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China on the rise..

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shanghaiceltic

Shanghai Royalty

Joined: Sep 20, 2005
Posts: 8337
Location: Perth WA
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Posted: Oct 05, 2008 - 05:06 AM
Post subject: China on the rise..

Envious eyes watch China's rise

"CAN you save us? We're here to be rescued." That, in a nutshell, was the collective cry of a swarm of US and European bankers, auditors, consultants and industrialists thronging the cavernous halls of the colossal convention centre in Tianjin last weekend.

While the western delegates at the World Economic Forum's summer conference in the coastal port city that serves as the maritime entry to Beijing were confused, bemused and hyper-anxious about the financial crisis and its impact on the global economy, the Chinese were magisterially assured. Certain that they are the new masters of the universe - now or very soon.

The Chinese Premier, Wen Jiabao, made plain that his country's economy is not immune from the crisis. But, unlike the US and Europe, which are heading for recession or in it, China had put in place the monetary and regulatory measures to ensure continued growth.

China's growth in gross domestic product will not be the 11.9 per cent of last year but still, at 8 or 9 per cent in 2008 and the same in 2009, is still a boost to global trade. Inflation, which peaked at more than 8 per cent in February, has been brought down to 4.9 per cent. And if Chinese exports - enjoying a 170 billion ($300 billion) surplus with the EU alone last year - are experiencing slower growth and even heading for a decline, Mr Wen promised to continue the shift towards domestic consumption and to open the economy further.

But will this happen? Will Mr Wen deliver on his oft-repeated promise to reform China's capital markets? As Stephen Roach, the Asia chairman of Morgan Stanley, told delegates, Chinese consumer spending is, at about 35 per cent of GDP, less than half that of the US where the "binge" of the past 14 years has come to an end, leaving the US consumer "toast, done, finished". The US, he said gloomily, "will have its version of Japan's lost decade".

There were two striking aspects to the Tianjin discussions among policymakers. First, the Chinese authorities were blunt that it was up to the US to sort out the mess it had created, putting at risk, as Mr Wen told CNN, "the safety and security of Chinese capital". Chinese investments in US and European financial assets have gone sour in the toxic meltdown, so the country's leaders are demanding global co-operation to fix the regulatory framework, with Liu Mingkang, the top banking supervisor, exclaiming with unusual ferocity that US lending practices had been ridiculous and demanding a large say in any reforms.

Second, the Europeans were vastly outnumbered by the Americans. David Hale, a Chicago-based consultant and economist, told a group of us: "The Chinese and Americans are drawn to each other; they have a lot in common - entrepreneurial, can-do."

One of the most prominent European delegates there was Tom Enders, the chief executive of Airbus. Over the weekend he and Mr Wen opened the plane-maker's first non-European final assembly line - in a $US600 million ($770 million) plant on a cabbage field that took less than 15 months to build and is now the most modern in the world.

Mr Enders denies that Airbus is putting all its eggs in the Chinese basket but he and his executive team are investing heavily in the prospect of sustained growth - not just in the economy but in air traffic as consumers grow richer. They expect Chinese airlines to order more than 3000 new aircraft in the next 20 years and Airbus to capture more than half of those. Although the new plant involves little technology transfer, Airbus executives do not rule out co-operating more fully with the Chinese in years to come.

One senior European diplomat gave a gloomy forecast of how China's pace of development would affect the European market. "The Chinese are investing heavily in R&D and moving rapidly up the technological value-chain, but we Europeans are in danger of falling behind and failing to invest in research. We could swiftly drop out of the premier league as far as they are concerned."

It was a shuddering thought at the start of a week in which the US financial crisis swept the globe engulfing several European banks. If the diplomat's fears are proven right, there could be worse to come in other sectors, too.

Guardian News & Media

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shanghaiceltic

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Joined: Sep 20, 2005
Posts: 8337
Location: Perth WA
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Posted: Oct 05, 2008 - 11:19 AM

I wonder what the RMB would actually do if it were allowed to float as other currencies do?

The Big Mac Index
Sandwiched

Jul 24th 2008
From The Economist print edition
Burgernomics says currencies are very dear in Europe but very cheap in Asia

EVER since the credit storms first broke last August, the prices of stocks, bonds, gold and other investment assets have been blown this way and that. Currencies have been pushed around too. Did this buffeting bring them any closer to their underlying fair value? Not according to the Big Mac Index, our lighthearted guide to exchange rates. Many currencies look more out of whack than in July 2007, when we last compared burger prices.

The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just a single item, a Big Mac hamburger, but one that is sold around the world. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value yardstick.

Only a handful of currencies are close to their Big Mac PPP. Of the seven currencies that make up the Federal Reserve’s major-currency index, only one (the Australian dollar) is within 10% of its fair value. Most of the rest look expensive. The euro is overvalued by a massive 50%. The British pound, Swedish krona, Swiss franc and Canadian dollar are also trading well above their burger benchmark. All are more overvalued against the dollar than a year ago. Only the Japanese yen, undervalued by 27%, could be considered a snip.

The dollar still buys a lot of burger in the rest of Asia too. The Singapore dollar is undervalued by 18% and the South Korean won by 12%. The currencies of less well-off Asian countries, such as Indonesia, Malaysia and Thailand, look even cheaper. China’s currency is among the most undervalued, though a bit less so than a year ago.

The angrier type of China-basher might conclude that the yuan should revalue so that it is much closer to its burger standard. But care needs to be taken when drawing hard conclusions from fast-food prices. PPP measures show where currencies should end up in the long run. Prices vary with local costs, such as rents and wages, which are lower in poor countries, as well as with the price of ingredients that trade across borders. For this reason, PPP is a more reliable comparison for the currencies of economies with similar levels of income.

For all these caveats, more sophisticated analyses come to broadly similar conclusions to our own. John Lipsky, number two at the IMF, said this week that the euro is above the fund’s medium-term valuation benchmark. China’s currency is “substantially undervalued” in the IMF’s view. The dollar is sandwiched in between. The big drop in the greenback’s value since 2002 has left it “close to its medium-term equilibrium level,” said Mr Lipsky.

If that judgment is right, the squalls stirred up by the credit crises have moved at least one currency—the world’s reserve money—closer to fair value. Curiously the crunch has not shaken faith in two currencies favoured by yield-hungry investors: the Brazilian real and Turkish lira. These two stand out as emerging-market currencies that trade well above their Big Mac PPPs. Both countries have high interest rates. Turkey’s central bank recently raised its benchmark rate to 16.75%; Brazil’s pushed its key rate up to 13% on July 23rd. These rates offer juicy returns for those willing to bear the risks. Those searching for a value meal should look elsewhere.

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Cambronne
Post Roaster

Joined: Feb 23, 2008
Posts: 4217

Posted: Oct 05, 2008 - 05:53 PM

The burger standard, a brilliant symbol of USrael style capitalism. Better than the invisible hand of the market or the end of history put together. Though I tend to prefer the American Standard...

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warz

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Joined: Apr 27, 2007
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Posted: Oct 05, 2008 - 06:34 PM

why tax payer's money should be spent to make the US safe? they created this **** and it is time for them to eat their own ****.

sure, a bad US economy could potentially hurt the Chinese economy back, however a more deeper fact is it is time for China to shift it export economy to be more domestic consumption based.

I hope the US economy could crash hard, this world will become a much better place for us and our children with a weak US.

phiota

LoopKicker

Joined: Nov 01, 2005
Posts: 801

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Posted: Oct 06, 2008 - 02:05 PM

warz wrote:

It's a Catch 22. The Chinese consumers (like all consumers) will only make a shift and spend more if the global economy is doing well. With information/news via the internet the world contracts or expands together.

John

Cambronne
Post Roaster

Joined: Feb 23, 2008
Posts: 4217

Posted: Oct 06, 2008 - 03:30 PM

Quote:

Thats pre-mashed thought if I ever saw it. Any more slogans like this?

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warz

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Joined: Apr 27, 2007
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Posted: Oct 07, 2008 - 03:41 PM

phiota wrote:

No, you lack the very basic knowledge about the topic being discussed here in this thread.

When the global (US) economy is strong, it usually means the Asian counties put more of their $$$ into US. The US is suffering from the current problem because there are money keep flow into their market and they believe every one could borrow any amount they want. Tell me where they got those money? From Japan/China/SA.

What is the reality here?

People in the US borrow money from the world to maintain their "US dream", people in China and Japan have to keep a stupidly high saving rate to fuel American's stupidity to make sure the US economy could be "strong".

For the current bailout plan which is criminal and pure communist style, the US want to borrow more money from the world. Ask yourself: where they can get that 850 billion USD? Guess what is the most amazing thing? The US spent about that amount on the War on Iraq, now it is crying for help.

enzo

Lurker

Joined: Feb 19, 2004
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Posted: Oct 08, 2008 - 09:59 AM

Strong US economy = more exports for all Asian countries

Weak US economy = bad business for Asia, fewer jobs

Strange how people living in Asia can rejoice in a weak US economy, it's bad news for people all around the world, even for the poor in Asia.

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FooJay

Joined: June 21, 2008
Posts: 1717
Location: Shanghai & Taipei
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Posted: Oct 08, 2008 - 10:10 AM

Quote:

Strong US economy = more exports for all Asian countries
Weak US economy = bad business for Asia, fewer jobs
Strange how people living in Asia can rejoice in a weak US economy, it's bad news for people all around the world, even for the poor in Asia.

Agree 100%...
You cannot imagine how many manufacturers and exporters from China I hear complaining and worrying recently.
They should be angry too. After having pulled and built the whole chinese economy with the exports, now they are given lip service, and left to survive by themselves...

Besides, if some economic players could act' with bad greed" when times were good like for the milk scandal, imagine what they will do to survive in hard economic times..

p1atl10

Shanghai Royalty

Joined: Mar 18, 2005
Posts: 9063
Location: Shanghai
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Posted: Oct 08, 2008 - 10:53 AM

warz wrote:

And where did you get your economics education Einstein?

Like it or not....US consumers still drive a large part of the Chinese economy...

Think the 99th GDP/Capita country in the world is going to consume all the goods currently manufactured for export?

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warz

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Joined: Apr 27, 2007
Posts: 527

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Posted: Oct 12, 2008 - 09:29 PM

p1atl10 wrote:

I am not a economist and I don't want to be one. However, you are safe to call me a computer scientist who knows a lot about software and statistics. For my education background, well, the uni where I earned my degree is not as "good" as those top US ones where they produced the creators of the current global scale trouble and the war criminals like Bush. Wink

For the topic of this thread and your above post, you mentioned "US consumers still drive a large part of the Chinese economy" which means you are looking the US as a whole, while you also mentioned China as a "the 99th GDP/Capita country in the world" which is per capita based.

Would you like to explain why dual standard is deep down in your heart?