China & HK Archives - Page 56 of 60

October 25, 2011

China: the case of the missing inflation – FT.com

While most analysts pored over the numbers to get a sense of how growth was holding up, at least two spotted a large discrepancy between reported price changes and implied price changes.

The gap is more than just an academic curiosity. It suggests that inflation is a lot stronger than the government has been saying and could explain why Beijing has been so reluctant to loosen policy despite a slowing economy.

….China chalked up an implied GDP deflator of 10.3 percent year-over-year in the third quarter, the highest since it started publishing quarterly growth figures in 1999, noted Wei Yao, an economist with Societe Generale. That was well above the 6.3 percent rise in the consumer price index during the same three months.

Diana Choyleva, an economist with Lombard Street Research, found that the chasm was even bigger in quarter-on-quarter terms: the GDP deflator was up 3.8 percent, while CPI was up just 1.5 percent.

….the gap between the deflator and CPI is usually innocuous, just a couple of percentage points.

via China: the case of the missing inflation | beyondbrics | News and views on emerging markets from the Financial Times – FT.com.

October 25, 2011

Iron ore crash – macrobusiness.com.au

Spot iron ore prices have shed 19 percent so far this month in a sell-off largely fueled by slower construction steel demand in China, the world’s biggest buyer of imported iron ore at around 400 million tonnes a year.

In Europe, a more important market for Vale than Rio, steel markets have taken a knock given uncertainty surrounding the region’s debt crisis.

Growth of Europe’s steel production will slow in 2012 along with activity in the steel-using sectors, Eurofer, the European steel producers association, has forecast.

via Iron ore crash – macrobusiness.com.au | macrobusiness.com.au.

October 25, 2011

China property developer warns on price falls – FT.com

China Vanke, the country’s biggest developer by market share, said government efforts over the past year to rein in soaring prices were having a severe impact on the market and developers were being squeezed after sales volumes in 14 of the country’s largest cities halved in September from a year earlier.

“We can see a trend of declining sales, especially in the major cities,” Shirley Xiao, executive vice-president at China Vanke, said on a conference call with investors on Tuesday. “Prices have begun to decline little by little so we think even buyers who are able to buy will choose to wait for now because they’re targeting even lower price cuts.”

via China property developer warns on price falls – FT.com.

October 22, 2011

Toddler’s Death Stirs Ire in China – WSJ.com

“The most important thing for Chinese people right now is making money and pursuing their own interests,” said Jin Liang, deputy director of the Shandong Institute of Behavioral Science in eastern China. “Our education system doesn’t teach ethics. Environment is very important in determining people’s behavior, and right now Chinese culture is sick.”

Others have argued that the problem is largely a legal one. They point to a series of cases in which Chinese Good Samaritans have helped strangers only to be later blamed and sued.

The most famous such case occurred in Nanjing in 2007, when a young man named Peng Yu was sued after he escorted an elderly woman to the hospital after she had fallen and broken her leg. The court ordered Peng Yu to pay 40% of the woman’s medical bills, explaining that “according to common sense” he wouldn’t have helped her if he weren’t in some way responsible for her fall.

via Toddler’s Death Stirs Ire in China – WSJ.com.

Humanity seems to vary greatly between countries …. and sometimes within countries. I myself can only recall experiencing kindness when I lived in Africa, but at the same time would read news stories like the Cape Town woman whose car overturned on a country road, leaving her trapped inside with a broken leg and pelvis. Passersby dragged her free of the car before raping her and making off with her handbag.

If there was some way of measuring humanity in a country, on a scale of 1 to 10, I am sure that you would find a strong correlation between humanity, stability and economic prosperity.

Scandinavian countries would probably rank highest on such a scale. Interesting that, before introduction of a religion (Christianity) which emphasizes humanity toward your fellow man, their Viking ancestors would have ranked near the bottom. Perhaps there is hope for all of us.

October 21, 2011

China’s U.S. Debt Holdings

According to China Daily, China owns $1.13 trillion of US debt. China has $3.20 trillion in foreign exchange reserves.

via Chart of the day: China’s U.S. Debt Holdings | Credit Writedowns.

The key statistic here is the $36.5 billion decline in August which dwarfs previous monthly changes. No wonder the yuan jumped against the dollar.

But ask yourself: why has a poor country like China (GDP per capita of $4000 a year) invested more than $1T in US Treasuries? It could not be for the yield. Inflows on the US capital account are used by China to suppress its currency and give its exporters a massive trade advantage against US manufacturers. Imposing punitive tariffs on Chinese imports would provoke a tit-for-tat response and lead to a trade war. But a US withholding tax on foreign capital inflows could not provoke retaliation as China already strictly controls capital inflows. And exemptions to the withholding tax — only to countries who have reciprocal open capital markets — could be negotiated on a country-by-country basis as an extension of existing tax treaties.

That would force currency manipulators to repatriate their investments in US capital markets. This should be welcomed by the US as it would suppress the dollar against the yuan and other currencies, giving US manufacturers a massive advantage in export markets.

October 18, 2011

China & HongKong retreat

Dow Jones Shanghai Index fell sharply on Tuesday, signaling a test of the lower trend channel. Declining 63-Day Twiggs Momentum below zero indicates a strong primary down-trend.

Dow Jones Shanghai Index

The Hang Seng Index retreated to 18000 Tuesday. Respect of both resistance at 19000 and the descending trendline warn of another test of primary support at 16000. Declining 13-week Twiggs Money Flow indicates long-term selling pressure. Failure of primary support would offer a target of 13000*.

Hang Seng Index

* Target calculation: 16 – ( 19 – 16 ) = 13

October 17, 2011

Of Blind Men and Elephants – Grasping China’s Economy – China Real Time Report – WSJ

Former Australian Ambassador to China and current board member of Australian miner Fortescue Metals Geoff Raby had a different take.

….While he clearly felt the recent sell-off of stocks on fears that China’s economy was slowing was hugely overblown, he had more time for concerns about Chinese corporate disclosures. He said he didn’t think corporate transparency was any worse now than before, but “I don’t know why people believed [the numbers] so much in the past.”

That the Shanghai Stock Exchange’s benchmark index is trading at a fraction its 2007 peak is a sign that “people are finally starting to work it out.”

via Of Blind Men and Elephants – Grasping China’s Economy – China Real Time Report – WSJ.

October 17, 2011

Westpac Economic update – Spot iron prices falling

Spot iron ore prices have fallen quite sharply over the last 2 weeks, down 8% to $158/t. In the last 4 weeks, Australian spot fines, as measured by the TSI, are down almost 12% landed in China.

Westpac forecast spot prices of around US$140/t by mid 2012.

October 13, 2011

Roubini: Moving From the Post-Bubble, Post-Bust Economy to Growth | Credit Writedowns

It is not only the U.S. economy that is in peril right now. …Europe is struggling to prevent the sovereign debt problems of its peripheral Euro-zone economies from spiraling into a full-fledged banking crisis… Meanwhile, China and other large emerging economies… are beginning to experience slowdowns…Nor is renewed recession the only threat we now face. Even if a return to negative growth rates is somehow avoided, there will remain a real and present danger that Europe and the United States alike fall into an indefinitely lengthy period of negligible growth, high unemployment and deflation, much as Japan has experienced over the past 20 years following its own stock-and-real estate bubble and burst of the early 1990s.

via Roubini: Moving From the Post-Bubble, Post-Bust Economy to Growth | Credit Writedowns.

October 11, 2011

The Next Shoes to Drop | Steve Saville | Safehaven.com

China is experiencing an “Austrian” boom-bust cycle writ large, with the boom phase possibly nearing its demise. The extent of mal-investment is unprecedented in modern times. The most obvious signs of this mal-investment are new cities with almost no inhabitants and massive newly-constructed shopping malls with almost no tenanted shops, but the problem runs much deeper than the unoccupied buildings. The core of the problem is that the banking industry is completely dedicated to serving the State, and as a consequence a lot of bank lending is done with total disregard for economics.

Considering that most analysts and investors believe that China is making rapid REAL economic progress and that China’s economy will continue to strengthen, one of the next shoes to drop could be the general realisation that China’s economy is structurally unsound.

via The Next Shoes to Drop | Steve Saville | Safehaven.com.