This should be an interesting exchange:
China Needs US Guarantees for Treasuries, Yu Says
by Belinda Cao and Judy Chen
Feb 11 (Bloomberg) — In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.
[top]
Looks like at least part of the plan is to push exports via lower prices.
China to Raise Export Rebate for Textiles to 15%, Xinhua Says
by Zhang Dingmin
Feb 4 (Bloomberg) — China will raise export tax rebates for textiles and garments to 15 percent from 14 percent, the Xinhua News Agency reported today, citing a meeting by the State Council.
The move was part of a plan to boost the textile industry, the official news agency said. The council also passed a plan to support the nation’s equipment manufacturing industry, it said.
[top]
Karim writes:
In my years of following G7 economies, I have never seen weaker data than we have had in Japan in recent months.
Today’s data:
[top]
China’s policy stimulus to spur car sales in year of ox
Jan 28 (Xinhua) — Due to bigger-than expected cut in fuel prices at the end of 2008 and halved car purchase taxes in effect just before the Lunar New Year, China’s auto industry can expect the year of the ox to be a bullish one for sales growth, which was in a ten-year low in 2008.
“With the recent policy changes on fuel price, car purchase tax and fees, I can save more than 8,000 yuan ($1,170) to have a car,” said Wang Yong, who just bought a new POLO sedan produced by Shanghai Volkswagen Co Ltd.
Like many other auto makers, the company offered discounts of 5,000 yuan for POLO and LAVIDA models during China’s Lunar New Year to woo the young working class. The prices for the cars are a little higher than 100,000 yuan, which is generally considered affordable for wage earners in China.
More than 3.1 million small-sized cars were sold in China last year, accounting for 61.54 percent of the total 9.35 million units of vehicles sold in the period, when the year-on-year growth slowed to 6.7 percent, the lowest in ten years, according to statistics from the China Auto Industry Association.
Ye Sheng, an auto industry analyst said that China’s auto market is far from saturated — especially for private vehicles.
He expected the government’s stimulus to boost the market sentiment this year.
Ye said despite that the global financial pinch eroded the demand for business cars and drove up the cost for auto production, China’s auto demand would continue to grow with the increase of personal wealth.
[top]
Here we go:
Think they realize exports are real costs and imports real benefits???
Obama Deems China ‘Manipulating’ Yuan, Geithner Says
by Rebecca Christie and Mark Drajem
Jan 22 (Bloomberg) — President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” Geithner said in the remarks, which were posted on the Senate Finance Committee Web site today. “The new economic team will forge an integrated strategy on how best to achieve currency realignment in the current economic environment.
[top]
Got some new players as well!
Bank of Korea to Supply $3 Billion to Local Banks
Jan 19 (Korea Times) — South Korea’s central bank said Monday it will provide $3 billion to local banks suffering from a dollar liquidity crunch in the wake of the U.S.-sparked global financial turmoil, Yonhap News reported Monday.
The Bank of Korea (BOK) said the money is part of a $30 billion currency swap agreement it signed with the U.S. Federal Reserve in late October. The BOK has tapped $13.35 billion out of the swap line so far.
The central bank plans to hold an auction Tuesday and the loans will mature in 84 days.
The move comes amid rising market jitters about South Korea’s falling foreign exchange reserves, the world’s sixth-largest.
The country’s foreign reserves, which totaled $201.22 billion as of the end of December, fell for eight consecutive months in 2008, before climbing slightly in December as a weaker U.S. dollar boosted the dollar value of assets in other currencies.
South Korea also reached new currency swap arrangements with China and Japan in late December, expanding its existing swap lines with the two countries to $30 billion each.
[top]
Seems something that maybe should involve Congress, along with the other near $600 billion outstanding draws?
Peru Seeking Currency Swap Lines With US Fed, China
by Robert Kozak
Jan 15 (Dow Jones) — Peru has begun talks with the U.S. Federal Reserve and China’s central bank with the aim of setting up currency swaps, Finance Minister Luis Valdivieso said Thursday.
These would be part of a strategy of having access to various measures to confront any economic slowdown that could affect Peru’s economy, he said at press conference with the foreign press.
[top]
| China Central Bank Attacks Paulson’s ‘Gangster Logic’ |
| China to Enact Stimulus Plan for Nine Industries, Minister Says |
| China’s Economy Faces 2009 ‘Hard Landing,’ Fitch Says |
| China not to blame for crisis: Experts |
Couldn’t agree more!
Let them export their brains out, while we sustain domestic demand with lower taxes/higher federal spending.
It’s all to our advantage!
China Central Bank Attacks Paulson’s ‘Gangster Logic’
by Li Yanping
Jan 16 (Bloomberg) — A Chinese central bank official attacked reported comments by U.S. Treasury Secretary Henry
Paulson that China’s high savings rate helped trigger the global credit crisis.
“This view is extremely ridiculous and irresponsible and it’s ‘gangster logic,'” Zhang Jianhua, the bank’s research head,
said. His comments were in an interview with the state-run Xinhua News Agency, posted on a government Web site today.
[top]
(email exchange)
>
> On Tue, Jan 13 at 5:48, Morris wrote:
>
> He believes most market participants correctly expect the first half of ’09 to be
> weak but he thinks most expect a second half recovery which says won’t
> happen.
>
Depends on the fiscal package. He could be right.
>
> To him the FED is pushing on a string.
>
He doesn’t realize it’s always pushing on strings.
>
> When he first suggested that financial losses would be $1 trillion and then
> inched up to $2 trillion no one agreed with his analysis; at this point it looks
> like the actual number for ’08 will be north of $3 trillion.
>
Only because of a total failure of government. I thought they’d do a Q3 fiscal package.
>
> He maintains the banking system is insolvent
>
Always is on the way down. As soon as things turn up it isn’t anymore.
>
> And the credit crunch remains severe. The government will have to contribute > another $1 trillion to the banking system to enable lending.
>
No, delinquencies will have to fall and systemic creditworthiness to enable lending.
>
> His estimate is that the recession will end in Dec ’09 but in 2010 growth will be
> a disappointing 1-1 1/2% so the recovery will be very tepid and not help
> valuations. At present he sees 60% of global GDP contracting and he looks for
> earnings disappointments out of capital goods and technology companies due
> to muted spending.
>
Agreed.
>
> China GDP will grow at best 5% in ’09 which is the equivalent of a hard landing
> and may be worse. Russia will decline 2-3% in ’09. Commodity prices might
> decline an additional 15-20% and we face deflation pressures.
>
Not with a real, trillion plus fiscal package.
>
> The governments response is aggressive but the markets are overestimating
> their effectiveness.
>
Don’t agree. They will be very effective if they are large enough.
>
> This is a solvency not just a liquidity crisis.
>
Usually is only a solvency crisis.
>
> His three main points are: 1) We are facing an ugly synchronized global
> contraction. 2) Forecast of all firms EPS growth is “delusional”. For ’09 the S&P
> will at best be $60 and could be $50 with a P/E in the range of 10-12X.
>
Very possible without the right fiscal package.
>
> The effect of those projections would result in the market declining 20-25% in
> the mildest case and up to 30-40% in his “worst case scenario”. 3)There
> remains room for financial shocks. We no longer face a total financial systemic
> shock but it could take another 2-3 years of increased individual household
> savings to repair balance sheets before consumption can grow.
>
Will take far less than that with the right fiscal package. Government deficit = non government savings
>
> Unemployment can hit 9 1/2% by mid 2010.
>
Maybe, it’s a lagging indicator.
>
> We have too many zombie institutions and the government has to permit
> more to fail…he did not name any.
>
There aren’t many he could name.
>
> Real estate liquidations cost US financial institutions 20 cents on the dollar so
> he prefers government loan modifications as being more efficient and a
> cheaper alternative.
>
I prefer a payroll tax holiday, which should have happened in September, to restore the ability to make mortgage payments.
>
> There remains no asset class in which to hide. These are globally synchronized
> problems. He is long term bearish the dollar which needs to decline to help
> the export sector.
>
It might decline but doesn’t have to for the purpose of helping exports.
From his previous writings he’s way out of paradigm but has been right for many of the wrong reasons.
[top]
China Dec crude imports at 3.38 mln bpd – source
by Jim Bai
Jan 12 (Reuters) — China’s imported 14.37 million tonnes of crude oil in December, or 3.38 million barrels per day, a source familiar with the data said on Monday.
The rate would be 11.6 percent higher than a year earlier, and 4 percent higher than in November 2008 on a daily basis, according to a Reuters calculation.
The imports would bring China’s annual imports to a record high of 178.89 million tonnes, or 3.58 million barrels per day, a rate 9.6 percent higher than a year earlier.
[top]