BRIC+ News & comments

[Billy T]

{footnote of post 700} ... * With England´s financial troubles, I wonder if they will (or have?) tried to buy all or part of Rolls-Royce airplane engine division, which is the world´s second largest manufacturer of turbofans and is most noted for their RB211 and Trent series, as well as their joint venture engines for the Airbus A320 and McDonnell Douglas MD-90 families. Such an offer might be accepted when England is back in recession.

China may be thinking the same and making life difficult for Rolls-Royce to get Asian engine division cheaper:

Aircraft engine maker Rolls-Royce today said it may be prosecuted over alleged "malpractice" in Indonesia and China after passing on information related to bribery concerns to Britain's fraud office.

China often plays "capitalistic hard ball" well.

 

[Billy T]

China seems to have it´s "soft landing" and it "taking off" again.

There were several economic reports out of China overnight indicating that the world’s second biggest economy is improving.

November Industrial Production: +10.1% year/year, which was above the consensus for +9.8% and October’s +9.6%. Note that November’s reading was an 8-month high. Electricity production, which is a widely watched proxy for China's economic activity, accelerated to a 7.9% rate of growth from 6.4% last month.

Fixed Asset Investment Growth: +20.7% in November year-to-date period, which was below the +20.9% expectations an in line with October’s +20.7% rate.

April Retail Sales: +14.9% on a year-over-year basis vs. consensus for +14.6% and October’s +14.5%.

CPI: +2.0% on a year-over-year basis vs. consensus for +2.1% and +1.7% in October.

PPI: -2.2% on a year-over-year basis vs. consensus for -2.0% and -2.8% in October.

I´m not sure but think PPI is inflation of whole sale prices and CPI is same as in the US.

 

[Billy T]

Chinese telecom company Huawei Technologies will invest 70 million euros (US$90.6 million) over a five-year period to establish a research and development center in Helsinki. Its first task will be to build software for smartphones and tablets based on Android and Windows Phone 8. Huawei is the world's fifth-largest smartphone vendor in terms of unit sales, but wants to enter the top three and is hoping to take advantage of Nokia's struggles to make that happen, ... "Huawei is being a little opportunistic in that it knows there will be a lot of well-qualified Nokia people in the Helsinki area who will be looking for alternative employment," Huawei said.

Huawei is world´s largest seller of communication switch networks etc. and winner of many prizes for performance and quality. - See list of 8 major ones here: http://www.sciforums.com/showthread...amp-comments&p=2975490&viewfull=1#post2975490

 

[Billy T]

Just saw on CNN that Air Asia is buying 100 air bus model A320 air planes for 9 billion dollars (at list price, but they will pay less on this big order) as the Asian demand is up 20% YoY. Most US air lines don´t make money and are merging to keep planes in the air.

 

[Billy T]

Main surprize is that Canada beat Brazil, which has China as its main trading partner, so also earns Yuan to pay the dim sum bonds, was the first to do this.

Canada's British Columbian government announced in Hong Kong last week that the province intended to sell at least 500 million yuan ($80.1) million of government debt. What is newsworthy is that these bonds will not be denominated in U.S. dollars, or Canadian dollars, but instead in China's currency, the yuan. This British Columbian bond offering will be the first time that a government outside of China has issued bonds denominated in the yuan. ...
In an interview in Hong Kong, Jim Hopkins, assistant deputy minister of finance of British Columbia was quoted as saying: "We're very confident (about) China's emergence as a global economic power. The internationalization of the yuan is a trend that's only going to grow."

Data released by Dealogic indicates that so far this year an estimated $13.97 billion of dim sum bonds have been issued outside of China by companies, up slightly from $13.47 billion last year.

In less than a decade, most governments that trade with China will issue Dim Sum bonds as they will sell at lower interest cost. Buyers then will want high interest to lend dollars (buy US bonds) as the dollar´s value will be rapidly falling, but the Yuan will continue to be growing stronger.

Just as a point of interest, the first Dim Sum bond were issued by McDonnalds, only a week or two after that was legal. Big Mac got yuan and used them to build stores in China - Very little FX risk as all is in Yuan (sold the bonds to rich Chinese, who were no longer wanting all their investment to be in real estate).

 

[Billy T]

Argentina to go bankrupt again, soon, due to government miss-management:

21Dec12: PAAS has suspended all operations at Navidad & warned the project is dead unless the Argentine government steers away from punitive taxes and royalties; PAAS could take a significant write-down if the project is ended, as Navidad's current carrying value is ~$560M. PAAS currently operates the Manantial Espejo silver mine in the Santa Cruz province, where the governor also wants to tap the industry to plug a budget gap.

To get a few desperately needed feathers now, the government is killing the goose that lays the golden eggs. A few years ago, to fight inflation, the government made export of grain crops illegal, thinking then the farmers would be forced to sell cheaper locally, but farmers burned their crops in the field as it did not pay to harvest them with high minimum wages set by government. It is all very sad - US seems to be unable to govern its economy but does better than Argentina.

 

[Michael]

Huawei is world´s largest seller of communication switch networks etc. and winner of many prizes for performance and quality. - See list of 8 major ones here: http://www.sciforums.com/showthread...amp-comments&p=2975490&viewfull=1#post2975490

I just bough a Huawei Honor which had specs similar to Samsung Galaxy S3 only a better battery and less memory. The Huawei was almost exactly 1/3 the price.

I really don't see these sorts of electronics being made in the USA. Even if the dollar was equivalent, I just don't think I'd trust Made in the USA when it comes to electronics. I'd feel safer being Japanese or if the price is right Chinese. In this case, the price was right and I'm happy with the phone.

 

[Michael]

Argentina to go bankrupt again, soon, due to government miss-management: To get a few desperately needed feathers now, the government is killing the goose that lays the golden eggs. A few years ago, to fight inflation, the government made export of grain crops illegal, thinking then the farmers would be forced to sell cheaper locally, but farmers burned their crops in the field as it did not pay to harvest them with high minimum wages set by government. It is all very sad - US seems to be unable to govern its economy but does better than Argentina.

While sad, Argentinians know the routine and will probably have been preparing for some time.

Compare with the USA where if you dare pack away a month of food and water you're labelled a "prepper". I mean, Jesus H Christ, my grandparents always had canned food in the cellar along with medicine and water - and a generator. People now think "the government" is going to take care of them to the point they watch as hurricane after hurricane leaves people homeless and walk around in a daze believing the propaganda when facts otherwise stare them right in the face.

So, while sad, Argentinians probably know what to do to look after some of their savings and themselves.

 

[Billy T]

BEIJING- China will look to improve farmers' income growth and reduce obstacles in agricultural development next year, in a bid to boost vitality in rural areas, according to an annual conference. At the Central Rural Work Conference that closed Saturday, Minister of Agriculture Han Changfu said while improving the country's basic rural system, China would focus on fostering new types of agricultural businesses. {Billy T notes: that is reference to vast agri-business crop production, but it is not politically correct to say that openly.}

This will require maintaining stable land contract relationships on the basis of household contract management while guiding the orderly transfer of farmers' land contract management rights, said Han. It was agreed by delegates at the conference that farmers' rights will be fully protected, and land transfers should not be compulsory or restricted.

Just as I noted a while back this anti-comunistic doctrine change is very important part of China´s rapid advances:

{part of post 673, this thread}... Allowing the peasants to lease their inefficient tiny family farms to giant agri-corporations was completely against Communist doctrine, but done as more efficient food production was essential with China´s limited fertile land. Part of why rural incomes are up so dramatically is that the former "pig farmers" * now have salaries from jobs in the city PLUS their farm lease rents.

Article also notes that: "... over the last 30 years, real per capita income in China has grown by more than 1,300 percent. " and during the 30 years of the US´s rapid urbanization (1870 to 1900) real, per capita, incomes rose only 100%. Currently real incomes in US have declined 7.2% since 2007. As source quoted in post 645 noted: "China produced 600,000 graduates with engineering degrees last year. The U.S.? Only 70,000." (and they seem at least as well educated as those of the US). The dragon is awaking and the world is shaking as Napoleon predicted it would. With the recent upward revision of 2Q12 US GDP growth, (from 1.5 to 1.7%) China in its current "slump" is growing slightly less than five times faster than the US is. ...

 

[Billy T]

Looks like I scooped Bloomberg again. This time by more than half a day if you just count recent post 709 or by five months if you count my earlier post 673 and Bloomberg still does not understand how transforming the introduction of large scale agri-corporations is upon the whole Chinese economy as I explained in some detail in post 673.

Here is their link: http://www.bloomberg.com/news/2012-...ral-reforms-to-boost-incomes-consumption.html

 

[Billy T]

China, the United States' biggest foreign creditor, modestly increased its holdings of US Treasury securities to $1.17 trillion in November, up $200 million from the previous month, the Treasury Department disclosed on Wednesday. ... China's holdings of US Treasurys shrank from the $1.25 trillion high reached in November 2011, continuing a pattern of decline through much of last year.

Yao Wei, a Hong Kong-based economist with French bank Societe Generale SA, said the modest increase in November is a further sign of Chinese diversification in foreign investments. "China certainly is trying and will continue to try to diversify away from US Treasurys," Yao said.

"However, there are two stages of diversification: first flow and then stock. In terms of flow, we should check the share of US Treasurys in total foreign-exchange reserves. Based on that, the trend of flow diversification started in mid-2010 and has continued ever since." *

Lou Jiwei, chairman and CEO of China Investment Corp, the country's sovereign wealth fund, said that while China will continue to buy US government debt, the return on its investment doesn't look promising. "It is a very difficult decision," he said. Lou, a former Chinese vice-minister of finance, manages CIC's $410 billion in assets. He said US Treasurys are "still a safe asset right now, but you have to pay a big price to buy such safe assets", referring to continued low interest rates in the US. "If you don't buy them, your risk-aversion capability will be affected, but if you do, then the returns won't be very good," Lou said at the Asian Financial Forum in Hong Kong this week.

Japan, which is second to China in the amount of US debt held, increased its total by $900 million, to $1.133 trillion, in November, according to the TIC report. Japan increased its US Treasury holdings by $66 billion during the past 12 months while China's total shrank by $85 billion, helping narrow the gap between the two leading US creditors.

* I´m not sure what this "flow & stock" is telling, but think China has increased its holding of ALL foreign assets with the increase of US bonds being slower than for others - hence: "the trend of flow diversification {away from US bonds} started in mid-2010 and has continued ever since."

It certainly is hard for China to sustain a net decrease (down 85 billion in last 12 months) in holding of US bonds EVERY month in months when US trade deficit with China is hitting all time highs as was the case recently (Both Nov & Dec 2012, I think.)

 

[Billy T]

Japanese Prime Minister Shinzo Abe kicked off his first overseas visit since his election victory in December in a bid, analysts said, to bolster Japan's regional influence and try to contain China. Before embarking on Wednesday on the trip, to three Southeast Asian nations, Abe said the strategic environment of the Asia-Pacific region is undergoing a "major change". Abe and his Vietnamese counterpart Nguyen Tan Dung held talks in Hanoi. Abe will also visit Thailand and Indonesia. Japanese media have carried quotes from government sources saying that the main purpose of the visit is to strengthen maritime cooperation with other countries against China.

Abe expressed concern at what he described as China's increasing maritime presence. ... "Abe's trip is political posturing and will have few, if any, benefits. Hanoi will surely consider ties with Beijing when dealing with Tokyo, and Hanoi will not miss the big picture simply because of the South China Sea issue,'' Jia said.

Ties between China and Japan ran into severe turbulence in September after Tokyo illegally "purchased" part of the Diaoyu Islands, which have belonged to China for centuries. Japan's exports to China, and China-based outsourcing businesses, have been hit and reports said some Japanese entrepreneurs are avoiding investing in China ...

US´s "pivot to Asia" seems well coordinated with Japan. - Not surprising that China feels threatened.

 

[elte]

US´s "pivot to Asia" seems well coordinated with Japan. - Not surprising that China feels threatened.

Why didn't the US continue reducing its military budget after the Cold War ended?

http://upload.wikimedia.org/wikiped...PerCapitaInflationAdjustedDefenseSpending.PNG

 

[Billy T]

Why didn't the US continue reducing its military budget after the Cold War ended?...

Ike warned of the MIC (military industrial complex) which is raking in 3.8 billion for each new "stealth destroyer" planned for service in S. China Sea, but it can be seen by any of the 10,000+ Chinese fishing boats, which report its position to 10 meter accuracy with the Chinese version of GPS!

The MIC is helping destroy the US dollar, but they don´t care so long as they "earn" ~100 million dollars per month.

 

[Billy T]

Industrial and Commercial Bank of China Ltd, the world's largest lender by market value, said on Friday it has set up a subsidiary in Sao Paulo, Brazil, Latin America's largest economy. ... "Establishment of the Brazilian subsidiary is another major breakthrough we made in South America after we entered the Peruvian and Argentinian markets. ... Zhang Hongli, a vice-president of ICBC, said, "The subsidiary will play a bigger role in facilitating bilateral trade and investment between the two countries, on the basis of more integrated business with the other two institutions on the continent."

China is Brazil's largest trade partner. According to data from Chinese customs, bilateral trade has grown by more than 40 percent since 2009. ICBC said earlier: "Close economic ties between China and Brazil provide enormous potential for financial business.

Perhaps I can open an account in Yuan, one of the world few appreciating currencies, or even a Gold account (credited with x grams of gold) as they exist in the Chinese ICBC and other Chinese banks.

 

[Workaholic]

(Taiwan) Local banks to begin RMB trade by Feb. 6 at earliest

http://www.chinapost.com.tw/taiwan/business/2013/01/31/369117/Local-banks.htm

Taiwan banks will begin offering renminbi-related products starting on Feb. 6 at the earliest, said the Central Bank of the Republic of China (Taiwan) yesterday.

According to the central bank, local banks may now sign their own renminbi clearing agreements with Bank of China's Taipei branch. Once that is done, local banks may begin their renminbi business.

The offering of renminbi products, such as savings accounts, may happen on Feb. 6 at the earliest, before the Chinese New Year break, which begins on Feb. 9, the central bank said.

The long-awaited regulatory approval was embraced by local banks, many of which have announced promotional offers to lure customers.

Quasi-state banks, such as the Bank of Taiwan, the Land Bank of Taiwan and the Taiwan Cooperative Bank, have higher thresholds for interest accruement. The Land Bank of Taiwan, for example, offers interest on savings and time-deposit accounts with minimum balances of 500 yuan and 5,000 yuan, respectively.

IIRC, Taiwanese companies will begin registering exports to China in RMB terms and receiving RMB to store in their Taiwan Bank account. Good news for two countries technically still at war.

 

[Workaholic]

This should be old news by now considering it happened in Nov 2012. I am sure BillyT probably posted this somewhere on the forums, however I was not able to find it via the search function, so here it is:

Post-US world born in Phnom Penh
http://www.atimes.com/atimes/Global_Economy/NK27Dj02.html

Apparently, most of the countries in Asia along with Australia have launched the Regional Comprehensive Economic Partnership. It will be a trade agreement among these nations which excludes the USA. Good article with some notable stats (stats may need to be checked for accuracy)

President Barack Obama attended the summit to sell a US-based Trans-Pacific Partnership excluding China. He didn't. The American led-partnership became a party to which no-one came.

Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club and leave out the United States. As 3 billion Asians become prosperous, interest fades in the prospective contribution of 300 million Americans - especially when those Americans decline to take risks on new technologies. America's great economic strength, namely its capacity to innovate, exists mainly in memory four years after the 2008 economic crisis.

To put these matters in context: the exports of Asian countries have risen more than 20% from their peak before the 2008 economic crisis, while Europe's exports have fallen by more than 20%. American exports have risen marginally (by about 4%) from their pre-2008 peak.

China's exports to Asia, meanwhile, have jumped 50% since their pre-crisis peak, while exports to the United States have risen by about 15%. At US$90 billion, Chinese exports to Asia are three times the country's exports to the United States.

After months and dire (and entirely wrong) predictions that China's economy faces a hard landing, it is evident that China will have no hard landing, nor indeed any landing at all. Domestic consumption as well as exports to Asia are both running nearly 20% ahead of last year's levels, compensating for weakness in certain export markets and the construction sector. Exports to the moribund American economy are stagnant.

Asian Summit

Chinese Exports to Asia vs USA

President Obama meeting foreign leaders to discuss the Trans-Pacific Partnership in Cambodia

 

[Billy T]

... I am sure BillyT probably posted this somewhere on the forums, however I was not able to find it via the search function, so here it is:

Post-US world born in Phnom Penh http://www.atimes.com/atimes/Global_Economy/NK27Dj02.html ...

Thanks. No I have not been a reader of www.atimes.com but will visit site now as this post does have many facts I have posted from other sources. Your link gives a good summary of fact that trading with US and EU is becoming relatively unimportant to China. For years I have been crediting Chinese leadership with understanding that US and EU are broke and can only buy Chinese goods if China lends the money or if they just print the money, decreasing the value of all already existing. - Why China is making such a big effort to grow both non-US/EU trade and its domestic market.

Typically, I have been posting individual RMB boosting facts, one-by-one, as they occurred and were reported by the likes of Bloomberg etc. Nice to see most of them all pulled together and graphically presented, but this linked article is a little light on how China has displaced the US in Africa and S. America. It is not just that US & EU are of falling importance to Asia (and China in particular) but that Trade with Africa and S. America and currency swap agreement (to avoid dollar use) are rapidly growing much more than off-setting the declining importance of US & EU and the dollar.

Thanks again. This one link gives more than a dozen of mine, so I recommend it highly to all who want to understand what has ALREADY happened to the US.

 

[Billy T]

Brazil:

{2012 was} another good year for the automotive industry with 3.6 million new cars sold in Brazil. As a consequence the Brazilian fleet of light vehicles reached 35 million cars, another year with an 8% growth,...

On a per capita basis 3.6E6 new car sales is greater than in the US (I think). At least 25 million of those cars can run on eco-friendly, cheaper and renewable alcohol from sugar cane! This repeated 8% annual growth is due in part to many in the lower economic groups moving up into the middle class and buying their first car.

median population age is just 28.9 years, making it one of the youngest median population ages in the world. As a point of comparison, the United States has a median age of 36.9 and Japan has a median age of 44.6. This helps to explain why so many people are confident about Brazil's future.

For 5 more reasons why Brazil has a bright future, see source of this last quote. (And they don´t even mention that Brazil has large fraction of world´s liquid fresh water, abundant oil & other minerals and crop lands, not yet even in production!)

 

[Billy T]

Like Brazil, Austrailia (and NZ) will escape the coming depression with at worst a mild recession as "economic colonies"* of Asia, mainly China:

Brazil´s story is the same. China, no longer the US, is the main trading partner. For example Brazil now imports more cars (especially Chery models) from China than the USA. As parts have lower import duty, Chery is building an assembly plant in Brazil - more Brazilian jobs. One of the first currency swaps was China/ Brazil so dollar not used for this trade. That´s now true for several dozen countries China trades with, including India, Russia, S.Korea and Japan

* I.e. suppliers of low value added items (food, raw materials and energy) and buyers of China´s high value added products (cars, electronic items, digital cameras, etc.) - The typical releationship like England had with India, 100+ years ago. etc.

For the Chinese view about how the RMB can become world reserve currency(and steps still needed) see: http://usa.chinadaily.com.cn/opinion/2012-07/20/content_15605603.htm
For Billy T´s guess as to how China, when ready, can displace the dollar as THE world´s reserve currency, see post 639 of the BRIC+ News ;Thread.

China is worlds largest producer & buyer of gold. When ready, China will back its bonds for central banks with gold & then enjoy paying for its imports with printed paper as US has done for ~70 years.