Sept. 1 (Bloomberg) -- The Shanghai Composite Index, the world’s worst performer in August, may fall another 25 percent as China’s economic recovery isn’t “sustainable,” former Morgan Stanley Asian economist Andy Xie said. The measure plunged 6.7 percent to 2,667.75 yesterday, the most since June 2008, and entered a bear market on concern a slower lending growth may derail a rebound in the world’s third- largest economy. Xie said the index “should be 2000 or less.” “The market is in deep bubble territory,” Xie, 49, who correctly predicted in April 2007 that China’s equities would tumble, said in an interview with Bloomberg Television. China’s retreat sent the MSCI World Index of 23 developed nations down 0.8 percent, while MSCI’s emerging-market index lost 1.5 percent, the biggest drop in two weeks. The Bank of New York Mellon China ADR Index, tracking American depositary receipts of Chinese shares, lost 2.3 percent, led by commodity producers.
The national flag of the People's Republic of China (PRC) will be hoisted at the South Lawn of the White House in Washington on September 20, media reported Sunday. Chinese associations in the United States had applied to hold a ceremony in front of the US President’s residence to celebrate the 60th anniversary of the founding of PRC. Chen Ronghua, chairman of Fujian Association of the United States, told reporters that their application was approved not only because of the sound Sino-US relations but also because China is a responsible country.
If we are to learn anything from this sordid episode in our nation's economic history one lesson must come through: It is the presence of these "under the covers" backstops that cause asset bubbles to be blown to the degree that we saw occur, because without them nobody in their right mind ever allows a commitment of money to dodgy assets to the degree that is necessary for a bubble of the magnitude we saw in housing to occur. Between those "side letters" (or their moral equivalents) and accounting fraud you have a recipe for disaster. We have now seen two bubbles - The Internet and Housing - occur due almost entirely to these factors. ENRON occurred due to the ability of the firm to run off-balance sheet deals that turned out to be an outright scam, and the housing bubble occurred due to what amounted to the same thing: massive off-balance-sheet exposures and vehicles that were effectively financed the same way (that is, sans disclosure.) We sorely need
China called on the United States to reduce and eventually halt air and sea military surveillance close to its shores after a series of territorial disputes this year. Five times this year, Chinese vessels have confronted U.S. surveillance ships in Asian waters, the U.S. Defense Department said in May. China said the U.S. vessels had intruded its territory. There has since been a sixth incident.
MGI finds that a comprehensive program of reform would also enrich the global economy with $1.9 trillion a year in net new consumption, boosting China's share of the worldwide total to 13 percent—4 percentage points higher than its share without further effort. China's household income would also be 15% higher than current trends. Higher consumption will make China's growth sustainable. The implied increase in GDP would be 0.8-1.2% over the projected 7.7% from 2010 to 2025.MGI set out a wide range of policies that it said could raise the share of private household consumption to 45-50 percent of gross domestic product by 2025, or 6-11 percentage points more than the rate of 39 percent it is likely to reach on present trends. Consumption made up just 35.3 percent of China's GDP in 2008, according to the National Bureau of Statistics. Japan's consumption share is 55 percent and the United States' is 71 percent, MGI noted in a report.
China has launched a national organ donation system to try to reduce its dependence on body parts harvested from executed prisoners, who make up the majority of donors.
Organ transplantation in China has long been criticized as profit-driven and unethical, with critics arguing death row inmates may feel pressured to become donors, violating personal, religious or cultural beliefs.
China Construction Bank Corp. said excess cash in the banking system has led to asset bubbles, underscoring concern that the nation’s lenders will rein in credit after the Shanghai Composite Index’s 64 percent rally.
“There are uncertainties in the economy and bubbles in the capital market,” Guo Shuqing, chairman of the nation’s second- largest bank, told reporters in Beijing yesterday. “China’s banking system still has excessive liquidity.
The United States needs to borrow nearly $10 trillion over the next decade, including about $1.6 trillion this year. Where's it going to come from? This is a critical question, because resistance on the part of creditors will drive up interest rates, clobbering the housing market and demolishing the value of whatever cash savings Americans have left. The other answer--our government lending the money to itself--will destroy the value of the dollar, and that wouldn't help too many people, either (except debtors--it would help debtors because they will be able to repay nominal debts with toilet-paper dollars. For now, the money we're borrowing is coming from somewhere, thankfully. But it's not coming from China, which has funded our spending for most of the past decade. As you can see in the chart above from the NYT, China's absolute purchases of Treasury debt continued to rise through last year, but the percentage of our borrowing that China is funding is s
MarketWatch argues: A weak set of economic indicators for July laid the foundation for the latest market correction, challenging the Shanghai Composite's nearly doubling in value in the first seven months of the year. But let's dig a little deeper. China's current-account surplus is off 32% for the first half of the year. Financial Times Alphaville writer Izabella Kaminska convincingly argues that China's stimulus money is being recollected back from the people who receive it before it can do any good. China has lent out a huge amount of money. Marketwatch's David Weider notes that "China loaned $852 billion globally through the first five months of the year". Vitaliy Katsenelson argues that while China has been blowing a huge bubble in lending, the government may have enough of a surplus to pull it off - at least for a couple of years (especially given that the banks are controlled by the government). But - at some point in the future
China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg. Inflation fear In recent months the US government's budget deficit has widened thanks in part to the Obama administration's costly stimulus plan. Our correspondent in Shanghai says that China is worried about this, and fears the stimulus efforts will fuel inflation in the US, reducing the value of the dollar. This would then erode the value of the debt China holds in the US currency. In June, China cut its holdings of US securities by about $25bn, a fall of 3.1%. 'Dollar alternative' The sales were made as the US treasury secretary was visiting Beijing to try to reassure the Chinese that their investment in his country's government debt is safe. In 2008, the Chinese increased their holdings in US debt by 52% over 12 months. "China has said it would like to establish an alternative to the US dollar as
New data on international capital flows into U.S. financial assets were released Monday indicating that in June China was a net seller of $25.1 billion of U.S. Treasuries. Many will put the sale in the context of China’s $38 billion buying splurge in May, but the better metric is put the net purchases for May and June in the context of its $122 billion accumulation of international reserves during the two months. In other words, China invested very little of its new money in Treasuries in May and June—just over 10%, a sharp contrast to the 60% to 70% figures seen in recent years. China’s investment in Treasuries in recent months looks even smaller when data for April are included. In April, China accumulated over $55 billion of international reserves, yet it was a net seller of $4.4 billion of Treasuries.
The data raise fresh doubts about the strength of global trade and whether the world can rely on China's growth miracle to power recovery. Separately, the Baltic Dry Index – measuring freight rates for bulk goods – has tipped over, dropping 25pc since late July. The shipping figures buttress reports that China has stopped building up stocks of metals and other commodities after a spate of frantic buying over the early summer.
nascent legal rights movement, already reeling from a crackdown on
crusading lawyers, the kidnapping of defense witnesses and the
shuttering of a prominent legal clinic, has been shaken by the
detention of a widely respected rights defender who has been
incommunicado since the police led him away from his apartment 12 days
Insightful commentary from Warren Pollock on how China is quietly getting the hell out of dodge.
It was fueled by bank lending and inflation fear. I think that Chinese stocks and properties are 50-100% overvalued. The odds are that both will adjust in the fourth quarter.
Pretty harsh words from former Morgan Stanley Analyst Andy Xie: “Chinese stock and property markets have bubbled up again. It was fueled by bank lending and inflation fear. I think that Chinese stocks and properties are 50-100% overvalued. The odds are that both will adjust in the fourth quarter. However, both might flare up again sometime next year. Fluctuating within a long bubble could be the dominant trend for the foreseeable future. The bursting will happen when the US dollar becomes strong again. The catalyst could be serious inflation that forces the Fed to raise interest rate. Chinese asset markets have become a giant Ponzi scheme. The prices are supported by appreciation expectation. As more people and liquidity are sucked in, the resulting surging prices validate the expectation, which prompts more people to join the party. This sort of bubble ends when there isn’t enough liquidity to feed the beast.”
For those who, like me, are skeptical of the solidity of China’s economic growth and the basis for the commodity rally, this article is for you: Copper’s 76 percent rally this year may soon end on signs that China has stockpiled more than it can use in new homes, cars and appliances. Inventories monitored by the London Metal Exchange posted their first back-to-back weekly gains since February, increasing 8.3 percent from an eight-month low. Sumitomo Metal Mining Co., Japan’s second-largest smelter, said Chinese imports are slowing after record purchases boosted domestic supplies, and U.S. copper-scrap exporters report shipments to Asia are dropping.
Even noted China-phile Jim Rogers is wary of the huge market rally in Shanghai. In this interview with Bloomberg, he tells Margaret Brennan (so that's where she went) that he's not buying any Chinese shares these days, and is waiting for the market to collapse again. He also discusses China's ongoing thirst for commodities from abroad.
Across the Pacific, China has been voicing concerns about the U.S. deficit. As the large holder of U.S. Treasury bonds, the Chinese government is currently one America’s biggest trading partners. It is understandable why Beijing is wary of the dipping value of the U.S. dollar During the G20 Summit, President Obama spoke to Chinese Premier Hu Jintao. At this time, Mr. Hu suggested that if the U.S. provided relevant military technology, that the Chinese government would forgive some U.S. debt. According to insiders, there is much turmoil in the Department of the Defense over Obama’s suggestion that they sell the blueprints for the B-2 Spirit stealth bomber. Secretary of Defense Robert Gates has openly opposed the President’s plan. As a result, Gates was asked to resign as Defense secretary if he does not wish to get the ball rolling.
As I have repeatedly pointed out, China is in better shape than the U.S. and many other Western countries, but all is not rosy in China. CNN Money is now making some of these same points out for a mass audience: But when Chinese leaders meet their U.S. counterparts this week, they should pause for reflection before venting any criticism, because hidden liabilities mean China's books are uglier -- potentially much uglier -- than at first sight. Indeed, Ellen Brown argues that China has not outsourced its money-creating power to private banks because the government and private banks are really one and the same. Therefore, while China's debt might be higher than previously disclosed, the government does not have to pay huge amounts of interest to a third-party creditor - unlike the U.S. - thus putting China at an economic and competitive advantage.
What a hoot. The Chinese Communists invaded Washington on Monday demanding not that we sacrifice our freedoms but rather that we balance our budget.
A top Chinese official said on Tuesday the United States should be
careful about flooding global markets with dollars while the world
struggles to restore economic stability and get growth back on track.
President Barack Obama put forward his top economic officials to try to reassure China that the U.S. will not let huge budget
deficits or runaway inflation jeopardize the value of Chinese
Two more Web sites dedicated to social networking went offline in China
on Tuesday amid tightening controls that have blocked Facebook, Twitter
and other popular sites that offered many Chinese a rare taste of free
China's motivations to boost the global standing of the yuan stem from
the same concerns as its calls for a new reserve currency. Greater use
of the yuan in trade would improve the competitiveness of Chinese
exporters by reducing transaction costs and currency risks. By
internationalizing the yuan China can also begin
extricating itself from the "dollar trap," in which the country,
through its trade, amasses giant surpluses of dollars, which forces it
to invest in dollar assets.
China looks set to hit its full-year growth target of 8% after a surprisingly strong second quarter notable for a surge in investment driven by powerful fiscal and monetary stimulus.
Annual gross domestic product growth accelerated in the second quarter to 7.9 percent from 6.1 percent in the first quarter, making China the best-performing major economy and reinforcing hopes that the world economy is pulling out of its deepest recession in 80 years.
Al-Qaeda has vowed to avenge the deaths of Muslims in China's Urumqi city by targeting the country's workforce in northwest Africa.
The call for reprisals against China has come from Algerian-based Al-Qaeda, the South China Morning Post said, summarising the intelligence report by London-based risk analysis firm Stirling Assynt.
I don't have time to do a long entry today, but in my June 30 entry I marveled at the huge explosion in new lending, and claimed that credible rumors suggested that total new loans for June would be an astonishing RMB 1.2 trillion.
For us who work in the pro democracy movement cyber attacks have been old news since at least last September or 08’. Spam bombs as I call it have hit us many times in the past and for the most part we’ve learned how to deal with cyber garbage as a whole. The technology is quite primitive but if one is not vigilant even the most archaic assaults can be devastating. It’s almost laughable government sites were so vulnerable though. I found it quite interesting to note that the media mentioned the latest internet assaults came from North Korean sympathizers. Well the one real sympathizer I know who already launches these types of attacks is the government of Burma. With the help of their Russian technicians they’ve been launching spam bombs for months now. So it is a safe bet that Than Shwe and his band of thugs were involved in the latest assault. Just with our technology we’ve identified the perpetrators and their locations. The samplings of the spam all had .ru addresses but laun
Police on Tuesday fired tear gas to disperse thousands of Han Chinese protesters armed with makeshift weapons and vowing revenge, as chaos gripped this flashpoint city riven by ethnic tensions. Authorities ordered a night curfew and thousands of heavily armed police deployed across Urumqi, the capital of China's remote northwest Xinjiang region. But tensions spiked dramatically following weekend clashes that claimed at least 156 lives. Authorities said they had arrested 1,434 suspects, accusing them of murder, assault, looting and burning during attacks by Muslim Uighurs against the Han, China's dominant ethnic group who are seen in Xinjiang as oppressors. But despite the security clampdown involving police with submachine guns, shotguns and batons, mobs of Han Chinese marched through Urumqi -- with many wielding bricks, chains and poles and bent on reprisals against Uighurs. "The Uighurs came to our area to smash things, now we are going to their area t