PRC Economy and Industry: News and Discussions

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Vasu
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Re: PRC Economy and Industry: News and Discussions

Post by Vasu »

I have a fear that http://www.shanghaiist.com will probably be pulled down by the lizard if we begin quoting it so often here.

But the big story published today is the state of the Shanghai Metro's line 10.
Since people in Shanghai love constant surprises, the Shanghai Metro has been pulling out all the stops this summer, coming out with one hit after another on the Line 10 of Doom. We've been privileged enough to witness Line 10 trains going in the wrong direction, platform doors shattering, and now trains breaking down with all the doors closed.

According to Shanghai Daily, the incident occurred at 10:38am this morning between Songyuan Road (宋园路站) and Hongqiao Road station (虹桥路站), with passengers being trapped inside and weibbing their distress:

The Metro operator activated an emergency plan and asked the following train to pull the paralyzed train back to Songyuan Road Station to let passengers get out.

A Metro worker on the train said they had pulled the emergency brakes on the train to try to open the doors but failed.

Some passengers expressed fears that the failure of the train's door system could threaten their lives if a fire occurs.

And lest you start pointing figures at Line 10 for being the epicenter of all the recent troubles, we'll have you know that it was the dastardly Line 3 that was stalled by lightning over the weekend, and the precarious escalators of the People's Square station (nowhere near Line 10) that injured a toddler a little over a week ago. The thrills abound!
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Re: PRC Economy and Industry: News and Discussions

Post by Singha »

from the same blog - the chinese hasan ali!


Confirmed: Railways official stashed $2.8 billion USD overseas

Zhang Shuguang, aka 'High-Speed Rail Number 1 Person' (高铁第一人). Though the rumors had been kicking around for a while, an official report from CCTV confirms that the Shanghainese former deputy chief engineer for the Ministry of Railways Zhang Shuguang (张曙光) kept overseas deposits worth $2.8 billion USD. In contrast, former Minister of Railways Liu Zhijun (刘志军, he of the 18 mistresses :twisted: ), made off with only a piddling $155 million USD worth of red-packet money.

5 other officials from the Ministry of Railways are also under investigation. Zhang and Liu were together tasked with the goal of creating a high-speed rail network worth $300 billion USD spanning 10,000 miles by 2015.

Despite the reasonable monthly income of 8000RMB, Zhang managed to amass a fortune of nearly $3 billion greenbacks stashed away in bank accounts in the US and Switzerland. Zhang was also considerate enough to purchase three homes in Los Angeles for his wife and daughter. You can never have too many homes to lounge in while playing QQ Poker on iPads all day, right?

And so the phenomenon of corruption continues unabated in China. Is there a class at the Central Party School on how to be a greedy unconscionable ********? We only hope that if a human flesh search engine for Zhang's family happens, then a proper amount of restraint is shown. Go easy, rabid netizens!
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Re: PRC Economy and Industry: News and Discussions

Post by Singha »

another good one - a chinese co that fakes US RMV licenses so good that even police officers are fooled. popular with high school and college kids hungry for some id to drinking out. if any of you oldies have kallege kids maybe check their licenses out too :lol:

http://www.washingtonpost.com/local/lat ... story.html

In an era when terrorism and illegal immigration have transformed driver’s licenses into sophisticated mini-documents festooned with holograms and bar codes, beating the system has never been easier.

Just wire money to “the Chinese guy.”

“He’s like some sort of genius in China,” said a 19-year-old for whom Eney bought shots that night. “Every kid in Annapolis has one of his licenses.”

The “Chinese guy” — whose e-mail address is passed around on college campuses and among high school kids — is actually a Chinese company that mails untold thousands of fake driver’s licenses to the United States. They have been turning up in states from coast to coast.

To the naked eye — even the practiced eye of most bartenders and police officers — the counterfeits look perfect. The photo and physical description are real. So is the signature. The address may be, too. The holograms are exact copies, and even the bar code can pass unsophisticated scans.

“We’re seeing these false IDs being generated from the same source out of China,” said Steven Williams, chief executive of Intellicheck, which supplies detection equipment to federal agencies, law enforcement and businesses. “There’s a rampant distribution of false IDs . . . from China, from one source.”

The IDs have shown up in various states, each license carrying a mysterious hidden tip-off in the bar code that points directly to the same Chinese company.

Eney’s 19-year-old drinking companion said she can’t recall who gave her the e-mail address for “the Chinese guy.” She soon discovered that friends on campuses in California and New England had it, too.

More than just the rage among underage drinkers, the top-flight bogus licenses are a hot item among practitioners of credit-card fraud.

..................

The shoe box that arrived in the mail from China contained a cheap pair of shoes.

“We thought the Chinese guy had ripped us off,” said the 19-year-old who shared shots with Eney the night he died.

Until then, the transaction had gone smoothly. She made first contact through an e-mail address supplied by the acquaintance. A prompt e-mail reply laid out the deal.

“It was $300 if you just wanted one” license, she said. “It was $200 [each] for two and $75 [each] if you wanted more than 20.”

Photos, names, signatures and physical descriptions were e-mailed to the address. Money was collected from friends, many of them former classmates at the Severn School, from which Eney also had graduated, and wired to an address in China specified in the e-mail.

“You can pick from a list of about 10 states,” she said. “I heard that the Pennsylvania license was the best one.”

The shoe box with postmarks from China arrived in a matter of days. After initial consternation, she flipped over one of the shoes and ripped open the sole. Out tumbled 22 brand-new, visually perfect driver’s licenses.

“And my friend’s license came in this,” she said recently, flipping to a picture on her iPhone. It showed a necklace box with a sparkling brooch.

This spring, federal authorities in Chicago intercepted thousands of fake licenses hidden in jewelry boxes and the soles of shoes shipped from China. Most of them appeared to be addressed to college students.

Border Patrol officials, who made the seizure in Chicago, are cracking down on phony licenses, but the IDs usually come disguised in individually addressed packages, making the task difficult.
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Re: PRC Economy and Industry: News and Discussions

Post by ashi »

India Journal: Why India’s Demographic Dividend Will Lag China’s
China in just 15 years, between 1995 and 2010, leveraged its “demographic dividend” to build the world’s second-largest economy after the U.S. and will overtake the U.S. within the next 20 years. Chinese nominal per capita gross domestic product in dollars increased seven-fold between 1995 and 2010!

Can India ride the same winds? We don’t mean overtaking China or the U.S. That simply will not happen. But can India leverage its demographic dividend into a substantial economic payoff which will significantly change the lives of hundreds of millions of the poor?

There will be a payoff but it will not be as large as China’s. The best India can hope for is that nominal per capita GDP in dollars will increase by a factor of 3.5 to 4 between 2010 and 2025, about half what China achieved between 1995 and 2010. Even though India is a young country, the age dependency ratio still favors China over India till 2025. (The ratio is the proportion of people too young or too old to work to the number of working-age adults.)

Both countries have momentum but China’s structural factors are far superior to India’s so India will not get the same leverage.
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Re: PRC Economy and Industry: News and Discussions

Post by gakakkad »

^^^ May be the true reason is that panda is tallel/deeple and Yindians are SDRES only ? :P :P :P :P :P

ADDED LATER- How much did emperor Hu pay WSJ cronies to write this crappy article? For your info India had a nominal growth rate of 25% LAST YEAR.
Last edited by gakakkad on 06 Aug 2011 09:56, edited 1 time in total.
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

Cross Posting..
Muh hwaa haa.. In one fell swoop, the US (or rather S&P) has shafted China.. Well, think of it. All that $2T reserves dropped in value by a couple of hundred billion! . Now the true music beings. The Chinese will suddenly realize that they are out of time and can't do the "managed" growing of domestic consumption and removal of the fixed peg. They have to do it quickly and diversify away IMMEDIATLY. A massive double whammy! Panda is Phacked. I doubt that they can dodge the bullet much longer. Panda is going to have a big crash.

All very good for Yindia. Global interest rates will remain low, commodity prices will crash ( there is no monetary bullets left..sorry you cant go much below zero anyways , to pump the commodity bubble!)

Jai Ho!

But right now keep the shorts firmly in place folks.
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Re: PRC Economy and Industry: News and Discussions

Post by DavidD »

vina wrote:Cross Posting..
Muh hwaa haa.. In one fell swoop, the US (or rather S&P) has shafted China.. Well, think of it. All that $2T reserves dropped in value by a couple of hundred billion!. Now the true music beings. The Chinese will suddenly realize that they are out of time and can't do the "managed" growing of domestic consumption and removal of the fixed peg. They have to do it quickly and diversify away IMMEDIATLY. A massive double whammy! Panda is Phacked. I doubt that they can dodge the bullet much longer. Panda is going to have a big crash.

All very good for Yindia. Global interest rates will remain low, commodity prices will crash ( there is no monetary bullets left..sorry you cant go much below zero anyways , to pump the commodity bubble!)

Jai Ho!

But right now keep the shorts firmly in place folks.
For the bolded part, why? What will happen if they don't?
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Post by DavidD »

I think people are looking at this debt/reserves issue through their personal experiences with debt and savings. These things simply don't mean the same thing for private individuals as it does for massive nations. China can't buy anything with that money anyway, so whether they're there or not makes little difference.

What all currencies do is to attempt to place a number on how much people value things. A table may cost $100 or $1, but it doesn't change how much people value that table. All this financial mumbo-jumbo is relatively meaningless, what's meaningful is how much a nation can produce and how valuable the products are. That is, National Strength = # of Products x Value of the Products. For example, Germany after WWI went through some horrific financial problems, hyperinflation made the German Mark worthless. However, within a few years they were back on the world stage as a formidable power, why? It's because they still had the capacity to churn out enormous amount of valuable goods.

You can blame America's decline on the succeeding crises like the dot com bubble, the real estate bubble, and the ensuing financial meltdown, but none of that is the real reason. The real reason is because America simply does not produce as much valuable goods as it once did. All the bubbles did was to temporarily mask the true decline for a short while, and without these bubbles America would've simply steadily declined to its current state rather than doing so sharply. It's similar though in an opposite fashion to what happened to Germany post WWI, when the financial crises masked the true strength of Germany.

Similarly, the current day global recession may affect nations like China and India in the short term, but in the grand scheme of things it won't matter at all. As China and India continue to develop, as the two countries continually become more productive, and as they continue to move up the value chain, their national strengths WILL increase regardless of what currencies be it dollar or yuan or rupees say they are. This is what has happened since the beginning of mankind, when we as a species become "wealthier" as we become more productive over the millenia. This simple but irrefutable truth is what will truly determine the paths of each nation, and financial gimmicks like exchange rate or debt won't ever change that.
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Post by DavidD »

Now, to expand more on the debt issue. What is the value of money? Those pieces of paper have no intrinsic value, what makes them valuable is the things that you can buy. Let's say I have $100 in savings, if I lose $20 of it, it means I can buy less things. Now, why is this different for nations? Let's look at China for an example, they have $2T or whatnot in savings, but what can they buy with it? Nothing. There is nothing worthwhile to buy with that money, so that $2T is ALREADY WORTHLESS. So why did China accumulate so much worthless money and is in fact continuing to accumulate more(some predict it'll rise to $5T by 2015)? It's because the worth of accumulating that money is not in the money itself, but in the ACT OF ACCUMULATING it.

By keeping the price of Chinese goods artificially low, China has been able to develop a robust manufacturing industry and it has raised the productivity of the nation as a whole. In essence, that $2T is ALREADY SPENT. It was spent to give the Chinese industries a competitive edge, which they've used to become a much more productive country.
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

DavidD wrote:For the bolded part, why? What will happen if they don't?
Well, unlike you, it seems that it matters terribly for your compatriots if there is actually $2T or NOT! :mrgreen: .

Anyways, expect more of these kind of hysterics.

China blasts US over debt problems and calls for oversight over the USD
"China, the largest creditor of the world's sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," Xinhua said
:rotfl: :rotfl: :rotfl: . That takes the cake. You go and buy US debt over any prudent need, just to keep your currency pegged and keep lending against all sanity and then "DEMAND" :eek: . Well, the "right" you have is to sell and get out! Err. In English it actually means taking a knife and stabbing your stomach! That is what you guys have gotten yourself into!
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua wrote.
Oh. How nice. How about the realization from the Chinese that cheap exports to the rest of the world as a means of prosperity is a dead end and that keeping the currency artifically low is the flip side of the problem! How about fixing YOUR mess first by letting the currency float by itself and then do the lecturing to others! Let the currency float and the global imbalance will be immediately fixed.
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.
:P :P So "Glandpa Wen" is going to sit at the federal reserve instead of Bernanke and decide monetary policy! Truly the Chinese are deluded if they think that anyone except the US itself can "supervise" it's currency! What the Chinese can do is supervise the RMB and let it float. For starters make it fully convertible and let it float and half the Chinese will sell the RMB and buy USD and Euro and the Aussie and Canadian dollars!
"There would be chaos in international financial markets at least in the short term. The most direct impact for China would be the hit on its reserves. The value of China's dollar investments will fall and the shrinking effect may be great," said Li Jie, a director at the Reserves Research Institute at the Central University of Finance and Economics.
Now this is one sane guy. Maybe you should listen to him.
"China will be forced to consider other investments for its reserves. U.S. Treasuries aren't as safe anymore. There is a class of assets out there that are more risky than AAA, but less risky than AA+. China didn't consider these investments before, but now it would be forced to do so," Li said.
Really. Something as liquid and deep as US Treasury for you to park 2T without severe price impact, well as Lee Iacocca said "If you can find a better car, Buy IT" . Similarly, "If you can find a better instrument, Buy it!" .. Good luck , Comrade Li.
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

vina wrote:Cross Posting..
Muh hwaa haa.. In one fell swoop, the US (or rather S&P) has shafted China.. Well, think of it. All that $2T reserves dropped in value by a couple of hundred billion! . Now the true music beings. The Chinese will suddenly realize that they are out of time and can't do the "managed" growing of domestic consumption and removal of the fixed peg. They have to do it quickly and diversify away IMMEDIATLY. A massive double whammy! Panda is Phacked. I doubt that they can dodge the bullet much longer. Panda is going to have a big crash.

All very good for Yindia. Global interest rates will remain low, commodity prices will crash ( there is no monetary bullets left..sorry you cant go much below zero anyways , to pump the commodity bubble!)

Jai Ho!

But right now keep the shorts firmly in place folks.
Your bond math is not correct. Aaa to Aa is worth at most 30bps. China holds 1.3T in UST not 2T. DV01 is like $1.5billion. We are talking a less than $50 billion impact on a 3T+ portfolio. This paper loss is more than offset by the RMB move closer to reserve currency status. If US and EU fail first, China wins and vice versa. It's a game of last man standing.

How any of this can possibly benefit India is just crazy. India cannot possibly fill the void if US, EU or China implodes.
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Re: PRC Economy and Industry: News and Discussions

Post by Shankas »

wong wrote: This paper loss is more than offset by the RMB move closer to reserve currency status. If US and EU fail first, China wins and vice versa. It's a game of last man standing.
^^^
I don't understand this.

RMB which is artificially valued and pegged to the US$ will become the next reserve currency? Also if it comes to the "Last Man Standing" situation, will not the US and EU bond together? They are after all bound by History, Race, Religion, etc.
Theo_Fidel

Re: PRC Economy and Industry: News and Discussions

Post by Theo_Fidel »

S,

I think you got a glimpse into the official party line. This is the internal bullet point sent to the Ding-Dong who has faithfully regurgitated it here without understanding any of it. They don't understand the consequences or the near total dependence on the West.
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

Shankas wrote: ^^^
I don't understand this.

RMB which is artificially valued and pegged to the US$ will become the next reserve currency? Also if it comes to the "Last Man Standing" situation, will not the US and EU bond together? They are after all bound by History, Race, Religion, etc.
The RMB is pegged. There's nothing artificial about it. What's a non-artificial peg?? Lots of countries peg their currency. During the Asian financial crisis in '98, China didn't devalue despite every incentive to do so and held that peg while all its ASEAN neighbors devalued. The PBoC has stated that it wants the RMB to be a medium of exchange for global trade and it's moving carefully in that direction. They are floating bigger and bigger dim sum bonds in Hong Kong to start an international market for Yuan bonds. This is a work in process and will take another 10 to 20 years to complete. Any downgrade in the US credit rating can only be beneficial to this effort because it means weaker competitors for capital. That's also why India cannot benefit from the US rating downgrade. I just don't see institutional investors having to decide between US Treasuries or Indian debt for a variety of reasons.

The advantages for reserve currency status are clear enough. For example, Iran accepts RMB for oil already. To purchase Iranian oil, China has only to start the printing press. This is a huge advantage for China. Also, if there's one non-EU country standing behind the EU, it's China. I don't think the criteria you listed have anything to do with it. Chinese-EU trade is growing incredibly fast. Several EU countries like Germany are actually running a healthy trade surplus with China.
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Re: PRC Economy and Industry: News and Discussions

Post by Christopher Sidor »

sum wrote:
Foxconn to replace workers with 1 million robots in 3 years
Will the robots also start committing mass suicides after being overworked like current foxconn workers seem to be doing?
In the late 1980s and early 1990s another east Asian nation, also tried the same thing. i.e. replacing human workers with robots on the assembly line. Then also the so called savings in cost could not materialize. Manufacturing eventually shifted to China. As it is shifting slowly and surely away from China to certain nations in South East Asia. Hell even Bangladesh is even mentioned in some circles.

CNN Money ran an article in Feb-2011 about a factory in JAPAN using less number of robots, so as to reduce costs. Even in a highly mechanized country like JAPAN, it seems that robots are not that cost effective compared to humans.

There are inherent advantages of using robots, namely high precision and off course the absence of a "UNION". Something which humans will not be able to provide.
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Re: PRC Economy and Industry: News and Discussions

Post by paramu »

If manufacturing is done in by robots, why should those factories be in China? Why can't they be relocated to US or Mexico so that they could save transportation cost? If they still keep that in PRC it should be because of subsidy.
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Re: PRC Economy and Industry: News and Discussions

Post by VikramS »

wong:

RMB as a reserve currency is a joke.

It might act as a medium of trade for regimes which are currently outcast like Iran, North Korea or Venezuela, or countries which may end up with a huge trade surplus with China (perhaps Russian hydorcarbons) or African countries which the Chinese resource-hunger needs to manage.

However a medium of trade does not make it a reserve currency.

The first step towards a reserve currency status is a free floating exchange rate. The next step is the rule of law on which an outsider can rely on. Then you need capital controls to be relaxed. And above all you need transparency about government finances. Right now the Chinese are supposedly the lenders to the Western world while their own internal auctions are failing due to abnormally high negative real interest rates.

The interest in Dim-Sum Bonds are primarily a play on currency appreciation. To see that as a justification of RMB's role as a reserve currency is fool-hardy.

In fact I will argue that the INR has a better chance of becoming a reserve currency than RMB. The Indian economy is not export dependent, has a significantly higher level of transparency when it comes to government finances and has a rule of law in place to protect investors. Growth in India is not driven by massive public spending projects; nor does her economy have an imbalance like China's where construction is a huge portion of the GDP.

The INR floats in a much wider range consistent with what the economic picture represents (a negative trade balance compensated by big remittance inflows; trading labor for goods). Another decade of high single digit growth will double the size of the Indian economy making it comparable to the big ones.

Many oil producing countries have historical, cultural and personal links with India and with India's rising hydrocarbon imports the relationships are deepening. Prior to the discovery of oil (till the 40s-50s), the Indian Rupee was the currency of exchange in this region so that it is not without any historical precedence.

In many parts of the emerging world, there is a growing interest in India, often at the expense of China. The relationship which India has is two-way and in sharp contrast with the relationship which China has which is seen as parasitic. These are the relationships which will survive in the long-haul; not the neo-colonialism which China is trying to perpetuate.
http://blogs.ft.com/beyond-brics/2011/0 ... z1UKRB2rhP

India’s economic interest in the region is more on high-end and even long-term investment and products, from IT to manufacturing, in contrast to China’s voracious, almost singular focus on raw material exports from Latin America.

And it is only a matter of time before protectionism starts emerging; structural unemployment will be tolerated for so long in the West. The Chinese have had the West for suckers for the past two decades, stealing their jobs openly and their IP behind the scenes. Given the turmoil in the West, that era is seeing the beginning of the end.

China hopefully is bracing itself for that. And if they feel that their bond holdings will allow them to wield influence, the just need to look at the Fed's balance street growth. The Fed will gladly print a few more trillion dollars if the Chinese decide to wield the T-bomb.

There is a reason why the demand for Gold imports in China has now overtaken India even though China is the world's larges producer of Gold. The Chinese people know that real-estate can no longer hedge against inflation and now are moving towards gold.

Unlike India, China is tied at the hips with the Western fiat ponzi. Any circulars telling you how the downgrade of the US by S&P will help RMB become a reserve currency are making me :rotfl: :rotfl: :rotfl:

Suckers.
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Post by wong »

^^^^

VikramS,

The proof is in the pudding. India tried for 6 months to get Iran to take INR for oil. Iran said no thanks. Why?

You wrote: "The first step towards a reserve currency status is a free floating exchange rate." Who said ?? Did that come from the same "circular" telling you "democracy equals innovation" ??

I even stated it will take 10-20 years for RMB to get to reserve currency status and I have no doubt it will. It is making huge progress in that direction. This downgrade can only help. The first step is a basket currency in 5 to 10 years. Maybe they will put INR in this basket or maybe they won't. We shall see. The Fed is out of bullets. Aa's don't get an unlimited printing press.
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Re: PRC Economy and Industry: News and Discussions

Post by Christopher Sidor »

paramu wrote:If manufacturing is done in by robots, why should those factories be in China? Why can't they be relocated to US or Mexico so that they could save transportation cost? If they still keep that in PRC it should be because of subsidy.
Cost of energy. Add to it the cost of depreciation. And it is not like that once robots are installed, they will run non-stop for decades. Rather robots also have to be replaced as they wear down and break down.

Even today the cost of robots is more compared to a human worker. The equation will change slowly and steadily in the future, in favor of robots. But not right now. For hazardous tasks, like deep water or radiation affected zones or spaces robots are ideal and the only option available. But right now it is more cost effective to hire a nanny or maid/help or in India's case a bia then to buy a robot.

For China and particularly Chinese, the problem is that when the switch happens, they should have moved from being the "factory of the world" to something else. Otherwise remember the old adage, "The mightiest have the hardest fall, as they have to fall the furthest."
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Re: PRC Economy and Industry: News and Discussions

Post by Shankas »

wong wrote: The RMB is pegged. There's nothing artificial about it. What's a non-artificial peg?? Lots of countries peg their currency. During the Asian financial crisis in '98, China didn't devalue despite every incentive to do so and held that peg while all its ASEAN neighbors devalued. The PBoC has stated that it wants the RMB to be a medium of exchange for global trade and it's moving carefully in that direction. They are floating bigger and bigger dim sum bonds in Hong Kong to start an international market for Yuan bonds. This is a work in process and will take another 10 to 20 years to complete. Any downgrade in the US credit rating can only be beneficial to this effort because it means weaker competitors for capital. That's also why India cannot benefit from the US rating downgrade. I just don't see institutional investors having to decide between US Treasuries or Indian debt for a variety of reasons.
Wong
Thank you for the explanation, I still don't understand as I see a gap

1) RMB pegged to US$
2) China Buys T-Bills from US to maintain peg and to keep currency value low/steady so exports remain competitive
3) US $ loosing value - China's US T-bills loose value, China has to purchase more T-bills to maintain peg
4) China floating dim sum bonds to position RMB as a alternate currency
5) But RMB is still pegged to the US$

How will it become an alternate currency? I understand RMB can and will be used by countries to settle transactions. But the transaction value is still determined by the US$ value due to the Peg.
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Re: PRC Economy and Industry: News and Discussions

Post by Shankas »

Post self deleted. Double post.
wong
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

Shankas wrote: Wong
Thank you for the explanation, I still don't understand as I see a gap

1) RMB pegged to US$
2) China Buys T-Bills from US to maintain peg and to keep currency value low/steady so exports remain competitive
3) US $ loosing value - China's US T-bills loose value, China has to purchase more T-bills to maintain peg
4) China floating dim sum bonds to position RMB as a alternate currency
5) But RMB is still pegged to the US$

How will it become an alternate currency? I understand RMB can and will be used by countries to settle transactions. But the transaction value is still determined by the US$ value due to the Peg.
1. Yes, this is not in dispute.
2. This part is not correct. The currency peg and US Treasuries are not directly linked. RMB and USD are two closed loops in China with a heat exchanger in between. China could be buying cockroaches instead of UST with it's current account surplus and you'll just have USD$100.00 cockroaches.
3. Paper loss. Who cares? China can't spend it all anyways. For China, US Treasuries = Synthetic storage of Boeing, Soy Beans, Corn and Petroleum. I would say China has at least 5 to 7 years worth of these economic inputs synthetically stored. It needs nothing else. The Chinese goods it sells the US could just as easily be buried in the Gobi Desert and have the same net economic impact on the Chinese economy.
4. It's a start. They have to start somewhere.
5. For now it is in China's interest to peg it to the dollar. In the future, I doubt this will be the case.

I'm sure when China buys oil from Iran in RMB, the price per barrel in USD is used as a reference price. So?? That just determines how long the printing press stays On or Off.
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Re: PRC Economy and Industry: News and Discussions

Post by Theo_Fidel »

wong wrote: ...The Chinese goods it sells the US could just as easily be buried in the Gobi Desert and have the same net economic impact on the Chinese economy.
:rotfl: :rotfl: :rotfl: :rotfl:

Guys, just a reminder. BR is long banned in Pandaland.

The only 'Chinese' who show up here are officially approved minders. They are pushing their crazy party view and using this forum for credibility. Ignore them.
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Re: PRC Economy and Industry: News and Discussions

Post by VikramS »

wong wrote: The proof is in the pudding. India tried for 6 months to get Iran to take INR for oil. Iran said no thanks. Why?
:rotfl: :rotfl: :rotfl:

India has been towing the US line when it comes to Iran sanctions. There is a delicate game political game being played. However, if you actually go taste the pudding you will realize that Iran has been giving India free oil for many months now! yes FREE. 0.0% APR for 6 months (or until you figure out how to pay us by bypassing US sanctions).

Iran not accepting INRs now is not the question. They do not import much from India (unlike China). The question what happens after the current Chinese system based on mercantilism is shaken after their biggest markets start saying "we have had enough"?


As I said earlier, it is the beginning of the end of the looting of the West by the Chinese. The question to ask is:

1. How will the CCP cope with protectionism in the West?
2. The issue is not "democracy == innovation". The issue is the underlying credibility and moral authority of the system. There is a reason that authoratarian regimes often collapse virtually overnight. They rule by fear and once people stop fearing it, they collapse.

BTW, there are enough instances of Chinese nationals who have had a chance to give live in freer but much poorer societies NOT wanting to return back to China. They put a greater premium on the lack of fear in the free societies, than whatever make believe wealth they can have back in China.

The thing about freedom is that once you taste it you wonder how you could live without it. Of course that becomes relevant only when your basic needs are taken care off, as they are now in China.

Enjoy the show. The system is rebalancing. It will be painful.

Instead of defending the old system, hope that it results in the emergence of a sustainable, equitable system and the realignment of China as a more responsible power.When you fight border wars with all your neighbors, sooner or later it will come back and bite you. When your list of allies is lead by N.Korea, Pakistan and Iran, you have a problem.

Yes of course China will be a major geo-political power. But it is not going to get there on the current path.





Zero Hedge Article quoting the FT oped by Yu Yongding, a former member of the Monetary Policy committee of the Chinese Central Bank
Text in italics is comments by ZH

Chinese officials are understandably angry about the irresponsible brinkmanship demonstrated by their American counterparts in recent weeks. Unfortunately, anger counts for little in international finance. The danger facing the US is that after Tuesday’s debt deal any sense of urgency over a dire fiscal situation will dissipate. The danger for China is that it does not learn the right lesson – namely, that now is the time to end its dependency on the US dollar.

China is worried about the possibility of a US default for obvious reasons. As the largest foreign holder of US Treasuries, either a default or a downgrade would bring huge losses. Even after this week’s debt deal, however, the risk remains that US debt will continue to grow to the point where its government is left with no option but to inflate the burden away. While there is little China can do about its existing Treasury holdings, it can rethink past policies – and ask both how it fell into this trap, and how it might free itself.
Stepping back, the reason for the problem, known to most who follow international finance:

China has run a current account surplus and a capital account surplus almost uninterruptedly for more than two decades. Inevitably this has led to an accumulation of foreign reserves. It is clear, however, that running these surpluses persistently is not in China’s best interests. A developing country, with per capita income ranking below the 100th in the world, lending to the world’s richest country for decades is not reasonable. Even worse is the fact that, as one of the largest foreign direct investment-absorbing countries in the world, China essentially lends money it borrowed at a high cost back to its creditors, by buying US Treasuries, rather than importing goods and services.
To be sure this is not the first time China has jawboned at the US for taking advantage of its symbiotic Mutually Assured Destruction status :

The Chinese government has admitted that its foreign-exchange reserves have already exceeded its needs. It has tried various measures to slow down the growth of these reserves and protect the value of its existing stock. This has included demand stimulation, allowing the renminbi to appreciate gradually and creating sovereign wealth funds. It has also promoted reform of international monetary systems and the internationalisation of the renminbi. Sadly, none of these has worked. With large capital inflows and a current account surplus, China’s foreign exchange reserves have continued to rise rapidly.
The trade off: at what point does the cumulative loss probability offset CNY depreciation gains:

These policies failed because they did not address the real cause of the rapid increase in foreign exchange stocks, namely state intervention aimed at controlling the pace of renminbi appreciation. The question is: what losses is China willing to bear in its foreign exchange reserves in order to slow the pace of the renminbi appreciation?
His conclusion:

One further factor is that any losses in the financial assets held by China will not be realised until their holders decide to cash out. If the US government continues to pay back its public debt, and China continues to pack its savings into US securities, this game may continue for a very long time. However, the situation is ultimately unsustainable. The longer it continues, the more violent and destructive the final adjustment will be.

If there is any lesson China can draw from the US debt ceiling crisis, it is that it must stop policies that result in further accumulation of foreign exchange reserves. Given that many large developed countries are simply printing money (and the recent rumours are that the US might return to quantitative easing) China must realise that it can no longer invest in the paper assets of the developed world. The People’s Bank of China must stop buying US dollars and allow the renminbi exchange rate to be decided by market forces as soon as possible. China should have done so a long time ago. There should be no more hesitating and dithering. To float the renminbi is not costless. However, its benefits for the Chinese economy will vastly offset those costs, while being favourable to the global economy as well.
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

wong wrote:Your bond math is not correct. Aaa to Aa is worth at most 30bps. China holds 1.3T in UST not 2T. DV01 is like $1.5billion.
True. I agree the losses wont be "hundreds" of billions, but you are looking at a close to 5% to 7% direct impairment in value. Yes, the DV01 (or PVBP as I prefer to call it) is probably not the bulk of the value of the damage to the portfolio.
We are talking a less than $50 billion impact on a 3T+ portfolio. This paper loss is more than offset by the RMB move closer to reserve currency status.
I think you are underestimating the damage due to the impact costs. Your PVBP based loss is a serious underestimate. See, you have to sell the dollars you hold (the mere whiff of any Chinese sales will see prices plummet and you take big hits on the value ) and diversify away into safer assets (gold, CHF, NZD, Aust D, etc..etc) and all those you will be buying in a rising market with hundreds of others zooming in there for safety as well (try buying gold at current prices.. you will drive the already stratospheric prices into outer space) and when the normalization happens over time (everything reverts remember?) and you will suffer massive losses. Factor all that and a close to 7% to 10% hit doesnt seem to unreasonable to pencil in.

As for your "portfolio" where you went and bought coal and oil and other assets at massively inflated prices (which you created anyway) over the past 3 to 4 years, congratulations, they probably have just cratered!
If US and EU fail first, China wins and vice versa. It's a game of last man standing.
Nope. US and EU go down, China goes down to tubes with them. Given the export and investment intensity of the Chinese economy, that will flatten China.
How any of this can possibly benefit India is just crazy. India cannot possibly fill the void if US, EU or China implodes.
LIke you said, the last man left standing will be India. We could be fine even if US, China and EU implode . Sure we will suffer big blows too, but we will be fine and not down flat. Also, that kind of scenario with global interests at record lows and commodity prices crashed is exactly the setting that India needs to turbo charge it's growth (india is a massive commodity importer, primarily crude and also a current account deficit country!)
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Re: PRC Economy and Industry: News and Discussions

Post by Sri »

VikramS wrote: India has been towing the US line when it comes to Iran sanctions. There is a delicate game political game being played. However, if you actually go taste the pudding you will realize that Iran has been giving India free oil for many months now! yes FREE. 0.0% APR for 6 months (or until you figure out how to pay us by bypassing US sanctions).
Vikram Ji,

This is what I was wondering about. Essentially our oil marketing firms got a $6bn interest free loan from Iran. This they can't hope for even from Indian banking sector.
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Re: PRC Economy and Industry: News and Discussions

Post by Christopher Sidor »

It is unbelievable, we still see some people claim that 3 trillion USD of Chinese reserves is a good thing. Especially when approximately 1 trillion USD is held in US treasuries. China is slowing seeing its gold (i.e. US Treasuries) turn to Brass.

Let us assume that the GDP of PRC is 6 trillion USD, at 3 trillion USD of Reserves, we are seeing that foreign reserves held by Chinese have now equaled 50% of GDP. It means China is putting in extra effort just to prop-up certain foreign countries. Is it because Chinese know that if a slow down comes in west, it will face a disproportional amount of pain?

The recent Chinese hectoring of America, after the downgrade by S&P is not anger. It is fear on what it means for the Chinese economy. That is what you get when a country is driven by people who are not accountable to the masses.

I hope that we do not see a 2011 recession. But what I pray even more is that China does not go bust. Not out of love for the Chinese. But because they have managed to do something which is admirable. They have managed to lift so many people out of poverty, that it is praise worthy.
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Re: PRC Economy and Industry: News and Discussions

Post by Theo_Fidel »

http://blogs.wsj.com/chinarealtime/2011 ... igh-rates/
China’s major banks may have pledged that last month’s tragic high-speed rail crash would not prompt them to raise the cost of borrowing for the Ministry of Railways, but the market is proving to have no such reservations.

On Monday the Railways Ministry, one of the biggest issuers of debt in the country, launched its first bond sale since the crash on July 23. It sold all 20 billion yuan ($3.11 billion) worth of three-month bills on offer in the interbank market, but promises to pay an annualized return of 5.55%, a relatively high rate for government paper.
At the end of June, the Ministry of Railways’ outstanding debt rose to 2.09 trillion from 1.98 trillion yuan at the end of the first quarter. That accounts for roughly 5% of China’s gross domestic product, up from about 2% in 2007.

Moreover, data disclosed by the ministry in a recent bond prospectus raised questions about its ability to generate enough revenue to have the cash to cover its debt repayments, raising the prospect of a bailout of its finances and even a dismemberment of the ministry itself.
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Re: PRC Economy and Industry: News and Discussions

Post by VikramS »

Sri wrote:
Vikram Ji,

This is what I was wondering about. Essentially our oil marketing firms got a $6bn interest free loan from Iran. This they can't hope for even from Indian banking sector.
Sri:

I do not know the exact terms but they are unlikely to be prohibitive. Otherwise the Indian side would have made a hue and cry with Uncle.

People forget that India is quiet but also has huge leverage. We are one of the largest importer of hydrocarbons and they can be pumped on demand. If Iran balks, there S. Arabia giving India guarantees of filling the gap. And all these regimes *NEED* oil revenue to survive, so they can not afford to lose India. Period.

While China's construction driven GDP is getting all the headlines, the underlying foundation of that system are exposed.

Sidor:

The imbalances in the global system have to rectify to have sustainable, balanced growth. It has to happen. The longer it takes the more painful it will be. Let it happen, and then let us start from a clean slate. Otherwise it will be generations of massive uncertainty and anxiety. The system needs to be cleansed.

What we should hope that the cleansing is orderly and does not lead to wars, famines and other assorted stuff.

It is literally a battle between democratic versus authoritarian regimes. Hope the good guys have the spine and the courage to fight it out.
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

Yawn.. Chinese Fault Beijing of Foreign Reserves
Chinese Internet sites lit up over the weekend with criticism of Beijing’s management of the country’s foreign reserves — a usually esoteric subject that had attracted little public attention.

But the S.& P. action hit a nerve. The ambitions of the Chinese people, eager to take their part as consumers in their nation’s economic success story, have in many ways been stifled by their government’s fiscal and monetary policies.
Nice. This kind of thing actually gives me hope that the Chinese people atleast are still human and can think, rather than being turned into programmed automatons / bots in the service of the CCP.
“The United States’ sovereign credit rating suffered a downgrade, why did we become the biggest victim?” one microblogger wrote on Sina Weibo
Smart guy. But too smart to be healthy for him/her in Commie China. Well, go ask Comlade Hu about it.
“On the question of U.S. debt, China’s strategic decision makers are pigs, they would rather let the people’s money be used by others than let the money be used by their own people,” said one posting over the weekend. The comment soon disappeared, presumably removed by censors.
Oh well, in this forum, we rail on and on about Babu Baboons, Dilli Ding-Dongs and Mantri Monkeys, but in China, you call the DSE/ISI/E-Con Dilli Ding Dongs as Pigs, it gets censored. Well, what can I say, welcome to China and welcome to the 21st century.

Seriously the Chinese society needs to be liberated from the stifling dead weight of commiedom and discover their human selves again. That society has been turned into one giant army of programmed bots or atleast that is the hope of the commie masters.
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Re: PRC Economy and Industry: News and Discussions

Post by ashashi »

vina
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

Cross Post..

Yawn... Macro e-Con-O-Mic tide turning India's way. Global interest rates and low commodity prices are good for India. I am taking a bet that the RBI will actually drop a symbolic 25bps in the next interest rate meet, signalling a downward bias in the interest rate.

And yeah, I also expect Shri Bernanke to pull out some unorthodox rabbits out of his hat in today's Fed meeting to get the e-Con-O-Mee going in the US. The old "Quantitative easing" business is probably run it's course and given the Chinese obduracy with currency is actually just fueling inflation . The way to deal with the Chinese is to punch them in the chin and kick the feet out of their exports if they don't play ball, sort of like what Japan was forced to do in the early 90s There is NO other way out of the mess, other than address the fundamental economic imbalance. Chinese currency is undervalued AT LEAST 20% with true fair value being some 25% to 27% up from here. That is the way to get consumption going in china, prick that investment bubble and the idiotic commodity excess. So, expect the US and Europeans to jointly work on that and kick China in the nuts. Unkil will rope in Japan, S. Korea (where the index melted some 9% this morning when I looked) and the Euros (Germany esp ) will get the Russians on board. For India, that is perfectly in our national interest to do so and we will happily do so. So , everyone lines up against China and says,
Freely float your currency, or no market access to your exports under WTO
. This will come in the next few months.

Meanwhile , I hope the e-Con Baboons and the Mantris and the Dilli-Ding dongs in general , pull their pants up and get their acts together this time now the macro is swinging our way. I just hope unlike in 2006 & 2007, when under the thumb of the Commies , the UPA wasted the fiscal leeway due to the economic cycle in expanding "Entitlement Programs" like NREGA and doling out subsidies, they bite the bullet, totally decontrol energy prices, put a freeze on entitlement spending and this time actually use the leeway from the fiscal cycle to invest in productive growth oriented avenues, massive investment in infra, and do the deep reforms in the sectors hitherto largely untouched (agriculture, retail, financial markets, etc. .. labor can come last) to set the stage for strong productivity growth to have sustained strong growth over the next decade.

I pray to Bhagwan, Allah, Yahweh, Jesus, No God,Ahura Mazda, whatever/whoever, to finally knock some sense into the MMS and the Dilli Ding-Dongs to kick the National Advisory Council jokers in the nuts and tell them to make themselves scarce for the next 2 years and show up just before elections , so that you can put nice big sounding entitlement plans for the election manifesto , but actually dont have to do anything for the next 2 years.
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

Cross Post..
ramana wrote:vina, The American century turned out to be a few decades. The Chinese one is less than a decade.
At the rate the Chinese are going, it is going to be still born, unless they fundamentally reform their economic system. The problem is that they dont realize that their formula for success until now is past it's sell by date and cant work going forward. Somethings gotta give and unless they move to something that will work sustainably and take them to the next level, they are toast. The current system with it's imbalance is dead. The Chinese think that they can continue with the merry old ways. They cant. This system needs 2 people to play tango, one the Chinese and the other the US and Europe. US and Euro cant play this game anymore and the game is over.

Now the music has stopped , is there going to be another tune , or is the chair going to get kicked out from under you.

So like the song goes.. "Bad Boyz, Bad Boyz , watcha gonna do ? Watcha gonna do when they come fer you!" :rotfl: :rotfl:
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

Lo, ji. Lookee.. Inflation Climbs in China on Higher Food Prices

See, the Chinese too have a inflation problem fueled by excess liquidity (at BRF in 2008, we had said that the stimulus would be largely mis spent and result in inflation down the line.. brone out by the high speed rail fiasco and the food inflation and now the cratering global economy will bring growth down again... oh well.. go ask Glandpa Hu and Wen. What goes my father's) . In India , it makes it to the headlines, in China it is either not discussed or suppressed and any small "incidents" that break out are put down by the CCP police.
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

^^^^
vina, falling commodities only helps India but not China? Does that even make sense?
Notice their $30B paper gain yesterday? No practitioner in US/UK calls it PVBP.
Last edited by wong on 09 Aug 2011 14:09, edited 1 time in total.
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

Theo_Fidel wrote:
wong wrote: ...The Chinese goods it sells the US could just as easily be buried in the Gobi Desert and have the same net economic impact on the Chinese economy.
:rotfl: :rotfl: :rotfl: :rotfl:

Guys, just a reminder. BR is long banned in Pandaland.

The only 'Chinese' who show up here are officially approved minders. They are pushing their crazy party view and using this forum for credibility. Ignore them.
When you start using emoticons & calling China Pandaland, I know you have absolutely nothing to say.

The Chinese economy runs on RMB. Not Dollars. All those dollars are just a headache, an embarrassment of riches.
What happens if China were to theoretically bury goods headed for the US in the Gobi Dessert??? Everybody would still be employed. Price of Chinese desert would sky rocket. China would start running a current account deficit just like India. That "horrible" problem doesn't seem to bother you guys.
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

VikramS wrote: :rotfl: :rotfl: :rotfl:

India has been towing the US line when it comes to Iran sanctions. There is a delicate game political game being played. However, if you actually go taste the pudding you will realize that Iran has been giving India free oil for many months now! yes FREE. 0.0% APR for 6 months (or until you figure out how to pay us by bypassing US sanctions).

The thing about freedom is that once you taste it you wonder how you could live without it. Of course that becomes relevant only when your basic needs are taken care off, as they are now in China.
What India get for 0.0% for six months and then has to pay with Euros, China gets for "free" by starting the RMB printing press.

Here's a nice recent example of someone who's tasted your so-called 'freedom', but decided to return to China. I can give you many more examples.
http://www.businessweek.com/printer/mag ... 42011.html
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Re: PRC Economy and Industry: News and Discussions

Post by vera_k »

Late night here, so I must be missing something. Why not then send all that stuff to India and start stocking rupees?

And then buy Indian paper used to finance purchase of Chinese goods like that power equipment
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Re: PRC Economy and Industry: News and Discussions

Post by wong »

^^^^
Because you guys don't make Boeing 737/747, soy/corn, Intel Xeon and petroleum doesn't trade in rupees. I referred to UST before as synthetic storage of these goods until China has an alternative.

Notice how the CPC has a 20 year plan to replace each of those American things:

Boeing 737 => Comac
Soy/corn => Buying African & South American farmland
Intel Xeon => Godson
Petroleum => RMB Reserve Currency Status
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Re: PRC Economy and Industry: News and Discussions

Post by vina »

wong wrote:^^^^
vina, falling commodities only helps India but not China? Does that even make sense?
Yes indeed. Commodity inflation dead means that China is flattened, remember, the incremental commodity demand that drove inflation came mostly from China! For India, commodity prices down means that one of the factor inputs got cheaper and there is more headroom for growth!
Notice their $30B paper gain yesterday? No practitioner in US/UK calls it PVBP.
Paper gain ? Where, in treasury? Sure, but did you notice what happened to your stock market and oh, also how your exports are going to look like if it continues?

No practitioner? Huh? What are you talking about? It is as widely used as anything else in any fixed income desk. Google around if you want, Let me post to two first hits I get.

Price value of a basis point Investopedia definition

CFA Level 1 study guide- Price value of basis point investopedia. Look if it is in a CFA level 1 guide and exam question, you can best your last dollar or all your $3T reserves if you choose to that it is widely used and pretty well known.
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