China Economy: News & Discussion

^^ Finally, Western investment firms are beginning to see the light. ^^

Another Gordon.Chang style anticipation......let's wait and see....

frankly speaking, if the next year Wall street collapses again and Morgan Stanley gets bankrupt for it or taken over by a chinese company, I will not be suprised at all

That's funny considering this guy's business is to sell China-A shares.

Looks like sh!t is hitting the fan in China. Banks had to go to markets to raise the capital?? Isn't it weird when banks have all the money of chinese people who have some 40% saving rate. What happened to all that money??. Must be gone in stock and real estate bubble which is going to explode sooner than later.

hmm, lets see whether DFI is ahead of the curve on China or head buried in sand to China's arrival on the Global Stage.

China Overcapacity Wreaks Global Harm, EU Group Says

By Bloomberg News

Nov. 26 (Bloomberg) -- China’s excess industrial capacity is “wreaking far-reaching damage on the global economy,” stoking trade tensions and raising the risk of bad loans, the European Union Chamber of Commerce in China said.

A 4 trillion yuan ($586 billion) stimulus package is worsening overcapacity, especially in the steel, aluminum, cement, chemical, refining and wind-power equipment industries, according to a study by the chamber and Roland Berger Strategy Consultants, released in Beijing today.

The world’s third-biggest economy has rebounded this year on stimulus spending and a $1.3 trillion credit boom. China is adding capacity when global demand is yet to recover from the financial crisis, increasing the risk of trade frictions undermining commerce and making the threat of non-performing loans within the nation “ever larger,” the EU Chamber said.

“The Chinese stimulus package has poured credit into increasingly questionable projects,” the business group said, without identifying specific ventures. “The global impact already can be felt in the form of growing trade tensions.”

U.S. President Barack Obama and Chinese President Hu Jintao pledged this month to work to ease frictions, exacerbated by U.S. duties on Chinese tires.

The chamber recommended 30 measures to cut overcapacity, including letting an undervalued yuan gradually appreciate, reducing a “subsidy” for Chinese manufacturers.

Energy Prices

It also proposed lowering energy-price subsidies, raising interest rates to reduce easy credit, increasing dividend payments by state-owned enterprises, and spending more on health care and social security to encourage consumption and cut precautionary savings.

No comment was immediately available today from China’s commerce ministry.

In September, China’s State Council approved plans to curb expansion in industries including steel, cement, glass, coke, wind turbines and shipbuilding. The government has also introduced measures to limit land supply to sectors with excess capacity. So far, the government’s efforts have been ineffective, the chamber said.

China’s excess capacity is an “international concern” as goods that can’t be sold locally may be sent to markets that shrank because of the global slump, European Union Trade Commissioner Catherine Ashton said in Beijing Sept. 9. Ashton has since been named the EU’s top diplomat.

‘Unfounded’ Criticism

Yu Yongding, a former adviser to the Chinese central bank, said yesterday in Melbourne that that the “worrying” long-term effects of China’s expansionary policies include overcapacity, bad loans, and inefficient investment.

Not everyone agrees with the EU Chamber’s assessment. Isaac Meng, a senior economist at BNP Paribas SA in Beijing, said industries including steel and cement are not big exporters and claims of damage to the global economy are “unfounded.”

“In sectors where China is a massive exporter, like electronics, there’s no overcapacity because when exports collapse factories just close,” he added.

Increasing trade tensions between China and the U.S. are the result of high unemployment in the U.S., which is creating “political pressure to reduce China’s exports,” Meng said.

China as ‘Victim’

China’s own economy is the main “victim” of excess capacity, the chamber said. Lower profits mean companies lack cash to invest in research and development and develop more valued-added goods, it said. Businesses are also forced to cut costs, contributing to slower wage growth and less consumption, the report added.

“This is a major obstacle on the government’s path to become both an innovative and sustainable economy,” the report said.

China’s lending surge this year focused mainly on expanding production at state-owned enterprises, the report said. This led growth in fixed-asset investment by manufacturing companies to jump to 50 percent by mid-year from 25 percent in January and February, the chamber said.

Companies in industries with overcapacity will struggle to repay credit, increasing the risk of a repeat of the 1990s surge in non-performing loans, the chamber said.

China’s five largest banks have submitted plans to regulators for raising money after unprecedented lending eroded their capital, according to four people with knowledge of the matter.

It’s “particularly troubling” that more than 140 billion yuan was invested in the steel industry in the first half of this year and that 58 million tons of capacity are under construction when global demand may decline 14.9 percent in 2009, the report said. The chamber also warned of “a looming deluge” of extra cement capacity in the nation.

I just think that Indians should not count on the collapse of Chinese economy..otherwise Indians would be babies who will cry for nothing left after they find China doesn't collapse as they wish.

China Losses Inevitable as Dollar Weakens, Ex-PBOC Adviser Says - Bloomberg.com

China Losses Inevitable as Dollar Weakens, Ex-PBOC Adviser Says

Nov. 26 (Bloomberg) -- China’s foreign-exchange reserves face a “triple whammy” as inflation, oversupply and the “inevitable” decline of the dollar threaten to erode the value of its holdings of U.S. Treasuries, said Yu Yongding, a former adviser to the Chinese central bank.

China needs to divert its trade and investment surpluses away from U.S. debt if it is unable to reduce them, Yu, a member of the central bank’s monetary policy committee from 2004 to 2006, said in a speech in Melbourne last night. The nation, with the world’s largest foreign-exchange reserves of $2.3 trillion, is the U.S.’s biggest creditor, holding $798.9 billion of Treasuries as of September.

“Capital losses -- let alone obtaining decent returns -- seem inevitable,” said Yu, a member of the Chinese Academy of Social Sciences. “There is no question whatsoever that the U.S. dollar will go south, which started in April 2002 and, after a short interval, restarted in March 2009.”

The dollar traded near a 14-year low against the yen as the Federal Reserve signaled it will tolerate a weaker greenback and Russia’s central bank announced plans to add Canadian dollars to its reserves to reduce its reliance on the U.S. currency. Russia, holder of the world’s third-largest foreign currency reserves, and China this year suggested the world economy would perform better with an alternative reserve currency to the greenback.

A 10 percent slide in the greenback would cut the value of China’s dollar-denominated assets by about 1.5 trillion yuan ($220 billion), exceeding Chinese central government spending under the nation’s $586 billion stimulus plan, Yu said Oct. 28 at a forum in Beijing.

The U.S. dollar has declined against all 16 of the most- traded currencies this year. It traded at $1.5125 per euro as of 9:22 a.m. in Tokyo and has weakened 8.3 percent against the currency this year.

To contact the reporter on this story: Candice Zachariahs in Sydney at [email protected]
Last Updated: November 25, 2009 20:49 EST

So all these reports from Morgan Stanley, Bloomburg, EU Chamber of Commerce are all the current Gordon Changs eh?

Wake up and smell the coffee. If all these pro-China investment groups are warning of a bubble, you can bet it is coming. Their business is to paint rosy pictures of China, and or get the CCP to stop reckless policy so they don't lose money.

guy, what is currency?

in a simple word, the value of one currency is not the exchange rate, but its purchase power .

the purpose why CHina holds so many dollars is not to earn more other currencies in exchange markets ,but to buy resources with them.

as long as the price of resource marked by dollars is not ,such as oil and ores, the dollars in the hands of CHina are still there.

China has already lost 40% + by holding dollars, that 40% less resources Chinese can buy, and the bubble is just starting to burst with the debt where there are no buyers or a market for the debt so in reality holding 33% US debt and 40%+ depreciated asset along with the slavery of having to buy more debt to continue buisness with USA does not make the Chinese smart buisnessmen, but the losers in a one way trade relationship with USA.

well,as I posted once , CHinese stock market is always just a enormous casino and is hardly connected with CHinese real economy.....

as for bubbles, there were/are e bubbles there and the bubble will be...

however, so what even if the bubbles in stock market were to be thrusted?

During 2007-2008 and 1998-2003, the stock index of Shanghai went down 50% twice+,but CHinese economy still went up and up...

1.are you ignorant about the price of oil and other resource?

when the price of oil went up to 140 dollars , the dollars in the hands of CHina devalued most....

but now.....

2.the essence of international trade is the exchange of goods.

to china , the trade is to buy recourse with industry products;

to most developing countries , the trade is to buy industry product with resouce;

to USA, the trade is to buy everything with IOU,that is dollars.

once the IOU of USA is not available any more, CHina can still buy resouce, bacause China still has industry products and developing countries still have resouce.

However, if IOU of USA is not available any more, USA would find that USA almost has nothing needed by others,except weapons and boeing planes

what is ignorance??
1 dollar in your holding now has 55 cent value or buying power.
Russia and India and many other central banks dumping the dollar
Russia switching to canadian looney
China has 40% holding in US debt no market =no value china is counting it as an asset when it is worthless since nobody in their right mind wants it
China has to continue exports to USA for which they still receive an American IOU which is esentially worthless in the international market
do not mix US IOU which are bonds and treasury notes with Dollars.
US IOU is worthless while dollars are liquid and still have value but the dilemma for China is they continue to accept the worthless IOU when nobody else in the world does, what does China know that the rest of the world dosen't??

Urban China is heavily invested in the near $10 trillion value of Chinese stock markets. A collapse of those markets would heavily effect them, especially as household debts are at all time highs. Urban is the only real economy there is in China that has any value.

When the bubble bursts, no bubble will be.

Chinese economic collapse, but hey --- you don't seem to care about losing trillions of dollars.

In 2003 China was on the verge of collapse, only thing that saved it was bundling up NPLs and shoving them under the rug to save the banques. The bear of 2008 was only because it was WAY overvalued. Billionaires pocket the money while the working stiff lost his shirt. Chinese economy goes up and up because it is pumped with trillions of loans and subsidies, they will have to take account soon.