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Archived Notes for China before 2010

•  2009.11.18 On the world stage, another lock horned bud head between China and US is in favour of China even from the eye of American journalism. China Holds Firm on Major Issues in Obama's Visit, 2009.11.18 Complement of The New York Times. This report highlights a few important protocols that showing American started with the wrong foot with the bad assumption that China is under her thumb. The article begins with a picture showing President Obama surrounded by the usual entourage in a visit to the Forbidden City. Pres. Obama is wearing a leader bomber jacket with all and no exception everyone else dressed in formal attire. This is not something you can taking it lightly in diplomatic protocol. It is comparable to President Bush Jr.'s casual lunch with Chinese President Hu Jintao in 2006 rather than a state dinner during a state visit. Other than this mistakes, American just never learns that China will not have any chance to entertain American's phoney human right supremacy while the Guantanamo Bay Prison remains as dark as the Beijing's Great Wall Prison. As for the support of American's debt, you can spin a dead cat as much as possible but when nine life is gone, it will be gone.  China is at the verge of redirecting the dependency of export to American by diversify to the rest of the world and more important to the Chinese middle class consumer. The only thing left on the table is the Himalaya debt which American pretends to be non-exist. There is not much to talk about. In fact, American is extending her dependence on China. The most recent energy deal signed between Iraq and Exxom is an example. Exxom is so much desperate to replenish the oil reserve and income, it agrees to produce Iraq oil on a U$2.00 per barrel only after the help of China. The Imperial American Empire is withering fast.
•  2009.11.03 It is a shocker that IMF sold 200 tonnes of gold from its reserve to India for U$6.7B. The price is U$934.70 which is a discount of U$130 to yesterday and U$150 today's close price. While speculation points to China, India is just another black horse. Actually any BRIC country will do this deal for a more than 10% discount of spot or future price. It is very possible that China, India and some unknown countries from Arabian Peninsula participated in this race and India won. China is in #1 gold producer in the world with access to South Africa's production. It is discernable that China does not have to beat up the gold price. Should American is behind the sale, there will be a good explanation why China does not get it because American still want China to buy billions of T-note. U$6B is not a large number especially there could be special agenda to sell more gold from IMF. Share the love is the way to go so that a platform is built to let China get more gold from IMF without obvious reason.
•  2009.10.30 According to UxC.com report, China will be leader of the nuclear plan in 2030. By 2020, 78 GWe new nuclear capacity should be built. The current status is that 16 is building, 250+ are planned and over 70+ are identified.
•  2009.10.20 Xinhau News Agency reports that China has become the third country, after US and Japan, produces 10 million automobile a year. With Japan's auto industry slowing down and American auto industry declining, China is on her way to become the number one auto producer. For the meantime, we can count on the demand comes from internal. As time go by, China will turn to high efficient car either fossil fuel or alternative energy. With the high volume and strong base technology (e.g. BYD is the world leader of battery), the export is not what but when. There another crown jewel lost by the American.
•  2009.10.04 Komatsu, Japan's Caterpillar, reported that China buys more hydraulic excavator in 30% in June, 50% in July, 60% in August, and 75% in September on year over year basis. This is a staggering number after the 2008 Olympic. It means there is a significant demand stems from the infrastructure activities. Considering China already has the railway modernization U$700B in action. The nuclear plan and the solar farm project could definitely use more machinery. This also confirmed by the higher sales of methanol by Methanex. All in all are coercive to a strong spending story.
•  2009.09.09 Gold spot and gold future jump in and out of the U$1,000 region. Barrack dipped 6% because this its n+1 times to "dehedge". With gold poises to write the <$1,000 price into history, all investors worry about who has not come clean. At the same time, The diving of Barrack will no doubt create the margin call. Investment portfolios and funds which short Barrack or hold too much Barrack on margin (aggressive fund) will sell their holding to cover the margin call tomorrow morning. There is a high possibility the gold shares go down further until the early part of the afternoon when the margin clerks stop working. This is speculation and good material for financial mystery. Don't take it too seriously. However we do see some discrepancies on the short term (spot) and December gold as shown below. Gold spot has moved back to a much defensive position while gold future digging its heel above the U$1,000 mark. Gold dipped about 1% today with USD Index lost another 0.3%. So it still a good deal to trade U$ for gold. This kind of orderly transition could be the hallmark of USD Index. China has attempted to talk up the gold price because she encourages people to accumulate gold and silver (at 10, 100 gram chips sold at the banks) starting 3 years ago. As always, Chinese does not announce when they will do but have completed or initiated. Therefore, we can see Chinese to reap the profit. While gold is dancing the jive, swinging left and right and bobbing up and down, silver is monotonic doing the waltz or spiral up. Gold and silver ratio has dropped a hair below 60 today since 70 a month ago. We may see it to improve as much as 50 in short term and 40 in mid-term. When the 2B Watt solar farm is built in Inner Mongolia, China is built in next 10 year, you will need a lot of silver and copper to complete the infrastructure. After First Solar announces the news, copper is recuperated during the day. All looks good until the derivatives blow up.

  

•  2009.09.06 2010 may be a crucial year for China to transit from high-tech manufacturing to space technology industry. China has secretly slid from low price manufacturing by massacring most of them during the 2007 economic crisis to high tech manufacturing such as BYD which produces battery, cell phone and other high tech electronics. This is on top of all TV, LCD Display, 3 meter tire and a long list of high tech manufacturing. China has launched her space lab program starting next year to launch 2 unmanned and 5 manned space vehicle to build a space lab by 2015. China Daily's report Nation strives to launch labs on 2009.09.01 details the plan. The plan has a very unusual comment. The comment states the success factor of the plan is hinged on the docking technologies. All Communist propaganda, publishes the success story and never hints any possibility of failure or what could be wrong. China is no more using the mass media as propaganda machine anymore. She has passed this point. During the 1960's space race created numerous advantage to boost the American's and Russian's manufacturing industry. Marvellous products such as Velcro and WD40 were some of the prime example. This time will write China the ticket to world domination, economically and technologically.
•  2009.09.03 There is an emerging pattern on the prelude activities of G20; the BRIC meets before the G20. This has been page 16 news (complement of Don Doxe famous quote) which escapes many major Western news agencies. Before the London G20 (another photo op), the BRIC met and set the agenda for the G20. Xinhau News Agency report "Stimulus measures should be maintained: Minister" reviews two things. First the spokesperson is from China which implies China is the captain of the team. In fact China is buying her way into official monetary steering committee by buying U$50B IMF bond to increase the SDR or the votes that could be exercised (China Daily Report China banking on IMF's bond idea, 2009.09.05). Second, the position of BRIC to lead the world's economy is no more subtle. The BRIC meeting was held at the same locale as the G20 immediately before the G20. However, the trend in the G20 remains unchanged; ignoring the BRIC's voice. The BRIC demands the continuation of the stimulus which has been misread by many as BRIC countries are throwing new moneys at the economy. The announcements were simply the repackaging of the old programs which have been executed years. Here we have the situation that the West continues to dream that BRIC countries are printing money like them but in fact the BRIC is mopping up the excess money. The spectacular downfall of the Shanghai index is the result of the squeeze on speculators by the Chinese government which is again blamed by the West that performing a crazy panic act. It is just sour grape; they lose money. Will the G20 follow the BRIC's demand to continue the stimulus? Germany is driving the G20 to start to think about stopping the QE in this AP report European Countries Call on G-20 Tackle Bonuses. Germany knows the effect and consequence of QE well because she has first hand experience. This is good advice which contrasts to the BRIC's recommendation. For BRIC to transit from export economy to internal growth economy, it takes time and they do not want to lost money during the transition. Also, the more the stimulus, the more debt the West will pile up. The creditor's voice will be louder and louder. China is speaking with both sides of the mouth now. On one side, she worries about the devaluation of the U$ and on the other side QE must go on. So far the American Imperial Empire is just doing as much damage to the world economy as possible by doing QE.
•  2009.09.03 "Chinese stock market has gone crazy. The rally cannot be sustained.", "Chinese stock market is damping that will finish the bear market rally.", "During a bear market everything goes down.", "During the Great Depression Homestead gone up 10 times.". It seems there is pattern emerging. When you say something contrarian, you are in fashion without any real support. This likes a stopped watch it can tell the time absolutely right two times everyday. When China promotes the economy starting five years ago but updates recently, they say the pouring money now flood the economy with money does not work. When the China government tightens the money supply to combat stock speculation, they say the Shanghai Index falls 25% in a quarter is disaster. Please look carefully. Shanghai Index moves up and down 6% in one day a lot. It is usual fluctuation. Market commentators start to cross the profession of advertisement: bold words is in fashion. This obscures the true advise from some good one.
•  2009.08.29 The iron grip of three big iron ore producers on China will have to be loosen when China made a deal with FMG. Details are reported by The Australia. The FMG receives U$5.5B to U$6.0 finance (not sure buy in or loan) from Import-Export Bank of China to allow it to expand the production. In return the supply price is cut by 35% from the fixed price. This could be a small token compare to Japan and Korean receiving 33-44% discount with the big 3. While the Big 3 are the 800 pound guerrillas, a few hundred monkeys may beat the guerrillas. The importance of this event is that China is now trying to break the walls built by the existing economy war lords. A first step to level to the play field. There is also another hint we need to observe. The FMG supply contract is only U$5B and has been labelled as small order. Why does China buying all these metals? Is she really stocking or using? From the consumption of all steel required material, China may have a very high probability of consuming these iron ore for domestic and export purpose. Remember that U$700B railway upgrade project?
• 2009.08.28 U$ has been the major driver on the violent movement of oil and gold. Every time, gold moves up, oil and gold dramatically fall and climb back slowly when the U$ falls. Thanks to the great quantum probability, they can move in same direction. Actually this may be the result of strong inflation. U$ is competively devaluated to other currency. However, other currencies fight back to support U$'s reserve status. Nowadays there is no benefit to be the reserve currency which almost like a four letter words. The commodities prices go higher due to the inflation. At the same time, competitive devaluation of currency pushes U$ up for survival. This is complicate.

  

•  2009.08.28 According to GlobeInvestor.com, China has acquired at least U$22B assets of oil and natural resources through various state owned companies so far in 2009. These are bigger deals that cost hundreds of millions dollars. There are scores of tens of million dollar investment are "too small" to get on the list. Obviously, the tally is done through news reports that announced through public interest or regulatory requirements. The unannounced deals with the Arabians, Africans and South Americans could easily add one or two multiple to this U$22B number. As Dean Lebaron says, Chinese is executing a takeout strategy with the FX she has. While this number seems dwarfs the monthly tens of billion of US T-notes/bills purchased, but it may be comparable. The strategy the Americans used was different. They entered a country's economy at a high profile through multi-billion corporate such as as IBM, GE, P&G, JNJ, Coke, and MacDonald. But the Chinese all out takeout strategy may be more effective to net all asset with decent under the radar quality. Is this the application of sweeping style takeout. No Japanese and Korean had done that before. Nothing is really new under the sun.

•  2009.08.14 A new chief to the China National Nuclear Corporation is reported by China Daily on August 14. The report allows us to look into the inner of the China state owned business and their relationship with the Politic Bureau. The new chief held the title of Chairman of China Atomic Energy Authority from 2005 to 2008. The title in CNNC is GM. The event triggered is the previous GM was implicated in an investigation. What we can say is the legal machine is running. The Chinese Administration is deploying key resources to all key business units in the country to ensure continuity of the policy. China has a dedicated organization to oversees the use of nuclear energy in an active role because it involves actual building as contrast to the monitoring role of EIA. An August 17 report from China Daily describes "The CNNC is responsible for China's nuclear weapons, power production, and managing the country’s nuclear waste disposal facilities, according to the company's website. It made a profit of 4.8 billion yuan ($705 million) last year. China plans to build five nuclear power stations this year to reduce the country's reliance on coal and oil." China's nuclear energy is not yesterday technology. This time it is at the technology bleeding edge. Xinhau News Agency reported on April 20, 2009 that "China on Sunday started the construction of its first third-generation pressurized water reactors using AP 1000 technologies developed by US-based Westinghouse. The reactors, located in Sanmen of east China's Zhejiang Province, will also be the first in the world using such technologies." This project is a joint venture of CNNC's subsidiary SUFA and Westinghouse. There are also other technology trial with Russian as early as in 2006 reported by China Daily. The stimulus package is in fact smoke and mirror. It sounds like new money, but these type of multi-year planned project could be included in the U$500M package. The announcement is just the second run of an epic movie. Another sign to show China Government is in the driver seat to switch export oriented economy to a balanced internal consumer model.

•  2009.08.01 While many intelligent people are debating whether the world (read United States not even Europe), some of them are alleging China is creating another bubble. The most prominent evident is the drop of China's 8% growth so far this year. Some of them (not necessary including the first some) found the fact that China is getting in the worse of the depression (not recession) because scores of thousands of business fail and the export of machinery parts reduced by 21% in last quarter. The obvious point is contradicting information yet many see it as rapport and believe the information is consistent. Reports are obsolete when they are published these dates; so does the statistics. So when we see rallying data it could be shrinking now in reality. Analysis has to be done on the level that the foundation does not obsolete by the time analysis has finished. This was not as a tough job in the past but it is now because the reality has hastened at the communication speed. Since we are at the web speed, information can be propagated in minutes, so does the economic. At the beginning of 20th Century, the economy of grain is determined by the speed of the cable which relayed by the horse drawn carriage or train. It is at the rate of weeks. If Binge and others had their internal communication network to beat the newspaper by tapping right from the mouth of the farmer. So grain situation at Balkan and Argentina could be received and drove the decision of more barge sending out or cut the renting of elevators. What remains the same is the same human brain thinking and meticulous thinking process with great knowledge background are the key factor to do timeless (within a reasonable short time) correct analysis. It is more advantages for the people nowaday that they can update the analysis as new information poured in. In this cyber age, do not read stale reports. Read fresh or timeless one.

•  2009.07.26 Like clockwork, China is advancing her agenda to open the access to American's assets. The G8 did not answer China's request to broaden reserve currency, China announces that the forex reserve must have reasonable return, if not it is not good enough, China Daily: China's forex reserve not investment fund: central banker July 18, 2009. (Note: China used U$200B to set up China Investment Corp 2 years ago to diversify.). We have to be very careful with China's wording. She does not say U$ foreign reserve. As a small token to comfort American, there is a U$30M joint clean energy research centre (China Daily: US energy chief wraps up China tour July 18, 2009) in respond to American's demand to reduce carbon emission. Now the heavy weapon is out. The China-U.S. Strategic and Economic Dialogue (S&ED) will be held at Washington on July 27-28 to facilitate talks between presidents from both side preparing for the Copenhagen and G20 meeting. (China Daily China-US dialogue to facilitate cooperation July 26, 2009) U.S. could not keep on brushing China away. The report singles out the fact that "The Obama administration intends to remain focused on the trade gap. It plans to stress at the talks Monday and Tuesday that China can't rely on U.S. consumers to pull the global economy out of recession this time." This could be read as American offers nothing to China while she does not need American to get her out of the recession because she has her internal market on the way to replace the export to American. In another word, American did nothing but shrinking the wealth of China, why China wants to help American. China can help Europe, Russia, South America, Africa and not the last the Arabian. After China's head fake in IMF to use SDR as reserve currency, the idea to unseat U$ using SDR is doppred. In the report China Daily: Nation to get $9b in SDRs July 22, 2009, down play her need of SDR which supposes to replace her forex reserve. The S&ED move is a very small change of U.S. Government's mentality. If we see President Hu leaves for some internal affair, we shall know the meeting fails again. To the least, American should have a state banquet for the meeting not a casual lunch. Both sides will definitely using the carbon footprint as lance to fight in this tournament. American is collecting the dirt for China so does China. According to China Daily: US must lead the climate battle by example, July 17, 2009, American is not doing enough. Lets stay tune...

•   2009.07.19 It has been in heated debate when the "World" economy is going to recover or to be more accurate, out of depression. Eurozone and United States have the GDP shrinking and unemployment rate rising roof high. The definition of "world" may require some clarification. These group thinks like China before the 20th Century: China is the world and world is China and China dominate everything. Such concept, interestingly, established when China relinquished that notion when the world became more flat as the warships around the world were busy cruising other country's water preparing for invasion. For the meantime, both North and South America governments are experiencing the flirting of negative GDP contingency plan. Although some only admit either there will be one or two quarter and/or very small decimal point contraction. These experts also extrapolate these numbers to the BRIC. Lets focus only on China and see how accurate. China Daily has published the report China leads world toward recovery on July 19, 2009. The GDP has met the NBS's forecast of up by 8% and may have an up side risk. This crushes the theory that China cannot recover before United States because China's economy depends on the extravagant spending habit of American. They also points out the massive bankruptcy of low tech industry and high unemployment in China confirm their observation. The first point is obviously unprofessional. Business cycle will have high and low. During the low time, only the fittest should survive, no bailout. More, the rate is not high in a developing country who is strive to find the niche, the sector and growth opportunities. The agility of bankruptcy and move to other sector is the sign of an efficiency economy. China's unemployment is staggering at anytime. Western reporters love to have feature story on worker goes home unemployed. What a sensational story but this is not journalism. You cannot use the American's historical unemployment rate to see the China unemployment rate. Proper reference frame has to be used. Dr. Nouriel Roubini forecast that the recession is U shape and may be in a period of 28 months while we are 19 month in already. Well, this does not jive with the uncovering of the collapse of commercial real estate and the massive debt servicing of American. Will these drag down BRIC? The impact could be much lighter than the first time because the BRIC has been developing the internal markets. China is the first success story reported.

•  2009.07.12 World Economic Forum is the European economic planning and networking platform to the world. It does not offer loan like IMF or World Bank but the networking that generate support, relief and relationship have the same effect to developing countries. China was spotted and introduced to the WEF as soon as Dan Xiaoping confirmed the Open Door policy. Now you can argue, China could be the second biggest economy sharing or ahead of Japan. WEF does not customarily hosting meeting outside Switzerland. This summer, September 10-12, will have its Summer meeting at Dalian, China which is one of the top heavy industry centre (including shipping and manufacturing, e.g. gigantic tire for mining). There is a deep meaning to this location. Guangdong has been the centre of light industry for the last decade that drives China's economy. Now it is the heavy industry that allows China to advance at the world stage, either for her infrastructure development or export. Light industry like cavalry that powerful and maneuverable. It may create some success. The major attack has to be coming from the heavy artillery. With a local stage, the world reserve currency discussion may go before no one has gone before.

•  2009.07.09 Conspiracy Theory: What could cause Chinese President Hu Jintao left G8 L'Aquila abruptly? There is sign showing that other than the key issue on how to promote international trade through a more stable reserve currency was pushed off the table. This is not the main cause. The problem could come from the carbon foot print which China is being alleged to be the biggest culprit. The carbon dioxide caused global warming is beginning to fall apart along with the global warming theory. So with the American's Guantanamo Bay prison, the human right bash on China is dropped. Rather, the CO2 is the new theme to insult China. China does not have to take this insult anymore. This is a childish retaliation on China's RMB settlement. This is not an unique case. EU does it among her member countries. Many bilateral agreement also settle on on-U$. Because the U$ is so weak, American become sensitive and want to exercise her bully right.

•  2009.07.08 News report on a sudden departure of Chinese President Hu Jintao in the middle of G8 meeting. The official statement is that the President to return to China to take care of the unrest at Xingjian. Let step back and see what could happen. First the unrest at Urumqi is not a newly developed situation. The conflict of Han clan and the aborigine has the conflict since the China executes the great migration of population. The purpose is to move population from the dense district where the Han clan is the majority to the much thin density at Xingjian. The purpose is a combination of political and economical. Political is to dilute the localism so that the dominion could be more Beijing centric. Economic is obvious because you need the labour to develop the natural resources and agriculture. Even you have the machinery, you still require people to operate. There is a U$1B wind farm at Xingjian so you can expect highly industrial development other than just for residential. Understanding this background, the conflict is natural and could be ferocious and unlike any inter-racial conflict in any country. To prevent major damage to the investment to the area which significantly improve the quality of life for the aborigines has to be brought under control. Any attempt to destroy these investment is irrational and forcing a lost-lost result. Xingjian has the historic target of Russia. Mongolia was part of China over three hundred years during the Qing Dynasty and also during the Yuan (Genghis Khan) Dynasty. You can argue to the cow come home but country boundary should could the most recent period, otherwise, China should claim Japan as part of the country. Does the Urumqi conflict deserves the attention of the Chinese President? The situation is not as bad as the Tibet unrest and as bloody. You can not expect it every day but it is not as dangerous as it sound. China has setting up the stage to discuss the broadening of reserve currency. So far the West continue to ignore. The conflict between the West and China has to be so severe that there is no possibility to continue the discussion. This is not the first time and China in her subtle way to leave with an excuse. Since the motion of trade settlement in RMB is in action, it will spread from Asia and South America to Middle East and Europe at a much faster rate. Conspiracy Theory: To calm China's fustration American has artificially pushes U$ higher and dump the commodities so that China could uses the U$ reserve to buy commodities cheap. This could only be done. The behind the scene negotiation will be vigorous until the G20. The contract negotiation will be hard to verify. But the NYMEX shows much higher volume on WTI, copper, heating oil, natural gas and gasoline. If this is not for the benefit of China, then someone is making the market to exploit the fear and accumulating the commodities.

•  2009.07.06 Renminbi trade rule comes into effect: http://www.chinadaily.com.cn/bizchina/2009-07/03/content_8350939.htm. Together with the leaked new that China may request a debate on reserve currency set the stage to draw the line for BRIC reserve currency and non-BRIC reserve currency. G8 not likely to discuss reserve currency: analysts http://www.chinadaily.com.cn/world/2009g8/2009-07/02/content_8347946.htm. G8 has to respond but most probably will follow the tradition to ignore China until too late. This could very possible the very few chances to correct this tradition. If G8 does not follow China's suggested agenda, China will have a very good reason to defend her foreign reserve. This is the redeployment of the reserve to other assets that were untouchable.

•  2009.07.03 China is going to expand the railway system big time. The report from Xinhau News Agency China to spend U$731B on railways by 2020 was coming out on December 21, 2008 way before the stimulus package in March 2009. China continues her supersonic action; you can only hear when she started the action. Where will this railway going? To the west. Consider all the natural resources that locate at Tibet, Qinghai and Xingjian where no good transportation system exists, a massive building must take place before these resources could be deployed to generate GDP. As we know, along the railway, there will be boom town. This is how American conquer the west but building the cross country railway. Similarly, Canada united all provinces through the Canadian national railway. You can bet on the success of this formulae. You can bet Chinese are on top of the money spent at all the pressure points.

•  2009.06.17 Last October, G7 had a pre-meeting for G20. Chinese Premier Wen JaiBoa went to Washington to discuss the action to respond the credit crisis. He got cold shoulder. On the following November 9, 2008, China announced the massive stimulus for infrastructure building amount to half a billion U$. The major function of the the stimulus is not the spending but to rebuild the confident. Should American echo or even just acknowledge the contribution of China, we could have credit easing a quarter earlier. No, nothing came out from the States while Bush continue to act like he knew how to solve the problem in fact no. The positive effect is now emerging from the Asia, for example, record high auto sales in China in 2009 will hit 11 million with first quarter sales up from 25-40%. This contrast significantly to the big three in the States. It is interesting that although the auto sales is growing such rapidly, the entertainyst firmly declares that iron ore world demand will drop significantly. States is not the world any more. China has been rising to the third largest world economy. Combining other BRIC countries, they are not much behind the #1. They want to have their share of world power. If American prevents the rise of the power and share the stage, they will build their without American. The BRIC meeting in Russia is the beginning of a new era. The BRIC countries does not have to share the old playground. They have their new one. If reform in IMF, UN, even UN does not with proper consideration of the economic power of BRIC, the confrontation will be serious down the road and it will not be in favour of the old boys' club.

•  2009.04.16 "The British Empire has no sunset ." That has passed. American Empire is the leader (military and economy) of the world. This will pass. What are the common points? Both end up in a war financed by a foreign country. The British and American believe that war will stimulate economy, i.e. industrial military complex. This is not necessary the government's thinking but the rich and greedy money lord behind the election. Britain believed Germany and Italy would never expand to a state that could affect the British Isles and the Japanese would not able to thin out to take hold of the Asia. There for the trade with Europe and the supply of raw material from Asia to Britain would never be impacted. When there is war, there would be stimulation of consumption at a grand scale through destruction (ammunition) and rebuilt (financing). As the Second World War waging on to the end of the 1930's, the resource strapped Britain could not mobilize the League of Nations members to spend the money including herself. The war indeed stimulated the economy, the American and brought her out of the depression. The American industry took off with a high note. The fighting was not on American soil. Damage to American industry reduced to the minimal. No problem on sacrifice of the brave soldier. Everything was according to plan until the American colonies (i.e. raw material such a sugar and rubber) were attacked and occupied by Japanese. By that time, Britain and Europe countries were all under the thumb of American through debt. American the was the world's creditor. Until 2006, the world was on an economy expansion war. American believed that the economy war would stimulate the financial industry which produce nothing from thin air, fiat wealth. The wealth would be spread among American (the rich and their serves) to enjoy life. American started two wars: military and economy. The first is the invasion of Iraq and Afghanistan. The second is the economy leaning on developing countries in Asia and South America. China was seduced to jump into the bed with American through channels of international corporations such as Costco, Coca Cola, Johnson and Johnson, GE and the list marching on. American consumes, China produces and takes care of pollution. At the same time, the American global companies buyout the local large competitors to convert the local to use products from these global companies. Simultaneously, paper wealth was created through financial structured vehicles. These vehicle supposed to be armour guarded with high return. The world was bullied on to derivative, future speculation and so on manipulated by the handfuls of American investment houses. A very excellent idea at that time. American believed that they got all the world tied down through the derivatives and structured investment. It would be the Second World War again. t was the Pearl Harbour déjà vu again. This time the location was on the American soil. The company was Lehman Brother. If we believe Larry Summer did not know the impact of bringing down Lehman Brother, it would be an ignorant assumption. However, the book was so complex that the Wall Street gang lost track on who owns what because all these derivatives were off the book and they still are. They also over estimated that China will remain to be submissive as the last two decades. She will give money as soon as Uncle Sam hooks the finger. Same thought might cross Chamberlain and Churchill's mind at one point. But these great British politician did not observe American made another National League behind their back. Just the same thing for China has the allies with the NAF (Non-American Friendly) nations. American came on Britain at a high profile. Chinese flexes her muscle in a very low profile, i.e. concerns on the foreign exchange reserve (which may significantly diversified since two years ago through spending spree to buy oil, mineral and other asset she could lay her fingers on) and reduces T-Bill buying. Does it sound like what the American did at the end of Second World War? Did American suffer after the Second World War like China's economy? The American was out of cash but the government was the creditor of the world. But there is a very much difference. Chinese government is the creditor of the world. Chinese has the foreign exchange reserve and Chinese citizen has the saving. The war continues.

•  2009.04.11 China is holding U$2T foreign exchange reserve. Is this real or is this a myth. The statistics is never published or confirmed by China recently. It is calculated based on the current account. If we step into the shoe of China, immediately we will feel very uncomfortable with such a large lump sum held in cash (actually more in T-Bill). It is just a basic financial management principle that you do not want to have a 10% factor that could cause any major trouble. This is not a reasonable assumption right from the beginning that China will hold it indefinitely. The original intention was to hold the money in T-Bill which will mean lending money to US Government to stimulate American spending. There are signs that China divested the reserve to invest in stock market. A U$200M fund was announced 3 years ago as the first step of divestiture. There is no subsequent announcement but you can bet that it does not stop there. It should be safe to say China does not hold all these U$2T but a certain amount has been put into different asset classes. Then why such a secrecy? If the cat is out of the bag, we can see the collapse of the U$. This does not do any good to American and China. If a speculation has to be made, the current unexplained high of U$ is the escaping hatch for China to divest her U$ to other asset classes such as other currencies (not a safe bet because of competitive devaluation), equities (many Chinese state or private companies are buying companies overseas may use these T-bills) and investment payment (such as building the NG pipeline in Russia to supply NG to China). It this is true, this is the golden opportunity to exchange the unreasonable high U$ with the suppressed gold price. One day, when the vile of intricacy is lifted we would appreciate how China negotiates out of this U$2T reserve.

•  2009.03.28 A group of research from the Munk Centre for International Research publishes a report on GhostNet which is a network of infected computer around the world to collect intelligence. The news report from NY Times could be found at here. A chart for the numbers and location of these infected computer is shown by this chart from NY Times. The researchers suggest the ring is controlled by Chinese but stopped at the Chinese government. There is a few observations that I am compelled to share:

  1. Virus/malware is not just a destructive game for some one without a big agenda. It could be used in many ways especially in espionage. The origin of virus technology was born at Bell Lab on as Unix machine as a research for defend and vulnerability analysis on military computers. Now it lives to its original expectation.

  2. The number of infected computers are very small in comparison to the CIA/FBI/MI-6/KGB/etc network which could easily incorporated with the computer manufacturer. To substantiate that I would quote that all telephone switches are embedded with the spy code to log calls, trace call, tapping live by the request of government. All data centre in US were tapped by CIA/FBI for all traffic and monitored live with or without warrant (report by PBS). So adding malware/spyware to PC are very possible without your knowledge.

  3. The western located spied computer are relatively small. The high concentration is at Taiwan and Hainan in China and Vietnam. The high concentration should be at political centre. Location at south of Illinois does not have much high political value. Location at Hainan is also ridiculous because it is Chinese navy base, vacation and trade centre for a Chinese spy network unless the information is not for China.

  4. The Dalai Lama case example is weak. We all know that Internet chat room security is next to none. The transcript is not necessary coming from GhostNet. Perhaps the report substantiate it better.

  5. The statement saying Chinese ‘patriotic hackers’ controls the GhostNet because the controlling machines are at China would just say Eastern Europe countries control all the spam mail in the world because most of the machines sending out is from the Eastern Europe.

•  2009.03.15 Real analysts are watching the moves of China on how to survive this global financial tsunami. The current mode of thinking is that China hurts badly because the demand destruction causing the significant slow down of the world's factory. As the result, China has to continue her funding to the biggest consumer of the world, American. Analysts predict that the unemployed in China is increased in hundred of thousand by day will cause the social unrest. This could force social disturbance. Forget this theory, Chinese deals with social unrest thousands of year. Not a big deal. The world's third economy will soon pass Japan as the second not because of export but now is the time for internal consumption and manufacturing sophistication. Within one and two years, we could see China emerges as the global brand names from fashion to high end consumer products. Low end manufacturing will push back to India and South East Asia. Those international global industries will be surprised how they are confronted and competed with the Chinese. The hope of global company to survive by increasing market share in China could be over estimated. Entertainysts use the geek thinking to predict Coca Cola, Pepsi, MacDonald, Proctor and Gamble, GE and many big names will benefit from the China's survival. Therefore, the global fund will be a desirable class of asset. History tells us that Chinese will compete with the world after being taken over by the outsider (like the end of 19th Century) and still emerges as the world leader no matter how weak it was. The key is the educated overseas Chinese link to mainland China. It started with Chen who assisted von Braun to develop the space program in US went back to China. If you visit the frontier of the industries in China, you would see many faces who have been holding senior position overseas. Call it patriotic if you like but they have better opportunity to grow and perform than in the West. The second factor is the gold factor that China is hording gold. This will secure her monetary system. Third, when China completes the transition from low end manufacturing to high end (it took Japan over 40 years) triggered by this financial tsunami, all these global companies will be competed. For example, when P&G marketing the high end diaper and tooth paste, China can do it better. Why P&G has not faced its competition? No, it did. It uses the marketing machine to drown the competition. This time, it will be the other way around. The Western concept of Coca Cola and MacDonald will soon be replaced with the equivalent. This is not necessary to be patriotic. It is the behaviour. Simply put, Chinese likes to learn from the best and create the next best. It is not unique to Japanese. This is the Eastern thinking.
•  2009.03.13  Chinese Premier Wen Jiabao says China is 'worry' about her foreign reserve investment on American's Treasure Bill. This is not the first time China makes such statement and American never takes it seriously. Why should American response differently? US government lectures China on very topics from humanity, foreign policy, technology development, trading, environmental to quality of life. If you use the same criteria on the American, none will pass its own test. The imperial supremacy ego of Uncle Sam does not change at all for the last two centuries. Finger is pointing at the others but not applicable to herself. When you have enough military force to enforce the bulliism that it is OK. Let take a look at the reality, American still has not paid up all the due to UN. So this is a typical bully behavior to kick others in order to squeeze more lunch money of others. Without any question, China has been depending on the spend like no tomorrow attitude of the American to support her export. Now this export trade is not as much needed by China but required by American to maintain her life line. Without the cheap import driven by Wal-Mart, the Fed cannot lie about the deflation. It is true that the commodity is in deflation but everything else is inflationary. More important the American needs the T-Bill to finance stimulus package which is common knowledge. Could you bully your biggest creditor to get more money? The answer is easy and simple.
•  2009.02.16  Globe and Mail reports that the G7 have a meeting on financial crisis. This is un imaginable to have such meeting without China. First China has no debt which is uniquely showing the healthiness of the banking system (until they blow up). Although one of the attendee, India, has the growth but she is quite small in comparison to China who spends about 20% of her GDP on internal stimulus without printing money. People are ignoring the obvious just like continue to believe Canada has a robust banking system. One thing entertainlyst should pay attention to the after fact that Canadian banking system invest heavily on real-estate and lending money in Canada and of course in States. Statistics indicates there is no exception to major lost in these areas. How could the Canadian banks' profit be safe. Canadian real-estate is an area people superstitiously believe that it will withstand the down turn. Royal Bank Chief Economist Patricia Croft points out that the Canadian real-estate market and stock market are catching up with the downturn in the States because the economy of both countries are joined at the hip. While hope is a very strong motivation for survive but ignoring the true situation is suicidal.
•  2009.01.30  World Economic Forum is the stage that China continuous escalating her weight on the world stage. Starting years ago as an observer to now as the third largest economy of the world after America and Japan. Even Japan's second place may be doubtful during this economic shakeout. China always shows support to this venue due to the history. The benefits of attending this forum can be divided into two periods. The learning period when China started the economic revolution spearhead by Deng XiaPing. Financial, economic and social scholar as well as bureaucrats could have a window to absorb and interact with the western in real-time. Starting four years ago, the Forum become one of the venue to announce China's economic policies especially those related to Europe. American government never admits its interest in public and continues to choose to ignore this communication publicly. This attitude is a form of childish game of ignoring the world trend. When China announced the stimulus package in December last year, if the American could echo and had a proper dialog, the confident crisis abyss could be less deep. The Chinese effort to create a climax to the Bush's world leader meeting was forfeited by the American. On January 28, Chinese Prime Minister Wen JiaBao discloses a 4T RMB package at WEF which includes the part of 11th Five Year Plan and new items. You can tell from the expansive and stimulus form of the package, China is in a mode that the foreign exchange reserve could be put into great usage. Again, the policy align with what the December announcement: infrastructure building. The special item is to build more housing for rural area. The objectives of course is to reverse the migration from rural to urban. This does not mean to push people back to farming only. The rural of China has been evolved to small and light industry centres. What China doing is to accelerate the decentralization of business/industry from major cities to the rest of the country rather than that 5% of land near the coast. This is not just the spreading of wealth but the proper reallocation of resources. It may be too early to know the details but it could be a significant turning point to cool the overheated and imbalanced Chinese economy. What emerges from the other end will be a more evenly developed China across the land which she failed during the last economic reform under Deng's direction. It is not criticism. It is an observation. The lesson will be worthwhile if the lesson is learnt. Economic revolution has to involve the whole country. It could not be dominated by a small portion of the population. Deng's original plan was initiating the change at five major cities and special area like Shenzhen near Hong Kong. However, migrants from far west moved to these locations to work deserting their home. This created an unintended lopsided development. During this economic downturn, many migrants will return to their origin cities. Their knowledge and skill will be spread. If the economic stimulus can reach them, the next wave of Chinese economy growth will exceed exponentially. If not, it is still worthwhile to do the experiment.
•  2008.12.09 China's U$500+B infrastructure project spending was not echoed by the West. One day after that the stock market fell follow the rally. If the world leaders all chimed in, the psychology will be significantly improved. It was the prelude for the North America G20 meeting. With help from Bush to water wash down the significant of the spending and the infrastructure approach, the G20 meeting can easily be labelled as the meeting of the lamies. President elected Obama missed the chance to really improve his international status. It is only this week, the announcement of U$1T infrastructure spending. If China budget half U$1T, American needs to spend more to pave the road of recovery. Unfortunate, these late action and the continuous drama of greed (e.g. the banks and the auto industry) also deteriorate the possibility of sovereignty wealth funds' support. Dean LeBaron's latest commentary 'Chinese Lessons' has the most important quote  'Interesting Time' from Lou JiWei, Chairman and CEO of Chinese Investment Corporation points out that the risk at the American capital market is too high. It is a very polite way to say the irresponsible and unethical behavior of the top dogs in the banking and financial sectors that caused investors losing more than 75% of their investment in just one year.
•   2008.09.28 ShenZhou VII completed its mission to carry 3 taikonauts with a 20 minutes of External Vehicle Activities by Zhai Zhigang which included the standard celebration of waving a Chinese flag and retrieve a graphite based solid lubricant from the spacecraft's outside body to the inside. Technical achievement is high and put all those doubt sayer to rest about Chinese ingenuity. One of the less discussed point is the change of attitude in the Chinese government from close to now much pragmatic. The objective of the EVA is to test the $4.4M home made space suite. In this action, there is another backup taikonaut wearing a Russian made space suite. The backup taikonaut actually exposed to the space vacuum and  in a very brief moment when his head was outside the spacecraft. So what is so special. First the broadcast is live not taped. The second is the mention of the backup suite by Russian. It is no more the ego driven policy to deny any possibility of flaw in home grown design. This is progressive.
•  2008.08.30 Tiananmen Affair will forever scar the history of China among many struggles in human history. The West has unforgivingly brought up the incidence in any context relevant or irrelevant discussion which is obscene. Should anyone talk about the Mei Lai massacre or slave history in the West that tortured and killed thousands they would be provoked. The crux of the Tiananmen circles around the suppression of freedom of speech. The Western journalists claim that China's freedom of speech has been improved during the Olympics Games period but it is next to close. It becomes a strong evident to their wrong observation about Tiananmen which happens 19 years. Would you expect that massive demonstration was not supported by any political and military power in such media controlled age? Culture Revolution started as small and used by some opportunist who had strong military support to create the massive disruption. Deng Xiao Peng knew it just too well because he was the victim. If the fire allowed to spread, it would put all his effort to modernize China in vain. We shall not see the progress in China now.
•  2008.08.13 Is China's growth going to be slowing down after the Olympic? Will the Sichuan earth quake slow down its growth? Are these reasons for demand destruction? Let's answer the second question. Rebuild always stimulate growth. Although asset lost but the growth comes from the spending to the reconstructions. To a certain extend, the Sichuan rebuild will accelerate the modernization of the central part of China. Sichuan has its share of growth but not exactly the member of the recent 10 years' growth at the coastal part of China which lives about 4-5% of the total population with about 4-6% migrants from other part of China for the 5-10% of strip of land. The growth around the costal area will continue to grow but with proper nourishment the quality of growth could still be extreme strong because of high quality foundation but it has to solve the housing and product tier problem. If the housing problems (price and availability) could not be solved the growth could suffer implosion. But the Chinese government is solving it with a very stern hand. If the products manufactured remain at low to mid price range, the growth will be limited by the low margin. This is again aggressively addressed by Chinese government by shutting off small factories. It is always China's state objective to spread the growth to the west, to the northwest and the sourthwest (yes, Tibet which the Bombardier rail goes). The wealthy costal area will provide the funding, technology and ambition to modernize the Sichuan area which locates slightly to the east of the central part, the Chinese call this area the “gate to the centre”. This becomes a springboard to spread the growth to the other parts of China. Now let's look at what happen to post-Beijing Olympic. While many countries attempted to make Olympic financially responsible but not really close to success. Beijing Olympic is actually a trade show which has stunted the world with artistic success (showmanship), commercial viable product (e.g. the big screen), and array of products that facilitate the competition (civil engineering technique such as the water cube). If you are in the Olympic venue, you will be immersed in all China mid and high tech products. If you watch NBC, for example you will be hit by Lenovo. The material used to construct the water cube’s pillow, ETFE, has a factory in Beijing. Rest assure, there will be huge order after the Games if not during. Another major effect of the Games is to show what luxury product Chinese can pursuit other than established bland name MacDonald, Wal-Mart Ikea, Coke, Chanel, Blackberry, Nokia etc. There are many more merchandizes used by the visitors. Without question, they will escalate the consumer awareness for more variety of gadgets that would improve their quality of life. Last, I take a report by ASPO-USA.org very seriously. It says that demand for petrol product in China is limited by the subsidized program which set a quota for the supply. The real demand is actually much higher and much willing to pay for the price because it comes from either the new rich baby boomer or the transportation industry. The later can transfer the cost to the consumers who are very willing to pay for the merchandize. Remember, not everyone can afford these merchandizes but there is a huge population that is willing even it is a small percentage.
•  2008.08.08 Today supposed to be the coming out party of China that planned at least 10 years ago. My believe was that China would use this opportunity to align the economic policy with capitalism, escalate global positioning, educate citizen to the world outside China and with a little bit of luck gain brand recognition for the manufacturing. The results are amazing. It is not only all these targets are exceeded but much earlier. The coming out party becomes a celebration party because China has been recognized as the major player and leader of many areas. For example, when the energy curfew is in action, there are much oil to spare around the world. The elimination of low price manufacturing to force the industry to return the low price manufacturing back to India or Africa, will improve the GDP as well as worker's skill set. On the economic side, three years ago China was recognized as the 4th larges world economic country. Without question, it can be easily to sharing the third or even second. One of the biggest criticism about China is her human right record. Yes, like all Communist countries, the record was dark for the political dissidents. However, one should differential information filtering and human right. When a country catching up the world at 10 or even 100 time the speed, unprepared citizen would have adverse effect to not fully understood information. The filtering has to be done because during the neck breaking speed economic growth, there are many cracks created. The Chinese government are plugging as they happen but the negativity will hurt and confuse the good. For example, in a fast pace growth, the very possible crack to meet the building boom is cutting corner on quality to meet schedule and demand. People consistently pointing the building collapse at Sichuan province was the result of lousy quality. Some of them may be. Yet building a school that withstands 6 Richter scale quake would be either too expansive or impractical. Try to impose that to New York, I don't think 20% of the buildings will qualify. To conclude this short comment, I just want to add a note about the number 8 which is only the southern Cantonese regarded it as lucky because it pronounce same as the word prosperous. The noble number is 9 which represent royal and heaven and power. Would the China prosperous balloon inflated after the Olympic Games, with the curfew on manufacturing production, mining, shipping and any thing consuming energy, I believe the boom will resume.
•  2008.07.18 It is this type of gossip makes me feel sorry for the misled retail investors. The article from Telegraph Oil price shock means China is at risk of blowing up paints a doomsday picture for China’s economy. The following are a few of my observations that Chinese government has already foreseen the issues and taking action already: 

  • 1.      The plunge of the Shanghai market was well warned by the Chinese government through high interest rate, higher stamp duty and higher margin. More important is the fundamental for some of the underlining companies are sound. For example, CNOOC and Lenovo are growing in revenue and profit. Speculative activities have gone too far ahead.

  • 2.      Shipping cost for China will not be as bad as described because the freight company has to keep the ship moving to reduce maintenance cost. Stationed ship costs to keep it too. All shipments are bi-directional. China’s export to the West has been riding the low end of freight charge may be ending. So does the export of deflation. The more expensive trip is from the West to China. Deglobalization is always a balancing act of globalization. Don’t take Jeff Rubin’s word out of the context.

  • 3.      China is not just doing low cost production like shoes or sandal. The latest acquisitions such Lenovo (computer) and TLC’s joint venture with French Thompson group (now becomes world's larges TV manufacturer) has and already dominate the market in their respective sectors.

  • 4.      China’s energy inefficient small factories, mines and smelters have been systematically shutting down by the state starting at least 3 years ago as a national energy improvement program. One of the recent activity to joint venture with Ottawa’s Thermal Energy to recover energy is another example to improve national energy efficiency.

  • 5.      The continuous rise in oil price may not hit as hard as the West. China has ventured out to secure energy supply from American friendly countries such as Saudi and NAF (Not American Friendly) countries such as Iran, Russian, Venezuela and even African. This includes future contract at a price lower than the commodity exchange future.

  • 6.      China’s $1.8T reserve could be used to subsidize the energy course if necessary but it chooses to reduce internal subsidize to promote energy efficiency. It is not just petroleum product. It includes electricity which partly comes from hydro and coal. However if needed, I believe the subsidize will be used to maintain the health of the economy.

  China is not immune from the stock market crash because of the globalization of the financial market. Any worry or gossip will bring down the highest performers and SSEI is one of them. Journalism has becoming an entertaining business that only sensual news would be provided to improve the readership. Journalist are just digging the worst and the best but not in the same article to balance the information. It is not a bad thing as long as you have to tell people what is the percentage or probability of such incidence has/could occur.

•  2008.06.20 Yesterday at New York, WTI future dropped U$4.75 and China has been blamed. The prices increase for one litre of gasoline and diesel will be 0.8 and 0.92 yuan. It is explained that the raise of fuel prices could dampen the booming nation's oil consumption. Putting oil into the fire is another announcement by Iraqi's signing supply agreement with several major Western big oils. The trader may be freaked out but certainly the market magician is at work to make wave. This morning, the future has recovered half of the loss and it is a very good possibility to recover all in coming week if not higher which has become a pattern: big drop and new high. Other than the real demand that pushes the long term price (confirmed by the 200MA of oil future sitting above U$100) we also know a certain pocket of speculation in a very tight spot market. When the speculator does not willing to deliver by the time contract expires the price will drop as they have to dump it. Yesterday was the first trading day of July future which means delivery has to be made soon. When the shortie covers the deliverym the price will be high. The reasonable thing to do is watch the 50MA. Now lets look at the fact. PetroChina has reported that their profit has dropped 30% in the first quarter of 2008. The reason is the government controls fuel price. The more the Chinese companies sell through the Chinese retail, the more they lost. All China oil companies bear the same pain. What China government doing is to move forward to a autonomous economy slowly. It takes time for a young market to be efficient.  Although this could increase the CPI there is a price for everything. Will the demand dampen, only time will tell but with the forecast of number of cars in China to be doubled in coming years, you better not believing it.
•  2008.06.12 In the MarketWatch.com's news title China's consumer inflation pace slows in May reports that the inflation has come down from April 2008's 8.5% to May 2008's 7.7%. It is hard to believe someone could consider this as good news. But I believe it lies the important message that China is getting a better grip of inflation now but they may not cool inflation too much as inflation links to controllable (possible increase in supply and price control) and uncontrollable (oil price and scarcity of material). The Chinese inflation is strongly tied to growth which is what the government driving. In another related report from Globe and Mail, Inflation in China eases to 7.7%, it increases in farm products (promotion of productivity) to reduce the price. One thing we, who live in the West, forget that the price of underdeveloped countries are always low. During the progression to the improvement Quality of Life the consumable’s quality will increase so those the prices which pushes up the inflation. It is not necessary a bad thing to have inflation as long as it does not create a balloon.
•  2008.05.03 Last China item reports China discouraging agriculture commodity export. This is really the tip of the iceberg. Although import and export of all merchandize is normal economic activities but it is only during emergency situation you would discourage the flow direction to ensure you have enough supply. Under panic situation, the flow will completely shut off. We know China is a major food import country. The obvious reason is the population. The continuous growth on the demand of high protein food such as meat will demand much higher use of lower grade grain (for feeding livestock) and more fertilizer (to grow). The demand pushes the price inflation as consequence it increases the cost of production for export of all spectrum. Under the pressure from the world China can just make a measured RMB appreciation which is the major source of inflation around the world. With the agriculture commodity inflation there will be vicious inflation cycles that pushes the imported cost for China and accelerate the export inflation. Although all fronts have confirmed that the recession of American does not mean world recession but there still adverse effect to the world economic health. During the stabilization of shifting majority demand out of America the volatility of commodity price will be completely driven by the panic and fact (i.e. rumor and news) until a patent of demand has been solidify and the chain of supply to meet this demand pattern is established. Investment in China and in commodities will be just as exciting as investing in sub-prime.
•  2008.04.30 China has executed strict measure to control agriculture resources. Xinhau report. http://www.chinadaily.com.cn/bizchina/2008-05/01/content_6656095.htm. The measures discourage export for domestic consumption. The report has mentioned a 8% increase in the CPI that includes food.
•  2008.04.18 Most of the people has a very narrow scope of political interest. Basically, it starts with office, municipality, country and foreign country with descending knowledge and interest. The Tibetan Separatist creating tremendous impact on the social order in many countries may not help their political agenda. Without knowing the detailed background, citizens of many countries would treat them as violent fundamentalists who disrupt the city life one enjoying. Great tradition such as the parade of Olympic Flame has been interrupted that may not bring shame to China but was felt frustration because it degrades the quality of life one entitled to enjoy. Great leaders must have the influence to keep any political movement to the minimal disruption of others life. This is the basis of democracy. If the non-government party does not respect this how could the people try them when they are in power?
•  2008.04.14 Economist at the People's Bank of China has identified an interesting relationship between the American economy and the GDP of China. According to Xinhau's news report, one percent slide in American economy would lead to 5-6% drop in China's American export. This study provides one additional interesting number. The decline of 1% export to American can be translated to 1% decline in the Chinese GDP. Now the coupler will be very happy because there is explicit document on the coupling. The decoupling will be more happy because there is only a one to one link between the Chinese and the American GDP. If the American gone to a disaster of 0% GDP this will meet make the Chinese GDP pulled down from 12% to 9% which is about the official forecast of 8.9%. Lets not forget Europe has been increasing its import from China. This only come to a conclusion that don't count on China's to diet on its material demand.
•  2008.04.13 Tibet Separatists are making a big mistake by attacking the Olympic flame parade. The parade is the tradition of Olympic Games and conducted outside China. The attack does not contempt to the governments by violating the local law but also seriously disrespect the citizen of the world. Ignoring the historical fact that Tibet has been part of the China over thousand of years, any terrorist like act will not earn the sympathy and support of the movement. Rather, it has degraded the meaning and intention of the movement. China has been exploiting this opportunity to earn the respect of the world on handling this matter with great success. This sequence of events help Chinese Government frame the violent and irrational behavior of the Tibet Separatist which is not a good path to go down.
•  2008.04.07 It has been reported China will allow the Chinese banks (by implication investment houses) can invest the clients' money in American banks and mutual funds. The timing is interesting because this has to meet two criteria to make the action justified: good value and possible. The first is not obvious because although the American banks' price has been much lower it it hard to price the value. The second should not be a problem because American government is seeking non-controlling interest investment in its financial systems that could boost the capital supply. This is an example how the Chinese government guides the direction of investment including timing.
•  2007.12.22 December 2007 should be a proud month for Chinese. Two announcement put China on the advanced technology map which could ask the West to take a more serious assessment on China's productivity. First is the announcement of the regional jet ARJ21-700 (翔凤) and 300 kilometer per hour bullet train CRH2-300. The business jet took 7 years to develop which uses some western technologies and parts but it is only a fraction of time other regional jet companies required to develop the product. The bullet train put China to be the fourth country to produce such advance product after Japan, France and Germany. The results could remove many roadblocks set up by the American for the advancement of the undeveloped countries such as Vietnam and African countries. This could play economic catalyst for these countries. At the same time, it create tremendous pressure on the existing manufacturers. China's 20 years project to build jumbo jet may possibly be shorten. Through the strategic partnership with the west in aerospace industry which includes the mandatory requirement of setting up shops in China has help the industry significantly. However, the Western aerospace industry has to bow to the market of China.
•  2007.12.04 China's Boasteel (the biggest metal conglomerates in the country) is mulling to bid Rio Tinto. China has contracts with BHP which makes an offer to Rio Tinto earlier will not want to see a single dominant in the iron supply in any case. The counter action is a move to ensure the country's demand for high and low time. Should the Chinese economy engages in high gear, the security and supply of iron ore must be guaranteed. In low time, you want to buy the cheapest available by soliciting competitive bids. This event is not necessary a confirmation that China is definitely on the highway of economic expansion. It is just a normal course of action to protect the supply security and deploy the massive FX reserve. This is the reason Chinese government is involved. China's Baosteel mulls Rio Tinto bid: report China Daily, 2007.12.04
•  2007.11.20 Today Chinese Premier Wen Jiaboa told a business audience in Singapore that it had been coming difficult to manage China's U$1.4T FX because its value had been under unprecedented pressure. This is old news. What we should read is the U$1.4T FX. After China's FX investment fund, the buying of overseas stakes, even with the monthly monster grow, it should not be U$1.4T. This gives the listeners the illusion that the diversification has not begun which is a tactic but not a fact. The actual amount in U$ would be hard to determine but could be just above 50% now.
•  2007.11.15 Has US$ falls too fast? You bet. It is no good the the current holder and this could be the reason why bipolar messages have been sent out by China. Cheng Siwei (Vice Chairman of the Standing Committee of the National People's Congress of China) said diversification. Today, Yi Gan (Assistant Governor of the People's Bank of China) said the dollar has to be continue as key component of the country's U$1.4T reserve (Why it is not from the Governor? Another personal comment? There is no such thing as personal opinion in China.) according to a China Daily report on 2007.11.15. Anchor does not means remaining at the current percentage and does not exclude including other value store such as gold. In fact if China wants to own gold, the simple and straight forward way is to buy an African gold producer who is suffering by a heavy hedged book. She can take the lost but get the hands on the yellow metal.
•  2007.11.08 On 2007.11.07 Cheng Siwei, vice chairman of China’s National People's Congress suggested that country will diversify its foreign exchange reserves. It will seek “strong currencies over weak ones.” Many Entertainysts dismissed the importance of this because they do not understand how the Chinese government and media work. First if it comes from any official document it is too strong. Panic will be much worse. Second, when some one in the National People's Congress they speak for the government. Third, when Chinese high rank says some thing, it has already started unless a tangible project is described. The panic sell-off for the U$ is a normal reaction but it could be a little bit late. Just think about the consequence if Chinese government did not execute that earlier. We have the gray matter between our ears, it would be nice to put it to work.
•  2007.10.22 Bear Stearns, Citic Near a Deal, 2007.10.22, WSJ, CITIC buys 6% or U$1B equity of Bear Stearns. Looks like a fair deal to everyone until the other part of the story shows. Bear Stearns will buy U$1B 40 years convertible debt of CITIC which is about 2% of CITIC's asset. Debt has no control and can be called, equity has. This is just a very typical way how American help developing country yet the table has turn this time. CITIC will own a piece of Bear Stearns without handing out a penny. Like it or not, Bush will be fairly quiet on these deals down the road because American needs help to pop up the market and the economy. The banker is calling the shot.
•  2007.10.17 As always, watching China is far more difficult than watch the Fed; no hint and no pattern. But CITIC buying Bear Stearn is a major event to me. It signifies crossing the stage of passively assisted by foreign banker to build China’s financial infrastructure and international presence (paying the tuition by selling the pie) to a stage that paths to an active role in international capital market with a Western face (for many reasons including the trillion plus U$ reserve).  Obviously this investment is outside the 200 Billion set aside for the FX investment company. We may bear in mind when China says they will invest the 200 Billion we should consider it has been done. This may hint half or even more the U$ based FX reserve has been invested around the world already. As the result China will allow USD to fall even below 72 but not too much. CITIC bidding for stake in US investment bank, 2007.10.17 China Daily.
•  CITIC eyeing stake in Bear Stearns, FT.COM October 16, 2007. After one year of offering its financial infrastructure to the American to build the network and learn the intricacy now is China's turn to take a pound of flesh from the hunter.
•  2007.09.21 After many finger pointing exercise by Mattel during the toy recalls, it issues an apology saying all problems (mechanical and lead paint) are based on their designs. During these incidences American politicians exploit the situation and distorted the fact to attack China. This new development becomes a huge embarrassment. http://www.nytimes.com/2007/09/21/business/worldbusiness/21cnd-toys.html?hp. One may argue that Mattel yield under the pressure of no other manufacturer alternative but it also exposes the irresponsibility of Mattel which does not carry out its responsibility to execute the quality management program which is a must for this ISO certified company.
•  2007.09.10 China has pumped out 9 million cars in one year which places her to the second place in car production. Russian is seeking partners to build more and faster.  It does not matter whether it is manufactured for the countryman or export.  There is not much slow down on the the demand of cars. Biofuel and electric cars are on their way but it will be quite awhile before prime time. OPEC says that supply is ample but the price is hitting U$78. Will the slack be picked up by BRIC? It would be just a matter of time. I leave this to the economist to verify it.
•  2007.09.01 China introduces toy an food recall system, China Daily 2007.09.01
•  2007.08.14 "It never rains but pours." is an English saying that fits the "Made in China" epidemic. While everyone is blaming on China's suppliers which is an absolutely inaccurate picture of the reality. Companies who buy from a supplier always have quality control on their end as a required step for either ISO9000, TQM or Trillium quality systems. It is never a one side problem. What could be the cause, companies like War-Mart continue to squeeze down the price that could the cause of cutting corners. Perhaps, this is an orchestrated effort by the Protectionist. Don't put all the blame on one source.
•  2007.08.06 "China has declared a moratorium on the construction of most ethanol plants. Chinese officials recognized that producing corn-based ethanol was dangerously driving up food prices. Unless the fuel can be produced with sorghum, batata, cassava and other "non-staple crops," it won't be produced in China at all. " Peak Oil Review August 6, 2007.
•  2007.07.28 Two Chinese automakers merge may signal the beginning of ferocious efficiency improvement for the budding Chinese automotive industry. This could be a sign for second Chinese automaker export to the world after Chery. More details on this merge is reported in Carkmakers set to join forces, China Daily, 2007.07.28
•  2007.07.04 China is advancing her automotive manufacturing agenda aggressively through Chery. Its most recent actions include a deal with Daimler/Chrysler to export small car to Latin America in one year and to US in 2 1/2 year. Chery also signs a deal with Italian Fiat Group to supply 100,000 petrol engines to latter for cars built both in China and abroad. Fiat is going to spend 16 RMB in China and forecasted to sell 263,000 cars a year by 2010 (30,000 cars in 2006).
•  China issue U$203.49B special T-bonds to buy forex (http://www.chinadaily.com.cn/bizchina/2007-06/27/content_903838.htm) may provide a cushion for the fall of the weak U$.
•  2007.06.25 From the weekly Peak Oil Review of ASPO-USA June 25 Issue China has become the #1 CO2 producer and its oil import increase by 11.5% compare to last year same period.
•   2007.06.23 When a concept is hot, everyone borrows the idea. This creates a feedback loop that amplifies the effect. The snowball rolls larger and larger. The exotic, beautiful and mysterious of China have become the scene of many movies. Starting from James Bond's Golden Gun (no named place) to Mission Impossible III's Shanghai fight to Fantastic 4 Silver Server's China encounter are designed to draw world's attention to China. Without doubt all these will promote the tourism. Combine the effect of 2008 Beijing Olympic there is a huge opportunity for the Chinese government to reintroduce China's modern face to the world such as the progressive modern architecture, world class magnetic levitated train, complex transportation system and 5,000 year of history. This is a good opportunity to tone down the pig tail, bright red lantern, and gold decoration of the chop souy  image to citizens of the world.
•  2007.06.11 China's Aluminum Corporate will buy 28% of Canada's Peru Copper has two interesting meanings. First, to support the electricity demand, 40 nuclear generator and over 400 coal fired generator will be built. This requires huge amount of copper for the dynamo. So you could expect copper supply will be tight in the coming decade. The secondary effect of energy supply will be demand for higher Quality of Life. As Dr. Michael Berry (http://www.michaelberry.biz) says QoL will generate demand. The second people has been focus on the U$200B investment corporation managed by the China government for its surplus, please do not forget, this does not include the investment oversea by other companies (state own or not) like CNOOC. This is a way to allow the hot money from China to combat the global inflation. To understand the requirement of copper, you could read Dr. Berry's fabulous Morning Note on June 11, 2007 at http://beearly.com/pdfFiles/MNs%20Mon%20June%2011%202007.pdf.
•  2007.05.31 China has implemented a very sensible measure to control the inflation of the Shanghai speculation bubble by tripling the stamp duty of stock (transaction tax) to 0.3%. This rate will have significant impact on frequent traders because this could literally triple the cost for day trader. For long term investors, this change has minimal impact. The Chinese government is on the course to promote long term investment to combat the inflation due to blooming economy and currency revaluation through more investment vehicles (see China: 2007.05.29 for more details). At the same time, she puts more pressure to the unhealthy investment practice of speculating by mortgaging your house. American does not speculate as much but they mortgage their house for their spending. I just would like to see other country could have such a magic hand to balance such situations.
•  2007.05.29 While the world is worrying about the Shanghai stock market's stellar performance for a correction in short term Chinese government is unleashing more vehicle to invest which covers the state-owned enterprise. However, there will be measure for protection. It would be interesting to see how these rule may spread to the current listed B shares. http://www.chinadaily.com.cn/bizchina/2007-05/29/content_882425.htm.
•  2007.05.26 According to Reuters, China is the second largest exporter of toothpaste to the United States behind Canada. This trigger my thought about the future of J&J/P&G. Would J&J/P&G’s future be tarnished with the growth of the Chinese personal hygiene products? This has an implication on the thesis of investing US based global large cap equity which becomes very popular. US global large cap will continue its strength for awhile until the Chinese counter parts grow up. I use Taiwan’s computer OEM industry as example. Twenty years ago, they started with small PC OEM contracts with American computer manufacturers. Now most American PC are made by Taiwan companies in Taiwan or China. At the same time, their own brand names Acer/Asus are competing with the American ferociously. Perhaps the alternative way to invest globally can go back to the fundamental methodology by identify potential stocks around the world rather than assuming the US large caps are the safe bet.
•  2007.05.16 China's agriculture land has been appropriated for the manufacturing and residential real-estate. On top of this, water resources are tighten due to many reasons. The world's largest grain and soy export country, USA, has been shifting its grain, corn and soy to biofuel. With the reduction of bee colony, grain, corn and soy future prices will rise. The U$200B FX to be invested by China could put into good use to buy some future contracts for the future import of the grain, corn and soy.
•  2007.05.03 Xinhau News Agency reported that China found a world class oil field (7.35 billion barrels) by China National Petroleum Corp near Tangshan City, north China's Hebei Province. This discovery certainly improve China's oil security but does not slow down its oil appetite too much.
•  2007.02.28 After the exciting freefall yesterday, the market seems recovering from the mass sell off trigger by the Chinese stock markets. One should understand the bubble has been there for very long time. Chinese government has been muscling all efforts to reduce liquidity to contract the bubble. The burst of bubble will drain the saving and put a brake on Chinese economic machine which will have severe consequence as discussed in the 2007.02.21 article. However, once the agenda is set in motion, it may not be easy to stop. Chinese government would do as much as possible but not at all cost to savage the situation. Investors should not regard today's recovery as the end of the action. One should prepare more negative action could follow due to the triggering of margin call on hedge funds. I quote John Budden's suggestion here: "Sell to the sleeping point for what you don't feel comfortable, buy small portions to average down." If it does not average down, you will be just doing  OK.
•  2007.02.21 China's Egg Shell Economy
•  2007.02.20 Chinese central bank People's Bank of China raises the deposit reserve ratio by 0.5% starting February 25, 2007. This will take away 150 billion yuan from the money supply. Some criticizes the measure is ineffective to reduce liquidity. I believe it reflects the true intention of the Chinese government to control the growth through bankers by selecting business more selectively without shocking the economy. At the same time, it still discourage saving (high interest rate encourage saving) and encourage spending which is a method to fuel internal growth; a way to reduce trade surplus by balancing the demand between internal and oversea market. Despite all the noises made on the effort to slow down economy, this policy could mean a continuous growth on Chinese economy (to ensure employment), slowly appreciate the yuan without losing the price competitiveness before shifting the product from low to high price and reduce the foreign current reserve. News on the topic: http://www.chinadaily.com.cn/china/2007-02/18/content_811689.htm.
•  2007.02.06 I believe the Chinese government has opened the flood gate to secure all strategic resources:

   1.     Money – by IPO the Chinese banks which literally grabs the American and world’s wealth in exchange for the future Chinese fortune. The Chinese banks’ IPO is the first step to tie and leverage the foreign investment bankers for the next steps.

  2.     Energy – The foreign policy to support African, Middle East and South American countries is a great success not to mention the tie with Russian. The joint venture with India on energy bidding kills two birds with a stone: put the dispute originated from the Indo-Chinese boarder to bed for now and set up a strategic leverage on the Indian’s wealth stored overseas.

  3.     Natural resources – Gold may be the first step but we could see many other overseas strategic takeovers coming.

  These actions are not impulse actions. Chinese is now taking steps in a measured pace. Otherwise, they would jump into bed with Encana without skipping a heart beat. One move we have to watch is the promotion of international trade payment in Reminbi which has been offered as an option for China-Hong Kong trade settlement. This could be easily extended to South East Asia. When that happens, Rembinbi will earn the status of the reserve currency.

•  2007.01.19 When Ronald Reagan proposed the North America Strategic Defense Initiative although shot down due to budget was considered one of the pioneer of extending the defense to the space frontier rather than arm race. It is strange why China's ASAT test considered as arm race? http://www.aviationnow.com/avnow/news/channel_awst_story.jsp?id=news/CHI01177.xml.
•  2006.09.19 SCO
•  2006.09.02 China is gaining weight in IMF
•  2006.08.23 China, Russia joint Mars mission
•  2006.08.21 China: Pick your poision
•  2006.07.21 Bush supports military ties with China
•  2006.07.06 American has blown the North Korea missile test out of proportion. Development of long range missile is a natural course. If a country does not develop, it will buy from somewhere else. Nucleus weapon is also another necessity. American has created a disadvantage position for itself to let China becomes a hero. I believe the Congress is trying to do some damage control to get the six parties negotiation continues without any sanction by sending Christopher Hill to China today. Negotiation is also China’s strategy which will build its world leadership position.

  I believe this is just another spitting contest without winner but the Bush loses more. The following article may worth careful reading and look for messages between the lines. The rise of oil price may be due to some other reasons that could surface later.

   http://www.chinadaily.com.cn/china/2006-07/07/content_635258_2.htm

•  A herald to diversify China's foreign reserve from US$. Action could come soon including converting the US$ to gold. China central banker urges reserve diversification, China Daily,  http://www.chinadaily.com.cn/china/2006-06/28/content_628079.htm. The ideal course of action should be smooth and gentle. Any sudden fall in the value of US$ is a lost of China's foreign reserve. 2006.06.30
•  Canadian government apologizes for Chinese Head Tax 2006.06.26
•  China secure energy deal with South Africa. China wants 'new partnership' with Africa, AFP/China Daily, 2006.06.22. This approach does not only create the business but also social and cultural symbiosis.
•  Which G8's economy is smaller than China? 2006.06.20
•  China: A must read to understand current China's energy geopolitics. Asia Times 2006.06.10 US outflanked in Eurasia energy politics by F. William Engdahl. Actually US also outflanked in South America by China. Thanks to John Budden of BeEarly to catch this one.
•  China starts to control the overheated real-estate market starting from residential housing. Business property would not be too far behind. China Daily provides some background. 2006.05.31 http://www.chinadaily.com.cn/china/2006-05/29/content_603360.htm
•  Is China Iran’s white knight? 2006.05.07
•  Higher wage and lending rate 2006.04.29
•  China raises lending rate causes gold up 2006.04.27
•  Hu's World Tour 2006.04.22
•  Telecommunication Roadmap 2006.04.12
•  Chinese Space Program a Threat to US 2006.04.04
•  “China’s industry rise no threat to US” Gutierrez  2006.04.01
•  Two articles on fungshui (风水) from ChinaCulture.org 2006.03.26. A Secret of Chinese Heart: Fengshui, Brief Introduction of Fengshui
•  North China economy prepared to take off. As the result, not just GDP grows but also the consumer demand and level the imbalance. China Daily 2006.03.17
•  American does not support Taiwan independence. Taiwan situation stabilized. China Daily Report 2006.03.17
•  Cease NUC Update 1 2006.03.09
•  Ceasing NUC 2006.03.05
•  Fair Trade Balance 2006.02.16
•  Is China’s PNTR a joke? 2006.02.11
•  Cuban Oil 2006.02.05
•  WEF 2006 China friendly? 2006.0202
•  Flood gate of oil 2006.01.24
•  China Daily Report: China, Saudi Arabia agree to forge closer relationship 2006.01.24
•  China does not just manufacturing Wal-Mart merchandises. She supplies machinery to international companies like Siemens AG of Germany, Alstrom SA of France and Bombardier Inc. of Canada. from Dow Jones Journal HEARD IN ASIA Machinery makers in China gain strength as steel costs fall By MURRAY HIEBERT January 20, 2006. 2006.01.22. A copy of the report could be found at BeEarly.com under Blog.
•  Ramming in the oil fields 2006.01.21
•  FT.COM report Questions grow over China's forex strategy 2006.01.08
•  Japan's visible hand at China's gas 2006.01.04
•  Hot cold theory and allergy 2006.01.01
•  Elton John & David Furnish's Wedding 2005.12.23
•  Paying up is not enough 2005.12.08
•  China may assemble Airbus A320 2005.12.04
•  On the road to modernization 2005.11.25
•  Who let the paper money out 2005.11.20
•  Design to lead the world 2005.11.15
•  China's Foreign Debt 2005.10.22
•  China's overseas acquisitions skyrocket 2005.10.11
•  Being 3rd is not that bad 2005.10.11
•  Ping Pong, Labor and Olympic diplomacy 2005.10.07
•  Nuclear weapon and free lunch politics 2005.09.21
•  The foreign bankers are getting ready for a stampede to the China banking market while Chinese government is anticipated to raise the foreign investment limit from 20% to 25%. I suspect the ceiling could be raised as situation allows. 2005.09.14:
• China may raise cap on foreign investment up to 25% from 20%
• Foreign investors able to buy large SOEs China Daily 2005.09.15
• Standard Chartered to create China bank
  14 deals mulled to link Chinese, foreign banks
  China's two biggest banks sign $6B in deals
  BOC said to hire Goldman for IPO
  ANZ eyes stake in new lender
  Citibank seeks 19.9% of Shanghai lender
  Temasek close to buying BOC stake - FT
•  Smart Purchase 2005.09.13
•  China Military Buildup or Not 2005.09.10
•  China 4 Japan 3 2005.09.08
•  Collision of Galaxies 2005.09.07
•  A Sino-US Katrina? 2005.09.05
•  If you thing the Chinese economy is too hot think again. Read this:  Beijing is planning to easy credit curb. China Daily report 2005.09.03
•  China, UK, EU going to sign big deal 2005.09.03
•  Is Sino-Russian War Game a game? 2005.08.28
•  Will Li Ka Shing sell his family asset to China? 2005.08.26
•  Technology Evolution in China 2005.08.26 

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