Posts Tagged: china

 

Speculative trading has caused China’s natural rubber inventory to yo-yo, depriving rubber farmers and distributors across the globe of a yardstick for making decisions on their production and procurement activities. Such trading appears to be on the decline for now, but this is only accelerating the already rapid decline in stockpiles. 

     China’s rubber inventory increased from last autumn through the beginning of this year on expectations of growing domestic demand for car tires and other rubber products. Since then, however, importers and exporters have been reducing the volume of their procurements, as they are betting the commodity will continue to trade at low levels for some time to come.

Out of balance

Rubber produced by farmers in Thailand and Malaysia and imported to China by distributors is held at warehouses designated by the Shanghai Futures Exchange before being delivered to buyers. The volume of the inventory at these warehouses is a key gauge of the supply-demand balance in China, which consumes one-third of the world’s natural rubber.

     In 2013, that inventory was around 100,000 tons in the January-September period, but it started surging in around October. The volume roughly doubled to about 200,000 tons in February. Imports from Thailand and other countries rapidly increased on hopes for a further rise in Chinese rubber consumption, said a sales representative at a Japanese rubber trading house. Ribbed Smoked Sheet (RSS) No. 3 listed on the Tokyo Commodity Exchange (Tocom) fell to the 220 yen ($2.13) level per kilogram in February, down from the 270 yen level logged at the end of last year. >> Read More

 

Having spied on RIMPAC for a week or two, it appears the Chinese imperialist rhetoric is rising once again. China can build whatever it wants on its islands in the South China Sea, Reuters reports a senior Chinese official said on Monday, rejecting proposals ahead of a key regional meeting to freeze any activity that may raise tensions in disputed waters there: “what China does or doesn’t do is up to the Chinese government. Nobody can change the government’s position.” Of course, after showing what is at stake here, it should hardly be surprising that China is pushing back again. But don’t worry, China’s Ocean Affairs minister added “trust in us Asian people to use Asian means and wisdom to resolve our own problems.”

As Reuters reports,

 

Southeast Asian foreign ministers this week hold security talks with counterparts, including those from the United States and China, in Myanmar, with escalating tensions over maritime disputes in Asia likely to be a major issue.

 

 

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Japan’s Shinzo Abe has set foot on every continent save Antarctica since returning to the prime minister’s office, most recently South America. All this economic diplomacy is meant to keep pace with China.

     Chinese President Xi Jinping stole a march on Abe in Latin America and Africa. When it comes to staking out promising markets for their nations’ corporate sectors, the two men are engaged in global one-upmanship.

     For Abe, the current pit stop of Brazil marks 47 countries visited since December 2012. After less than a year, he had toured all 10 members of the Association of Southeast Asian Nations. He has also gone boldly where no Japanese leaders had gone before — twice to Turkey, for example.

     Gaggles of corporate executives have accompanied him to Myanmar, Russia, Africa and other beckoning markets. Abe has logged one overseas trip a month, seeking to translate his government’s economic growth strategy into business opportunities in infrastructure, farming, health care, mining and other sectors. Last year in Africa, for instance, he set a goal of 3.2 trillion yen ($32 billion) in Japanese public-private investment over the coming five years. >> Read More

Is the BRICS rise over?

27 July 2014 - 11:49 am
 

On one level, this seems like a rather odd time to be asking such a question, especially when the BRICS political leaders have just agreed to set up a joint development bank to be headquartered in Shanghai. So the BRICS name is certainly here to stay, and in terms of global governance, their influence is likely to rise as a group because of this development.   Previously, the BRICS political leaders meetings had failed to agree anything specific and even once the creation of such a bank was first mooted, for the past two years, they appeared to have difficulties in agreeing where it might be located and how it should be capitalised. At this Fontaleza meeting in Brazil, they have confounded sceptics by agreeing not only both these key things, but also to have the first head of the Bank to be an Indian. What the Bank will prioritise in terms of lending and projects, we will have to wait and see, but one can think of many good ideas including shared road and rail infrastructure challenges, especially those with some common borders, projects for energy efficiency, alternative energies, clean and safe water, and of great importance to themselves, to focus on the growing resistance to antibiotics, a challenge that if a solution cannot be found will be very harmful for their futures. But if the BRICS leaders hadn’t made this breakthrough, I am sure the siren rising about the end of the BRIC economic phenomena would be even louder and it is important to try and objectively deal with this, separately from this announcement, important as that is. >> Read More

 

The PBOC has just signed a deal with the BRICS nations on a $100bn Contingent Reserve Arrangement. After finalising the deal they said it was in the best interests of China and the world to help other emerging economies. They also said that it’s is hard for China to be the exception if there is huge volatility in global financial markets.

China’s reach now goes further with this deal. It’s effectively an emergency swap agreement program like the Fed, BOJ, BOE and ECB have agreed for their respective currencies.

The breakdown is as follows;

  • China – USD 41 billion
  • Brazil – USD 18 billion
  • Russia – USD 18 billion
  • India – USD 18 billion
  • South Africa – USD 5 billion

It will be interesting to hear if Russia ever needs to access the swap lines if sanctions bite deeply.

 
  • Hard landing of Chinese economy will not happen
  • Will take China until middle of this century to become a fully modernised industrialised economy
  • Will rely on targeted measures to ensure growth
  • Believes Chinese economy will maintain medium to high growth rate in long run
  • Expects minimum growth rate of 7.5% and ceiling of CPI growth will not exceed 3.5%
  • Trade imbalance is not ideal, Chinese economy has to be deeply integrated with the world economy
  • Territorial expansion not in China’s DNA
  • Opposes use of force in other countries affairs
  • Pledges to deepen Chinese reform and level playing field
  • Will push for structural reform to attract foreign investment

Chinese premier Li speaking in London

 

Standard & Poor’s has affirmed China’s solid creditworthiness but warned against more debt-fuelled growth and urged the country to improve transparency and governance to reduce rent-seeking.

China’s AA- rating – the fourth highest possible – was confirmed by S&P today, based on its robust economic growth potential, strong sovereign balance sheet and generally healthy finances. The US rating agency predicted that China’s per capita economic growth rate would average 6.6 per cent in 2014-17, much faster than most countries at similar income levels.

However, the US rating agency noted a couple of blemishes – not least the importance of credit-financed infrastructure and real estate investments to the overall economy. At 45 per cent, China has the second-highest investment ratio of all 129 countries rated by S&P.

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China’s services sector accelerated to its fastest pace of 2014 in May, raising hopes that the world’s second largest economy is on the mend after Beijing unleashed a round of pro-growth policies.

China’s state-sponsored non-manufacturing index came in at 55.5, the highest level since November. In April the reading was 54.8.

Any level above 50 indicates growth.

The positive result follows an upbeat report on manufacturing, released Sunday, which hit a five-month high of 50.8.

The non-manufacturing data is published by The National Bureau of Statistics and Federation of Logistics and Purchasing

china-non m pmi

 

Much has been said in the past year about China’s unprecedented pollution problem. So much, in fact, that both China and Goldman Sachs have noticed, because it goes without saying that it is not easy to conduct a healthy investment climate in a city in which one needs a mask just to go outside and enjoy the lack of sun. Which is why we were amused to see the latest gimmick conceived by the Goldman reality adjustment wizards who have come up with a new metric: pollution per unit of GDP.

This is how they explain it:

As part of the efforts to reduce China’s carbon footprint, the Chinese government announced in 2011 its goal to reduce carbon intensity (CO2 emission per unit GDP) by 17% in 2015 from 2010 levels. Based on IEA’s estimate of China’s CO2 emission in 2010, we estimate that China’s 2015 carbon intensity target could be around 149g/Rmb, compared to 179g/Rmb in 2010. If China is successful in reducing its carbon intensity not only would it be more comparable with the rest of the world, but it may also serve as a strong catalyst for other countries to taper their emissions

In other words, while you may be drowning in unbearable smog (don’t believe us? just check @BeijingAir), all those unknown toxic particles you are inhaling are actually not that bad when one divides them by the epic housing bubble and ghost cities you call GDP. Visullay this looks as follows:

Taken to its absurd extreme, should China build an infinite amount of empty cities in the Gobi desert, or break enough windows and thus push its GDP to somewhere just why of positive Keynesian infinity, China’s GDP problem should melt away.

Joking aside, if one were to measure pollution in its conventional way, in terms of PM2.5 concentration per volume of air, China is really not all that bad. According to the WHO there are at least 6 countries that will need to take some pointers from Goldman on how best to fudge their GDP so their Pollution/GDP ratio also gradually drifts away to zero.

Presenting: the most polluted countries in the world.

 

Western strategists and talking heads, we are sure, will know better and continue to pitch China as the renewed engine of growth in the world and that everything will be fine… but when the country’s largest property developer says, the “golden era” for China’s property market has passed, adding that “The period in which everybody makes money out of property is gone,” perhaps it is time to listen? Of course, we are sure there will be an orderly exit (just as there was in CNY last night which crumbled to 19-month lows) but as China Vanke Co’s Yu Liang warns, “the phase where ‘whoever buys makes money’ is gone.

 China’s largest property developer warns that China’s property bubble is bursting… (via Bloomberg)

 
 

The “golden era” for China’s property market has passed, according to China Vanke Co., the nation’s biggest developer, which is shifting its focus to homes for owner occupiers rather than investors. >> Read More

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Technically Yours,
Team ASR,
Baroda, India.