HANGZHOU – Two brothers and their father were sentenced to death on Monday for cheating 15,000 investors out of over $1.1 billion in east China’s Zhejiang province. Ji Wenhua, president of the Yintai Real Estate and Investment Group, was sentenced to death for the crime
Dan Collins CMR “Gold going to $7,000”, an article today in the Chinese media is going viral and one of the most viewed articles in the financial press. The article references American Jim Rickards and his concept of comparing inflation-adjusted gold prices. Most Chinese economists
It’s not uncommon for the large Wall Street banks to combine in shorting an entire years supply of minded silver in a single day.The same goes for all commodities. Endless paper printing getting funneled to Wall Street has destroyed all real price discovery. Capitalism fails
Dan Collins CMR When I moved to China back in 1998 I was surprised to learn how highly the Chinese thought of America. Of course China was a much poorer place back then but coming from the Detroit area I couldn’t fathom where was all
Chanos is back! His short China thesis is very long in the tooth but as it goes with most ego maniacs he cannot accept failure or that fact that he might be wrong. Being wrong on an entire country where you have never visited and
You have to laugh at the whole “China will collapse crowd” on CNBC and even respected sites like Zero Hedge. Personally, I love the Zerohedge stuff. They understand the ponzi-financial fraud-money printing-welfare state economy that now envelops the West. But China is a real economy,
D.Collins CMR China’s cloud computing market is expected to be worth 37.2 billion yuan (US$6 billion) in 2017 as demand for the service grows, the Chinese-language China Securities Journal reported on Friday. Some American tech companies are watching the largest and fastest I.T. market in
Breaking News today that a Chinese vessel as rammed and sunk a Vietnamese fishing boat. All countries in the South China Sea and East China Sea are using fishing boats in a game of cat-and-mouse to challenge each other on their respective areas. This time
Stockswatch China has become a banking powerhouse. Four of the five largest banks in the world are Chinese, according to SNL Financial’s latest global bank rankings. It’s a big change from the past few years when only two Chinese banks made the top five. Beijing-based
Scared of losing the Chinese tourist dollar, France has relented to China and will allow Chinese police on the streets of Paris. More signs of the benefits of third-world immigration into the West to the point where cultural breakdown has occurred and law and order
Gold has been flowing East for a decade. When the West wakes up to the fact that their gold is gone, they will no longer have sound money with which to back a currency. The world has only been off a gold standard since 1971
From the China Daily… BEIJING – China will lower banks’ reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country’s central bank announced Saturday. The cut, the second of its kind this year, will drop the RRR for the country’s large financial
Is China tweaking its numbers on GDP? Probably. For twenty years Chinese GDP roughy came in right on the governments target. This would be an almost magical performance record considering economists in the West can predict absolutely nothing. For years, China most likely lowered GDP
Japan will learn the hard way that destroying your currency is not an viable economic strategy. Shanghai Daily JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in January as rising exports trailed surging imports of crude oil and gas due to rising
American GDP: The Fantastic Fiction of American Economic Strength By Dan Collins Is the U.S. economy still the most powerful in the world? That is what we are told as the United States does have by far the world’s largest Gross Domestic Product (GDP). In
Paul Carsten and Nishant Kumar (Reuters) – The head of hedge fund manager Man Group Plc’s China business has been taken into custody to help authorities in a probe into recent market volatility, Bloomberg reported on Monday, while separately a local financial reporter confessed on national TV to having spread false information that caused “panic and disorder”.
Both are likely to jangle nerves in the financial industry as regulators try to find out who they think was behind China’s wild stock market rollercoaster ride in the past three months.
Authorities have been investigating possible market manipulation following wild swings in the stock markets which have plunged around 40 percent since mid-June on concerns of a slowing economy and a surprise devaluation of the yuan earlier this month.
Officials are probing the financial industry amid allegations of malicious short-selling and other strategies seen as weakening confidence in the market.
Bloomberg, citing a person familiar with the matter, said Li Yifei, Man Group’s China chairwoman, was assisting with police inquiries, noting this doesn’t mean she faces charges or has done anything wrong. Reuters could not independently confirm the report.
Man Group spokeswoman Rosanna Konarzewski declined to comment on the matter, and China’s Ministry of Public Security could not immediately be reached for comment outside regular working hours.
Li’s husband, Wang Chaoyong, told Reuters he had spoken to his wife on Sunday and Monday, and she had told him she was in “highly confidential” meetings. “She said she was in meetings and it’s inconvenient for me to contact her,” he said by phone, adding he did not know where the meetings were taking place.
Separately, Chinese police are looking into the spreading of rumors about the stock market, as well as other issues such as the fatal explosions at a chemical storage facility in Tianjin.
On Monday, Wang Xiaolu, a reporter for the Caijing business magazine, read a confession on national state television, saying he spread false information in his reporting of the stock market that had caused “panic and disorder”.
“I shouldn’t have sought to make a big splash just for the sake of sensationalism,” he said.
It was not possible to verify whether Wang made his confession freely or under any coercion.
State news agency Xinhua said earlier that 197 people in total have been punished in the rumor campaign.
The investigations are likely to unsettle China’s investment community, and the report of Li’s involvement could leave foreign investors particularly on edge.
“Short run, any sane foreign businessman would have pause about doing business in China, given the environment,” said Bob Eisenbeis, vice chairman and chief monetary economist at Cumberland Advisors. “Long run, people will not overlook the size of the market and what that offers.”
Li, a former MTV Networks executive, was appointed Country Chair, China in 2011, according to a page on Man Group’s website archived by Google on Aug. 6. The page is not currently accessible.
Man Group says on its website it has $78.8 billion of assets under management.
The pageant will feature 12,000 soldiers, almost 200 of China’s latest aircraft and mobile ballistic missile launchers capable of delivering nuclear warheads to the continental U.S.
“There is a fairly crude signal to the international community that China is a modern power not to be trifled with,” said Rory Medcalf, head of the National Security College at the Australian National University in Canberra.
Xi heads a fighting force that boasts the world’s second-largest defense budget after more than doubling spending over the past decade. That expansion — especially China’s focus on developing its navy — has alarmed neighbors and fueled the region’s biggest military buildup in decades.
Geopolitical rivalries have played out on Xi’s guest list. Abe and Indian Prime Minister Narendra Modi, who both have territorial disputes with China, will skip the event. Taiwan, which China regards as a rogue province, has asked its veterans to turn down the invitation to attend.
With 7 police officers gunned down on the streets of America, with many now
being murdered execution style one must start to question if the actual
social fabric of the country is starting to unwind. With 100 million people
of working age not working, almost 50 million people on direct food assistance,
illusionary talk of a positive economy and low unemployment does no good.
Unlike their fierce competition in the O2O (online-to-offline) market, China’s leading internet giants Baidu, Tencent and Alibaba (often referred to collectively as BAT) are quietly proceeding with deployments in smart hardware devices to build a solid presence in the huge Internet of Things (IoT) market, reports Shanghai’s China Business News.
IoT allows hardware devices to be sensed and controlled remotely across existing network infrastructure, creating opportunities for more direct integration between the physical world and computer-based systems.
In this regard, smartphones will play a diminishing role in the IoT system as they become removed as the centerpiece of the smart network and more devices become “smart” in and of themselves.
Accordingly, how to achieve an integrated, smart connection among different hardware devices is a very important direction for development, and China is likely to reach home base quickly in this area of development, said Chen Lijuan, general manager of Alibaba’s Smart Living Unit.
On Aug. 25, Alibaba Smart Living and Philips jointly launched a smart speaker that can be linked via Wi-Fi to smart home products on the Alibaba smart platform and can complete a music search and change its display based on voice commands. Alibaba is also introducing “Pepper,” a robot produced in partnership with SoftBank of Japan and Foxconn Technology, which will be linked with Alibaba’s smart home products to serve as their commander.
A clear development trend in smart living is that smart home devices will be connected via Wi=Fi or Bluetooth, instead of smartphones, and adapt to real-time physical conditions. For instance, a smart lock can judge whether someone is home or not, and after someone returns home, the air conditioner, water heater, and other electrical appliances will turn on one by one according to that person’s habits, said Du Haitao, a senior product expert at Alibaba Smart Living.
As smart devices compatible with Tencent’s platforms are not necessarily usable on Alibaba’s, the BAT companies as well as traditional makers of household electrical appliances are working with the Ministry of Industry and Information to formulate uniform IoT connection standards. The standards are set to be released by the end of the year at the earliest.
Since last year, the three internet giants have accelerated their deployment in smart devices. Baidu launched the “Baidu Inside” plan for developing innovative smart devices. Tencent introduced the QQ Connect, a platform that enables hardware developers and partners from various sectors to connect with the large number of QQ users. Alibaba integrated its smart cloud computing, Taobao’s crowdfunding platform and Tmall’s electrical online shopping into a Smart Living division. Such other internet enterprises as JD.com, Xiaomi and Qihoo 360 Technology are also jumping on the bandwagon of developing smart hardware devices.
Over the past year, the three giants have followed different paths of development. Tencent has applied its entry advantage in linking smart devices with its popular QQ and WeChat platforms; Baidu has developed Baidu Wi-Fi equipment, routers, smart TVs and unmanned bicycles developed on its own or in cooperation with third parties; while Alibaba has cooperated with more than 100 hardware makers of autos, healthcare and security products, including electrical appliance makers Hisense, Kelon and Galanz.
Traditional makers of household appliances are also stepping up the development of smart devices. Haier Group has just signed a strategic cooperation pact with Huawei, aiming to combine Huawei’s telecommunications advantage and its own hardware prowess.
As the huge IoT market cannot be controlled by any single enterprise, it is a sensible choice for traditional manufacturers to cooperate with internet enterprises. Haier, again, has also cooperated with Alibaba in sharing a backend database and cloud computing analysis, among others.
For the first time in China’s modern history, the national legislature has introduced a “debt ceiling” for local government debt, setting it at 16 trillion yuan (more than $2.5 trillion) for this year.
This decision was made on Saturday when the National People’s Congress Standing Committee approved a motion proposed by the State Council, or Cabinet.
Observers say this may be the first move by the central government to set a quota system for the debt that is allowed for the governments of all provinces, municipalities and autonomous regions.
China’s new Budget Law, which took effect this year, also allows local governments to raise part of their funds for development purposes through the issuance of local bonds. But the size of such issuances is subject to NPC approval.
According to Lou Jiwei, the minister of finance, the NPC’s decision makes clear that local debts can never exceed 100 percent of a local economy’s wealth-generating capability－as measured by their fiscal revenue.
It also clarifies that a high-risk warning is warranted once local debts range between 80 percent and 120 percent of local fiscal revenues. Lou estimated that with a total debt of 16 trillion yuan, China’s local debt ratio would hover around 86 percent, or a high-risk level, at the end of the year.
But Bai Jingming, a researcher at the Ministry of Finance, said such a degree of risk is still largely manageable, although some local governments would inevitably face more difficulties than others.
Liu Jianwen, a professor of finance and law at Peking University, said managing the recent runaway local government debt is one important task for China’s ongoing economic transition. The quota system will force local governments to become more responsible for their spending and fundraising activities.
Of the 16 trillion yuan local debt, 15.4 trillion yuan is debts that local governments will have to take full responsibility for repaying, according to a survey at the end of last year by the National Development and Reform Commission, the People’s Bank of China and the China Banking Regulatory Commission.
In comparison with a survey in late June 2013, the figure has increased by more than 40 percent.
Wang Dehua, an economist at the Chinese Academy of Social Sciences, said such a high increase in local debts is due to the introduction of a large number of major public infrastructure projects by local governments.
As for housing development borrowing by companies with ties to local officials, the State Council has already made it clear that local governments are responsible for their debts.
After blowing past the U.S. in most economic categories (other than number of
welfare receipts, prisoners, wars started, and police officers being executed
by citizens on the street) now China is beating the U.S. in of all things….
track & field.
China finished second to take silver behind Jamaica in the World 4x100m relay
in Beijing last week.
Want China Times
PLA tests missile to protest Japan’s second helicopter destroyer
In protest over the launch of Japan’s second Izumo-class helicopter destroyer, China test-launched its Sunburn supersonic anti-ship missile during a naval exercise held in the disputed East China Sea on Aug. 27, according to the state-run China News Service.
More than 100 warships, including the Russian-built Sovremennyy-class destroyer from the PLA’s North, South and East Sea fleets were mobilized for the war game. In addition, PLA Air Force aircraft taking part in the exercise provided the warships an opportunity to coordinate with aircraft and submarines in an environment close to real combat.
It is the third-largest exercise the PLA Navy has launched within the last two months, according to state news agency Xinhua. Some of the hardware mobilized for the exercises are likely to be demonstrated to the public during the military parade in Beijing on Sept. 3 to celebrate the 70th anniversary of Victory over Japan Day.
Beijing decided to launch the exercise out of anger over the launch of Japan’s second Izumo-class helicopter destroyer on Aug. 27, according to the China News Service.
Designed by Russia to sink aircraft carriers, the Sunburn supersonic anti-ship missile has an attacking range of 120 kilometers. Fuzhou, the PLA NAvy’s second Sovremennyy-class destroyer, was responsible for the test-launch of the missile during the drill.
China has a total of four Sovremennyy-class destroyers introduced from Russia, said the report.
Chinese Sprinter Su Bingtian just ran himself into the multimillionaire
club in China by being the first Asian to run under 10 seconds in the
100m finishing 4th in the finals in Beijing. Sponsors will now be
beating down the door. Its not at the same level as Liu Xiangs Gold
metal in the 100m hurdles in 2008 but its not far behind and he has
years left to improve.
Want China Times
China’s central bank has dumped more than US$100 billion in US-dollar reserve holdings over the past two weeks to stabilize the value of the renminbi and could liquidate a lot more over the next four to five months, according to a report from US-based financial blog Zero Hedge.
On Aug. 11, the People’s Bank of China devalued the renminbi and in the ensuing three days the value of the currency dropped 4% against the dollar. Shortly after this, however, the renminbi stabilized because the bank began intervening directly in the foreign exchange market by purging foreign reserves of US dollars at a rapid pace.
As noted in analysis by French multinational banking services firm Societe Generale, the People’s Bank slashed its reserve requirement ratio (RRR) for all banks by 50 basis points on Monday and offered additional reductions of 300 bp for leasing companies and 50 bp for rural banks. When these measures take effect on Sept. 6, the total amount of liquidity injected will be close to 700 billion yuan (US$106 billion).
Analysts were already stunned to discover that China had sold some US$107 billion in US paper in the first half of the year, and now China has sold nearly just as much over the last two weeks alone, the Zero Hedge report said.
China’s actions will place a significant amount of pressure on the plans of the US Treasury to raise interest rates, given that the more the renminbi devalues against the US dollar as a result of rate hikes the more likely the People’s Bank will increase the scale of its foreign reserve dump to stabilize the renminbi.
According to Societe Generale, as China’s foreign reserves are still at 134% the recommended level, the People’s Bank still has around US$900 billion it can dump for currency intervention before it affects the country’s external position.
If the current pace of liquidity outflows continue and require US$100 billion in reserves to be dumped every two weeks to stabilize the renminbi, then based on its estimated reserves China would be able to continue interfering in the foreign exchange market for another 18 weeks, Zero Hedge said, adding that it remains to be seen whether the US Federal Reserve will do anything to stop the biggest offshore holder of US Treasurys from liquidating its entire inventory
Concerns over a possible U.S. rate rise by the Federal Reserve may have sparked a global stock market rout rather than the devaluation of China’s yuan currency, a senior Chinese central bank official told Reuters on Thursday.
Yao Yudong, head of the bank’s Research Institute of Finance and Banking, said the U.S. central bank should delay any rate hike to give fragile emerging market economies time to prepare.
He said Beijing’s decision to let the yuan fall in value against the dollar should not make it a scapegoat for the sell-off.
“China’s exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming U.S. Federal Reserve monetary policy move,” Yao said.
“We were wronged.”
BEIJING (Reuters) – China is showing “rare courage” to reform in the face of economic troubles, the country’s top newspaper said, deriding foreign media for fanning fears that recent stock market turmoil could herald the end of China’s model of economic governance.
Plunging stock markets have exacerbated worries about China’s faltering economy, with share prices dropping 25 percent in little more than a week before the central bank cut interest rates and further loosened bank lending on Tuesday.
The ruling Communist Party’s official People’s Daily slammed foreign doomsayers for suggesting the country’s economic system would be shaken to its core in a commentary published on Thursday under the pen name “Zhong Sheng”, meaning “Voice of China”. “Some people around the world have rather impatiently spoken of the so-called end of the China model, or of a hidden financial crisis in China,” The People’s Daily said. “Of course, Chinese people are already unsurprised by the selective thinking in Western public opinion,” the paper said, noting that commentators on the U.S. economy were far less alarmist when the dot-com bubble burst in the early 2000s.
“China is devoting rarely seen courage to comprehensively deepen reform. The world also needs to reform its perspectives on China,” the paper said. The central bank’s latest moves have yet to convince investors of Beijing’s ability to jolt the economy out of its slowdown, with some economists estimating the current level of growth may be half of the government’s 7 percent target.
Chinese state media English-language commentaries, which typically target foreign audiences, also lashed out at Western alarmism over China’s economy.
The Global Times, a popular and influential tabloid published by the People’s Daily, said in an editorial that any notion that the slowdown would impair the party’s legitimacy was a “delusion”.
“The stock market’s sharp fall is like a fever, but foreign media describes it as a cancer. If so, the market plunge seven years ago would have ended the China model,” it said.
The official Xinhua news agency in its own English-language commentary on Wednesday said that “market jitters will not last long” and China optimists need more time to prove they are right.
“Only those investors who have grasped an objective picture of the Chinese economy can weather the turmoil and reap their gains,” Xinhua said.
But a commentary circulated widely last week in state media, including by China Central Television and the Guangming Daily, a party paper aimed at intellectuals, pointed to domestic resistance over the government’s handling of the economy and broader reforms.
People must be more conscious that President Xi Jinping’s push to reform will inevitably touch upon deep issues in China’s politics, economy, society, military and diplomacy, and deals with the basic question of making “the lifeblood of this enormous economy” healthier, the commentary said.
“The enormity of the difficulty” and the fierceness and complexity of opposition to reform, “possibly exceeds people’s imagination,” it said.
(Reporting by Michael Martina and Ben Blanchard; Editing by Simon Cameron-Moore)
The benchmark Shanghai Composite Index sank 7.6 percent to close at 2,964.97, falling below the 3,000 level for the first time in eight months. The gauge has lost 22 percent over the past four days.
More than 1,000 stocks slid by the daily limit of 10 percent on Tuesday, including China National Petroleum Corp and Sinopec Group, the country’s State-owned oil giants and heavily-weighted blue-chips of the Shanghai gauge.
Banks including CITIC Bank, Bank of Communications, Everbright Bank, Ningbo Bank and Nanjing Bank dived by more than 9.5 percent.
The ChiNext Index, tracking China’s NASDAQ-style board of growth enterprises, plummeted 7.5 percent to 1,990.71 on Tuesday.
Turnover continued a downward trend, with 358.7 billion yuan of stocks changing hands at the Shanghai exchange. The extending balance of margin trading dropped for a fifth day by 6 percent as of Monday, latest data by the bourse showed.
The Chinese government failed to step in and protect the 3,500 benchmark
on the Shanghai composite on Monday. The markets remain way to volatile but
in retrospect are still up considerably over the last couple of years and only
just went negative for the year. The smart money in China evacuated as the
the index was pumped up to incredible levels by the mom and pop investors.
The little guys late to the rally have now had their faces ripped off.
We could go lower even testing 2,000-2,500 levels which is where the rally
started back in the middle of 2014.
However, instead of seeing the end of the popping of a stock bubble, the West
has extrapolated it as an economic crash. Once again, they confuse markets with
real economies. Is the Chinese economy booming? No, not at all. But is it
collapsing.. once again, not at all.
The Chinese economy is a two speed highway, the high tech firms and modern
private companies are booming and the state owned sector stuck in old industries
and plagued by overcapacity and in for consolidation. It’s a much needed creative
destruction of governments vanity projects and malinvetsment, in this case
infrastructure and steel making capacity.
As bad as the economy may or may get in Asia, at least they are not living
Want China Times
The People’s Liberation Army has sent troops to China’s border with North Korea as escalating tensions on the Korean peninsula have pushed North and South to the brink of possible war.
The Hong Kong-based Oriental Daily reported Saturday that internet users have been uploading photos of what appear to be PLA armored vehicles and tanks passing through the streets of Yanji, the seat of the Yanbian Korean autonomous prefecture in eastern Jilin province. The city, considered a key transport and trade hub between China and the DPRK, is less than 30 kilometers from the 1,400-kilometer border.
The military deployment is believed to reflect how seriously Beijing considers the the current standoff between North and South Korea. Delegates from Pyongyang and Seoul have agreed to continue talks at 3 pm Sunday local time after the first high-level dialogue between the two sides in nearly a year was adjourned following a marathon 10-hour session.
The talks began around 6:30 pm on Saturday shortly after the passing of Pyongyang’s deadline for Seoul to cease broadcasting anti-DPRK propaganda across the demilitarized zone through loudspeakers. Pyongyang had declared that its frontline troops were prepared to go to war if Seoul did not back down and an unnamed official from South Korea’s defense ministry has reportedly said that his government will only discontinue the broadcasts if there is an acceptable outcome from the talks.
The loudspeaker broadcasts began from the South after a land mine attack — for which the South has blamed the North — injured two ROK soldiers. On Thursday, the South Korean military fired dozens of artillery rounds across the border in response to North Korean artillery strikes, in turn supposedly in response to the South’s broadcasts. As usual, Pyongyang has denied being behind both the land mine attack and the artillery strikes while keeping up its standard “sea of fire” rhetoric.
The standoff also comes amid annual military exercises between the US and South Korea, which the North claims is part of a preparation for invasion.
On Aug. 21, Chinese foreign ministry spokesperson Hua Chunying said that China is following “the situation of the Korean peninsula very closely and is deeply concerned about what has happened recently.”
“China staunchly safeguards regional peace and stability and opposes any action that may escalate tension. We urge relevant parties to remain calm and restrained, properly deal with the current situation through contact and dialogue, and stop doing anything that may make the tension even worse,” Hua said, adding that the Chinese side is “willing to work with relevant parties to jointly ensure peace and stability of the Korean peninsula.”
China’s Global Times tabloid has tried to downplay the risk of military conflict, stating in an editorial: “The South and North are not willing to start a full-scale war, and no one is instigating a war. As a result, the new round of friction may not be explosive and can be dissolved by previous experiences. After all, escalation will do no good to either side.”
The Korean Central News Agency, North Korea’s state news agency, has hit back at China’s calls for restraint, saying, “We have exercised our self-restraint for decades. Now no one’s talk about self-restraint is helpful to putting the situation under control.”
China is about to take over a military base from the United States in the small East African nation of Djibouti, according to the website of China’s nationalistic tabloid the Global Times.
Djibouti reportedly ordered the US to vacate the Obock military base so that it can be turned over the People’s Liberation Army. According to US-based magazine CounterPunch, the announcement was made in May, a day after US secretary of state John Kerry visited the country.
The move is said to be “deeply worrying” for Washington as it comes amid a wave of Chinese investment in Djibouti that includes a US$3 billion rail project to connect the country with the capital of neighboring Ethiopi, Addis Ababa, and US$400 million in investments to modernize the country’s undersized port.
The deals have had Djibouti’s president Ismail Omar Guelleh “openly talking about the importance of his new friends from Asia,” the CounterPunch article said.
Djibouti is currently home to Camp Lemmonnier, the largest permanent US military installation in Africa, which houses 4,000 troops and a fleet of drones. The US Defense Department pays Djibouti nearly US$63 million per year for use of the base.
Though the US is losing only a secondary military installation in Obock, Washington is likely more concerned with what the base will provide China, which is strategic positioning in the Horn of Africa at a key entry point from the Indian Ocean to the Red Sea and a gateway to the Suez Canal.
South Korea detected a projectile, assumed to be a small rocket, that was
fired toward the western province of Gyeonggi. The South Korean military
responded by firing a few dozen shells at the area from which the North
Korean projectile was fired, the official said.
The North then came out with this announcement broadcast below
(Very very Loosely translated…)
Like a moth to the flame of nuclear justice, the Southern puppets
of Western imperialism dared try to scare us again! Once again…we
have overcome the enemy with sophisticated technology…something we
call “The worldwide web”. It is a classified North Korean
invention that connects computers and was invented by the Dear Leader Kim Jeong
Un. The starving Americans continue to try an assault us in tandem
with the Japanese devils. Through our superior technology of “World wide web”
and “Netscape Browser” , we are monitoring all their communications.
Long Live the North! Long Live the Dear Leader…the rest of you, now back to
collecting mushrooms to find something to eat.
The Chinese Yuan has now become the Sun with all Asian currencies
orbiting around it. This means further devaluation of the RMB is
fruitless as the PBOC will likely conclude. As we live out the
last days of U.S. Dollar hegemony, these days will go into the history
books and something that “no one saw coming.”
HANOI, Vietnam (AP) — Vietnam allowed its currency to weaken by at least
1 percent Wednesday following the devaluation of the Chinese yuan and
the expectation of a possible U.S interest rate hike.
The central bank-set reference rate weakened to 21,890 dong to the U.S.
dollar and the trading band within which the dong can be traded was
widened to 3 percent from 2 percent, the State Bank of Vietnam said.
Former CEO at An Zhong (AZ) Investment Management Shanghai
Four More Exogenous Events for China
When the PBOC announced a change in methodology for calculating the midpoint reference rate and the currency immediately depreciated 1.9% the press responded as if Buster Douglas defeated Mike Tyson. Long time China investors fully understand that 10 years down the road may actually be easier to forecast than 10 weeks and with that in mind, I offer 4 events that might, but shouldn’t, surprise any China watcher:
The removal of daily and annual limits on RMB conversion
Hong Kong scrapped limits on so-called CNH (RMB in HK) conversion last year and despite the fear/reality of hot money flowing out of the mainland, SAFE must comply with the PBOC’s desire for an international currency. Getting in and out of the currency is the single largest barrier to IMF consideration. Outside of China the RMB is effectively fully convertible but there remains daily and annual conversion limits for locals and foreigners.
Eliminate Foreign Investment Programs
In conjunction with daily and annual limits on RMB conversion, there must be bigger pipes and operational efficiency to investing in the equity and fixed income markets in China. The total QFII+RQFII+Stock Connect is only about $180 billion USD equivalent which represents less than 1.8% of the China equity market. As a comparison, foreign ownership of Japanese stocks is 30%. Of course some of this disconnect is demand related, but China will move to eliminate the barriers to investment. Recall that China also has the third largest fixed income market and there is still very little pure access. Without easy access and increased transparency, the international community will continue to stay on the sidelines.
RRR Rate Cuts
A good primer on how the PBOC uses the RRR is helpful in understanding why further rate cuts are on the way. Simply stated, capital outflow will continue and when that happens, the PBOC sells reserves and cuts the RRR to offset. Of course there are other tools, such as open market operations, but China has traditionally eschewed a target for interbank rates and chooses to moderate deposits and the RRR.
Swap Treasuries for Gold
Over the last 5 quarters, China has sold more than $520 billion of foreign exchange and forecast to sell more than $40 billion a month. This is partially to combat the $800 billion in capital flight from the country over a similar period, but also for a more strategic reason. China still owns 3.5 trillion, but curiously, China’s been running a large and soon to be larger trade deficit (given the currency depreciation) which would usually equate to an increase in foreign exchange (first half of 2015 $260 billion versus $100 billion last year). Capital flight is real and a combination of tools will be implemented. So why gold? Because a RMB denominated gold market is on the way and even if a small portion of gold is traded in RMB, it would represent a watershed shift in reserve currency status.
These are macro events in China that coincide with long stated plans of the government. In order to achieve long term objectives, there will periods of dislocation. Only investors willing to handle short term volatility for long term stability need apply.
Want China Times
China’s five most dismissed weapons developed against the United States and its allies actually pose serious threats to the contest for control over the Western Pacific, according to a piece in National Interest magazine.
Due to the US military’s heavy reliance on the electromagnetic spectrum and network of military satellites, China has devoted a huge amount of resources towards the development of weapons for space warfare. Of those, the first undercover weapon is the Tiangong space station. After the space station becomes operational in 2022, it could be fitted with anti-satellite weapons developed to blind US military forces and cut off their intelligence.
The second unnoticed weapon China has is its manufacturing base, according to the article. China, still holding onto the title of the “world’s factory,” produces everything from barbeque grills to iPhones. In the case of the iPhone, manufacturers have set aside 100 production lines manned by 200,000 workers, churning out an astounding 540,000 iPhones a day by late 2014. With this kind of capability, China would be well able to mass produce weapons systems.
College graduates are the third unrecognized potential weapon the United States should fear, said the report. China expects to have 195 million college graduates in the labor force by the year 2020. The People’s Liberation Army provides the perfect opportunity for graduates who are not able to get white-collar jobs, as the military begins to rely more on advanced technology, the article said. With the involvement of college graduates, the United States and its allies are likely to face a more technically savvy and efficient PLA on the battlefield in the future, said the report.
The PLA is likely to mobilize sea mines as its fourth weapon against the United States in the event of future conflict. During the Gulf War in 1991, one US cruiser and one amphibious helicopter ship were damaged by naval mines planted by Iraqi forces. Twenty-five years later, the US Navy still relies on the same aging minesweepers and helicopters it used in 1991, the piece said.
The PLA is estimated to have between 50,000 to 100,000 naval mines in its inventory. In a future conflict, they will likely be used to carry out maritime area denial operations against the US Navy.
As for the last forgotten weapon, the US must pay more attention to China’s special forces, about whom very little is known to the public.
Dennis Blasko, an expert on China’s special forces, said the PLA maintains eight special forces brigades and three groups or units. The PLA airborne corps under the air force and also has a special forces unit supporting the three airborne divisions, while the navy’s South Sea Fleet has a commando regiment. Even the Second Artillery Corps, China’s strategic missile force, operates a special forces unit.
China is believed to be developing a new DF-5B liquid-fuel missile that will be able to strike any target on the planet, reports our Chinese-language sister paper Want Daily.
The People’s Liberation Army’s current or in-development arsenal of long-range strategic intercontinental missiles (ICBMs) are led by the DF-31A, the DF-41 and the JL-2, all of which feature solid-fuel rockets.
The DF-31A, with a range of 10,000 kilometers, can reach the west coast of the United States. The DF-41 has a longer operational range of 12,000-15,000 kilometers and can carry three or more warheads, though the missile is still in the testing phase. The JL-2, which has an estimated operation of up to 8,000 km, can only be fired from a submarine at sea.
US and Japanese media report that China may have recently tested two ICMBs, the DF-41 and and the DF-5A. Military commentator Gao Feng believes that the firing of the DF-41 was part of regular testing, though the DF-5A test was likely part of basic research to develop a new liquid-fuel missile based on the DF-5 or the DF-5A.
According to Gao, though the DF-31A and the DF-41 are either in service already or nearing that stage, China should still have an interest in liquid-fuel missiles because of their significantly longer distances and higher load capacities. These advantages may be why Russia has recently announced that it is developing a new liquid-fuel missile based on its SS-18 ICBM.
Gao’s suggestion is also consistent with previous analysis of test images from Chinese media that China could be developing a brand new DF-5B liquid-propellant rocket. Compared to the DF-5A, the DF-5B will have an improved engine and superior precision and warheads. Reports indicate that the range will also be boosted to 13,000 km and 15,000 km, enabling the missile to cover the entire planet, while the load capacity will be upgraded to carry from four to six warheads.