PRC Economy and Industry: News and Discussions

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Re: PRC Economy and Industry: News and Discussions

Postby amol.p » 16 Dec 2009 14:37

THINK AGAIN ABOUT CHINA'S PROSPECTS

For many investors, emerging markets such as China are the wave of the future.

However, Duncan, a partner at Blackhorse Asset Management, a hedge fund in Singapore, said investors were too optimistic about China, which he said is certainly headed for bubble trouble.

He is doubtful the fiscal stimulus and new loan growth amounting to about 40 percent of gross domestic product will lead to structural change in the export-dependent economy.

"That will just lead to more excess capacity with no one to sell it to, which means product prices will be extremely depressed, companies won't profitable and banks won't be repaid."

http://www.reuters.com/article/idUSTRE5BF14420091216

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Re: PRC Economy and Industry: News and Discussions

Postby jamwal » 17 Dec 2009 03:09

Hari Seldon wrote:India to Levy Duty on Chinese Telecoms

India will levy antidumping duties of as high as more than three times the value on some telecommunication equipment imported from China, according to the governments in both countries.




At least it'll stop cheap Chinese companies like ZTE, Huawei etc from flooding Indian market with poor ripoffs from established brands. OTOH, cost of laying down infrastructure for many Indian telcos will go a bit higher. For example, BSNL is in love with China these days; telecom switches, broadband equipment , every thing is Chinese in many big circles. Prices for customers may increase if the telcos are forced to shell out more money. But this should be a very small price to pay.

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Re: PRC Economy and Industry: News and Discussions

Postby vavinash » 17 Dec 2009 04:48

Good move by GOI

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Re: PRC Economy and Industry: News and Discussions

Postby Ameet » 17 Dec 2009 05:07

China to build the world's longest bridge - another one.

http://www.guardian.co.uk/world/2009/de ... sea-bridge

China today announced it had begun construction of the world's longest sea bridge – barely 18 months after opening the current record-holder.

The Y-shaped link between Hong Kong, Macau and China will be around 50km (31 miles) long in total, 35km of which will span the sea, said the state news agency Xinhua. Due to be completed by 2015, the 73bn yuan (£6.75bn) cost of the bridge will be shared by the authorities in the three territories.

The structure also includes a 5.5km underwater tunnel with artificial islands to join it to bridges on each side.

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Re: PRC Economy and Industry: News and Discussions

Postby amol.p » 17 Dec 2009 09:45

Ameet wrote:China to build the world's longest bridge - another one.

http://www.guardian.co.uk/world/2009/de ... sea-bridge

China today announced it had begun construction of the world's longest sea bridge – barely 18 months after opening the current record-holder.

The Y-shaped link between Hong Kong, Macau and China will be around 50km (31 miles) long in total, 35km of which will span the sea, said the state news agency Xinhua. Due to be completed by 2015, the 73bn yuan (£6.75bn) cost of the bridge will be shared by the authorities in the three territories.

The structure also includes a 5.5km underwater tunnel with artificial islands to join it to bridges on each side.


Its seems china will be next Dubai......they are building on every piece of land available....

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 17 Dec 2009 19:43

Its seems china will be next Dubai......they are building on every piece of land available....


I disagree. Unlike Dubai, PRC ain't taking loans in phoren currency to fund its fixed asset expansion. SO no question of default (in the conventional sense) arises only. Besides, should the investments shour due to lack of demand, beijing will print like a camel in heat to more than cover up all the losses incurred in the system. Why worry, have curry.

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Re: PRC Economy and Industry: News and Discussions

Postby amol.p » 18 Dec 2009 09:57

Hari Seldon wrote:
Its seems china will be next Dubai......they are building on every piece of land available....


I disagree. Unlike Dubai, PRC ain't taking loans in phoren currency to fund its fixed asset expansion. SO no question of default (in the conventional sense) arises only. Besides, should the investments shour due to lack of demand, beijing will print like a camel in heat to more than cover up all the losses incurred in the system. Why worry, have curry.



Though they are not taking loan from foreign Banks but majority of all the construction is financed by Chinese state banks. In between I had given a link wherein chinese state banks are selling more bonds to overseas investors to mop up money. Also refer to below link....

China Banks’ Capital Likely More Strained, Fitch Says

http://www.bloomberg.com/apps/news?pid= ... FZJA&pos=4


Any unwanted construction which is going to remain under utilised or empty is hole in your pocket. Same trend is being setup in china wherein more & more building , road constructed are unused. The investment will be junk investment.

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Re: PRC Economy and Industry: News and Discussions

Postby abhischekcc » 19 Dec 2009 14:05

There is a general confusion about the structure and nature of the Chinese financial system. It is very different from western style financial systems, and hence, the financial ratios applicable elsewhere cannot help us understand Chinese banking. These figures are bad from the 'conventional' POV for China - which leads many people to make prognostications of doom.

But Chinese banks are owned by the central bank. Hence, all deposits in the bank also belong to the central bank. Any bank going under will be supported by the central bank, no questions asked. Which means that all NPAs are guaranteed by the central bank. Hence, no matter what happens in the larger economy, the financial system will remain stable. This is unlike the US, where a crisis in the financial system became an economic crisis. The same is unlikely to happen in China.

China's only problem is capturing enough physical resources to maintain high growth rates. They are vulnerable to volatile commodity prices, not availability of finance. This was illustrated two years ago, when high global demand for corn (EU mandate for making biofuels) caused +40% inflation in China, as corn is important input for pork, which is a staple food in the country.

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Re: PRC Economy and Industry: News and Discussions

Postby vina » 19 Dec 2009 19:04

But Chinese banks are owned by the central bank


Ah..But it doesnt mean that they have soverign guarantee. Since they are govt owned, everyone assumes so. But the true test will come only when the yellow matter hits the fan. Check out the case of Dubai. Anyone who bet on sovereign for Nakheel, Dubai World etc are toast.

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Re: PRC Economy and Industry: News and Discussions

Postby Sanjay M » 19 Dec 2009 23:27


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Re: PRC Economy and Industry: News and Discussions

Postby kmkraoind » 22 Dec 2009 14:33

China’s Speeding Bullet-Train Program May Brake Economic Growth

The line is part of China’s 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast.


China accelerated its high-speed-rail development plan last year in the wake of the global financial crisis, saying it would increase the passenger network by a third to 16,000 kilometers (9,944 miles) by 2020.

Montreal-based Bombardier Inc., the world’s largest maker of passenger locomotives, and Munich-based Siemens AG are helping to build the system. Bombardier’s Chinese joint venture won a $4 billion contract in September to build 80 high-speed trains. Siemens, Europe’s largest engineering company, and Chinese partners received a 750 million-euro ($1.08 billion) order in March for 100 trains.


Aside keeping unsustainability or expense, the Chinese are creating world class infrastructure. Probably, Chinese are earning more by supplying goods at cheaper rates than they are paying to Germany and Canada. IMO, the Chinese are diversifying the dollars in terms of raw material and investing heavily in acquiring futuristic technologies.

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Re: PRC Economy and Industry: News and Discussions

Postby ashish raval » 22 Dec 2009 15:01

^^ China is not a credit bubble or next Dubai. Its exports are Gigantic and savings by Chinese people is more in terms of % they earn than Indian people. It is adding $50 billion/month to its dollar reserves with which they can virtually buy anything on earth. Most land in China is owned by Government and not people. It is leasehold in most cases. So Government can control markets in any situation. People are free to think that China is a bubble but people who know China knows that it is not.

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 22 Dec 2009 19:35

The blatant psy-ops against innocent China by the western imperialists should not go unnoticed.

Social unrest ‘on the rise’ in China (BBC)

Take with a pinch of salt onlee. Like has been mentioned above, PRC is in no danger of imminent collapse. They can keep up the game forever, if need be, as long as resource constraints are not hit.

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Re: PRC Economy and Industry: News and Discussions

Postby abhischekcc » 22 Dec 2009 23:29

But it doesnt mean that they have soverign guarantee


Yes, it does. Although, 'sovereign guarantee' is the conventional way of understanding the Chinese system. When people in China make bank deposits, they are effectively making a deposit in the central bank, no matter what bank they are customers of. Unlike in the 'normal world', where the banks are independent, but regulated. This is because the government is the ultimate owner of everything in China.


Anyone who bet on sovereign for Nakheel, Dubai World etc are toast.

Not really, Abu Dhabi will bail out Dubai completely (despite the comment on 'case-by-case' help), and Dubai will lose independence to AD. One result of the bailout is that Dubai has agreed not to be the trans-shipment point for goods destined for Iran. This was a condition placed by AD. Given that Dubai is an entrepot, and Iran is one of the two most important destinations for re-exports (the other being KSA) - this was an important concession to make. Dubai has been reined in, but its debts will be met.

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 23 Dec 2009 07:57

Given that Dubai is an entrepot, and Iran is one of the two most important destinations for re-exports (the other being KSA) - this was an important concession to make. Dubai has been reined in, but its debts will be met.


Agreed. But there is now a distinct possibility all commodities including esp crude may fall as the USD for its (last?) hurrah. That puts pressure on the wanton, phree surpluses of crude exporters like Dhabi baby. Some commentators foresee a return to $40 a barrel within the next 2 qtrs. Seems implausible but aajkal, who knows?

In any event, let Dubai's creditors agree to haircuts first. Then we'll see. Also, Dhabi-baby's $10 bill seems more show than substance. There's $80 bill in principal yet to be repaid. And when the gulf defaults on that - we'll see.


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Re: PRC Economy and Industry: News and Discussions

Postby shyamd » 23 Dec 2009 20:10

abhischekcc wrote:Not really, Abu Dhabi will bail out Dubai completely (despite the comment on 'case-by-case' help), and Dubai will lose independence to AD. One result of the bailout is that Dubai has agreed not to be the trans-shipment point for goods destined for Iran. This was a condition placed by AD. Given that Dubai is an entrepot, and Iran is one of the two most important destinations for re-exports (the other being KSA) - this was an important concession to make. Dubai has been reined in, but its debts will be met.

Not entirely true. The "case by case basis" statement is actually correct, my paanwallah says, Sheikh Khalifa bin Zayed asked his team to secretly audit the Dubai companies, and he said only offer assisstance to financially viable companies. Will explain more in the ME thread about the side politics that is going on between the 2 families.

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Re: PRC Economy and Industry: News and Discussions

Postby wrdos » 25 Dec 2009 09:22

Chinese 2008 GDP revised to 4.6trillion US$.

http://www.stats.gov.cn/english/newsand ... 610196.htm

Announcement of the National Bureau of Statistics of China on Revision of the 2008 GDP Data
National Bureau of Statistics of China 2009-12-25 10:00:00

According to the accounting system of China and the results from the Second National Economic Census, the National Bureau of Statistics of China has revised the preliminary estimates of 2008 GDP. The main results are: The total GDP was 31,404.5 billion yuan in 2008, of this total, the value added of the primary industry was 3,370.2 billion yuan, accounting for 10.7 percent of the total GDP; that of the secondary industry was 14,900.3 billion yuan, accounting for 47.5 percent of total GDP; that of the tertiary industry was 13,134.0 billion yuan, accounting for 41.8 percent of total GDP (see appendix).

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Re: PRC Economy and Industry: News and Discussions

Postby Sanjay M » 26 Dec 2009 22:44

China's economy is expected to overtake Japan's in 2010, to make it the world's 2nd-largest economy

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Re: PRC Economy and Industry: News and Discussions

Postby wrdos » 28 Dec 2009 10:09

China Unveils 'Fastest Train' in World

http://www.foxnews.com/story/0,2933,581221,00.html

Image

China unveiled what it touted as the fastest rail link in the world on Saturday, the Agence France Presse reported.

The train will run between the cities of Guangzhou and Wuhan. At an average speed of 217 miles per hour, the high-speed train reduces the 664 mile ride from ten and a half hours to just three hours, an official Xinhua news agency said, according to AFP.

Construction on the rail link began in 2005. The idea was to connect Guangzhou, a business hub in southern China near Hong Kong, with the capital Beijing, Xinhua said, according to AFP.

"The train can go (217 miles) per hour, it's the fastest train in operation in the world," Zhang Shuguang, head of the transport bureau at the railways ministry, told Xinhua, AFP reported.

Japan's high-speed trains operate at 150 miles per hour, while in France they run at an average speed of 172 miles an hour.

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 28 Dec 2009 10:19

Chinese Premier Wen Calls for Action on Property Speculation as Prices Soar

China’s Premier Wen Jiabao called for policies to curb property speculation, an indication the government is ready to tighten policies to prevent the economy from overheating. Wen, speaking in an interview with the official Xinhua News Agency, said property prices have risen too quickly in some areas and that tax and interest rates are among tools that could be used to control speculation. His remarks were broadcast online today.


Quaint.

After 'directing' state owned banks to lend in a frenzy seldom rivalled after his gubmint announced what amounts to the largest stimulus (as a % of GDP) of any country in the world in 2008-09, what exactly was Sri Wen expected if not a jump in stock speculation (note the soaring equities in PRC) and property speculation by the beneficiaries of the bank largesse (state owned firms and party-connected individuals), eh?

Wen said in the interview that China isn’t experiencing inflation and that consumer price increases will be kept in a "reasonable range." "China will keep its loose stance at least in the first half of next year as inflation is expected to stay within tolerable levels," said Shen Minggao, chief economist for Greater China at Citigroup Inc. "There won’t be significant changes to maintain policy stability, but some industries with excess capacity have seen credit tightened."


Cheena ain't experiencing inflation despite the fact that to maintain its USD peg, the PBoC has left unsterlized $$billions in local currency sloshing around in the local economy?? Funny how that works, eh? All that excess liquidity has gone into pumping asset prices ever higher into the stratosphere (can someone say bubble?) whereas consumer prices actually deflate. Reason? Rampant overcapacity in practically every industry you can care to name (leave agri out of it). What happens when there are 10 firms fighting for a mkt which can only sustain 5 firms? 5 close but not before bleeding the others of profits in crazy price-wars for survival. And whn the weakest 5 fold, they take with them all the loans from the banks they got for opening the business in the first place. And so on.


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Re: PRC Economy and Industry: News and Discussions

Postby Vipul » 30 Dec 2009 21:56

China's auditors find $34.37 billion embezzled from $586 billion stimulus package news.

I am surprised the amount embezzled is not even 10% of the total package.The Chinese are upto their usual tricks and are bent on proving to the world that if required they can understate their numbers also. :P

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Re: PRC Economy and Industry: News and Discussions

Postby ArmenT » 30 Dec 2009 22:26


So exactly how are they going to detect if the Chinese manufacturers simply label the products as "Made in Vietnam", "Made in India", "Made in USA" etc. It's not like it hasn't been done before.

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Re: PRC Economy and Industry: News and Discussions

Postby SSridhar » 31 Dec 2009 15:25

China raises Kuwaiti oil imports by 50%
China has agreed to raise 2010 crude imports from Kuwait by 50 percent to about 240,000 barrels per day . . . The jump, which follows a one-third increase this year, comes after Iraq said it would more than double exports to the world’s second-largest oil consumer and Saudi Arabia agreed to a 12 percent increase for 2010. . . China’s fuel demand is poised for an eight percent expansion in 2010, more than double this year’s three percent

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Re: PRC Economy and Industry: News and Discussions

Postby Vipul » 01 Jan 2010 19:50

http://www.dnaindia.com/money/report_melting-of-himalayan-glaciers-the-biggest-threat-to-food-security_1328491-3.

Excerpts from the article:

China is now gradually falling victim to the Japan syndrome, and that is clearly worrying. Perhaps the most alarming recent world agricultural event is the precipitous fall in China's grain production since 1998. After an impressive climb from 90 million tonnes in 1950 to a peak of 392 million tonnes in 1998, China's grain harvest fell in four of the last five years, dropping to 322 million tonnes in 2003. For perspective, this decline of 70 million tonnes exceeds the entire grain harvest of Canada.

China is losing grainland to expanding deserts and it is faced with spreading water shortages that are shrinking the grain harvest. China's population of 1.3 billion is impressive, but even more impressive is the fact that 1.193 billion of them live in 46% of the country. The five sprawling provinces of Tibet, Qinghai, Xinjiang, Gansu, and Inner Mongolia, have only 81 million people - just 6% of the national total. Thus industrial and residential construction and the land paved for roads, highways, and parking lots will be concentrated in less than half the country, where 94% of the people live. People are crowded in this region simply because this is where arable land and water are.

If China had Japan's automobile ownership rate of one car for every two people, it would have a fleet of 640 million, a forty-fold increase from the 16 million today. Such a fleet would require paving almost 13 million hectares of land -- again, most of it likely cropland. This figure is equal to two thirds of China's 21 million hectares of riceland -- land that produces 120 million tonnes of rice -- the country's principal staple food.

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Re: PRC Economy and Industry: News and Discussions

Postby vina » 02 Jan 2010 07:32

Op-Ed by Paul Krugman in NYT. Nothing new here,but a clear sign that the US policy pooh bahs are running out of patience with the Chinese wrt currency manipulation. The Euros are even less amused. Same witht he Japanese and others who have seen exports plunge. Expect protectionist hit backs against China. Happy New Year indeed.


January 1, 2010
Op-Ed Columnist
Chinese New Year
By PAUL KRUGMAN
It’s the season when pundits traditionally make predictions about the year ahead. Mine concerns international economics: I predict that 2010 will be the year of China. And not in a good way.

Actually, the biggest problems with China involve climate change. But today I want to focus on currency policy.

China has become a major financial and trade power. But it doesn’t act like other big economies. Instead, it follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.

Here’s how it works: Unlike the dollar, the euro or the yen, whose values fluctuate freely, China’s currency is pegged by official policy at about 6.8 yuan to the dollar. At this exchange rate, Chinese manufacturing has a large cost advantage over its rivals, leading to huge trade surpluses.

Under normal circumstances, the inflow of dollars from those surpluses would push up the value of China’s currency, unless it was offset by private investors heading the other way. And private investors are trying to get into China, not out of it. But China’s government restricts capital inflows, even as it buys up dollars and parks them abroad, adding to a $2 trillion-plus hoard of foreign exchange reserves.

This policy is good for China’s export-oriented state-industrial complex, not so good for Chinese consumers. But what about the rest of us?

In the past, China’s accumulation of foreign reserves, many of which were invested in American bonds, was arguably doing us a favor by keeping interest rates low — although what we did with those low interest rates was mainly to inflate a housing bubble. But right now the world is awash in cheap money, looking for someplace to go. Short-term interest rates are close to zero; long-term interest rates are higher, but only because investors expect the zero-rate policy to end some day. China’s bond purchases make little or no difference.

Meanwhile, that trade surplus drains much-needed demand away from a depressed world economy. My back-of-the-envelope calculations suggest that for the next couple of years Chinese mercantilism may end up reducing U.S. employment by around 1.4 million jobs.

The Chinese refuse to acknowledge the problem. Recently Wen Jiabao, the prime minister, dismissed foreign complaints: “On one hand, you are asking for the yuan to appreciate, and on the other hand, you are taking all kinds of protectionist measures.” Indeed: other countries are taking (modest) protectionist measures precisely because China refuses to let its currency rise. And more such measures are entirely appropriate.

Or are they? I usually hear two reasons for not confronting China over its policies. Neither holds water.

First, there’s the claim that we can’t confront the Chinese because they would wreak havoc with the U.S. economy by dumping their hoard of dollars. This is all wrong, and not just because in so doing the Chinese would inflict large losses on themselves. The larger point is that the same forces that make Chinese mercantilism so damaging right now also mean that China has little or no financial leverage.

Again, right now the world is awash in cheap money. So if China were to start selling dollars, there’s no reason to think it would significantly raise U.S. interest rates. It would probably weaken the dollar against other currencies — but that would be good, not bad, for U.S. competitiveness and employment. So if the Chinese do dump dollars, we should send them a thank-you note.

Second, there’s the claim that protectionism is always a bad thing, in any circumstances. If that’s what you believe, however, you learned Econ 101 from the wrong people — because when unemployment is high and the government can’t restore full employment, the usual rules don’t apply.

Let me quote from a classic paper by the late Paul Samuelson, who more or less created modern economics: “With employment less than full ... all the debunked mercantilistic arguments” — that is, claims that nations who subsidize their exports effectively steal jobs from other countries — “turn out to be valid.” He then went on to argue that persistently misaligned exchange rates create “genuine problems for free-trade apologetics.” The best answer to these problems is getting exchange rates back to where they ought to be. But that’s exactly what China is refusing to let happen.

The bottom line is that Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation. So I’d urge China’s government to reconsider its stubbornness. Otherwise, the very mild protectionism it’s currently complaining about will be the start of something much bigger.

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Re: PRC Economy and Industry: News and Discussions

Postby Shankas » 02 Jan 2010 08:57

Hello - I am a first time poster, but a very long time lurker.

I constantly keep hearing China has pegged its currency, which in turn is causing a lot of headache for the US and EU. Instead of coming up with flimsy a pretext to introduce tariff/duties on Chinese goods, why not declare a peg of their own on the Yuan?

Can any of the residential financial experts explain this in simple terms.

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Re: PRC Economy and Industry: News and Discussions

Postby Masaru » 02 Jan 2010 14:06

Shankas wrote: Instead of coming up with flimsy a pretext to introduce tariff/duties on Chinese goods, why not declare a peg of their own on the Yuan?

Can any of the residential financial experts explain this in simple terms.


IMHO most likely PRC will re-peg yuan with respect to the new value of $ to regain the competitive advantage. Driven to extreme this will result in competitive devaluation motivated by beggar thy neighbour philosophy which was last seen when mercantilism was widespread in the early 1900s.

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Re: PRC Economy and Industry: News and Discussions

Postby Sanjay M » 03 Jan 2010 02:57

China Moves to Restrict Neodymium Supply


Concern as China clamps down on rare earth exports

Neodymium is one of 17 metals crucial to green technology. There’s only one snag – China produces 97% of the world’s supply. And they’re not selling

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Re: PRC Economy and Industry: News and Discussions

Postby Sanjay M » 05 Jan 2010 10:37

Rebuttal to Krugman's article on China:

http://www.newdeal20.org/?p=7248

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Re: PRC Economy and Industry: News and Discussions

Postby Masaru » 07 Jan 2010 00:07

$123,000,000,000,000!!!

This would surely warm the cockles of the PRC leadership. Key points, 'estimated' GDP 123 Trillion, percapita income $85,000 at double that of EU and 'much higher' than Japan!

Reasons for such untrammeled optimism ...

- Huge investment in education 100% high school and 50% college attendance leading to extra 6%(!) in GDP growth. wow
- Some random illogical statement about increasing productivity in the rural workforce
- Chinese GDP particularly the contribution from service sector is underestimated
- PRC leadership is open to criticisms in policy sphere particularly of the economic kind, hence will avoid any excesses of the Mao kind, IOW no political risk to the growth story
- PRC is more capitalistic than the EU and US and hence more conditioned for growth


Finally listing of all the potential problems i.e. rising income inequality, potential social unrest, territorial disputes, fuel scarcity, water shortages, environmental pollution, and a still-rickety banking system and a one line answer the great PRC leadership can fix them all.

Apparently laws of physics, and economics (capitalism specifically) don't dare cross the great wall guarded by the valiant mandarins of PRC.

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Re: PRC Economy and Industry: News and Discussions

Postby Katare » 07 Jan 2010 02:20

Sanjay M wrote:Rebuttal to Krugman's article on China:

http://www.newdeal20.org/?p=7248



Huh, its a political response on the lines of "open fly torn shirt". He is making no sense....

Henry Liu is arguing against forcing China to revalue the exchange rate of it's currency upwards while Krugman is only proposing that China let market decide the real value of its currency. There is a big difference between the two. Liu is only assuming that when freed Chinese currency would rise. He is assuming that because he knows Professor Krugman is right :mrgreen:

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Re: PRC Economy and Industry: News and Discussions

Postby amol.p » 07 Jan 2010 18:10

Stocks, Metals Decline After China Curbs Lending; Yen Weakens


Stocks fell around the world, driving the MSCI Emerging Markets Index down the most in three weeks, and metals declined after China moved to curb lending. The yen dropped after Japan’s new finance minister said he would welcome a weaker currency.

Central bankers in China, the engine of the global economic recovery, sold three-month bills at a higher interest rate for the first time in 19 weeks after saying their 2010 focus is controlling record loan growth.“Growth will probably slow this year as tight credit will damp the demand side.
http://www.bloomberg.com/apps/news?pid= ... hv9I&pos=2

The signal is clear......in china demand is created by pure free flow of debt...........you cannot run debt base economy for ever.................

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 07 Jan 2010 19:42

Fear of the dragon (Economist)
That fear is all too palpable in the reverence the Economist rag now pays PRC. You can't miss it while reading this piece.
China’s share of world markets increased during the recession. It will keep rising.


China overtook Germany to become the world’s largest exporter and its share of world exports jumped to almost 10%, up from 3% in 1999 (see chart).

China takes an even bigger slice of America’s market. In the first ten months of 2009 America imported 15% less from China than in the same period of 2008, but its imports from the rest of the world fell by 33%, lifting China’s market share to a record 19%. So although America’s trade deficit with China narrowed, China now accounts for almost half of America’s total deficit, up from less than one-third in 2008.


Impressive performance by any standards. You have to give PRC that.

How high could China’s market share go? Over the ten years to 2008 China’s exports grew by an annual average of 23% in dollar terms, more than twice as fast as world trade. If it continued to expand at this pace, China might grab around one-quarter of world exports within ten years. That would beat America’s 18% share of world exports in the early 1950s, a figure that has since dropped to 8%.


Its 10% slice this year will equal that achieved by Japan at its peak in 1986, but Japan’s share has since fallen back to less than 5%. Its exporters were badly hurt by the sharp rise in the yen—by more than 100% against the dollar between 1985 and 1988—and many moved their factories abroad, some of them to China.

Re the bolded part - the Reagan-Baker duo forced the '85 plaza accords through sealing japan's fate. Quite obviously, today's US lacks anywhere near that kind of arm-twisty strength and clout with today's PRC.

However, China’s future export growth is likely to come not from existing industries but from higher-value products, such as computer chips and cars. Japan’s exports also moved swiftly up the value chain, but whereas this was not enough to support durable gains in its market share, China has the advantage of capital controls that will prevent its exchange rate rising as abruptly as Japan’s did in the 1980s. When China does eventually allow the yuan to rise, it will do so gradually.

The bolded part says it all. PRC will eat its cake and have it too. I applaud them for the sole reason that the old world western dominated world order can finally be overturned. What replaces it causes me hajaar concern, but change is overdue.

Read it all. And be wary.

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Re: PRC Economy and Industry: News and Discussions

Postby amol.p » 08 Jan 2010 11:33

To Slow Growth, China Raises an Interest Rate

China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.

http://www.nytimes.com/2010/01/08/busin ... f=business

Contrarian Investor Sees Economic Crash in China

James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.
James Chanos made his hedge fund fortune predicting problems at companies and shorting their stock.

Now Mr. Chanos is betting against China, and is promoting his view that the China miracle has blinded investors to the risks in that economy. Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets[/b]......{ I had mentioned earlier china is the new Dubai} He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

[b]Bubbles are best identified by credit excesses, not valuation excesses
,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech later this month at the University of Oxford to drive home his point.

“The Chinese,” he warned in an interview in November with Politico.com, “are in danger of producing huge quantities of goods and products that they will be unable to sell.”

http://www.nytimes.com/2010/01/08/busin ... f=business

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Re: PRC Economy and Industry: News and Discussions

Postby girish.r » 08 Jan 2010 15:32

amol.p wrote:To Slow Growth, China Raises an Interest Rate


Its high time US does that too...... :|

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Re: PRC Economy and Industry: News and Discussions

Postby abhischekcc » 09 Jan 2010 12:01

Understanding the Chinese economy needs a change of world view. It cannot be understood if you assume private property is the foundation of Chinese economic management - that is the way of free markets. In China, all property belongs to the government. Individuals and private firms have property tights only aganist each other - not against the government. IOW, if a person or private firm has a property dispute against another person or private firm, then such a case can be heard in a Chinese court. But if one of the party to the dispute is the Chinese government, then the government's decision is final. No court can challenge the rights of the government to anything and everything in that country.

China is a fascist state - in which government is the owner of everything in all but name. It can regulate whatever it wants without giving any justification. And it does so with impunity, a trait it shares with Nazi Germany.

When you say that Chinese government will strugle to meet the liabilities of the banks, you are assuming that the government does not have that liability. In 'normal' language, Chinese government is the owner of all the assets and liabilities in the country. That is why they can consistently sell underpriced goods despite the losses, because the system benefits as a whole. Which is why you see the large forex reserves. This is also fascist economics at work (mispricing). The results are neven good, historically speaking.

Any losses can be made up simply by legislating it away. And if the local economy needs a cash infusion, that can also be 'produced' by legislation or printing, (another fascist economic magic - something that Nazi Germany practised with aplomb). The only real constraint to the Chinese economy is physical access to resources - money will never be a problem.

If the Nazi experience is anything to go by, printing money (or coupons for specific goods/services) produces rapid fire growth in the beginning - that's how Hitler was able to wipe out chronic unemployment within a few short years of coming to power. The second stage is high inflation (including asset price bubbles), which is the stage China is in right now.

The third and last stage is when, faced with potential low growth rates (due to asset constraints), the country goes into a drive for acquiring resources. China is in this stage as well, but only preliminary. Because resources are still not a constraint. When Nazi Germany faced such constraints, it triggered the second world war. That is the prospect the world faces - either that or a civil war in China. Three points for guessing which one I favor :)

-----------------

The difference between a free market and fascist economy is that in the former private entities allocate resources in light of their own self interest and the government has rights similar to other private individuals/entitities; while in the latter, the government controls allocation of resources (without being the owner) and has higher rights than individuals and firms over resources. This is similar to communism, except in communism the government is legal owner of resources.

That is why the Chinese system is closer to fascism than free market. Actually, it is a mixture of fascism and communism - because the legal status of resource ownership is a grey area of their system.

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Re: PRC Economy and Industry: News and Discussions

Postby ashish raval » 09 Jan 2010 14:26

^^ I agree abhishek. Valid points.

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Re: PRC Economy and Industry: News and Discussions

Postby satya » 09 Jan 2010 18:51

Not to derail the thread but hyperinflation came to Germany at end of World War 1 and it was due to mismatch between notes/ money in circulation and gold backing those notes and it happened much b4 Hitler came to power though he retained the same person as finance minister credited with bringing an end to hyperinflation by bringing up the state assets ( land , mines etc) as back up for money/notes in circulation thereby bringing the confidence back in DM .Another thing unemployment was not the main problem but the break down of social cohesion that shocked the average Germans & Hitler's party was able to bring back the order in day to day life .
PRC has an advantage in export mkt for it exports mainly consumer/day to day use items more than capital goods thereby ensuring a reliable base in export market that won't go away easily unless some very drastic measures happen which are unlikely giving it a steady market to rely on which it has built up domestic economy having credit boom .


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