounts of aid funds.

In fact, they are here to "shear the sheep".

The aid conditions set by the IMF's target countries are to liberalize financial markets and control state-owned assets to facilitate the entry of foreign capital for reaping the benefits.

The Xiang State had no choice but to accept all the conditions, which temporarily resolved the bankruptcy crisis.

But the price paid was that a large number of high-quality assets were looted by foreign capital, and the country’s decades of savings were plundered, which was more money than losing a war!

At the same time, per capita GDP plummeted by 60%, and people's living standards plummeted.

After 10 years of recuperation, the country barely recovered to its 2008 level in 1996.

Now the officials and royal family of Xiangguo want to take advantage of this opportunity to reap the benefits of Keguo and hedge against Chen Mo to earn back their lost assets. They also want to rely on this opportunity to break through the shackles of a developing country and become a developed country in one fell swoop!

"As long as the hedge against Chen Mo is successful, our Xiang Country will be able to regain its former glory, and even go a step further and become a developed country!!!"

When he thought of this, Seta couldn't help but tremble with excitement.