CHINA

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CHINA

Post by Enigma » Tue Nov 25, 2008 9:05 am

China and the middle east are pretty upset with the USA right about now ... but what goes around comes around.

http://www.businessspectator.com.au/bs. ... ent&src=mp

A warning from President Hu

It's difficult to guess what Prime Minister Rudd and Chinese President Hu Jintao are saying when they have their quiet chats in Mandarin. But the end result of these conversations is an incredible alignment of the international polices of the two countries. Nowhere was that clearer than at APEC. But APEC also sowed the seed of divisions between China and the US that leave us somewhere in the middle.

President Hu not only supported the Doha round of trade talks but canvassed the idea of an Asia Pacific free trade zone. That’s exactly what Rudd is saying. But it's not what President-elect Obama is saying.

Hu said China attaches great importance to climate change and hoped that all parties would work together to take effective actions in this regard in line with the Bali roadmap agreed last year.

That underlines why Rudd is going to drive a carbon trading scheme in Australia. China is vital for global carbon constraint. The United States may tie its carbon constraint to China and require action from China to match the words. That may be difficult to achieve.

When it comes to the financial disaster, the state-owned China Daily reports Hu as saying: “All countries should take prompt and effective measures, enhance macro-economic policy coordination, improve information sharing, help each other as much as possible, and employ all necessary fiscal and monetary means to stop the spread and development of the financial crisis, bring stability to global financial markets, stimulate economic growth, minimise the damage of the financial crisis on the real economy and avoid a global economic recession [my emphasis]."

I read that as saying that China will back the US to the hilt in its rescue packages and is going to pull out all stops to get the China economy back onto a high growth path. To have China taking all steps to avoid “a global economic recession” is very good news for our long term commodity prices. Again Australia and China are on the same page.

But for the US comes the sting in the tail and a warning that there are problems ahead once the crisis is over. China, Japan and the Middle East will have to fund the Americans' longer term spending spree because there are no plans to raise US taxes.

Without mentioning the US, President Hu wants better finance regulation which means that China as a key US financier may want a say in just how the system is improved.

Then comes a chilling Hu statement: “From a long-term perspective, it is necessary to change those models of economic growth that are not sustainable and to address the underlying problems in member economies.”

Hu does not name the US but there can be no doubt that’s who he is talking about. Once the crisis is over, China is going to take a much tougher line with the US and it is here that Australia will be tested because the US will not take kindly to being told that they have to cut their spending and/or raise taxes because their growth in not sustainable. And let's not forget that we rely on the US for our defence.

There are going to many more conversations in Mandarin, but those conversations won’t avoid a fall in the US dollar. We saw early signs of that last night.
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Post by Gavin Shaw » Tue Nov 25, 2008 9:11 am

But if China is not careful, anything they say or do could come back to bite them in the tail as well.

It does work both ways and if anyone thinks China is immune to the problems then they are in fairyland...
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Post by Enigma » Wed Nov 26, 2008 10:49 am

Yes they certainly do, but they also have $2 trillion (savings) ways of fighting their problems...
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Post by Gavin Shaw » Wed Nov 26, 2008 1:58 pm

Money can't solve everything.

But I have to ask. It sounds like China is willing to 'resuce' the US because it is good for China's economy (well at the moment it is), but may want a say in how the US spends money later. If the situation was reversed how would the Chinese react to the US wanting to have a say in how China was spend its money?
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Post by MzSnowleopard » Wed Nov 26, 2008 11:17 pm

cut back in spending with buying less from foreign businesses and other nations? or cut back on foreign aid?
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Post by Gavin Shaw » Wed Nov 26, 2008 11:29 pm

MzSnowleopard wrote:cut back in spending with buying less from foreign businesses and other nations? or cut back on foreign aid?
How about both? And I wouldn't blame the US for doing so. I would like Aus to stop buying 90% of its goods from overseas and produce more local (it would boost our economy massively and we could sell it back to them and charge as much as possible like they do) and to stop giving aid money to governments of countries where a large amount of it disappears into back pockets.

I have no problem helping out others but when I hear day after day some governments from "developing" nations demanding that the developed world pay them for something (and it is always something different) I get sick of it. Can't they pay for some of the things? No one paid us to develop our countries.
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Post by Sarge_II » Thu Nov 27, 2008 2:37 am

During our Revolutionary War, the USA received military support from France. Might there have been financial aid during or after, as well?
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Post by MzSnowleopard » Thu Nov 27, 2008 5:04 am

Gavin- this is why I support isolationism. We spend far too much on items made overseas. And the government gives away far too much in foreign aid. In return those countries only spit on us.

I understand that complete cut off would never happen. So perhaps cutting back on the international aid would be better- instead of raising taxes.

Another observation- I hear people in my area complaining about goods and foods being imported. And yet these people are buying oranges from Africa and leaving the store in cars from Japan.

Iowa is a farming state- why the grocers are buying from over seas makes no sense to me.

Ok- importing citrus I can undstand - BUT Florida and California have good quality produce and would most likely be fresher when they reach the shelves.

oranges from Africa.... sigh ::: shakes her head :::
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Post by Enigma » Thu Nov 27, 2008 9:50 am

Gavin Shaw wrote:
MzSnowleopard wrote:cut back in spending with buying less from foreign businesses and other nations? or cut back on foreign aid?
How about both? And I wouldn't blame the US for doing so. I would like Aus to stop buying 90% of its goods from overseas and produce more local (it would boost our economy massively and we could sell it back to them and charge as much as possible like they do) and to stop giving aid money to governments of countries where a large amount of it disappears into back pockets.

I have no problem helping out others but when I hear day after day some governments from "developing" nations demanding that the developed world pay them for something (and it is always something different) I get sick of it. Can't they pay for some of the things? No one paid us to develop our countries.
Manufacturing can be tricky because we like to pay our people more than $1 / hour (unlike China and India). We could take a pay cut but that would mean a lower standard of living.

One way to look at it is that China has become a slave to the West by producing all the nice shiny products we want and we repay them with an IOU. The money we owe them is becoming less valuable by the day yet they still do it because 10-20 million unemployed people is not going to be very pretty (for China).

A big factor in this though is currency value. The Chinese have not allow their currency to appreciate (making their exports more expensive) and hence reaching equilibrium - people stop buying them and local manufacturing gets a chance.

There is no such thing as a 'free market'.
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Post by Gavin Shaw » Thu Nov 27, 2008 10:25 am

I know the free market doesn't exist. Just look at the US - Aus 'Free' Trade Agreement. We got screwed on that. And now Rudd wants to get a free trade agreement with China. And China wants a lot of things from us and doesn't want to open up their markets much. I think they have only given a token gesture so far.

If Rudd takes it is as it is now, we will be screwed again and this time will be worst. At this rate we might as well sell Aus to another country and be done with, instead of selling it bit by bit.
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Post by Dark Angel » Fri Nov 28, 2008 8:18 am

Well this is the way I look at it...China's "economic boom" is semi artificial to begin with. Yes they are producing many things for the US and other nations and yes they are exporting a whole lot but like Enigma stated it's being quickly devalued, and they still have not found economic harmony with the west yet. There are some major issues with China's currency and they have yet to address those globally...China's bubble is yet to burst but the west's economic bubble bursting is just the start of it I tend to think. China will have some major issues to deal with very soon too environmentally and internationally as with this boom we have seen more products come to light with dangerous lead levels and other potentially fatal contaminants. Looking at the olympics this last time there is a major issue with air quality and I hate to say it but they looked worse then LA with their smog. They have got some major internal corruption that is taking place as well. Shall we see where this goes...they are experiencing the US's industrial era at an accelerated rate the only difference is we went through the pains of it about 100 years ago here. With more money and more wealth comes more of a class struggle and mark my words China is in for a real surprise with that in a modern world. Granted China has been around a lot longer then the US but we have a lot more experience with a capitalist market then they do.
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Post by MzSnowleopard » Fri Nov 28, 2008 8:28 am

sounds like they're in for a seriously rude awakening.

as I understand it- their contribution to the global warming is equal too if not greater than the US- and they're not willing to do anything about it. Might've been Japan though- it was a few years ago ( 2 + years ) that I heard about this- so things may or may not have changed. I know, I could use an update on this.
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Post by Gavin Shaw » Fri Nov 28, 2008 9:04 am

China, U.S. and Russia I believe produce the most gases (based on total).

However, per person China is relatively low (that is one of their arguments for not having to do anything about it).

Aus is quite high per person, but 1% or less for total worldwide contribution. Even if we stopped, what we produced would be quickly swallowed by China's increase...
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Post by Dark Angel » Fri Nov 28, 2008 9:47 am

Gavin Shaw wrote:China, U.S. and Russia I believe produce the most gases (based on total).

However, per person China is relatively low (that is one of their arguments for not having to do anything about it).

Aus is quite high per person, but 1% or less for total worldwide contribution. Even if we stopped, what we produced would be quickly swallowed by China's increase...
Ya they won't have to do anything about it till that comes crashing down with higher rates of cancer, breathing issues, when the pollutants start showing up in things they eat and in their bodies it will be a ecological Chernobyl and will result in major change. Just because they have more people in China doesn't mean they don't have or won't have more problems even if their pollution is less per capita the effects are amplified by the same factor...the number of people.

Basically this, if a person smokes a cigarette in a room by himself the effects aren't really that great but fill that same space with more smokers and it becomes more toxic...now take their claim that they are less of an impact because they have more people and while they produce more pollution and have more people it just means that the room is more populated and the smoke is getting thicker...great logic if they want to see their life span decrease and their mortality rate go up. The world really needs to drop the BS and have one environmental standard across the board no matter how many people a country has. If some countries can now or will in the future have the ability to do better then the standard then that's great. This BS coming from both China basing it off the per capita rate and the US holding out on it's responsibilities is really the issue pollution is pollution it doesn't matter how many people live in a country only how much pollution they produce.
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Post by Gavin Shaw » Fri Nov 28, 2008 10:01 am

You won't get an argument from me. I'm just stating the facts I know.

What pisses me off is that our government is going ahead with some scheme they claim will reduce pollution but it is being rushed etc. It is being done simply to please countries like China and the U.S. to show "look we are doing something, now it is your turn". Doing to impress is wrong. Doing because it is right is how it should be done. When it comes in, the cost of things are going to jump big time and I don't think the economy is ready for it and the plan is very vague and confusing.

But at least if we start meeting targets and reducing output, at future meetings we can sit with a smug look on our face and when the grim news about the current health of the planet is presented we can then look at these big polluters who did nothing and tell them they only have themselves to blame. We did something. We did our part. What did you do to help the environment?
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Post by Enigma » Wed Mar 25, 2009 12:24 pm

Looks like the Chinese are starting to consume, their dependency on exports is reducing.

Chinese car sales up by 25%

China overtook the US as the world's top seller of cars in January

Sales of new cars in China jumped by a quarter in February as government measures to help carmakers countered the global downturn in auto sales.

The month's sales totalled 827,000 vehicles, a 25% increase on the same month last year and a 12% increase on the number sold in January.

China slashed sales tax on small-engined passenger cars to try and boost sales of fuel efficient vehicles.

More cars are sold in China than in any other country in the world.

"The forecast is that the situation in March will be even better than February," said Xiong Chaulin, at the China Association of Automobile Manufacturers, the body that released the sales figures.

The figures were released on the same day that China announced a 25% fall in exports.

China is attempting to boost domestic demand to compensate for lost export sales.

http://news.bbc.co.uk/1/hi/business/7937345.stm
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Post by Gavin Shaw » Wed Mar 25, 2009 1:28 pm

It was eventually going to happen.

I'm waiting for the announcement where they indicate import tariffs will be increased to 'encourage' the people to buy locally to protect Chinese jobs (in direct violation of the commitment they made that they wouldn't).

And waiting to see what happens to the China - Rio Tinto sale. I say 'China' as ultimately the Chinese government is backing the company offering to buy up part of Rio. Some have said why don't we just sell China one of our states and be done with as that is what is going to happen, bit by bit...
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Post by DarkWaterSong » Wed Mar 25, 2009 11:10 pm

Hello this is a Californian weighing in on the produce debate. In the 27 years I have lived here, I have watched 70% of the local fields turned into houses and strip malls. Ventura county used to be a major lemon growing area, now we just grow some avocados and strawberries that taste like nothing.

Also, some of the best produce comes from local small farmer's markets and people's own gardens. When it comes to food, people should not only look locally, they should also rely less on mass production.

On globalization - in theory it sounds like a great idea, the problem is the imbalance of wealth and resources. As long as use factory workers make more in an hour than Chinese workers do in a day, there will be a trade imbalance that leads to issues.

To China - who's fault is it that you based your economy on exporting?
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Post by Enigma » Thu Mar 26, 2009 11:19 am

The Chinese are using capitalism against us (Capitalists) LOL. However as their standard of living rises so will wages and inflation.

You could argue that its the imbalance in wealth (of countries) that creates the opportunity that China has taken.

As for local manufacturing, there is virtually nothing left here in Aus.
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Post by Enigma » Thu Mar 26, 2009 11:21 am

UPDATE 2-China pushes SDR as global super-currency
Mon Mar 23, 2009 10:04am EDT

* China proposes sweeping overhaul of world monetary system

* IMF's special drawing right could replace dollar over time

* Advantage would be greater stability, fewer crises

By Alan Wheatley, China Economics Editor

BEIJING, March 23 (Reuters) - China on Monday proposed a sweeping overhaul of the global monetary system, outlining how the dollar could eventually be replaced as the world's main reserve currency by the IMF's Special Drawing Right.

The SDR is an international reserve asset created by the International Monetary Fund in 1969 that has the potential to act as a super-sovereign reserve currency, Zhou Xiaochuan, governor of the People's Bank of China, said in remarks published on the central bank's website, www.pbc.gov.cn.

"The role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system," he said.

Zhou diplomatically did not refer explicitly to the dollar.

But his speech, issued exceptionally in English as well as Chinese, spells out Beijing's dissatisfaction with the primacy of the U.S. currency, which Zhou says has led to increasingly frequent global financial crises since the collapse in 1971 of the Bretton Woods system of fixed but adjustable exchange rates.

"The price is becoming increasingly high, not only for the users, but also for the issuers of the reserve currencies. Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws," Zhou said.

Jim O'Neill, chief economist at Goldman Sachs in London, said the dollar-based system of floating exchange rates had demonstrated great flexibility down the years.

"But over time, as the world is taken off the steroids of the overleveraged U.S. consumer, you can't have the same dollar dependence as we have had. But who can provide it? And the answer is, if it functioned properly, maybe the SDR could have a much bigger role," O'Neill said.

FEWER RISKS

A super-sovereign reserve currency would not only eliminate the risks inherent in fiat currencies such as the dollar -- which are backed only by the credit of the issuing country, not by gold or silver -- but would also make it possible to manage global liquidity, Zhou argued.

"When a country's currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability." he said.

Reform of the international monetary system is likely to take a back seat to the more urgent task of economic and financial stabilisation when leaders of the Group of 20 developed and emerging economies meet in London on April 2.

But Zhou's speech shows that the issue is a pressing one for China, whose top officials regularly bemoan the volatility of the dollar and what they see as U.S. economic mismanagement.

Creating a new, widely accepted reserve currency may take a long time, Zhou acknowledged. It would be a "bold initiative that requires extraordinary political vision and courage".

SDR ADVANTAGES

Allocating more SDRs would give the IMF more resources and help it address imbalances in power within the fund, where big emerging economies like China muster a fraction of the votes cast by Europe and by the United States, which wields a veto.

As well as a further allocation of SDRs, Zhou proposed a series of steps to broaden the unit's use so it can evolve into a reserve currency:

-- Set up a settlement system with other currencies so there SDR can be widely accepted in global trade and financial transactions. Currently, the SDR is largely an artificial unit used by governments and international institutions.

-- Actively promote the use of the SDR in trade, commodities pricing, investment and corporate bookkeeping.

-- Create financial assets denominated in SDRs to increase its appeal. The introduction of SDR-denominated securities, which is being studied by the IMF, would be a good start, Zhou said.

-- Expand the basket of currencies forming the basis for valuing the SDR to include currencies of all major economies.

If the SDR were backed by real assets, such as a reserve pool entrusted to the IMF, confidence in its value would rise and destabilising currency speculation would be deterred, Zhou said. (Reporting by Alan Wheatley; Editing by Toby Chopra)

http://www.reuters.com/article/marketsN ... 44&sp=true
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Post by Dark Angel » Fri Mar 27, 2009 5:30 am

Well China is just trying to cover themselves against the coming doom that 1 Trillion in US Debt and a falling global economy is going to have on them...hows 40 cents or less on the dollar of that US debt sound...not a bad return considering the trade imbalance that China and the US have had for the last decade or more. Globalization is a wonderful thing...no thanks!
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Post by Enigma » Fri Mar 27, 2009 8:26 am

There is a reasonable chance that the US will lose its world reserve currency status and if that happens it will be a lot worse than 40c on the dollar.
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