September 14, 2010
Summer Davos 2010 Underway in Tianjin
The World Economic Forum's so-called "Summer Davos" confab (officially the Annual Meeting of the New Champions) is underway in Tianjin as the world's political, business, and media elite chew the fat of hot topics and hot dishes. Click here to see the full line-up of participants and panels...
Labels: foreign exchange, global economy, globalization, world economic forum
September 09, 2010
China Stock Market Cap Tops USA by 2030
According to a new report by Goldman Sachs (via the Financial Times) emerging markets stock market capitalization will reach $80 trillion (US dollars) by 2030 from around $14 trillion today with China the world's largest stock market cap by a wide margin....
Labels: chinese stocks, global economy, stock market
August 16, 2010
CHINA MAY ALREADY BE WORLD'S LARGEST ECONOMY
As regular readers know I believe a nation's energy use and production a much better gauge of an economy's size than Gross Domestic Product which is easily manipulated by central governments (Washington is as guilty as Beijing in that regard) and made meaningless by currency exchange. On a purchase power parity basis China has been the second largest economy for a very long time.
Earlier this summer China surpassed the USA as the world's number one energy user according to the International Energy Agency (Beijing rejects the designation). To me this says that China is already the largest economy in the world. That is a change of historic significance. Around a century ago the USA took that top energy spot and kept the position until now...
Labels: economy, energy security, gdp, global economy
February 18, 2010
China Doomsayers
None other than famous "Dr. Doom" Marc Faber has joined the chorus calling for a China crash this year. Marc Faber is well known for warning clients about the 1987 Wall Street selloff but he has been right about as often as a flashing clock since then although Faber's views on long trends are very prescient. If you had followed Faber's advice in January 2007 (see The Sinomania! Show episode 3) you would have missed out on the spectacular run up in Chinese stocks that saw the Shanghai Composite Index balloon to over 6,124. And Faber was wrong in 2003 when he said that SARS would ruin the Chinese economy. Most analysts believe and data appears to support continued strong growth in China with the risk to overheating versus a profound slowdown. Time will tell....
Labels: chinese stocks, economy, global economy, markets, stock market
February 12, 2010
World Markets Slide: Blame China
The consenus view of mainstream media today is that worldwide stocks and futures markets sank in reaction to the Chinese central bank raising its reserve requirement a half a percentage point. But contrary to what most reports claim the increased requirement for banks in China was not a surprise. Further an increase in the People's Bank of China benchmark interest rate, a much more important change, is expected sometime this year possibly in the second half as long as the Chinese economy continues strong growth. Money managers already factored in these increases in their predictions and analyst advice sometime ago.
More likely world markets reacted to news from the EU that its anemic recovery is faltering. Official statistics from the EU show that 4th Quarter 2009 GDP barely increased 0.1% and industrial production fell almost -2%. Add the ongoing sovereign debt problems in Greece and other EU members and surely world markets are more rattled by events in the EU than anything happening in China.....
More likely world markets reacted to news from the EU that its anemic recovery is faltering. Official statistics from the EU show that 4th Quarter 2009 GDP barely increased 0.1% and industrial production fell almost -2%. Add the ongoing sovereign debt problems in Greece and other EU members and surely world markets are more rattled by events in the EU than anything happening in China.....
Labels: banking, financial crisis, global economy, stock market
December 16, 2009
China, Coal, and Copenhagen
Beijing's National Development and Reform Commission (NDRC) is deregulating the sale of coal. New regulations say the central government will no longer hold an annual pricing conference. Instead individual power generators have a month to negotiate prices for 2010 coal deliveries with mining companies directly. The new rules also give priority to transporting thermal coal for power generation on Chinese railroads over coal for direct industrial use (coking coal for steel for example). Railroad companies can no longer allocate quotas prior to actual delivery contracts banning broker middleman from buying up quotas for spot coal sales. The end result may provide price stability overall but indications are Beijing will tolerate higher electricity rates as a result of these reforms.
China like the USA relies on coal for the majority of its baseline electricity generation. But China's dependence is higher - coal accounts for around 75% of electricity production - and China consumes more coal than any other nation. And coal use is growing and is expected to rise for the next few decades even as its use for power generation declines with more nuclear, hydro, and alternative energy production. The UN Copenhagen Climate Change Conference will end without addressing (let alone solving) this essential point: no real progress on air pollution can happen without reducing the reliance on coal for electric power by China and the USA.....
Labels: arms sales, chinese trade, electricity, global economy, reform, un
August 21, 2009
Wanted: 60,000 Factory Workers in ShenZhen
Factory orders are back up in the Pear River Delta of Guangdong/Hong Kong and the Shenzhen Labor and Security Bureau says the city has 60,000 unfilled factory jobs. Earlier this year Beijing urged provinicial and county level bureaucrats to encourage migrant workers to stay home to avoid high unemployment and unrest in China's big cities. Now some areas (labor shortages are also reported for Wenzhou, Zhejiang) need low-skilled workers back. Is this a sign that the Chinese boom is sustainable? Former Morgan Stanley analyst Andy Xie, famous lately for his bear-case scenarios, says much is at stake and China could be heading for a fall if structural change doesn't come to China and its co-dependent cousin USA....
Labels: global economy, shenzhen
April 23, 2009
China SWF Refines Its Mission, Looks to Europe
Recent reports that German auto conglomerate Daimler offered to sell a significant stake to China's Sovereign Wealth Fund - the China Investment Corp (CIC) - follow the comments of CIC chairman Lou Jiwei at this year's Bo'ao Forum that the SWF is getting encouraging words from Euro area companies desperate for cash. After being burned by hefty investments in the USA financial sector (Blackstone, Morgan Stanley), CIC is looking elsewhere for investments. Australian mining giant Fortescue has also sought out CIC.
And the announcement that Beijing's State-owned Assets Supervision and Administration Commission will soon form a "CIC 2.0" to invest solely in domestic companies as part of China's central government drive to restructure Chinese business means the CIC may focus entirely on foreign investments...
Labels: financial news, global economy, swf
April 17, 2009
2009 Bo'ao Forum Underway
The 2009 session of the Bo'ao Forum, the all Asia World Economic Forum-style event is underway at the Bo'ao resort on Hainan Island. Chinese PM Wen Jiabao will give the keynote speech. In the photo, Wen meets with Myanmar (Burma) PM Thein Sein. Chinese and Taiwan ministers and businessmen use the forum to meet and establish links. Delegates include dozens of private and government executives from around Asia and former US President George W Bush...
Labels: global economy
March 11, 2009
China Auto Sales Surge
827,600 autos were sold in China in February almost a 25% increase year-on-year and enough to maintain China as the world's number 1 car market. Meanwhile the USA auto industry suffered its worst month since December 1981 (when the population was 75 millions smaller)...
Labels: automobiles, chinese autos, global economy
March 04, 2009
SOE Reform - More Consolidation Ahead
World media and trading floors are twittering about whether China may save the world from a global depression. Reports are Chinese manufacturing is trending up and commodities prices are moving in the same direction in the hopes that Chinese demand will save our future. Adding to the excitement is a flurry of news leaks in the run up to the opening of China's annual parliament, the National People's Congress, March 5 in Beijing.
The biggest tease is that the NPC will approve more stimulus even though 11 separate stimulus packages were announced by Beijing on a regular basis over the past few months.
Also of note, word that a new national asset management entity will force consolidation of small and medium size State Owned Enterprises (SOE). Beijing is using the current global "slowdown" and correction in trade to create an economic oligarchy of up to 50 global size giants largely independent but with substantial and in many cases majority central government control...
Labels: global economy, national peoples congress, panic of 2008
January 30, 2009
EU-China Summit Back On - Agreements Signed
European Commission president Jose Manuel Barroso met with Chinese PM Wen Jiabao today in Brussels and said an EU-China meeting on trade would happen in April. Other sources say the EU-China summit cancelled by Beijing in December could be back on in May. China and the EU signed nine agreements today ranging from illegal logging, intellectual piracy to civil aviation. No details on those agreements at this time...
Labels: free trade, global economy
January 08, 2009
OBAMA: USA Must "Compete With Kids in Beijing"
In his big economic recovery policy speech today, USA President-elect Barack Obama said the US must create a 21st Century economy and gave somewhat specific clues at to where the up to $1 trillion for "New Deal II" will go:
ALTERNATIVE ENERGY
Goals:
Power generation by alternative energy will double;
75% of all federal buildings and 2 million homes will be renovated for energy efficiency;
stimulus for jobs that "can't be outsourced ... building solar panels and wind turbines;"
HEALTH CARE
Goals:
All medical records will be computerized in 5 years.
EDUCATION
Goals:
New equipment for classrooms, labs, libraries;
New PCs for schools.
INFRASTRUCTURE
Goals:
Building programs for roads, bridges, schools;
Creation of smart grid;
Increased broadband access.
And all these programs will be accomplished along with tax cuts! The big winners seem to be the construction and IT sectors of the US economy.
ALTERNATIVE ENERGY
Goals:
Power generation by alternative energy will double;
75% of all federal buildings and 2 million homes will be renovated for energy efficiency;
stimulus for jobs that "can't be outsourced ... building solar panels and wind turbines;"
NOTE: Given that the technology leaders in solar and wind are mostly European companies and the greatest production centers are or soon will be Chinese manufacturers - How can solar and wind manufacturing jobs be created in America without preventing imports? Will the stimulus include "buy America" provisions or prohibitive tariffs on imports or other restrictions such as slanted certification processes? Is this a potential protectionist land mine or just political hot air?
HEALTH CARE
Goals:
All medical records will be computerized in 5 years.
EDUCATION
Goals:
New equipment for classrooms, labs, libraries;
New PCs for schools.
INFRASTRUCTURE
Goals:
Building programs for roads, bridges, schools;
Creation of smart grid;
Increased broadband access.
And all these programs will be accomplished along with tax cuts! The big winners seem to be the construction and IT sectors of the US economy.
Labels: alternative energy, free trade, global economy, panic of 2008
GM Pins Hope On Chinese Buicks
GM will showcase the Chinese designed Buick LaCrosse sedan at the all-important Detroit Auto Show next week. As the troubled car giant pushes the arrival of the Chevy Volt further out (now expected at the end of 2010 and still with a pricey $40K price tag), GM hopes it can develop brand love for Buick in America with its successful Chinese models. It is questionable if such a strategy will work, further does it even make sense?
Labels: chinese autos, global economy, gm
January 05, 2009
2009 PREDICTION: CHINA WILL NOT CRASH
A theme is emerging among US journalists prone to project America's problems elsewhere that the big story of 2009 will be massive "social unrest" or "instability" in China that will lead to a Tiananmen Square type crackdown.
The meme ranges from trite to thoughtful and will most likely be a common refrain in the first part of the year. But Sinomania! can predict confidently that China will not fall and there will be no cataclysmic showdown between Beijing and the Chinese allegedly (so the MSM tells us each day) "yearning" for American style democracy.
Yes, China's economic slowdown is scary. But consider the contrast from conditions in 1989:
Inflation is the big bugaboo in Chinese politics as in any political system. Remember it was rampant hyperinflation that ended the Chiang Kai-Shek regime on the mainland. In 1989 the inflation rate was running at double digits (21% at the end of 1988) and rationing of some consumer staples had just ended in big Chinese cities. The 2009 CPI forecast is -0.8%. That's right, DEflation is the issue although most analysts believe that it is deflation due to supply shock not a collapse of the monetary system. And deflation is expected to persist perhaps all the way to 2010.
But what about GDP growth slowing all the way (!) to below the magic number of 8% - surely once that happens all hell will break loose since Beijing has no experience dealing with a major recession? Actually, the impression is wrong. It is not true that Beijing has never dealt with a major recession. On the contrary, the recession of 1960-61 was marked by a drop in GDP of -27.3% equivalent to the worst years (1931-32) of the Great Depression in the USA and recession occurred again in 1962 (-5.7%), during the Cultural Revolution (1967-68 -4.1%) and the year Mao died (1976 -1.6%). In 1989 GDP growth was just over 4% and fell to 3.8% in 1990. And during the so-called Asian flu in the late 90's China GDP growth fell below 8% (7.8% in 1997, 7.1% in '99).
Consider the differences in Beijing's financial position today:
Chinese banks have $6.85 trillion in deposits including around $2 trillion in foreign exchange reserves held chiefly in US dollar bills. By contrast in 1989 Chinese households had only 515 billion yuan deposited at the bank (approximately $138 billion US at the time) and a mere $5.5 billion in forex reserves.
Every economic indicator fell dramatically in 1989 including capital investment which is set to rise significantly in 2009 when Beijing's giant infrastucture stimulus programs are underway.
And signs are that China's economy may already be rounding the bend.
The pace of decline in industrial output slowed in December - that is output and new orders improved last month. The WSJ is reporting that China’s bond market is recovering and up to $235 billion in Chinese bonds are expected this year even though 1 year yields may dip below 1%.
The economy will be a big story all over the world this year but journalists and publishers hoping to focus instead on sexier and easier lines about an [insert color here] revolution in China will be disappointed.
(c) 2009 Ben Calmes, Sinomania!
Labels: global economy, global security
November 21, 2008
Time to Make the Donuts in China
Dunkin' Donuts --as famous for its coffee as it is for donuts-- opened its first franchise in Shanghai the company announced today. Plans are to open dozens of Dunkin' Donuts in Shanghai and the Pearl River delta region. Whether the company is looking at any Chinese Tier 2 or 3 cities is unknown. Dunkin' Donuts is most commonly found in Asian locations with heavy American (and American military) presence - South Korea and the Philippines.
Dunkin' Donuts (phonetic) Chinese name will be Tang En Dou Le meaning 'everybody is happy'.
Labels: global economy
October 22, 2008
China Coupling
The flurry of headlines and news reports in major world press highlighting the slowdown of China's economy to "only" 9% refutes the "de-coupling" nonsense about the global economy. We are all linked, China to Europe, Japan, the USA, South America, Australia, Brazil, Chile, ETC., and all concerned experienced a surprisingly sharp fall at the end of the third quarter.
What next? Morgan Stanley says we are in for a "wok" shaped recesssion and to expect only gradual improvement in the forseeable future.
Labels: economic impact, global economy, globalization
June 04, 2008
Iran China Ties Build Despite Pressure
At a press conference today Iranian ambassador to China Javad Mansouri said the two countries are increasing ties particularly in energy development.
China is buying more oil from Iran and imports of petrochemicals have grown from under $100 million (US dollars) a decade ago to an expected $1 billion this year. China accounts for around ten and a half percent of Iran's petrochemicals exports.
Last month Shanghai hosted an "Investment Opportunities in Iran" conference. Trade with the "Dragon's Head region (Shanghai, Jiangsu, Anhui, & Zhejiang) was in the billion$ in 2007.
Chinese oil majors are developing big oil and gas fields in China and Chinese auto manufacturers will soon supply Iran with passenger cars. Iran is one of many emerging markets for autos with sales over 1 million/year already. Chery will be rolling out the popular QQ sometime this year. And Chang'An Auto, partner to Ford Motors in China, just started a joint venture with the Iranian PIDF enterprise to assemble Chang'An's 1.3 liter mini, Benben, with production of 250,000 a year expected around 2012.
Meanwhile, geopolitical pressures of the EU and USA will leave this huge emerging market to China unless wiser heads soon prevail.
Labels: china, Chinese business, foreign investment, global economy, globalization, iran, opportunity
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