September 30, 2010
China Relaxes Rules on Gold Imports
According to Reuters, the World Gold Council says China's central bank announced rules in August that will allow Chinese more banks to import and export directly on the global market. As China is slowly building its central bank holding of gold this means that China may soon play an important role in the global trade for bullion....
Labels: banking, currencies, financial news, gold
September 29, 2010
TRADE WAR: US POLS WANT GREAT DEPRESSION II
According to Reuters the US House of Representatives is poised to approve a bill to impose exorbitant tariffs on Chinese goods by declaring that the Chinese government "subsidizes" the exchange rate of the Yuan. Frustrated by the Executive Branch's longstanding refusal to declare Beijing a currency "manipulator" a corrupt bipartisan House is pandering to big unions, anti-China blowhards, and the widespread ignorance of the vast majority of Americans about America's deep interconnectedness with China.
But will the Senate approve and President Obama sign the legislation and risk a trade war, huge inflation - increases in tariffs would be passed directly to consumers, currency retaliations around the world, and another Great Depression?
But will the Senate approve and President Obama sign the legislation and risk a trade war, huge inflation - increases in tariffs would be passed directly to consumers, currency retaliations around the world, and another Great Depression?
Labels: currencies, yuan
September 15, 2010
CURRENCY MANIPULATORS
Twenty-five years ago the USA forced Japan to appreciate its currency in order to correct its own bad books by fixing (temporarily) America's current account deficit. The Plaza Accord of 1985 led to rampant speculation in the Yen and a financial crisis and depression from which the Japanese have yet to recover. From the sidelines, having secured the return of Hong Kong and its capital, Beijing watched and learned.
Since the dotcom bubble popped and jobless recoveries, booms, and busts have America stalled, certain political factions believe that if Uncle Sam can force a similar appreciation of the Yuan on Beijing the American Dream can be saved. Chief among the politicians is Chuck Schumer (D-NY) and his chorus of taxpayer funded think tank reports and leading talking heads. One of the biggest proponents of the China tariff clique is Nobel Prize winning economist Paul Krugman. Krugman used his NY Times column again today to call for tariffs on Chinese goods deciding that one lesson from the Great Depression - the Smoot-Hawley Act - is not worth heeding.
I've written many posts and Sinomania! Show episodes on the futility of trying to force Beijing's hand on Yuan. Do a search here and on the Sinomania! website and you'll come up with the same conclusion. America cannot fix its problems by manipulating international forex markets. Beijing unlike Japan is not America's satellite and cannot be told what to do and is not afraid of Washington. And the biggest reason why people like Krugman and Schumer know that the issue is just hot air is not the "threat" of a "nuke option" - Beijing selling its holdings of US Treasury securities - but because the average American mired in a deep recession can't afford to pay two and three times for all the stuff they buy from WalMart, Target, IKEA, and everywhere else!
Further the accusation that Beijing manipulates the Chinese currency is complete hypocrisy when Washington and Tokyo both do the same. Just yesterday Tokyo intervened in forex markets for the first time in years to stop Yen appreciating. And Washington deliberately devalues the dollar (what W called the "strong dollar" policy) to support American exports and reduce the value of its debts.
Labels: currencies, financial crisis, forex, free trade, japan, schumer, yuan
April 01, 2010
Sinomania! on assignment - Open Thread
Sinomania! will be on assignment until next week. Use this post as an open thread. Treasury must report to Congress on Chinese currency in mid month. Will the Obama administration appease scared politicians up for re-election with a Chinese bogeyman and unleash a trade war?
[UPDATE: Camp Obama Punts - the Treasury Dept. said its semiannual statement on currencies will be delayed until after the G20 summit in June. When the USA put pressure on China at the Copenhagen Summit it nearly derailed the entire event. At last year's G20 in London China showed it is impervious to pressure even from her so-called peers. Good luck Geithner.]
Labels: currencies, news
March 15, 2010
Krugman's Last Stand
Columnist Paul Krugman of the New York Times says the US government needs to "take a stand" against China by declaring that Beijing "manipulates" its currency (Renminbi) and slap big extra tariffs on Chinese imports. Krugman began the year with the same message and seems willing to stake his reputation on his quixotic quest. Frankly the US has already taken a stand on the issue of the Yuan/Dollar exchange rate and been stood down. Further Krugman's simplistic explanation of alleged Chinese "mercantilism" is surprising from a Nobel Prize winning economist. To blame global economic imbalance on imports of Chinese goods is absurd.
To declare China a currency manipulator while ignoring Tokyo's support of the Yen and other currencies pegged to the US dollar including oil exporting nations and whole regions (the Caribbean, etc.) is a selective and hostile act. And if the Yuan is so undervalued why are the EU, Brazil, Australia, and other countries with important China trade not joining the USA in a stand against China?
Millions of Americans are already cutting back on what they buy and trying to make do with less. Do we need the cost of everything to go up because of additional tariffs on Chinese goods? Does Krugman think stagflation will help the American economy recover?
To declare China a currency manipulator while ignoring Tokyo's support of the Yen and other currencies pegged to the US dollar including oil exporting nations and whole regions (the Caribbean, etc.) is a selective and hostile act. And if the Yuan is so undervalued why are the EU, Brazil, Australia, and other countries with important China trade not joining the USA in a stand against China?
Millions of Americans are already cutting back on what they buy and trying to make do with less. Do we need the cost of everything to go up because of additional tariffs on Chinese goods? Does Krugman think stagflation will help the American economy recover?
Labels: anti-china, currencies, forex, free trade, renminbi, yuan
March 11, 2010
Obama's China Currency Comment
Headline writers this afternoon say President Obama "urged" China to stop controlling its currency. What did Obama say exactly? Long into a banal booster speech at the annual meeting of the Export-Import Bank of the United States (a federal government agency), Obama said
"China moving to a more market-oriented exchange rate will make an essential contribution to that global rebalancing effort."
It surprises me Obama continues to spend political capital in a pointless pursuit to coerce Beijing to appreciate its currency. Washington can urge China all it wants but Beijing has made its position on Renminbi very clear. Just this week at the National People's Congress session China said the Yuan's unofficial peg to the US dollar will end and appreciation up to 10% over the short to medium term is expected.
A move by Beijing to drastically create a more "market-oriented" exchange rate would mean reducing China's dollar holdings in favor of other currencies or gold. Is this ultimately what Washington really wants? It is also hard to argue that the exchange rate of the Yuan is that out of whack for US exporters when China is year after year the fastest growing market for US exports.
A move by Beijing to drastically create a more "market-oriented" exchange rate would mean reducing China's dollar holdings in favor of other currencies or gold. Is this ultimately what Washington really wants? It is also hard to argue that the exchange rate of the Yuan is that out of whack for US exporters when China is year after year the fastest growing market for US exports.
A far better use of rhetoric and effort would be for Obama to push Beijing to fulfill its promise to enter into the WTO Government Procurement Agreement (GPA) and open up potentially billion$ in opportunities to American businesses. So far no moves on the GPA have been made by US Trade Rep Ron Kirk or anyone else in the Obama administration. Why not?....
Labels: currencies, exports, foreign exhange, forex, goverment procurement, obama, wto, yuan
February 25, 2010
Anti-China Senators Call For "Crackdown" On China
Longstanding China critic Senator Chuck Schumer of New York is leading a pack of anti-China Senators in election year pandering to big union and other contributer interests by urging the Obama administration to -once again- declare that Beijing is "manipulating" its currency and solely responsible for the loss of American manufacturing jobs.
The anti-China coalition consists of:
- Charles E. Schumer (D-NY)
- Lindsey Graham (R-SC)
- Robert Byrd (D-WV)
- Carl Levin (D-MI)
- Barbara Mikulski (D-MD)
- Russ Feingold (D-WI)
- Susan Collins (R-ME)
- Olympia Snowe (R-ME)
- Sam Brownback (R-KS)
- Jim Bunning (R-KY)
- Debbie Stabenow (D-MI)
- Ben Cardin (D-MD)
- Sherrod Brown (D-OH)
- Bob Casey (D-PA)
- Arlen Specter (D-PA)
Anyone familiar with these politicians knows that they are the chorus in all condemnations against China. Sherrod Brown is a bomb thrower of particular reknown being a co-founder of the Taiwan Congressional Caucus.
The hypocrisy in the Senators' action is rich. All are beholden to special interests that require them to play a China card on wedge issues such as trade and human rights. Yet many come from states that benefit greatly from expanding Chinese trade, the USA's third biggest and fastest growing export market. It is afer all US multinational corporations that lead the charge in outsourcing to China. And there is no matching call against the Japanese Yen which is actively supported by Tokyo to be just as advantageous in trade.
Election year politics aside regular readers know that Washington is powerless to force currency appreciation on China beyond what is already happening in the markets....
Labels: china policy, chinese trade, congress, currencies, free trade, hypocrisy, schumer
November 30, 2009
No Word on Yuan at EU-China Summit
The 12th EU-China Summit concluded in Nanjing (capital of Jiangsu Province) today and the official statement contains not one character or word on China's currency. Outside the forum at the WTO headquarters in Geneva Minister for Commerce Chen Deming intimated that the USA was to blame for its policy to devalue the dollar. The EU and USA have now concluded several high-level talks with no official word on the Chinese currency. It is apparent that the exchange rate of the Yuan is a plaything of politicians only. All talk of China "manipulating" its currency is merely pandering to voters in election districts hard hit by aging industry and rising poverty. Absent a complete breakdown in global trade and a worldwide trade war, the EU and USA are powerless over Renminbi.
The EU is now China's number 1 trading partner. For the EU China is now number 2 after the USA. EU imports from China are down in the great recession to just over $65 billion euros in the 1st Half of 2009. Overall China accounts for 17% of all EU imports. As in the USA China is a growing market for exports accounting for 7% of EU exports, up one percent from 2008. The top EU exporters to China are Germany, France, Italy, UK, and Netherlands - in that order. While the EU overall has a trade deficit with China, the smallest individual deficits are in Germany and France which have the healthiest trade relations with China. Click here for more detail on EU-China trade....
Labels: currencies, euro, foreign relations, foreign trade, forex, yuan
November 11, 2009
All Eyes On Asia
A week of Asian summits begins tomorrow with the APEC 2009 meeting in Singapore and President Obama's first official junket to China with stops in Shanghai and Beijing. Chinese President Hu is already in Singapore celebrating close ties with the independent Chinese city-state that oversees the world's most precarious shipping choke point. During APEC Hu will meet with Taiwan President Ma's envoy Lien Chan, Kuomintang Party chairman.
In Beijing Obama will have his first official state visit with Chinese Communist Party leaders and already in the USA various right wing interests are pushing for Obama to confront the "ChiComs" with their pet issues such as "human rights" and the need to forcibly appreciate the Chinese currency. Word is Obama will pressure Beijing on climate change. Here's an idea: rather than try fruitlessly to get China to accept sweeping agreements to regulate CO2 emissions and accept Western nation mandates about global warming why not agree to explore a program for both the USA and China to reduce reliance on coal for electric power generation?....
In Beijing Obama will have his first official state visit with Chinese Communist Party leaders and already in the USA various right wing interests are pushing for Obama to confront the "ChiComs" with their pet issues such as "human rights" and the need to forcibly appreciate the Chinese currency. Word is Obama will pressure Beijing on climate change. Here's an idea: rather than try fruitlessly to get China to accept sweeping agreements to regulate CO2 emissions and accept Western nation mandates about global warming why not agree to explore a program for both the USA and China to reduce reliance on coal for electric power generation?....
Labels: apec, currencies, foreign relations, hu jintao, human rights, obama
October 15, 2009
Obama China Currency Flip Flop
During the 2008 Presidential campaign candidate Obama agreed many times with American industry groups and unions that Beijing "manipulated" its currency. Perhaps not understanding the impact of the "M" word in USA-China relations Obama's Treasury Secretary Tim Geithner also said as much in his confirmation hearings. But as so often happens when candidates come to power the complexities and realities of China relations compel an about-face.
Today the US Dept. of the Treasury released its semiannual Report to Congress on International and Exchange Rate Policies with the decision that China does not "manipulate" its currency. With somewhat contorted logic Treasury says that since the renminbi remains stable against the dollar it follows the movement of the dollar against other currencies although it is still "undervalued." The report revealed that China is anticipated to account for 2/3 of global growth in 2010. The reaction of Congress awaits....
Labels: currencies, foreign relations, forex, geithner, obama, treasury
October 06, 2009
TRADE WAR: Obama Labor Showdown on China Currency
Big labor is pushing hard for President Obama to declare China a currency manipulator when his Treasury department must report to Congress next week. Obama maintained that Beijing manipulated the Yuan exchange rate up to the eve of the presidential election and as freshman Senator from labor stronghold Illinois. Now the AFL-CIO and others want Obama to live up to his rhetoric. Will he disappoint them as he has so many other supporters?
If labor doesn't get their way, which most economists say would be detrimental to both nation's trade and finances, expect a big push for anti-dumping countervailing duties from Congress and the Commerce department. The USA has not accused any nation of manipulating its currency since 1994 when it last leveled that designation on China (see graph at left)....
If labor doesn't get their way, which most economists say would be detrimental to both nation's trade and finances, expect a big push for anti-dumping countervailing duties from Congress and the Commerce department. The USA has not accused any nation of manipulating its currency since 1994 when it last leveled that designation on China (see graph at left)....
Labels: currencies, free trade, obama, yuan
September 08, 2009
Will China Switch to a Gold Standard?
A swirl of pitches from "gold bugs" and currency commenters say China is buying gold and so should you. The excited headlines are based on various remarks by former and current Chinese government officials on Beijing's concern over the health of the almighty (US) dollar. Many of the remarks most often cited were said over the past year and some date back several years.
It is true Beijing is buying gold from domestic production, slowly, and some say secretly - initially off the official statements of the People's Bank of China. But the amount of gold held is a tiny fraction of the $2.13 trillion (as of 6/30/2009) foreign exchange reserves Beijing holds.
Will China switch to a gold standard? That question has tantalized speculators on and off throughout history. Little more than a century ago, Beijing's decision to not follow the USA and Japan with a gold standard may have contributed to the collapse of the Chinese currency (based on a silver standard) by the 1940s.
One thing stands out - talk of internationalizing Renminbi is everywhere. Henry Kissinger predicted on Bloomberg TV just a few weeks ago that an alternative international currency will probably emerge based around the Yuan. Investment guru "Dr. Doom" Marc Faber once predicted that the world's finances would become based on the dollar, euro, Yen, Yuan, and gold.....
It is true Beijing is buying gold from domestic production, slowly, and some say secretly - initially off the official statements of the People's Bank of China. But the amount of gold held is a tiny fraction of the $2.13 trillion (as of 6/30/2009) foreign exchange reserves Beijing holds.
Will China switch to a gold standard? That question has tantalized speculators on and off throughout history. Little more than a century ago, Beijing's decision to not follow the USA and Japan with a gold standard may have contributed to the collapse of the Chinese currency (based on a silver standard) by the 1940s.
One thing stands out - talk of internationalizing Renminbi is everywhere. Henry Kissinger predicted on Bloomberg TV just a few weeks ago that an alternative international currency will probably emerge based around the Yuan. Investment guru "Dr. Doom" Marc Faber once predicted that the world's finances would become based on the dollar, euro, Yen, Yuan, and gold.....
Labels: currencies, dollar, euro, gold, renminbi, yuan
September 01, 2009
Thailand, Russia Explore Yuan Currency Swap
Thailand and Russia will explore currency swap agreements with Beijing to allow trade settlement in Yuan. The Prime Minister of Belarus said in Beijing that his country would soon finalize its swap arrangement with China. Five other countries including Argentina and Indondesia have currency swaps in place with China....
Labels: currencies, foreign trade, forex, yuan
July 02, 2009
Second HK Bank to Issue Yuan Bonds
Hong Kong based Bank of East Asia will issue Y4 billion worth of Yuan denominated bonds (over half a billion US dollars) in an offering to be revealed next week. Last week HSBC was the first non-Chinese bank in the financial hub to issue Yuan bonds. Readers will recall the 'run' on the Bank of East Asia as the Panic of '08 began....
Labels: currencies, panic of 2008, yuan
June 30, 2009
Hong Kong-China Trade Settlement in Yuan by July
Yesterday Chinese central banker Zhou Xiaochuan signed a Memorandum of Understanding with the Hong Kong Monetary Authority to allow trade settlement in renminbi - Yuan - by July between Hong Kong businesses and the Pearl River delta cities Shenzhen, Dongguan, Zhuhai, and Guangzhou and Shanghai, a move widely interpreted as a first step to internationalize China's currency....
Labels: chinese trade, currencies, forex, renminbi, yuan
June 16, 2009
China Shed $4.4 Billion of US Treasuries in 1 Month - OR Not?
UPDATE: Brad Setser of the CFR analyzes Beijing's actions in US Treasuries and sees not a reduction in overall holdings but a slowing of purchases is evident.
Beijing sold near $4 and half billion (US) dollars worth of Treasury securities between March and April and the overall value of China's holdings fell for the first time in nearly a year to $763.5 billion.
Meanwhile, the Shanghai Cooperation Organization summit in Yekaterinburg, Russia, could be the most important meeting this year as China, Russia, and central and south Asia nations discuss moving their foreign exchange reserves into the IMF.....
Labels: currencies, dollar, strategic
April 29, 2009
China-Japan Bilateral Talks Urge Currency Swaps
PMs Wen Jiabao (China) and Taro Aso (Japan) are meeting in Beijing and both nations are pressing for closer economic cooperation. China is Japan's number 1 trading partner now and hard hit by the decline in Chinese imports. Wen urged greater expansion of the Chiang Mai Initiative of bi-lateral currency swaps originally devised during the so-called Asian Flu of 1997-98 and its aftermath. This is further evidence of Beijing's desire to solidify capital flows based on the declining US dollar....
Labels: currencies, foreign exchange, foreign trade, japan
April 24, 2009
CHINA INCREASES GOLD RESERVES
After weeks of speculation, it's official: China gold reserves increased and China now holds more gold than Switzerland. The US, Germany, France, and Italy still hold far more gold but the acknowledgement by the head of the aptly named SAFE (State Administration of Foreign Exchange) lead many to believe that Beijing may soon buy gold. The last reported figure for China's gold reserves was in December 2002 at approximately 600 tons. The new figure is 1,054 tons of gold and Beijing says the increase came from domestic sources. China is the leading gold producer in the world and could easily increase its gold reserves from its own mines. The planned sale of IMF gold however could proved tempting.
Meanwhile gold price rose today to a 3 week high...
Labels: currencies, forex, gold
April 17, 2009
Fundamental Misalignment Redux
As if it wasn't enough of a burden for US taxpayers to hand over billion$ to dying automakers, Michigan Senator Debbie Stabenow (Democrat) wants all Americans to pay more - far more - for nearly every item they buy. Stabenow is the latest politican to carry water for the anti-China trade pressure groups and will introduce legislation to accuse China of manipulating its currency for trade advantage and slap big countervailing tariffs and anti-dumping duties on Chinese imports. We've been down this road before...
Labels: currencies, free trade
April 16, 2009
Is China Hoarding Copper?
Lots of speculation in the news about moves by the State Reserve Bureau in Beijing to buy huge amounts of primary metals, particularly copper but also aluminum and cobalt. Is China planning a copper standard to back the Yuan? Is Beijing stockpiling industrial resources while the global economy is down in order to be ready for the next boom cycle? Or is China really still chugging along at full speed (compared to sluggish Western economies) despite the impact of the Panic of '08?....
Labels: currencies, foreign exchange, forex, renminbi, yuan
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