Chimerica

Chimerica is a neologism, which is composed of syllables of the words China and America. It refers to the symbiosis of the economies of the PRC and the United States of America.

Origin

The term Chimerica was coined in 2006 by the historian Niall Ferguson and economist Moritz Schularick. In an essay describing that in the previous years, a rise in capital returns while maintaining low capital costs (interest ) was observed, which stands in an apparent contradiction to the prevailing economic theory. Ferguson and Schularick lead as an explanation to a symbiosis of the economies of China and America. Thus, China produces goods and use the consideration received funds to grant the U.S. low-interest loans for the purchase of these goods. The U.S. use this low-interest loans to an unprecedented expansion of consumption, while China benefit by full employment and strong economic growth of it. Ferguson and Schularick call this symbiosis as Chimerica, a deliberate echo of the term chimera.

The term Chimerica on experts but also became popular by Niall Ferguson's book The Ascent of Money, and numerous newspaper articles. Ferguson believes that easy access of American companies and households to Chinese capital is a major cause for the boom of the early 2000s was because hedge funds and private equity firms were able to borrow on favorable terms, which their ability to use the leverage effect substantially increased. In turn, the vast purchasing U.S. government bonds have kept the yuan low by the Chinese central bank, which in turn favored the Chinese export economy.