tagged w/ china economy
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China may soon call time on Western quantitative easing. More worryingly, the language she is using is far from friendly.
In a report issued last month, the Dagong Global Credit Rating Company praises "emerging creditor countries" for preventing the collapse of "debtor economies" during the recent crisis, but stresses the "vulnerable position" of America, whose "excess issuance" of dollars has triggered a "global credit war" that "arouses all the countries in the world to take various credit resources as a financial weapon to safeguard the national interests."
Dagong blames QE for increasing exports of capital and raising international commodity prices, causing price and asset inflation in developing countries where, according to a cited World Bank estimate, net capital flows to stockmarkets soared by 42% and to bond markets by 30%.
Signalling that a US Treasury bond sell-off is a "financial weapon" that China may be prepared to use in its defense, Dagong notes that creditor nations stabilised the situation in 2010 not only by "continued buying" of treasury bonds but also because they "continued to hold" them.
China is by far the biggest holder of US Government debt - $891.6 billion at December 2010, according to the US Treasury. This is about the same as a year before, but ignores possible purchases via intermediary nations. In 2009, ex-Roubini associate and now NEC adviser Brad Setser plausibly argued that much of the British buying was on behalf of the Chinese.
This is all the more credible because of the UK government's own deep and long-standing financial troubles: Why would one near-bankrupt lend to another? In December 2010 the ostensible UK holding was $541.3 billion - triple the figure from 12 months earlier. Setser's January 2009 estimate was that taking US Treasuries and Agencies together, China controlled $1.425 trillion-worth.
The UK has since increased "its" stake in Treasuries by over $360 billion, though China appears to have been reducing its exposure to Agencies for some time, according to a July 2009 report from the Congressional Research Service:
Data from the Department of Treasury indicate that in recent months China has sought to reduce its holdings of LT U.S. agency debt, while increasing its holdings of short-term U.S. Treasury securities.
This shift from Agencies to Treasuries, and from long- to shorter-date debt, is itself a subtly troubling trend.
Total Chinese foreign exchange reserves - mostly denominated in dollars, one understands - were $2.45 trillion in June 2010 and the current figure may be over $2.8 trillion. The effect of currency depreciation on its foreign assets is massively expensive to the People's Republic, and it is little wonder that she should be reconsidering her investment - and musing on using her leverage to further other objectives.
Officially, China repudiates the notion of using its foreign exchange reserves as an "atomic weapon", but the use of an ostensibly unconnected agency to convey diplomatic messages would not be out of character. Founded in 1994, Dagong is based in Beijing, and in 2008 its chairman Guan Jianzhong received a "special government allowance" - not merely a monetary prize but a sign of governmental approval.
America still has the world's largest economy, but of developed nations it is also one of the most dependent on refinancing in 2011 - third in GDP terms (27.6%) after Japan and Iceland, and first in absolute terms.
As early as 2007, Brad Setser gave evidence about the US' economic vulnerability to foreign sovereign wealth funds, to the USCC. The US-China "Strategic Economic Dialogues" also began that year and one suspects that some home truths were being told even then. Now the noises are being made more publicly and discordantly, if still at one remove from official sources.
It is getting more serious, and Dagong is not hopeful:
The United States, as the biggest country involved in sovereign debt crisis around the world, will continue its quantitative easing policy when the country is in danger, and the world credit war will be escalated due to the overflow of US dollars.
Clearly we are still at the shot-across-the-bows stage, but we have come a long way from four years ago.
http://seekingalpha.com/article/255210-global-credit-warfare-china-preparing-for-a-treasury-bond-sell-offChina may soon call time on Western quantitative easing. More worryingly, the language... more
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China will boost further its already expanding economic ties with Africa, which reached a record two-way volume of more than $100 billion this year, the government said Thursday...
http://www.indiareport.com/India-usa-uk-news/ap/Business/68819China will boost further its already expanding economic ties with Africa, which... more
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China’s continued rapid growth should make it the main driver of the global economy next year as the U.S. slows down, the Conference Board, a highly respected economic research association, said in a report published on Wednesday.
China could even overtake the U.S. as the world’s largest economy by 2012 — at least by one economic measure, the research group said in its annual global outlook, the Wall Street Journal Reports.
China’s economy should grow by 9.6% in 2011 after expanding by 10% this year. By contrast, the U.S. economy is seen slowing to just 1.2% growth next year from 2.6% in 2010.
More: http://www.theblogismine.com/2010/11/11/china-will-overtake-the-us-as-worlds-biggest-economy-by-2012/China’s continued rapid growth should make it the main driver of the global... more
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President Barack Obama urged Chinese Premier Wen Jiabao to speed up the revaluation of his nation's currency, telling him in a two-hour meeting Thursday that the slow pace of reforms was affecting both the global and U.S. economies, a top U.S. aide said.President Barack Obama urged Chinese Premier Wen Jiabao to speed up the revaluation of... more
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After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
China is expected to surpass Japan this year as the world’s second-largest economy, an unprecedented position for a still-developing country and one that has brought strains as well as triumphs.
Japan lost its place as the world’s No. 2 economy to China in the second quarter as receding global growth sapped momentum and stunted a shaky recovery.
Gross domestic product grew at an annualized rate of just 0.4 percent, the government said Monday, far below the annualized 4.4 percent expansion in the first quarter and adding to evidence the global recovery is facing strong headwinds.
The figures underscore China’s emergence as an economic power that is changing everything from the global balance of military and financial power to how cars are designed. It is already the biggest exporter, auto buyer and steel producer, and its global influence is expanding.
http://www.theblogismine.com/2010/08/16/china-beats-japan-as-the-worlds-2nd-largest-economy/After three decades of spectacular growth, China passed Japan in the second quarter to... more
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The conventional wisdom in Washington and in most of the rest of the world is that the roaring Chinese economy is going to pull the global economy out of recession and back into growth. It’s China’s turn, the theory goes, as American consumers — who propelled the last global boom with their borrowing and spending ways — have begun to tighten their belts and increase savings rates.
The Chinese, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles.
That’s prompted some cheerleading from U.S. officials, who want to see those Chinese consumers begin to pick up the slack in the global economy — a theme President Barack Obama and his delegation are certain to bring up during next week’s visit to China.
“Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past,” Treasury Secretary Timothy Geithner said during a trip to Beijing this spring. “In China, ... growth that is sustainable will require a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption.”
That’s one vision of the future.
But there’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse.
A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.
more at link...
http://www.politico.com/news/stories/1109/29330.htmlThe conventional wisdom in Washington and in most of the rest of the world is that the... more
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While Obama's hastily passed stimulus spending bill, loaded down with earmarks for the politicians who didn't even bother to read it, is showing little in return, Beijing is already showing growth results from its stimulus spending. In general, China's economy is recovering while the Democrats are talking about a second stimulus, burdening the U.S. economy with more debt. .While Obama's hastily passed stimulus spending bill, loaded down with earmarks... more
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