world growth

world growth

Thursday, June 18, 2009

China lowers holding in US government bonds

China does not feel confident in holding so much US government bonds, especially when US is running a huge budget deficit to finance the stimulus package, time for China to diversify. Chinese economy depends too much on international trade.

China lowers holding in US government bonds

BEIJING (AFP) — A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.

The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.

"China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar," He Maochun, a political scientist at Tsinghua University, told the Global Times.

According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.

It was the first month since June 2008 that Beijing failed to purchase more US T-bills.

Zhang Bin, a researcher at the Chinese Academy of Social Sciences, said China's move showed a more cautious attitude.

"It is unclear whether the reduction will continue because the amount is so small. But the cut signals caution of governments or institutions toward US Treasury bonds," Zhang told Xinhua news agency.

China's foreign ministry said Tuesday that its purchases of US Treasuries remained based on "security, liquidity and value preservation".

For Zhao Xijun, deputy director of the Finance and Securities Research Institute of People's University, China may have reduced its holding of US Treasuries simply because it needed the money.

Zhao said the sell-off could have been in order to pay for its own economic stimulus package.

"The reduction was a result of composite factors, such as the investment need and the market change," Zhao told Global Times.




Let´s tell the only truth:

1. China is the main owner of the US, since it is the main debtor in US T-bonds and external debt.

2. Hedge funds and leveraged financial operations have been existing for a long time. It is nothing new that just arrived 2-3 years ago. Nick Leeson bankrupted BARINGS BANK 14 years ago playing with derivatives in Singapore Stock Exchange.
Georghe Soros became rich managing hedge funds focused on leveraged currency operations more than 20 years ago.

3. CAPITALISM has not failed, it has been the antique regulation vs. NEW and more complexed financial products ( options, futures, warrants, leveraged buy-outs, mergers, etc... )

4. Barack Obama is president of the US because of the worst performance ever of an US president (George W. Bush ),... But even with that, if the financial crisis does not explode 2 months before the election, B.O. would not have won it either.

5. B.O. was a complete unknown, but very useful to revitalize the image of the US in the world: youth, muslim relatives, black, elegant, the blackberry, ... the US lobbies have achieved their goal, and they have said to the world:

Look how robust is our democracy that we have elected a black president !!!...
Look how our relationship with the muslim world is going to change in a positive manner !!!...
Look how we are going to restructure the whole world !!!

Political Marketing, media and more dirty games ...

6. The US has finally understood that a war against "3 muslims hidden in a cave" was not a good idea, even more while China became more and more powerful, while the US became weaker with stupid wars.

7. Do not blame Wall Street !!!... Wall Street are not aliens living in a different world. They are only the representation of what America is. Wall Street has auto manufacturers, utilities, proud companies such as GOOGLE, MICROSOFT, and obviously it also has banks.
"Subprime loans" existed for a long time in the US, even since its colonisation.
The handling of these subprime loans is a different aspect, and it is precisely here where REGULATION failed.

8. ENRON case was not 2 years ago. Have we learned something since then ?...

9. Where is the "free journalism" ??... Let´s hope people will stop reading lobby newspapers and concentrate on real free bloggers.

10. INDIA has the key of the world hegemony. If it leans to the US, US will continue leading the world. If it leans to China, the US power is over.

11. What country will first realize that AFRICA has a lot to offer to the world ??... China is doing it already.

12. Why do I know that Obama has a dog called "Bo", and I do not know if HU JINTAO (China president ) has even kids ???

Please, let´s tell the truth to the world.

Jose Luis Revilla Escudero
WWShares, Inc
-Global Wealth Management-


CHINA, ready to lead...?

I have spent the last month travelling around ASIA to try to find an answer to this question. Just now, when we are in the middle of a global crisis, with almost all foundations of economy in danger, I wanted to answer myself about the role that each country is going to take to lead the world out of this recession period.
China latests are focused on the opening of Shanghai Stock exchange listings to foreign companies, but still with the limitation of doing it only with yuan currency, and still being not convertible.
Hong Kong, who belongs to China, but with a S.A.R. ( special administrative regime ) is deciding now its own future, since Shanghai and itself must now compete to become the financial centre of the "new" China.
Taipei celebrates that for the first time in six decades, a mainland company, China Mobile is due to acquire a 20% stake in a local communications carrier, breaking with this step, the so long disputes among these 2 asian states. Nevertheless, some old nationalists from Taiwan see into this movement from mainland, the challenge of a new adhesion process, similar to the one carried with Hong Kong.
And finally, Seoul is focused on recovery the way they best know. That is, working tough and smart to become again what two years ago it really was... an still unknown, but highly effective and productive capitalist economy.
China strategy along the years has been to manufacture goods at a low work labour cost, and sell them mainly to the US and Europe. Now, with 1,3 billion people living in the mainland, they realise that their real market may be inside, may be domestic. But to go along with this change in the way exports are handled, is not an easy task... but you can see already some interesting movements, such as the recently signed collaboration with India, to get a chunk into the OUTSOURCING market, as well as, the already mentioned opening of Shanghai Stock index to foreign companies.So the path seems to be built ahead, but still with critical issues such as if yuan will become the reference currency, if it will be flexible against other international currencies, or even maybe, if China and its allies decide to launch a takeover bid against dollar and euro world supremacy.
My opinion resides on the idea that in a not so long future, we will start looking at Shanghai index closings the same way we do it with Wall Street now.
If China converges into a more open performance, USA supremacy as the first economy in the world may be in danger.
China will try to joint Hong Kong current power and international presence, with Shanghai newest challenges. India will have to decide if it goes alone in this new era, with its 1,1 billion people and therefore, their impressive economic and social potential... or decides to take part with the US or with CHINA. That decision is going to become critical for India in the very near future.
But, for sure, we do not expect China president to become a worldwide "prime time TV star" the same way the US does with its presidents. We will never know if China president has bought a dog called "Bob" to his daughters... we even won´t know if he has kids at home,... or if his wife is dating another men ...
We must expect a new role, focused on discretion, hard work, no discussions, but highly effective and consumer oriented strategies.
If the US unveils its secret CIA files, ... China will continue with its secrecy in domestic critical matters.
If the US continues fighting muslims in Afghanistan, China will stretch its ties in a peaceful way with its long time disputed neighbors, trying to consolidate its presence in Asia.
If the US continues with prime time interviews, China will present only specific topics of its politicians activities.

Jose Luis Revilla Escudero
WW Shares, Inc