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
Want China Times
When China’s central bank unexpectedly adjusted its yuan central parity system, it triggered the currency’s biggest decline in decades.
So, what exactly happened?
On Tuesday, the People’s Bank of China (PBOC) changed the way it calculated the yuan central parity rate, to close the gap between the rate and the actual trading rate on the money markets.
From Tuesday, the central parity rate has taken into account the previous day’s inter-bank market closing rate, supply and demand in the market and price movements of other major currencies.
Ma Jun, a central bank economist, described the change to the way the central parity rate is calculated as a “one-off” technical correction that should not be seen as the beginning of a devaluation trend.
Just what is the central parity rate?
Each trading day at 9:15am Beijing time, the central parity rates of the yuan are announced against 11 major currencies including the euro, sterling, US dollar and yen. The rates are determined by a weighted average of pre-opening prices offered by market makers. When the inter-bank FX market opens 15 minutes later, trading may only take place within 2% of the rate.
The US dollar is strong and a sharp appreciation in the real yuan rate has hit China’s exports hard. The figures for July slumped by 8%. Furthermore, the central parity rate has gradually deviated from the market rate “by a large amount and for a long duration,” according to the PBOC, which has undermined “the authority and the benchmark status” of the central parity system.
How did markets react?
On Wednesday, the yuan declined sharply for the second day in a row, leading to a heavy sell-off in regional currencies and raising concern worldwide that volatility will become a drag on global economic growth.
Asian stocks fell.
The yuan is expected to remain weak and volatile in the near term.
Is this a deliberate move to stimulate exports?
Tuesday’s move is regarded as another step towards allowing market forces to determine the value of the yuan, but is probably not enough to make much difference to either exporters or China’s trade partners.
HSBC say the move does not mean that China has begun to purposely devalue the yuan.
“In an environment of soft global recovery, the benefits of beggar-thy-neighbor competitive devaluation are neither clear nor easy to reap,” was the bank’s analysis of the situation.
How will this affect the Chinese people?
A weaker yuan makes imported products more expensive and foreign travel more costly.
The Chinese are just getting used to their new prosperity. Shopping has become very important to them, especially shopping for imported goods. Foreign travel for its own sake, but more specifically for shopping, is central to the aspirations of China’s new wealthy classes. Those who plan to study abroad, particularly at American schools, will also feel the pinch.
Is all this good or bad for the yuan’s chances of a quick inclusion in SDR?
The International Monetary Fund (IMF) has welcomed the reform, which will certainly raise the prospects for the yuan becoming part of the IMF special drawing rights (SDR) currency basket sooner rather than later.
The change does not directly affect the push for SDR inclusion, but an IMF spokesman said on Wednesday that “a more market-determined exchange rate would facilitate SDR operations in case the yuan was included in the currency basket.”
What’s the risk?
The depreciation might trigger capital flight, dealing a blow to the stability of China’s financial system. Bloomberg economists Fielding Chen and Tom Orlik reckon that a 1% depreciation against the dollar will suck US$40 billion out of China. While US$40 billion is certainly not chicken feed, with massive foreign exchange reserves, substantial bank deposits and a controlled capital account, China is well set to deal with such an eventuality.
So, what next?
The PBOC has promised more FX reforms along the lines of “market- orientation” and opening up the FX market. More foreign entities are being allowed to participate in China’s financial markets, and the onshore-offshore yuan exchange rate will gradually be unified.
Tsinghua University is the M.I.T. of China, a school I attended in the
late 1990’s, is very close to the Central government. They have been picked
to take down one of the last remaining technical advantages that the U.S. still
has over China…. that of advanced computer chips.
Tsinghua Holdings Co Ltd, a technology conglomerate backed by Tsinghua University, plans to invest at least 30 billion yuan ($4.76 billion) in developing mobile chip technology, highlighting the company’s ambition to challenge Qualcomm Inc’s dominance in the country’s chip market.
“To catch up with Qualcomm as soon as possible, we will pour 30 billion yuan, and probably even more, into the research and development of mobile chips in the next few years,” Xu Jinghong, chairman of Tsinghua Holdings, told China Daily in an interview on Tuesday.
Tsinghua Holding said a certain proportion of the money will come from government funding and its partners. In February, its unit Tsinghua Unigroup Ltd said it has received 10 billion yuan from governments to invest in chip companies.
“Frankly, compared with global competitors, we are still three-to-five years behind in technology, especially in cutting-edge 4G and 5G products,” Xu said, “but if we don’t close the technological gap, we will never win.”
The comment came after Tsinghua Unigroup Ltd filed a plan to buy US chipmaker Micron Technology Inc for $23 billion. Xu said earlier it was still in discussions for a potential deal.
“We will continue to expand our presence in the integrated circuit industry through both acquisition and self-research,” he said, adding chips will be one of the focuses of the Beijing-based company.
Roger Sheng, senior analyst at research firm Gartner Inc, said the government’s emphasis on the semiconductor sector is the biggest advantage for Tsinghua Unigroup.
“Few tech companies in China have such a large amount of capital at their disposal as Tsinghua Holdings does,” Sheng, said adding “despite its current technological weakness, it has ambitions and is acting very quickly”.
“Qualcomm’s pioneering efforts in the sector also established a successful business patten which Tsinghua can follow,” Sheng said.
Tsinghua Holdings’ intensified efforts to boost its chip-related resources come as the Chinese government seeks to reduce the country’s reliance on foreign technology, on worries that it may hurt national security.
The company evolved into the largest chip firm in China after it acquired Spreadtrum Communications Inc, the world’s third-largest mobile phone chip maker, and RDA Microelectronics Inc, the fourth-largest, in 2013.
“If we can manage to catch up with Qualcomm technologically, our innovation capability, the huge smartphone market in China as well as the labor cost, which starts rising but is still lower than that of the US, can offer us considerable commercial opportunities,” Xu said.
Earlier this month, Tsinghua Holdings announced it has made a breakthrough in chemical mechanical polishing, an important process in manufacturing chips. One of its unit successfully developed the first 12-inch polishing machine in China which could planarize semiconductor wafers to an extent that every square of a nanometer (billionths of a meter) is flat.
“The machine shows that we are the first Chinese company to have mastered the technology, and enables us to produce extremely tiny chips for smart wearable gadgets,” said Li Zhongxiang, vice-president of Tsinghua Holdings.
The Shale revolution has contributed greatly to reducing the U.S. trade deficit
by decreasing imported gasoline. The story no one is reporting, however, is that
the manufacturing goods deficit is exploding and its worse than it has ever been.
The U.S. had a total deficit of $505 billion in 2014 and that number is
sure to grow in 2015 as new monthly records have been set going over $50 billion
in a single month.
China experienced its first failed local government bond auction in four years when Liaoning province’s 10-year bond went undersubscribed in early August, Chinese business news website Caixin reports.
The northeastern province auctioned 3-year, 5-year, 7-year and 10-year bonds and two bonds that were issued for specific government projects of five and 10 years on Aug. 7.
Liaoning only managed to raise 400 million yuan (US$63.27 million) in the auction of the 10-year bonds for specific projects, falling short of the targeted 550 million yuan (US$86.99 million), Caixin said.
It was the first time a local government bond auction had failed in China since July 2011, the website added.
In addition, the yields on the bonds in the failed auction ended at 3.99%, the top end of the range set by the provincial government. Yields on other bonds auctioned off the same day were at least 20 basis points higher than the low end announced by the Liaoning government. In comparison, yields on bonds auctioned off on June 19 by Liaoning fell in the low end of the announced range, Caixin said.
According to Li Qilin, a fixed income analyst at Minsheng Securities, the undersubscription and higher yields in the Liaoning auction were likely the result of a few banks putting in bids at higher rates because they were not promised government fund deposits in return.
Local governments in China have managed to secure lower rates for their bonds by promising banks to deposit part of their funds with those banks, making the banks more willing to take part in bond auctions, Caixin said.
Fan Wei, chief fixed income analyst at Shenwan Hongyuan Securities, said, meanwhile, that investors were also concerned about Liaoning’s weak economy, which posted negative fiscal revenue growth in the first six months of this year.
Liaoning’s economy, half of which relies on state-owned enterprises, also recorded growth of only 2.6% between January and June–the weakest among 27 of China’s 31 provinces, municipalities and regions that have reported the figures, Caixin said.
The weak economy is expected to affect the return on government projects, sparking concerns that holders of bonds issued for such projects might not be repaid, Fan said.
China Bond Rating said the failed auction showed that non-market factors can no longer be counted on to influence the issuance of local government bonds and that market forces will become more important as the bond market expands.
China and Russia are looking to give Iran’s armed forces a boost with fighter jets and defense systems as part of their strategy against the United States, reports the Beijing-based Sina Military Network.
With the US encouraging its allies to gang up on China in the West Pacific and NATO pushing on Russia in the Black Sea and the Barents Sea, the report said, Beijing and Moscow are striking back by investing their efforts in the Middle East and in particular Iran, a country that continues to be a tricky issue for Washington.
As part of this strategy, China is said to be aiming to provide Iran with a new fleet of advanced fighter jets, while Russia is considering selling Iran a new missile defense system.
The Islamic Republic of Iran Air Force (IRIAF) currently has around 500 aircraft, though they comprise mostly old fighter jets like the F-4D, Su-24, F-5E, J-7M and the F1. There is also a limited number of F-14As and MiG-29s, but not enough to counterbalance the US and its allies. Iran’s air defense systems are also regarded as weak and plagued with holes.
Russia is reportedly offering Iran an upgraded version of its S-300 air defense system. The S-300 would significantly bolster Iran’s defense as it can intercept aircraft and missiles from extremely low altitudes to high altitudes and from both close and long range.
The US strongly opposed when Iran first suggested acquiring the S-300, but Moscow ignored the protests and continued promoting the system to Tehran.
China, on the other hand, is close to completing a deal to sell Iran 150 J-10 fighters, according to Sina Military, citing Russian media sources. Photos leaked online recently showed what appeared to be around a dozen or so J-10B fighters in a row that have already been painted in IRIAF colors.
The J-10, currently part of the core arsenal of the People’s Liberation Army Air Force and Navy, is an all-weather, multirole fighter highlighted by its superior air combat capabilities against both land and air targets. The domestically developed aircraft can also be equipped with PL-10, PL-11 and PL12 air-to-air missiles, YJ-62, YJ-91 and YJ-83 anti-ship cruise missiles, or LT-2, LS-6 or Type 200A bombs.
If the J-10 deal is finalized, Iran’s air combat capabilities will undergo a major overhaul, Sina Military said. While the size of the IRIAF is too small to have an advantage against the US and its allies in combat, the J-10 provides Iran with what it needs, an aircraft that can carry out a wide array of missions with precision and efficiency.
The reality is the RMB is already up over 20% against major global currencies. The
“allies” of the U.S. have already slammed their currencies to ensure jobs for their
citizens at the expense of American workers. China has moved 2% but they will hold at
By Jamie McGeever (Reuters) – The global currency war entered a new and critical phase on Tuesday as China’s surprise devaluation threatened to unleash a wave of competitive devaluations and keep monetary policy around the world looser for longer – perhaps even forcing the U.S. Federal Reserve to delay or slow its expected rate rise cycle.
‘Currency wars’, a phrase used by Brazil’s former finance minister Guido Mantega in 2010 to describe how competing countries explicitly or implicitly weaken their exchange rates to boost exports and gain trade advantage, have intensified in recent years.
As interest rates have fallen to zero and below in many developed economies, money printing has proliferated and exchange rates have become one of the few remaining levers to stimulate business activity and, in some cases, avoid deflation.
The European Central Bank’s move to quantitative easing in March, for example, was widely seen as a way for the euro zone to weaken what was seen as an over valued euro and prevent a deflationary spiral in many of its heavily indebted countries.
The Bank of Japan’s latest wave of QE was also designed to weaken the yen.
Against that backdrop, China’s tight peg to an appreciating dollar meant the yuan’s real trade-weighted exchange rate had climbed more than 10 percent over the past year, even as its economy slowed and exports slumped.
But the near-2 percent devaluation of the yuan on Tuesday suggested Beijing had had enough, and was willing to risk toppling another row of regional dominoes and opening up fresh trade tensions with the United States.
DOLLAR’S STEEP RISE
The dollar has risen 20 percent on a trade-weighted basis in just one year. This de facto tightening of monetary policy has eroded the competitiveness of U.S. exports, eaten into economic growth and diminished company profits repatriated from overseas.
“(The yuan devaluation) puts the Fed in a difficult spot. It opens the possibility that the Fed might delay (a rate increase),” said Patrick Chovanec, chief strategist at Silvercrest Asset Management in New York. “On its own, it makes it harder to raise rates.”
Over the past decade, the U.S. Congress has pressed Beijing to loosen its dollar-pegged exchange rate to allow the yuan to appreciate, arguing that trillions of dollars of currency market intervention had depressed the yuan artificially and given China an unfair trade advantage on global export markets.
That made sense with China growing 10 percent per annum and attracting hundreds of billions of dollars of global capital every year. But with growth expected to slow to its weakest in 25 years and Beijing dipping into its foreign reserves to offset the biggest outflow of capital in years, a looser exchange rate now means a weaker yuan.
“Treasury now has to choose which is more important,” said Chovanec, also Adjunct Professor at Columbia School of International Public Affairs. “Should the renminbi (yuan) float, or should Beijing actively intervene to support it and draw down its reserves?”
The People’s Bank of China described its move, which caught markets by surprise, as a “one-off depreciation” of the yuan and billed it as a free-market reform.
The yuan’s slide to a three-year low instantly rippled across the world. South Korea’s won fell 1.6 percent against the dollar, its biggest fall in 10 months, and South African central bank governor Lesetja Kganyago said his country’s exports would be less competitive.
PRESSURE ON ASIAN CURRENCIES
“If China is really moving towards greater alignment with the market, which implies greater yuan weakness, this may be a factor that adds more pressure on China-related currencies,” Barclays Asia-based strategists said in a note on Tuesday.
Their counterparts at Morgan Stanley also Asian currencies excluding the yen were likely to slide against the dollar.
Many emerging market currencies, including the Malaysian ringgit, Indonesian rupiah and Brazil’s real, had already slumped to their weakest levels against the dollar in over a decade as capital fled their slowing economies.
The big question now for emerging markets, where growth has slowed and capital flight has increased dramatically this year, is whether their officials respond to China’s move in kind.
“It was inevitable that China would join the currency war at some point. The key will be the response of other central banks … There should be further pressure on the currencies of China’s trade partners,” said Nick Lawson, managing director at Deutsche Bank in London.
Central banks dumped as much as $260 billion of foreign exchange reserves in the second quarter as emerging market central banks tried to mitigate the impact of capital fleeing their own economies.
The decline was the largest drop in global foreign exchange reserves in more than a decade, outstripping the depletion in 2008-09 when central banks frantically tried to manage the fallout from the global financial crisis.
John Kerry is an overly ambitious tool of the neocons and special interests outside
the U.S. However,he is obviously deeply embedded in the U.S. power structure. With
his giant ego and only standard IQ one would imagine he at times lets things slip
he should not be talking about. In this case for instance, trying to crow-bar the
death of the U.S. Dollar as an argument for taking actions off Iran. The U.S. needs
Iran now to clean up its mess in Iraq and fight ISSIS, it has nothing to do with
the Dollar. But the mere fact he brings it up makes one wonder, who else in the
Pentagon and American power structure is now worried about the standing of
the U.S. Dollar.
Dollar could suffer if U.S. walks away from Iran deal: Kerry
If the United States walks away from the nuclear deal struck with Iran last month in Vienna and demands that its allies comply with U.S. sanctions, the dollar may soon cease to be the world’s reserve currency, the top U.S. diplomat said on Monday.
“If we turn around and nix the deal and then tell them, you’re going to have to obey our rules and sanctions anyway, that is a recipe, very quickly …. for the American dollar to cease to be the reserve currency of the world,” U.S. Secretary of State John Kerry said at a Reuters Newsmaker event.
He added that it would be impossible for Iran, under the nuclear agreement between Iran and major powers, to create a secret program for developing atomic fuel without the United States being able to detect it.
(Reporting by Louis Charbonneau, Michelle Nichols and Warren Strobel)
Expect lower U.S. bond purchases by China, even the selling of them.
Of course, that means more Fed buying, similar to the path set by the
Bank of Japan where they buy more than 100% of government debt.
We continue to muddle along..until one day, we don’t.
States often fail on one decisive military conflict but it is not that
military conflict that brings its destruction. It is the economic,moral,
and spiritual energy behind the state that has failed.
So carrying that logic forward, expect sometime in 2017-2018 for their
to be a major military showdown in the South China Sea. China will take
down the U.S military in the region. Once that happens, the curtain of
U.S. dollar and American economic supremacy will be pulled back for what
it really is….a bunch of retail workers living off imported Mexican
labor and imported Chinese products while financiers take everything.
The lifting of the curtain of illusion will be a very painful one.
Chinese Academy of Social Sciences
The International Monetary Fund forecast in its “2015 Spillover Report” that the expected interest rate hike by the United States Federal Reserve will create adverse effects in both developed and emerging economies, which are pursuing opposing monetary policies.
A US interest rate hike and slower growth in China will create a double whammy for emerging economies, which are already experiencing weakness in the performance of their currencies and assets.
The volatility in stocks and currencies in emerging markets and plunging commodity prices are reflections of expectations that the US will raise interest rates and China is no exception, adjusting its policies, including its monetary policy, in preparation for a rate hike.
China’s rapid economic growth in the past decade has been built on an excessive expansion of credit, aggressive promotion of the property market, and the appreciation of its currency. In the past 10 years, the renminbi has risen 35% in nominal terms and 54% in real terms against the US dollar. The jump in the currency’s value along with soaring property prices fueled the growth of the Chinese economy, which in turn bolstered the country’s political status in the world.
Beijing, therefore, will likely decide its monetary policy in a strong US dollar environment based mainly on political factors, including its effort to position the renminbi as a global currency and to maintain its global status.
Although China is expected to introduce further foreign exchange reforms and expand the trading band of its currency, which may lead to greater fluctuation in renminbi rates, the general trend of the Chinese currency following the greenback and remaining strong is unlikely to change.
If the renminbi weakens against non-US currencies, while the greenback strengthens following the forecast interest rate hike, it will adversely affect China’s plan to internationalize its currency. It may also lead to a capital outflow, as foreign investors pull out funds from China and Chinese residents decrease their holdings of domestic assets.
Such developments will increase the risk of bubbles developing in China’s housing and credit markets and surrounding the local government debt bursting, resulting in negative growth and increased systemic risk in financial markets.
Based on those dangers, China should maintain a strong renminbi after the rate hike to get foreign investors to hold and use the currency and foreign governments to include assets denominated in the Chinese currency in their foreign reserves.
China’s cyber spies have accessed the private emails of “many” top Obama administration officials, according to a senior U.S. intelligence official and a top secret document obtained by NBC News, and have been doing so since at least April 2010.
The email grab — first codenamed “Dancing Panda” by U.S. officials, and then “Legion Amethyst” — was detected in April 2010, according to a top secret NSA briefing from 2014. The intrusion into personal emails was still active at the time of the briefing and, according to the senior official, is still going on.
In 2011, Google disclosed that the private gmail accounts of some U.S. officials had been compromised, but the briefing shows that private email accounts from other providers were compromised as well.
If this spill had happened at any river in China, no mater how small,
it would have made front page news…. in the United States.
As it turns out, you poison one of the largest river systems in the U.S.
and it barley gets a mention. This is a clear symptom of illusion which is
a key characteristic of any society in its end days. As it turns out, the
worst polluters weren’t corrupt factory bosses in China but the Environmental
Want China Times
A photo posted on the internet indicates that China is constructing two C28A class corvettes based on the F-22P Zulfiquar-class frigate for Algeria at Hudong-Zhonghua shipyard in Shanghai, according to the Sina Military Network based in Beijing.
China agreed to provide three C28A corvettes to Algeria under a contract signed in March 2012. Each of the ships is equipped with a 76 mm NG-16-1 gun, an eight-cell FM90 launcher for HQ-7 short-range air defense missiles, two quad launchers of C-802A anti-ship missiles, and two seven-barrel 30 mm Type 730 close-in weapons systems. The hull numbers of the two warships are 921 and 922. One of the vessels has already been fitted with the HQ-7 missile system.
The first of the three corvettes, with 920 as its hull number, was turned over to Algeria two months ago. China began the construction of the three warships, designed based on the four F-22P Zulfiquar-class frigates China produced earlier for Pakistan, in 2013. Beijing and Algiers are currently discussing plans to construct three additional C28A corvettes in Algeria.
As they are an upgraded version of the F-22P, Algeria’s C28A corvettes are more advanced and powerful than the ships built for Pakistan. Sina Military Network said Algeria’s C28As look more like the PLA Navy’s Type 054A guided-missile frigate. Each of the ships can also carry a Westland Super-Lynx Mk140 helicopter.
Want China Times
Iran will become the second overseas user of Chengdu Aircraft Industry Group’s J-10 fighter without paying a dollar to China by signing a contract to allow Beijing to exploit its largest oilfield over the next 20 years, according to our sister paper Want Daily.
China will provide the Iranian Air Force with a total number of 24 F-10 Vigorous Dragon jets, the export version of the J-10, to equip its two fighter groups. The cost of a single J-10 is estimated at US$40 million, making the value of the deal around US$1 billion. This could be bartered through permitting Beijing 20 years of exploitation rights to the Azadegan oilfield.
With a range of 2,940 kilometers, the fighters are capable of defending Iran’s entire airspace and that of the Persian Gulf.
Several Chinese military analysts believe the United States may not be happy about such a deal and China will face international pressure should Iran use the fighters in combat against US allies in the region. Others meanwhile pointed out that 24 fighters will not make a major difference to the strategic situation in the Middle East.
It has been alleged — though officially denied — that the J-10 was developed with technology provided by Israel. If this is the case, it would be somewhat ironic if that technology ends up in the hands of Israel’s primary and avowed enemy in the region.
Pakistan is the first overseas customer for the J-10. Back in 2009, China agreed to sell 36 export version of the advanced J-10B fighters known as FC-20 to Pakistan in a contract worth US$$1.4 billion. The aircraft is designed to be equipped with new weapons system such as the SD-10A Beyond Visual Range Air to Air Missile. None of the aircraft have yet been delivered to the Pakistan Air Force, however.
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 Industrial & Commercial Bank of China holds the top spot
with assets valued at $3.5 trillion. That means the bank is worth more
than the entire value of the British economy. The only non-Chinese bank
remaining in the top five is HSBC, which is headquartered in London.
It fell several spots to position No. 4 this year.
The top U.S. bank is JPMorgan Chase (JPM), which ranks sixth with $2.6
trillion in assets. SNL notes that American banks calculate the value of
their assets a bit differently from international banks because of U.S.
regulations, so it’s likely that JPMorgan would rank higher in a true
apples to apples comparison.
China’s financial sector has been struggling in recent weeks after a major
meltdown in China’s stock market. On top of that, the Chinese economy is
slowing down this year. Even its large factory sector is shrinking.
But Chinese banks have still managed to grow, at least compared to their global
peers. Two banks that fell out of the top this year were France’s BNP Paribas
(BNPQF) and Japan’s Mitsubishi UFJ Financial Group (MBFJF). Both were hit by
weakening currency in their countries — the euro and the yen have fallen
substantially against the U.S. dollar in the past year. That makes their assets
less valuable in dollar terms.
Top 10 banks according to SNL Financial:
1. Industrial & Commercial Bank of China (China)
2. China Construction Bank (China)
3. Agricultural Bank of China (China)
4. HSBC (U.K.)
5. Bank of China (China)
6. JPMorgan Chase (U.S.)
7. BNP Paribas (France)
8. Mitsubishi UFJ Financial Group (Japan)
9. Bank of American (U.S.)
10. Barclays (U.K.)
The International Monetary Fund is scheduled to formally meet later this year to review whether to include the Chinese currency in its Special Drawing Rights (SDR) basket.
The current SDR basket, which includes the US dollar, the British pound, the euro and the Japanese yen, is reviewed every five years.
Siddharth Tiwari, director of IMF’s Strategy, Policy and Review Department, said on Tuesday that “we are also proposing extending the current SDR basket by nine months until Sept 30, 2016, to avoid changes in the basket at the end of the calendar year”.
That can be costly for some SDR users to rebalance their portfolios, as markets and trading are typically thin at the beginning of the year. The current SDR basket expires at the end of 2015.
“An extension of nine months would also allow users to adjust to a potential changed basket composition should the executive board decide to include the RMB,” he said.
But Tiwari indicated that the proposed extension, which will be decided by the 24-member executive board later this month, would not prejudge the timing of conclusion or outcome of the review.
In a report released on Tuesday, the IMF said that at the time of the last review in 2010, China met the gateway export criterion, meaning the use of renminbi, or yuan, in international trade, but the RMB was not included in the SDR basket because it was not judged to be freely usable, the second selection criterion for currencies.
The report said that across a range of indicators, the RMB is now exhibiting a significant degree of international use and trading.
The report points to several areas for further work that may help inform the board’s final judgment. Those include additional work to close data gaps, refine the quantitative analysis for the freely usable assessment, and evaluate, in consultation with the membership and SDR users, whether the RMB would meet operational requirements, including as a result of continued liberalization measures that are being implemented by the authorities.
Tiwari said RMB is the only currency not currently in the SDR basket that meets the export criterion. Therefore, a key focus of the current review will be whether the RMB also meets the freely usable criterion.
Historically, decisions that have changed the valuation method have been made with a 70 percent majority.
The review is well underway, according to Tiwari. Further work still needs to be done in a number of areas to help inform the executive board’s decision. Staff continues its technical work, including on addressing data gaps and operational issues while working closely with Chinese authorities and other members before the formal board meeting.
Eswar Prasad, a professor of trade policy at Cornell University and a senior fellow at the Brookings Institution, said that the IMF’s review indicates that China has made significant progress on meeting the “freely usable” criterion for the RMB to be included in the SDR basket, but that more progress is needed.
“The decision about the RMB’s inclusion in the basket hinges on reforms such as greater exchange-rate flexibility, more investor access to onshore foreign exchange and securities markets, and availability of a wider range of government debt securities,” said Prasad, a former IMF China Division chief.