PRC Economy - New Reflections : Dec 15 2011

pankajs · Post by **pankajs** » 30 Apr 2012 23:34

Growth rate should not take center stage in Chinese economy
Quality of economic growth matters

When you read headlines like the above (Peoples Daily) you don't need to read the article for you already know that they are pure and unadulterated BS!

pankajs · Post by **pankajs** » 30 Apr 2012 23:40

Feast nearly over for China

The reality is that since 2007/2008, a significant part of China's growth has been an illusion. Since 2008, China's headline growth of eight to 10 per cent has been driven by new lending, averaging around 30 to 40 per cent of GDP. Up to 20 to 25 per cent of these loans may prove to be non-performing, amounting to losses of six to 10 per cent of GDP. If these losses are deducted, Chinese growth is much lower.

China now faces significant problems in maintaining its high-growth strategy.

The case for the soft landing assumes the investment and property bubbles are less serious than thought. Beijing has sufficient financial capacity to boost growth by loosening monetary policy and bank lending, while adjusting specific policies, such as lifting restrictions on housing sales to prop up prices. China is able to boost domestic consumption, replacing investment as the key driver of its economy. Excess capacity is gradually absorbed as the world economy recovers. Growth comes down gradually, without causing social and political disruptions.

The case for the hard landing assumes the rapid and destructive unwinding of asset price bubbles and problems within the Chinese banking system. A poor external environment and losses on foreign investment exacerbate the problem. Growth collapses, triggering massive social unrest and political tensions.

The end of a cycle of debt and investment-driven growth is typically disruptive. Japan's experience, which China has drawn on in shaping its economic model, is salutary. Japan grew by 10 per cent in the 1960s, five per cent in the 1970s, four per cent in the 1980s and has remained stagnant since, adjusting to the deflation of its debt-fuelled bubble.

Growth may decelerate sharply as the identified problems emerge, falling below five per cent by the middle to end of the decade. While growth at this level is high by the standards of developed nations, it is below that required in China to meet the needs of its population and their aspirations. A lower growth rate is also problematic for external investors and trading partners, assuming higher rates of growth.

The global economy increasingly looks to China to drive the world's growth. These febrile expectations are ill-founded. China's GDP is only around 20 per cent of the combined GDP of the United States, Europe and Japan, which make up around 60 per cent of global output. The view China, because of its large population, can compensate for a decrease in consumption in the developed countries is fanciful. China's consumption is only a little more than France's, a little less than Germany's and around one-eighth of the United States'.

In the aftermath of the crisis, industrial and direct investors have looked at China for earnings growth and returns. High growth rates, fables of urbanization, rising domestic consumption and the need for investment in upgrading infrastructure have attracted investments. Fairy tales about how a billion Chinese would urbanize and consumerize, driving 10 per cent growth forever and replacing America as the global consumer of last resort, captivated audiences at business conferences.

Investors generally chose to ignore the truth underlying the fairy tales, ignoring how the growth was going to be achieved. China's debt-driven and investment-fuelled growth is now vulnerable.

China's problems are likely to affect global growth. There will be significant effects on commodity prices and volumes, affecting resource producers and commodity-exporting nations, such as Canada. It will also affect demand for industrial goods, especially advanced machinery. China consumes more than $500 billion of these products, mainly imported from Europe, the United States and Japan.

A hard landing will be especially traumatic for the global economy, which has not dealt with its core problems -- excessive debt levels, weak non-debt-fuelled demand and global imbalances. The crisis and its effects have been masked in developed economies by artificial demand from government spending, which is proving increasingly difficult to sustain. In China, it was masked by debt-fuelled investment. Now, that feast, too, is coming to an end.

Satyajit Das is author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011), and a consultant to Jory Capital.

-- April 26: China's not-so-miraculous economy

-- Today: Chinese landings -- hard or soft?

Drop in at the Winnipeg Free Press News Café, 237 McDermot Ave., this Thursday, May 3, to catch Satyajit Das in conversation with business reporter Martin Cash. The free event begins at 9 a.m.

wong · Post by **wong** » 01 May 2012 06:44

Theo_Fidel wrote:What! godless panda observing easter now. Will wonders never cease. There is a reason Disneyland is so popular with drones.

So Indians work like beavers while Panda trolls take vacations on credit cards....

I don't observe Easter, but American schools do. I can't exactly take my kids on vacation when school is in session.

There is no correlation between "working like beavers" and wealth creation. Plenty of people in this world work hard and earn peanuts. Plenty of athletes, actors, singers, inventors, hedge fund managers and writers work little and earn millions/billions. If you were in the latter group, you would know this basic fact of life.

China is hardly a prison. China is ranked fourth in people trying to leave, behind Mexico, India & Russia.

Raja Bose · Post by **Raja Bose** » 01 May 2012 08:02

wong wrote:Plenty of athletes, actors, singers, inventors, hedge fund managers and writers work little and earn millions/billions. If you were in the latter group, you would know this basic fact of life.

Are you in any one of the above categories? I guess not. Becoz if you were you would know how hard these guys have to work before they even get a shot at earning their millions and billions - The grass always looks greener from the other side. BTW I didn't know "inventors" was a profession - is it a profession in China?

wong · Post by **wong** » 01 May 2012 08:16

Raja Bose wrote:
wong wrote:Plenty of athletes, actors, singers, inventors, hedge fund managers and writers work little and earn millions/billions. If you were in the latter group, you would know this basic fact of life.
Are you in any one of the above categories? I guess not. Becoz if you were you would know how hard these guys have to work before they even get a shot at earning their millions and billions - The grass always looks greener from the other side. BTW I didn't know "inventors" was a profession - is it a profession in China?

1st world vs. 3rd world working hard. Do I really have to defend this statement??

And yes, I've scene it from the inside. My boss's boss was the 4th highest paid person in the country one year. We always took it as a given hard work is for suckers and there was no correlation. The wealthier the firm, the more they can afford to have lots of people do nothing but play politics all day.

abhischekcc · Post by **abhischekcc** » 01 May 2012 10:00

wong wrote:The wealthier the firm, the more they can afford to have lots of people do nothing but play politics all day.

Touche! I cannot help but agree with the statement - hard work is for suckers! We have plenty of examples in my current company. One head specializes in delegating work.

Raja Bose · Post by **Raja Bose** » 01 May 2012 10:06

Which country would that be?

BTW you had curiously restricted your category of people "who don't need to work hard to earn billions" to just athletes, actors, singers, hedge fund managers etc. I wonder what is the reason? I mean if it is so easy to make a ton of money by going into these professions and not working hard, why are you sitting here whining on BRF??

The truth is, initially you have to slog (and get lucky) unless its your rich uncle's company. But as you move up, you get a better and better chance at being one of the a-holes you are referring to, who engage in "strategy, vision" BS while people under them slog.

Theo_Fidel · Post by **Theo_Fidel** » 01 May 2012 10:53

Wealthy nations with fat cats cornering productivity gains can play these games.
For India it will be hard work and hard work to keep what we gain! Ain't no one giving us nothing.

vina · Post by **vina** » 01 May 2012 19:29

being one of the a-holes you are referring to, who engage in "strategy, vision" BS while people under them slog

Ouch! Very Very Ouch.

.

Watch out Bose Mullah. I've got my eyes on you and gonna come after you! Like they say in Bollywood movies.."Hum Bahut Katarnaak hai.. wuahaahaa"

Raja Bose · Post by **Raja Bose** » 01 May 2012 21:19

Finally vina mullah gets outed as one of the fat kat bourgeois.

gakakkad · Post by **gakakkad** » 01 May 2012 22:58

ot ,but is it fun being a fat kat manager ?

ashi · Post by **ashi** » 03 May 2012 11:02

China's motor industry Stepping on the gas

The upper end of the car market is still booming. BMW's Chinese sales rose by more than a third in the first quarter, compared with a year earlier. To capitalise on the apparently insatiable appetite for its cars, the German firm is launching a stretched version of its 3-series at the Beijing show. This is to appeal to the many buyers who want extra legroom in the back, since that's where they will be sitting, with their chauffeurs at the wheel.

Sport-utility vehicles are also selling like hot Chinese buns: if you can't afford a chauffeur, at least it's nice to drive a car with high seats so you can look down on other motorists. Sales of SUVs have gone up from about 350,000 five years ago to perhaps 2m this year (out of a total Chinese market for passenger cars of 15.5m) and look set to keep growing at more than double the rate of the overall market. That is why Ford launched three new SUV models at the Beijing show.

Encircling the cities

Things do not look so pretty at the smaller, “value” end of China's car market, dominated by local brands.

Pattom · Post by **Pattom** » 03 May 2012 20:25

Chinese drones and their Paki sycophants, take note. Premier Zhu Rongji coined the term 'Tofu-dreg project', used to describe a poorly constructed building. Here are some delightful articles describing the shiny, towering edifices of modern China:

Tofu projects in china
The Collapse of China - the comments section is also well worth a read!

Anyone who's lived a reasonable length of time in ANY Chinese-dominated society would agree with the author of the second article when he says, "Like so much in China, it’s a case of style over substance. A glossy façade hides a rotten core."

So, my dear Chinklurks and their bootlicking Paklurks, the whole shiny Chini package is a mirage. It's not just the construction industry, it's the economy, and society. Everything is made of tofu dregs. There's no quick route to development and glory.

ashi · Post by **ashi** » 03 May 2012 20:40

Pattom wrote:Chinese drones and their Paki sycophants, take note. Premier Zhu Rongji coined the term 'Tofu-dreg project', used to describe a poorly constructed building. Here are some delightful articles describing the shiny, towering edifices of modern China:

Tofu projects in china
The Collapse of China - the comments section is also well worth a read!

Anyone who's lived a reasonable length of time in ANY Chinese-dominated society would agree with the author of the second article when he says, "Like so much in China, it’s a case of style over substance. A glossy façade hides a rotten core."

So, my dear *deleted* and their bootlicking Paklurks, the whole shiny Chini package is a mirage. It's not just the construction industry, it's the economy, and society. Everything is made of tofu dregs. There's no quick route to development and glory.

My dear *deleted*, so what is the supposed and correct route to "development and glory"? Are you saying India's model?

Pattom · Post by **Pattom** » 03 May 2012 20:50

My dear ashi, I never claimed to have all the answers. Nor did I recommend the 'Indian model.' But I do consider the Chinese chest-thumping and jingoistic nonsense about Great Power status to be ill-founded. Prostituting your land and people to multinationals for a quick buck while raping the environment does not a great power make. Wasting money on ill-conceived gift projects, having overcapacity and underutilization as the norm in industry, or having some of the worst returns on capital investment for any country do not a world leader make. So smoke on that!

Theo_Fidel · Post by **Theo_Fidel** » 03 May 2012 21:10

Can't argue over someones need for glory.

As Patton said (parapharsing), "...victory is making the other B@astArd die for his king."

Pattom · Post by **Pattom** » 04 May 2012 02:58

Mole news flom Grolious Lepubric:

'Schools of Fraud' in China helped companies dupe investors

Pattom · Post by **Pattom** » 04 May 2012 03:24

Inside the Chinese boom in Corporate Espionage

amit · Post by **amit** » 04 May 2012 14:50

Pattom wrote:Inside the Chinese boom in Corporate Espionage

In a way I think it serves US/European companies right. In the course of my work I've met too many gung ho corporate honchos who either think all this talk of intellectual property theft is overblown or stem from jealousy or think they are too smart to be conned.

The link posted by Pattom needs some selective quotes.

The best one is:

As the toll adds up, political leaders and intelligence officials in the U.S. and Europe are coming to a disturbing conclusion. “It’s the greatest transfer of wealth in history,” General Keith Alexander, director of the National Security Agency, said at a security conference at New York’s Fordham University in January.

He didn’t do it alone. Sinovel is one of the best-connected clean energy companies in China. Among its major investors is the private equity group New Horizon Capital, co-founded by Wen Yunsong, also known as Winston Wen, son of China’s premier, Wen Jiabao. Han was also close to Zhang Guobao, until recently head of China’s powerful National Energy Administration. According to a former U.S. diplomat, who didn’t want to be named because he still works in China, Han’s relation to Zhang may have given him an early look at yet-to-be-published government regulations and given Sinovel preference in the kinds of turbines chosen to power the state-planned wind farms.

In hindsight, it now appears that Han never planned to fulfill the kind of long-term partnership McGahn had envisioned. In 2010, Han helped create a company called Dalian Guotong Electric, making himself chairman and giving Sinovel a 20 percent stake. When AMSC investigators opened up a Sinovel turbine in a second location in July, they found that an AMSC power converter had been swapped out and replaced with a nearly identical one made by Guotong. It was running on a version of AMSC’s control system software obtained the year before by Sinovel and decrypted by its engineers. It looks like Han wanted to make Guotong Electric the Chinese version of AMSC.

Corruption and politician businessman nexus is full view.

In terms of outright theft of intellectual property, there is growing evidence that China’s intelligence agencies are involved, as attacks spread from hits on large technology companies to the hacking of startups and even law firms. “The government can basically put their hands in and take whatever they want,” says Michael Wessel, who sits on the U.S.-China Economic and Security Review Commission that reports to Congress. “We need to take more actions and protect our intellectual property.”

The day after the press report, AMSC computer networks in Devens were hit by a cyberattack. Forged e-mails were sent to a handful of company executives; they contained spyware designed to copy confidential data, including documents and internal communications. Fredette says e-mails were expertly crafted and had a fake link to a story about Sinovel’s troubles, a bit of irony inserted by the attackers. The FBI is investigating the incident.

As McGahn surveyed AMSC’s technology, he focused on the company’s research into wind-turbine control systems. A modern 1.5-Megawatt turbine is the equivalent of a 160-ton, high-performance pinwheel. Each gets stuffed with as much as $200,000 worth of electronics, including a power converter and what’s called a programmable logic controller, an industrial computer the size of a couple of cigarette cartons. These devices are used to do everything from filling up the bottles in a Budweiser (BUD) brewery to controlling valves in oil pipelines. In the case of turbines, they can rapidly adjust the yaw and pitch of blades, among other functions. McGahn sensed an opportunity to take this technology and capitalize on China’s efforts to harvest energy from the wind.

The gungo ho go-getting manager keen to make his fortune in China. Pre-scam.

The more wiser McGahn, after he presided over his company's virtual rape.

McGahn says he still wants to do business in China. But even if the company never sells another component there, he contends AMSC will survive. He has since moved to secure deals in Russia and is eyeing India as the next big wind market. In the meantime, McGahn has been schooled about doing business in China in a way he never imagined. “I used to be a Sinophile,” McGahn says, then pauses for a long exhale. “I don’t know what I am now.”

However, even for China, there's something called a reality check:

Stealing information, however, is not the same as being able to use it. The Soviets ended up generations behind their U.S. rivals in computing technology because they could not advance the cloned equipment fast enough. Shih says that for the Chinese to succeed at the current game, they will need to build a research and development culture that can supersede their skills at mimicry. “Many countries go through an imitation phase, but the real challenge is moving to an innovation phase,” he says.

^^^^

Couldn't agree more

Singha · Post by **Singha** » 04 May 2012 19:01

a startup in low latency switching called Arista, got its entire codebase stolen from office by the simple means of a skilled burgler making off with their NAS filesystem server.

svinayak · Post by **svinayak** » 04 May 2012 23:07

Arista Network?

hnair · Post by **hnair** » 07 May 2012 22:26

BBC does its China bashing and the story tops their site:

S Korea 'to target powdered human flesh capsules'

The Korea Customs Service said it had found almost 17,500 of the capsules being smuggled into the country from China since August 2011.

The powdered flesh, which officials said came from dead babies and foetuses, is reportedly thought by some to cure disease and boost stamina.

But officials said the capsules were full of bacteria and a health risk.

"It was confirmed those capsules contain materials harmful to the human body, such as super bacteria. We need to take tougher measures to protect public health," a customs official was quoted as saying by the Korea Times.

Inspections are to be stepped up on shipments of drugs arriving from north-east China, Yonhap news agency reported.

The Dong-a Ilbo newspaper said that capsules were being dyed or switched into boxes of other drugs in a bid to disguise them.

Some of the capsules were found in travellers' luggage and some in the post, customs officials said.

All you chinese posters, do take care. Some superior officer might start eating y'all's liver with some fava beans and a nice glass of chianti. You know, for that boost in their careers.

Pattom · Post by **Pattom** » 08 May 2012 00:17

Why capsules? I should think chewable tablets or pastilles (like throat lozenges, which you suck on for a long time) would be much more popular ways to deliver powdered baby. Come to think of it, you could even have health drinks, milk additives (similar to Boost and Ovaltine). The possibilities are endless. And lucrative!

Theo_Fidel · Post by **Theo_Fidel** » 09 May 2012 08:34

ArmenT · Post by **ArmenT** » 11 May 2012 13:58

From Businessweek:
China Eyes Japan as the Land of Opportunity

Christopher Sidor · Post by **Christopher Sidor** » 11 May 2012 21:43

Theo_Fidel wrote:

So this is the area which India's IRBM have to target. Funny how a few provinces is all that is required.

svinayak · Post by **svinayak** » 12 May 2012 06:44

Three missiles is what is required

Rishirishi · Post by **Rishirishi** » 12 May 2012 14:10

Christopher Sidor wrote:
Theo_Fidel wrote:
So this is the area which India's IRBM have to target. Funny how a few provinces is all that is required.

the factories are spread over huge areas. each provice would need at least 15-20 x 1megaton weapons to be taken out. Millions would die, as the area has a massive population. global manufacturing would colapse. There would be shortages for everything from computers, electronics, cloths, etc It is something we should hope never happnes.

kish · Post by **kish** » 12 May 2012 15:21

Rishirishi wrote: the factories are spread over huge areas. each provice would need at least 15-20 x 1megaton weapons to be taken out. Millions would die, as the area has a massive population. global manufacturing would colapse. There would be shortages for everything from computers, electronics, cloths, etc It is something we should hope never happnes.

I disagree. Domination of Chinese manufacturing industry would cease, But manufacturing in alternative markets like Japan, Malaysia, Singapore, Philippines, to some extent India will pick up.

Textile Industries of Bangladesh, SriLanka, India will experience an unprecedented boom.

RamaY · Post by **RamaY** » 13 May 2012 06:00

A drone posted the China GDP growth story recently (gave some Google data link). I was surprised to notices that China GDP grew more than 15% in 2009 and did some research.

Looks like ~20% of China's GDP growth since 2000 came from exchange rate manipulation when measured in USD. India, unfortunately did not have that advantage. This difference becomes even glaring if we take 1970 US$ value as INR depreciated by 6 times where as CNY depreciated only 2.3 times in the same period.

harbans · Post by **harbans** » 13 May 2012 15:31

Ramay Ji, welcome back. However China since the early 90's became a low cost manufacturing base and supplied the world..appreciating it's currency. India steadfastedly refuses to reform and a large section of India wants it to turn magically self reliant in every sphere. China reformed it's retail for example years ago and learned to manufacture most items one see's in retail stores cheaply in abundance feeding an organized structure in major markets world wide. India is still debating whether reform is necessary or not. Even today the US wants China to 'appreciate' it's currency vis a vis the USD, not depreciate it to achieve some parity.

chola · Post by **chola** » 13 May 2012 18:35

RamaY wrote:A drone posted the China GDP growth story recently (gave some Google data link). I was surprised to notices that China GDP grew more than 15% in 2009 and did some research.

Looks like ~20% of China's GDP growth since 2000 came from exchange rate manipulation when measured in USD. India, unfortunately did not have that advantage. This difference becomes even glaring if we take 1970 US$ value as INR depreciated by 6 times where as CNY depreciated only 2.3 times in the same period.

The Chinese currency is way undervalued to cheat in trade regimes. The US estimates that the Chinese unfairly keep the Yuan depreciated by at least 20-40%.

Understand the Chinese game. They keep their currency low -- not high -- so they can cheat.

The rest of the world is trying to force the chinis to appreciate their currency while Indians are complaining that the PRC should have depreciated it more. Our understanding of the chini economic strategy is completely lacking.

A depreciated Chinese currency might make the chini-hindi comparison look better but it would mean devastation for India's and the rest of the world's manufacturing sector.

RamaY · Post by **RamaY** » 13 May 2012 19:18

Thanks Harbans ji. I understand the issue you raise but I have a different opinion.

What India needs urgently is to bring the efficiencies in production, supply-chain and product design. It need not ape China and become another factory of the world. I do not think world can support another billion plus factory.

Chola ji, I was thinking about what you said while putting that data together. I just wanted to put the impact of exchange rates, that is all. It is interesting to note that the Rs conversion rate stayed stable between 43-49 for the past decade where as Chinese currency depreciated 20% (from 8/$ to 6.2/$).

chola · Post by **chola** » 13 May 2012 19:56

RamaY wrote:Thanks Harbans ji. I understand the issue you raise but I have a different opinion.

What India needs urgently is to bring the efficiencies in production, supply-chain and product design. It need not ape China and become another factory of the world. I do not think world can support another billion plus factory.

Chola ji, I was thinking about what you said while putting that data together. I just wanted to put the impact of exchange rates, that is all. It is interesting to note that the Rs conversion rate stayed stable between 43-49 for the past decade where as Chinese currency depreciated 20% (from 8/$ to 6.2/$).

There doesn't need to be one factory of the world. The manufacturing should be shared across many countries. China is "the factory of the world" because it cheats by undervaluing its currency.

The chini currency went up 20% in the last decade only because of US pressure. If it were left to them they would leave it low to cheat.

If the US has its way, China's economy and currency would be 40% bigger than it is today. It would look worse in any China-India comparison but it would be better for India and the rest of the world in real terms.

The key is we want China's currency to rise not depreciate.

pankajs · Post by **pankajs** » 14 May 2012 00:13

World edges closer to deflationary slump as money contracts in China

Narrow M1 data for April is the weakest since modern records began. Real M1 deposits – a leading indicator of economic growth six months or so ahead – have contracted since November.

They are shrinking faster that at any time during the 2008-2009 crisis, and faster than in Spain right now, according to Simon Ward at Henderson Global Investors.

If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie.

Whether this hybrid system of market Leninism – with banks run by Party bosses – conforms to Western monetary theory is a hotly contested point. The issue will be settled one way or the other soon.

What seems clear is that China's economy did not bottom out as expected in the first quarter. It is flirting with real trouble. Yao Wei from Societe Generale says a blizzard of awful data "screams out for easing".

China's electricity output – watched religiously by bears – slumped in April. It is up just 0.7pc over the last year. State investment in railways has fallen 44pc, with an accelerating downward lurch over recent months. Highway construction has dropped 2.7pc. "The data shows extreme weakness in the Chinese economy," said Alistair Thornton from IHS Global Insight in Beijing.

The Yangtze shipyards tell the tale. Caixin magazine said eight of the 10 largest builders in the country have not received a single new order this year. "A wave of closures in the shipbuilding industry has yet to begin. A hurricane is approaching," said one official.

Housing sales slumped 25pc in the first quarter, testimony to the zeal of regulators. This has since fed into a drastic fall in new building. Mr Thornton said floor place under construction fell 28.3pc in April.

This is hardly a sideshow. The sector employs 10pc of the Chinese work-force, and a further 20pc indirectly. Land sales provide 70pc of tax revenue to local authorities and 30pc to the central government. It is the "fair weather" financing illusion, as
we saw in Ireland. China's scope for fiscal stimulus may be constrained if property goes into a long slump.

The property correction is deemed benign because it is planned. Premier Wen Jiabao wishes to forces down prices as a social welfare policy. Yet did the Fed not slam on the brakes in 1928 to choke an asset boom? Did the Bank of Japan not do likewise in 1990, only to find that boom-bust deflation has its own fiendish momentum? Once you let credit rise by 100pc of GDP in five years – as China has, more than in those US or Japanese episodes – you are at the mercy of powerful forces.

Something odd is now happening. The People's Bank said new loans fell from $160bn (£99.5bn) in March to $108bn in April. Non-conventional lending seized up altogether. Trust lending fell by 96pc, bankers' acceptance bills by 90pc. This is astonishing data.

It may not be as easy for Beijing to turn the tap back on again. Loan demand has been falling for months. Banks are offering credit. Companies are refusing to take it. This is the old Japanese story of pushing on a string, or the European story today.

"China is in deflation," says Charles Dumas from Lombard Street Research. Yes, consumer price inflation is 3.4pc – though falling – but consumption is a third of GDP. Fixed investment is 46pc, and here prices have dropped 3.5pc in six months. Export prices have dropped 6.6pc.

The authorities have belatedly responded, cutting the reserve ratio by 50 points to 20pc over the weekend. It is thin gruel. Are we to conclude that the People's Bank is bent on breaking excess capacity in a cathartic Schumpeterian purge, or that leadership battles have paralysed the Party? Hard to tell.

All the BRICs need watching. India's industrial output fell 3.5pc in March. The country seems caught in a 1970s stagflation vice. Brazil has softened too, with car sales down 15pc and industrial production contracting in March. The bad loans of the banks have reached 10.3pc, higher than post-Lehman.

The bubble has probably popped already, but hoteliers in Rio are hanging on. The European Parliament has pulled out of the UN's Rio forum on sustainable development in June because the rooms are exorbitant. "We are short the vastly over-vaunted and over-owned BRICs," says hedge fund contrarian Hugh Hendry.

My fear has always been that the credit cycle in the Rising World would blow itself out before the Old World has safely recovered, or reached "escape velocity" to use the term in vogue.

Europe will slide further into 1930s self-destruction until it equips itself with a lender of last resort and takes all risk of EMU sovereign default off the table, though that may come too late. The US has functioning institutions at least but growth is barely above stall speed. Ben Bernanke's "massive fiscal cliff" looms this autumn. The Economic Cycle Research Institute (ECRI) has not yet withdrawn its US recession call.

The BRICS helped save us in 2008-2009. If we now face a global crisis on all fronts – and such an outcome can still be avoided – it will test the mettle of world leaders. Interest rates in the G10 are mostly zero already, and budgets are frighteningly stretched.

Sensing what is coming, Citigroup's chief economist Willem Buiter says global central banks have not yet exhausted their arsenal. They can "and should" crank up quantitative easing (QE), buy everything under the sun, and do "helicopter money drops".

I would go even further. sovereign central banks have the means to defeat any depression thrown at them by launching mass purchases of assets outside the banking system, working through the classic Hawtrey-Cassel quantity of money mechanism until nominal GDP is restored to its trend line.

The problem is not scientific. A world slump is preventable if leaders act with enough panache. The hindrance is that the Euro Tower still haunted by Hayekians, and most G10 citizens – and Telegraph readers from my painful experience – view such notions as Weimar debauchery, or plain Devil worship. Economists cannot command a democratic consent for monetary stimulus any more easily today than in 1932.

One can only pray that helicopter drops do not become necessary in the chilly winter of 2012-2013.

zlin · Post by **zlin** » 15 May 2012 08:07

China building power transmission line of world's largest capacity

Updated: 2012-05-14 10:00
URUMQI - Construction of an ultra-high voltage power transmission line designed with the world's largest capacity started Sunday in China's far western Xinjiang region.

The 800 kv ultra-high voltage direct current (UHVDC) transmission line connects the energy base of Hami prefecture in eastern Xinjiang with the central city of Zhengzhou, according to the State Grid Corporation of China (SGCC), the project contractor.

The 2,210-km-long line goes through the vast region of Xinjiang, Gansu, Ningxia, Shaanxi, Shanxi, and Henan. It costs 23.39 billion yuan ($3.7 billion), and is designed to have a transmission capacity of 8 million kW upon completion in 2014, setting up a new world record.

The line will transmit 37 billion kWh on average annually, according to Liu Zhenya, general manager of the State Grid Corporation of China. "We can reduce 317,000 tons of sulfur dioxide and 267,000 tons of nitrogen oxide which would otherwise be produced during the transportation," Liu said.

Zhou Yongkang, a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, attended the construction launch ceremony in Xinjiang.

In the meantime, a second 750-kv HVDC transmission line which links Xinjiang with the main network of the Northwest China Grid Co. Ltd. kicked off on Sunday.

With an investment of 9.56 billion yuan, the 2,180-km-long line will become the major route to transmit wind and solar power generated in Hami prefecture, Jiuquan city of Gansu province, and Qaidam basin in Qinghai province to the rest parts of the country.

The construction boom of the ultra-high voltage power transmission lines came as the country strives to transmit the electricity from the energy-rich west to the booming central and eastern regions.

Xinjiang has 2 trillion tons of coal reserve, one third of which is in Hami. Meanwhile, Hami is one of the country's major wind power bases.

China's large energy bases are mostly distributed in the west and north, more than 2,000 km from the power network load centers in the eastern and central regions, said Zhang Guobao, director of Expert Advisory Committee under the National Energy Administration.

"The ultra-high power transmission lines are a way out for the country's imbalanced distribution of energy reserve," Zhang said.

Ultra-high voltage power transmission (UHVPT) projects, however, have met many obstacles, as some doubt whether the technology is mature enough and can bring about economic benefit.

China has been suffering prolonged and ever worsening power shortage in recent years, a driving force for the country to develop long-distance, high-voltage power transmission lines.

Starting from March 2011, an unprecedented power shortage swept most southern and eastern provinces and municipalities, with a supply gap of 30 million kilowatts, according to China Electricity Council.

"In spite of the controversy, the projects will continuously be carried forward," said Zhou Fengqi, deputy president of China Energy Society.

Industry insiders have said the State Grid Corporation of China will push for the construction of four alternating current and three direct current ultra-high voltage power transmission lines across the country, with an investment exceeding 300 billion yuan in 2012 alone

Singha · Post by **Singha** » 18 May 2012 14:52

http://www.nytimes.com/interactive/2012 ... -boom.html

some top china leaders and their kids in high positions

vina · Post by **vina** » 18 May 2012 15:18

China's towering metal stockpile cast slowdown shadow

When metals warehouses in top consumer China are so full that workers start stockpiling iron ore in granaries and copper in car parks, you know the global economy could be in trouble.

At Qingdao Port, home to one of China's largest iron ore terminals, hundreds of mounds of iron ore, each as tall as a three-storey building, spill over into an area signposted "grains storage" and almost to the street

Further south, some bonded warehouses in Shanghai are using carparks to store swollen copper stockpiles - another unusual phenomenon that bodes ill for global metal prices and raises questions about China's ability to sustain its economic growth as the rest of the world falters.

The slowdown has hit hard some of the small and medium-sized manufacturers and traders who form the bulk of China's metals business. Some steel traders have committed suicide and owners of faltering factories have skipped town to escape creditors , according to local media reports over the past year.

Singha · Post by **Singha** » 18 May 2012 16:24

the taiwanese / HK factory owners are a sharp lot. they keep their funds mobile and ears on the ground. they will quickly disappear back to their homelands and reappear in places like vancouver, auckland or sydney out of reach of the long arms of the panda.

wong · Post by **wong** » 18 May 2012 16:29

chola wrote:
RamaY wrote:A drone posted the China GDP growth story recently (gave some Google data link). I was surprised to notices that China GDP grew more than 15% in 2009 and did some research.

Looks like ~20% of China's GDP growth since 2000 came from exchange rate manipulation when measured in USD. India, unfortunately did not have that advantage. This difference becomes even glaring if we take 1970 US$ value as INR depreciated by 6 times where as CNY depreciated only 2.3 times in the same period.

The Chinese currency is way undervalued to cheat in trade regimes. The US estimates that the Chinese unfairly keep the Yuan depreciated by at least 20-40%.

Understand the Chinese game. They keep their currency low -- not high -- so they can cheat.

The rest of the world is trying to force the chinis to appreciate their currency while Indians are complaining that the PRC should have depreciated it more. Our understanding of the chini economic strategy is completely lacking.

A depreciated Chinese currency might make the chini-hindi comparison look better but it would mean devastation for India's and the rest of the world's manufacturing sector.

That kind of low cost mfg work isn't going to India regardless of the Yuan FX rate. It doesn't even make sense logistically. India is about the furthest place on the planet from the ports of Long Beach.

Once a month, I take my kids to McD's and do the Happy Meal test. I expect the free Made in China toy to be replaced soon with a Made in Africa or Vietnam toy. Made in India? I would be shocked. Next, I check a box of the newest LEGOs (Avengers). This tells me which countries are capable of manufacturing & packaging billions of very high precision injection molding pieces at less than 5 cents each with almost a zero error rate: Denmark, Hungary, Mexico, China and Czech Republic.