China on the rise!

[Monseratto]

What happens in the US and Chinese economy will boomerang each other. Mutual assured destruction, financial style. There's no real winner here.

Chinese economy is growing at a slower pace not since the late eighties.

China's economy has grown at its slowest pace in three years as investment slowed and demand fell in key markets such as the US and Europe.

Gross domestic product rose by 7.6% in the second quarter, compared with the same period a year ago. That is down from 8.1% in the previous three months.

In March, Beijing cut its growth target for the whole of 2012 to 7.5%.

China accounts for about a fifth of the world's total economic output and any slowdown may hamper a global recovery.

At the same time, many of Asia's biggest and emerging economies are becoming increasingly reliant on China as a trading partner.

"China has been a big factor for the slowdown in Asia this year," said Tai Hui from Standard Chartered Bank in Singapore.

He added that if China's growth does not pick up in the second half of the year then "that's going to mean a very difficult second half for a lot of the manufacturers in this region".

People are dumping yuan for the dollar.

China sees capital outflows in July
August 15, 2012

China posted monthly capital outflows in July, for the second time this year, as shrinking external demand weighed on its export growth and a slowing domestic economy also dampened global investors' appetite for yuan assets. China's central bank and commercial banks sold a net 3.8 billion yuan in foreign exchange last month, following a net purchase of 49.1 billion yuan in June and 23.4 billion yuan in May, according to Reuters calculations based on data published by the central bank on Tuesday.

That marks the second monthly capital outflow this year after the first net sales of 60.6 billion yuan in foreign exchange in April. China has suffered from sporadic capital outflows since late last year, as a darkening global economic backdrop has dented investor enthusiasm for emerging markets and caused some to begin scaling back exposure to currencies other than the US dollar.

"The capital outflows show investors' concern on the outlook of China's economy," said Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai. Analysts cited a narrowing trade surplus and declining foreign direct investment as the major reasons behind net forex sales last month, adding that China may see a slowing overall capital inflow for the full year.

China's trade surplus decreased to $25.1 billion in July from $31.7 billion in June and foreign investment inflows dropped 3 percent in the first half of 2012, marking the longest period of decline since the depth of global financial crisis. The monthly foreign exchange purchase averaged 42.7 billion yuan in the first seven months, down from 329.7 billion yuan during the same period of 2011.

Apart from slowing foreign exchange purchases, China also registered the first capital and financial account deficit since 1998 in the second quarter. Some analysts also said that the shrinking capital inflows may press the central bank to cut banks' reserve requirement to inject new money into the banking system. The inflow of foreign capital is a basic component of money supply in the financial system, and a fall in its level implies a need to expand domestic credit creation by easing monetary policy in order to keep money supply growth steady.

"The capital outflows will definitely put pressure on the banking system liquidity and will prompt the central bank to quicken its pace of cutting reserve requirement ratio," said Du Zhengzheng, an analyst at Guokai Securities in Beijing. Rising expectations on yuan to weaken further in the coming months also reduced willingness for individuals and enterprises to hold yuan assets, analysts say.

[uls]

this is what's happening in China now --

background muna -- to maintain competitiveness the govt keeps the yuan weak by printing yuan to buy dollars. that prevents dollars from flooding the system which would weaken the dollar

when the economy was red hot the govt printed huge amounts of yuan to absorb huge amounts of dollars coming in so there's so much yuan in the system (that's why they experienced high inflation)

but exports and foreign direct investments have fallen so there's less dollars coming in. so the govt prints less yuan. so there's less money in the system. exporters are also hoarding dollars. FX deposits are rising

less money in the system means less money going around so loans aren't getting paid. i'm sure non-performing loans at China's banks are already rising

[Monseratto]

PressTV - China corporate debt reaches ?alarming level?: Study

Not as bad as the world average, but worrying nonetheless...

A new study shows that Chinese companies are operating with "alarming levels" of corporate debt that would be hard to repay if the country’s economic growth slows down.


"The high level of corporate debt deserves our attention," vice president of the Chinese Academy of Social Sciences (CASS), a top state think-tank, Li Yang said on Thursday, Xinhua reported.

After a one-year study on China's government debt, corporate debt and individual borrowing, a research team led by Yang will publish their research results next month and will also submit the results to the International Monetary Fund.

Yang warned that China's leverage ratio is increasing, and the pace at which the country’s debt is rising will continue unabated if the current global financial crisis persists.

According to the study findings, China's debt-to-GDP ratio stands at 168.9 percent, which is lower than the global average of more than 200 percent.

However, the debt-to-asset ratio of Chinese enterprises has reached 105.4 percent, ranking the highest among 20 countries which were studied by the CASS.

CASS has also announced that Chinese enterprises are over-dependent on bank loans for financing.

Yang, however, added that China's debt levels are still a long way from those of the US and Japan.

The overall growth of China's gross domestic product slowed to 8.1 percent in the first quarter of this year.

PG/SS

[jon777]

wrong analogy

Metrobank can go bankrupt. the US can't

the US owns the dollar. it can print dollars to pay debt

if they default it won't be coz they went bankrupt

they can intentionally or unintentionally suspend payment (technical default)

bankrupt, technical default are all semantics in economics..... yoko na pahabain pa....

Ok so if the US has a technical default, what do you think would happen to the US economy? wala lang? parang walang nangyari? what will happen to china on the other hand? Sino mas maapektuhan in a more negative way?

another question for you: If the US owns China, then why is President Obama avoiding branding China as a Currency Manipulator amidst an obviously undervalued chinese yuan?

the answer is: When a country is branded as a currency manipulator, US laws states that the US has to automatically pull China on the sides for a trade negotiation and if china refuses to negotiate, a series of trade sanctions against China would happen

bottomline, the US courtesy of Pres Obama and his economic advisers are "afraid" that Chinese trade sanctions would seriously affect the US economy in a serious way the the 1930's depression would be seen as a picnic in the park

The US has trade sanctions/embargoes against Iran, Cuba, North Korea among others because the US can. But the US can NOT do that to China. If the US can not do that to China, im pretty sure the US does NOT own China

[uls]

so that's your example? the US not branding China a currency manipulator coz they're afraid of China?

maybe the US didnt brand China a currency manipulator coz data showed the yuan actually strengthened as the US trade deficit with China widened

[niky]

If the US didn't sanxtion Japan (for the yen), which isn't a big US export market, why would they sanction China?

[uls]

speaking of Japan...

to solve the huge trade deficit with Japan the US in 1985 pressured Japan to strengthen the yen

[jon777]

so that's your example? the US not branding China a currency manipulator coz they're afraid of China?

maybe the US didnt brand China a currency manipulator coz data showed the yuan actually strengthened as the US trade deficit with China widened

Nope, the yuan strengthened because of concerted efforts by the US and European Union for china to float the yuan. I wrote that BOTH the US and EU because the US alone DOES NOT have the guts and balls to pressure china alone, since the US wants to avoid a trade war with China. that is why they are calling on all like minded trade partners to pressure china. that is why they want to bring the issue to the G20,kasi gusto ng US concerted effort by 19 other countries.
Calls for floating the Yuan has been made since 2008. If the US owns China, then why is the US NOT branding China as a currency manipulator so as to start a trade sanction?
as per IMF, the Yuan is still undervalued by 23%

so who is the real boss? the US who needs to bring the Europeans along? Or china, who is taking its sweet time to float the Yuan?
Kulang na lang, lumuhod ang US sa China to strengthened the Yuan eh... Yan ba ang Boss?

Lawmakers renew call to pressure China on currency value - The Hill's On The Money

Congressional lawmakers renewed their calls on Tuesday to apply more pressure on China to raise the value of its currency, even as a bipartisan Senate-passed bill languishes in the House.

House Ways and Means Chairman Dave Camp (R-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.) called on the Obama administration to ramp up their efforts to convince China to let its currency rise during talks at the World Trade Organization (WTO) symposium in March.

Camp and Baucus sent a letter to Treasury Secretary Timothy Geithner and U.S. Trade Representative Ron Kirk, arguing that China has actively blocked currency undervaluation discussions at the WTO and the practice is costing U.S. jobs.

"China continues to undervalue its currency, providing an unfair advantage to Chinese exporters and harming U.S. manufacturers and their workers," Camp and Baucus wrote.

“China will not end its currency undervaluation unless the U.S. seizes opportunities like this to insist it does," they said.

"Expanding and intensifying discussions at the WTO can further this effort and bring significantly more pressure to bear on China.”

U.S. officials have tried to use every available forum to discuss China's trade practices with Chinese officials.

Specifically, the lawmakers said they support ongoing efforts at the WTO to understand the effects on trade of exchange rate policies.

China’s currency, the yuan, is undervalued relative to the dollar by as much as 23 percent, according to a recent analysis by the International Monetary Fund.
Unfair trade practices have added $200 billion to the U.S. trade deficit since 2001, Camp and Baucus said.

"Addressing China’s currency policy in a multilateral manner holds the greatest promise for an effective and meaningful solution," they wrote.They said the administration’s efforts at the Group of 20 talks helped develop an international consensus about China's need to rebalance its economy and allow its currency to more accurately reflect the market.

"China will not end its currency undervaluation unless the U.S. seizes opportunities like this to insist it does," they said. "Expanding and intensifying discussions at the WTO can further this effort and bring significantly more pressure to bear on China."

Sen. Orrin Hatch (R-Utah) also sent a letter to Geithner and Kirk on Jan. 18 suggesting that the United States and like-minded trading partners team up to apply more pressure on China to improve its trade practices and more quickly revalue its currency.

Earlier on Tuesday, the Alliance for American Manufacturing released a series of three reports showing that the U.S. auto supply chain has lost more than 400,000 jobs since 2000 and that another 1.6 million jobs are at risk unless China's illegal trading practices are curtailed.

"Taken together, these three reports show beyond a shadow of a doubt that China's blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S. auto supply chain," said Scott Paul, executive director of the AAM.

"It's essential that federal action be taken to challenge these abuses before they completely undermine the job recovery under way in the U.S. auto industry," Paul said.

The call comes as a Senate-passed bill that would punish China for continued unfair trade practices remains stalled in the House.

The measure has bipartisan support, but dozens of business groups have argued that legislation pressuring China to accelerate the value of its currency would likely have the opposite effect and result in a retaliation against U.S. exports — the reason why Geithner has taken a tack of pushing for the gradual increase.The Senate bill would require the Commerce Department to investigate any country undervaluing its currency and deem the practice as a government subsidy under U.S. law. Affected U.S. companies would then be allowed to seek retaliatory tariffs on goods imported from the country.

The Treasury Department also would be able to take actions against countries with undervalued currency if the problems aren’t corrected within a specific period of time.

[jon777]

If the US didn't sanxtion Japan (for the yen), which isn't a big US export market, why would they sanction China?

the US did not sanction Japan because Japan agreed in 1985 to strengthened the yen.

speaking of Japan...

to solve the huge trade deficit with Japan the US in 1985 pressured Japan to strengthen the yen

That is true via the Plaza Accord of 1985. But at that time, the US OWNS Japan. as of the moment, the US does NOT own China and that is the big difference

[uls]

the West doesnt have to make China rebalance

economic forces will force China to rebalance

China's economy is too dependent on exports and investment

but exports and investments are now declining

the economic crisis in the US and Europe is an in-your-face reminder to China that relying on exports means its economy is at mercy of the West

to make up for declining exports they have to increase domestic consumption. Rebalance. but it will be painful

i understand there are people who are really really proud of what China has accomplished. they think China's momentum is unstoppable and will soon replace the US as the dominant power in the world

sorry but i don't see it that way

let's not dwell on what China has accomplished. it's not as if di ko alam what China has accomplished

let's watch nalang what's gonna happen to China

will China overtake the US and become king of the world?

or will China's glory fade. like Japan

[uls]

let's go out 2 years...



5 years



so...

the Shanghai composite is now at post-08/09-crisis low

[jon777]

^^^^
I can perfectly understand your position. its like discussing whats a better place for business: Singapore or Hong Kong Or what is better: Honda or Toyota. My barkada has the same position as yours so i understand where you are coming from. Like what i have previously stated, Im Tsinoy but i view China's rise with suspicion.

bottomline, i hope that China being a soon to be super power takes its role in the world community with great responsibility and an advocate for peace and stability

[Boy Bastos]

bottomline, i hope that China being a soon to be super power takes its role in the world community with great responsibility and an advocate for peace and stability

But in reality, this is not happening especially on the peace part. I agree with uls opinion. China is still a newbie in a system created and controlled by Western countries.

[pop3corn]

Tama imagine mo Miss World 2012 ginanap sa China, tapos Miss China nanalo! wtf!

[Syuryuken]

Tama imagine mo Miss World 2012 ginanap sa China, tapos Miss China nanalo! wtf!

wag ka ng sumabad ang tino-tino ng usapan dito.

[marg]

wag ka ng sumabad ang tino-tino ng usapan dito.

Pabayaan mo na yan, may Sayad sa utak yan si pop3corn/OB

[CVT]

The only big factor is that a lot of US and European companies/industries are in China.

Furthermore, they are too huge a market to ignore....

16.7K:weathermanf2:>:sampay:

[timrev]

wow dami ang ako natutunan sa economics ha i had fun reading those post of we can say tsikot's financial analyst a lot interesting...kahit sabi ni wifey boring daw

natawa lang ako ng sumabat si OB

well i agree *uls US can still control china US are still world's super power

[isa1023]

Oo nga.

Tuloy niyo lang yung discussion dito ko kumukuha ng insights para sa report na ginagawa ko.

Kaya pag nahuli ako ng boss ko na nagti-Tsikot, sinasabi ko dito ko kumukuha ng ideas para website namin.



Padamay na din sa discussion yung renminbi offshoring na ginagawa sa HK ngayon.

Stepping stone ba yun para gawing reserve currency yung RMB?

[Ry_Tower]

On rhe rise nga, pati problem.

China's rural wealth gap near 'danger' level: study - Yahoo!7 News