October 29, 2008

Shenzhen Picked for UPS Intra-Asia Hub

UPS broke ground today on a huge new shipment and processing hub in Shenzhen, China, that will replace its current intra-Asia hub at the former Clark (USA) Air Force Base in the Philippines. The facility will employ 400 people at opening and its capacity can be expanded to three times its size. This is what economic slowdown looks like in China...

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October 28, 2008

Wen Jiabao: China-Russia Oil Deal "Strategic"

The China National Petroleum Corp. and Rosneft, state-owned oil majors of China and Russia, finalized the long planned pipeline connection between the expanding eastern Siberian oil fields and China's pipeline network and refining centers. In Moscow, PM Wen Jiabao described the deal as "strategic" and Beijing may float Rosneft a $25 billion loan in the package.

When completed, 15 million tons per year of Russian crude will flow through the pipeline.

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October 24, 2008

ASEAN + 3 Beats G20

Meeting in Beijing the 7th Asia-Europe summit pledges to coordinate response to the global financial crisis. In November the prime ministers of China, S.Korea, and Japan, will join ASEAN representatives in Manila ahead of USA President George Bush's G20 summit.

Will the ASEAN plus 3 lay the groundwork for an eventual pan Asian currency? And will it be in the Dollar or Euro zone or a new zone around Renminbi + Yen?

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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.

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October 17, 2008

Let A Billion Blossoms Bloom

According to the AP today, the restriction on foreign reporters interviewing Chinese on the street that was lifted for the 2008 Olympics is now permanent. My experience was the restriction existed on paper only as I did street interviews with a large video camera with Chinese all over Beijing.

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October 14, 2008

China Steel Sector Collapsing

Steel prices in China have fallen 12% over the past week and all major steel producers are scaling back production around 20% possibly through the end of the year. Steel makers are facing a dramatic decline in orders and their supply chain is affected down to the iron ore mines. Australian mines' orders are being cancelled and many older steel manufacturing areas in China such as in Henan Province are shutting down. In the US, scrap dealers are seeing exports dwindle and demand from China dry up.
If the global economy doesn't pick up and boom again, China's steel industry may become the first great victim of the Panic of '08. If so, I expect many of the older steel centers of China will not reopen and further consolidation in the industry through mergers and acquisitions.

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October 13, 2008

China Alt Energy Stocks Soar

As world stocks bounce back up today some Chinese alternative energy stocks did particularly well:

Chardan South China or A-Power Energy Generation System is a leader in specialized transmission grid and control systems based in Shenyang. APWR up 50%!

China BAK Battery is a major lithium ion rechargeable producer and industrial supplier out of Shenzhen. CBAK up over 9%.
China Biodiesel, a renewable energy company focused on biodiesel from cooking, other oils, with a production base in Fujian Province. CBI.L up over 14%.

China Clean Energy is a Fujian based diodiesel concern. CCGY.OB up amost 40%!

China Recycling Energy, based in shanghai, is engaged in energy recycling with a joint venture with a Xi'An company on gas recovery systems. The Carlyle Group took a major stake less than a year ago. CREG.OB up over 13%.

China Sunergy, a leading photovoltaic solar cell producer headquartered in Nanjing. CSUN up over 12%.

Gushan Environmental Energy, another Fujian based biodiesel enterprise. GU up over 21%.
JA Solar, a leader in photovoltaic solar cell production. JASO up over 16%.
Solar Fun Power produces pv cells and sells them worldwide. SOLF up over 16%.

Solar Power Inc., a California based pv module manufacturer in Shenzhen. SOPW.OB up 20%.

Suntech Power, a Wuxi based pv module producer and leader in the industry. STP up almost 22%.

Tiger Renewable Energy, a Canada-China joint venture ethanol producer. TGRW.OB up 40%!

Trina Solar, a major pv solar module producer based in Changzhou, Jiangsu. TSL up 14%.

Yingli Green Energy, a 10 year old pv manufacturer. YGE up over 15%.

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October 12, 2008

A Real Great Leap Forward

As the nations of the world deal with the downside of globalization Beijing looks inward and is preparing Chinese for a monumental change - de facto private ownership of land. The Third Plenary Session of the 17th Central Committee of the Chinese Communist Party* concluded today with vague but profound statements on improving the lives of China's rural poor. The specifics will be hammered out in time for ratification at next year's National People's Conference (March 2009) but numerous leaks tell of the greatest liberalization in land holding since the first land reform in the 1950s when surplus and unused land held by large landlords down to "rich peasants" was redistributed to landless Chinese. After two decades (approximately 1958-1978) of mixed results with collectivization, landholding returned to the leased small plots originally devised by the Communist ("collective property") party at the the Third Plenum of the 11th CPC Central Committee under Deng Xiaoping in 1978. Now Beijing is ready to truly leap forward.

The new changes would allow for rights of sale, transfer, and extended lease (more than doubling the current 30 years to 70 years) on land to give rural Chinese de facto private ownership. The reforms are on the heels of last year's new law on private property. I predicted March 2007 that the new law protecting property could open the door to finally giving rural Chinese what they've long for for centuries - their own piece of China. This is a monumental change and very important to follow and understand its impact on the Chinese economy.

*The members of the CPC Central Committee are: Zhou Yongkang, Li Keqiang, Li Changchun, Wen Jiabao, Hu Jintao, Wu Bangguo, Jia Qinglin, Xi Jinping and He Guoqiang.

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October 10, 2008

G7 Puffery Won't Fix Financial Mess

Speaking on Italian televison, the Finance Minister of Italy said the current proposal being discussed by the G7 emergency summit in Washington changes nothing and Italy won't sign on.

The Panic of '08 is not isolated to the Atlantic Alliance. Washington and New York big wigs need to put down their worn out copies of Churchill's memoirs, stop listening to Henry Kissinger, and bring China to the table. It is apparent that Europe cannot operate as a group. France is busy courting Russia, Germany embittered, and Italy in a tantrum. The EU can't function as one.

Carlos Slim Helu, alternately the richest man in the world, asks why China isn't buying up American assets. Many others are calling for coordination with China on the global financial meltdown. Here's a good summary.

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October 09, 2008

"Canada is not China"

So says a former Fed official as the USA seeks well-capitalized banks to clean up Wall Street's big financial mess. Of course that comment simply means that Congress won't balk if Canada banks start buying up American assets. Of course, Canada is not China financially either. Unlike Canada, China is sitting on a the world's largest collection of dollar bills and American debt. As the current election cycle is showing, bigotry and ignorance of the world beyond the United States' coastlines may sell politically but it continues to do serious damage to the now short-term prospects for American citizens.

In a related note, the remainder of the BRIC countries (Brazil, China, India) will attend Treasury Secretary Paulson's emergency G7 and later G20 summit starting tomorrow. Russia is already regular member. Will we see a new Bretton Woods emerge? We'll find out Saturday when the meeting is supposed to make an announcement.

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October 08, 2008

Is Bretton Woods II Dead?

The coordinated rate cuts by central banks around the globe today included China. The faded G7 powers and their corporate and state-owned (BBC, for example) press still view the so-called "subprime," "credit," "liquidity," financial crisis as an Atlantic Alliance issue. Nothing could be further from the truth. China is at the core of the financial system as much as the USA since they both depend on the "Bretton Woods II" regime of financing trade deficit with borrowed dollars. For years the USA has agreed with China that 'you buy our goods, we buy your debt.' That system is now unravelling.

A week ago the President of France Nicholas Sarkozy said "Laissez-faire is finished." He joined the call first made last year by outgoing German Chancellor Gerhard Schroeder for a G7 summit to fix the world's financial mess.

But what we really need is a Bretton Woods III conference where the USA, the EU, and China sit down and hammer out what the world's financial future will be. Certainly rich holders of dollars such as Japan, Russia, and financial centers of the Middle East should be there too as important participants.

If the future will be multipolar balanced by the dollar, the Euro, the Yen, Renminbi (Yuan), and Gold, as famous gloomsayer Mark Faber forecasts, then we need to get together now to craft a new system.

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October 06, 2008

World Needs A New G-3

With the exception of the fire-breathing wing of the American Republican Party most observors of the current scene agree that the global influence of the USA is finally beginning to wane. Events of the Panic of '08 show that the world really contains 3 superpowers specifically the USA, the EU, and China. An interesting analysis of where we are and where we very soon need to go is provided by one Parag Khanna in Der Spiegel. Two key grafs:

"As stealthy, globalized escalations continue among the great powers undeterred by global governance norms, the potential for conflict grows: resource competition in the Caspian and South China seas, terrorism with nuclear weapons, an attack in the Gulf of Aden or the Straits of Malacca. The uncertain alignments of lesser but still substantial powers such as Russia, Japan, and India could also cause escalation. Furthermore, America's foreign lenders could pull the plug to undermine its grand strategy, sparking economic turmoil, political acrimony, and military tension. War brings profit to the military-industrial complex and is always supported by the large patriotic camps on all sides. Yet the notion of a Sino-US rivalry to lead the world is also premature and simplistic for in the event of their conflict, Europe would be the winner as capital would flee to its sanctuaries. "

"Yet at present the term "international community" is little more than a euphemism for Western dominance. The West can expect no allegiance to a Western order masquerading as representative of global values decreed without global input. America has called on China to be a "responsible stakeholder" in the global system, but because it is implicitly an American order China is naturally resistant to it. China will not exercise its enormous economic weight in the interests of antiquated and unrepresentative clubs like the G-8 that will not even let it in. Similarly, much as the efficacy of the UN Security Council today depends on the United States, the same is becoming true of China, which can also bribe the rotating Security Council members to vote its way. Without a new division of labor, Western institutions will diminish with America's power, leaving only classic geopolitical competition without even the veneer of diplomatic coordination. "

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October 03, 2008

Wolfowitz Pushes Arms on Taiwan

Seven years after the Bush administration offered a massive arms deal to Taiwan and a year after Taiwan's politicians agreed to buy a much smaller package, the US State Department will move forward with $6 billion in weapons in order to avoid the entire package being scuttled by a future Obama administration.

The latest moves appear to be orchestrated by the Bush administration's former Pentagon heavyweight Paul Wolfowitz now Chairman of the US-Taiwan Business Council and the State Department's International Security Advisory Board and will most benefit Lockheed-Martin and a few other defense contractors.

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