Archive for the ‘currency’ Category

Obama’s Biggest Challenge of All: China

November 29, 2008

The single most important challenge for the new administration—one with the potential to shape the 21st century—is China. As goes China, so go 1.3 billion men, women and children—one out of every five people on the planet.

China’s economy is now roughly half the size of America’s; in three decades, the two are likely to be about equal. What the Chinese eat, how much (or whether) they drive, where and how they choose to live, work and play: all will have an enormous impact on the availability and price of energy, the temperature of the planet and the prosperity of mankind.

By Richard Haass

Beijing’s foreign policy is no less important. A cooperative China could help stem the spread of nuclear materials and weapons, maintain an open global trading and financial system, secure energy supplies, frustrate terrorists, prevent pandemics and slow climate change. A hostile or simply noncooperative China, on the other hand, would make it that much more difficult for the United States and its allies to tame the most dangerous facets of globalization. But the emergence of a cooperative China is anything but inevitable. That is why Washington needs a new approach to Beijing. Think of it as “integration.”

In this March 31, 2008 file photo, a worker on a boat clears ... 
A  worker on a boat clears garbage from the Yellow River in Lanzhou in northwest China’s Gansu province. Newly released survey results show water quality along one third of China’s famed Yellow River has fallen below the lowest levels measured due to massive pollution. China’s second-longest river has seen its water quality deteriorate rapidly in the last few years, as discharge from factories increases and water levels drop due to diversion for booming cities.(AP Photo/File)

Integration should be for this era what containment was for the previous one. Our goal should be to make China a pillar of a globalized world, too deeply invested to disrupt its smooth functioning. The aim is ambitious, even optimistic, but not unrealistic. The United States and China need each other. Neither wants to go to war over Taiwan, to see another conflict on the Korean Peninsula or to see world oil prices quadruple as a result of a military strike on Iran. Even more than that, China needs access to the U.S. market for its exports in order to maintain economic growth and domestic political stability. Americans, in addition to benefiting from low-cost Chinese imports, need Beijing to manage its large dollar reserves responsibly.

Americans must accept China’s rise. There’s no guarantee we could prevent it anyway, and the attempt would only worsen the rivalry. We should not exaggerate China’s strength or the threat it poses. China’s military, for all its improvements, is still a generation behind America’s. And we should resist any calls to block China’s access to the U.S. market. Trade and investment aren’t just beneficial on their own terms; they also contribute to the web of ties that would bind China into an orderly world order.

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Chinese People's Liberation Army troops stand in their formation ... 
Chinese People’s Liberation Army troops stand in their formation at a parade ground during the annual rotation of military personnel in Hong Kong November 25, 2008.REUTERS/Alex Hoffard/Pool (CHINA)

China Can’t Let Crisis End Reform, Central Bank Says; President Hu In U.S., Latin America

November 15, 2008

China can’t let the global credit crisis derail financial reforms that have benefited the public and helped the nation’s banks weather the turmoil, said Yi Gang, vice governor of the People’s Bank of China.

By Li Yanping, Bloomberg

“Although there have been doubts in the market on whether China’s financial reforms should continue after this crisis led to massive government bailouts and nationalization of financial institutions, China’s bank reforms can’t backtrack,” Yi said at a conference in Beijing today.

The worst financial crisis since the Great Depression has caused about $966 billion of writedowns and credit losses among financial institutions worldwide, according to data compiled by Bloomberg. The U.S. Treasury has initiated a $700 billion rescue plan to shore up distressed financial institutions.

“The U.S. and Europe may need to rethink financial innovations that exceed real economy needs and have pushed risks beyond control,” said Zhao Xijun, a finance professor at Renmin University in Beijing. “China’s financial services are under- developed by comparison, so we need to push ahead with reforms.”

Banks in China sold shares, accepted foreign strategic investors and enhanced risk management over the past three years to avoid repeating the bad-loans crisis earlier this decade, when the government spent $650 billion rescuing them. Limited buying of subprime debt has helped the banks avoid bigger losses.

`Unimaginable Shock’

“State-bank reform has been a success, benefiting people and greatly enhancing financial services,” Yi said. “China’s banks may have taken an unimaginable shock from this financial tsunami if they hadn’t completed shareholding reforms.”

Reforms based on market principles must continue to help shield banks from future risks during economic cycles, Yi said today. Banks will also be “tested” when the nation’s currency gradually become convertible and when interest rates are further liberalized, he added.

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Chinese President Hu Jintao, seen here, begins a Latin America ... 
Chinese President Hu Jintao, seen here, begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.

SAN JOSE (AFP) – Chinese President Hu Jintao begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.

The Asian giant has increased diplomacy and investment in Latin America in recent years, with an eye on its natural resources and developing markets for manufactured goods and even arms.

Many in Latin America hope for an investment boost to help ride out the economic crisis.

Exports from the continent to China include soya and iron ore from Brazil, soya from Argentina, copper from Chile, tin from Bolivia, and oil from Venezuela.

The trade is still only a small percent of the continent’s total, but it is growing.

China’s state-run Xinhua news agency reported this month that exports to Latin America grew 52 percent in the first nine months of 2008 to 111.5 billion dollars.

Hu will visit San Jose and Havana between a G-20 meeting on the global crisis in Washington on November 15 and an Asian Pacific Economic Cooperation forum summit in Peru on November 22.

China and Cuba have remained all-weather friends for decades, their Marxist Socialist past a driving force in relations.

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China’s Disquieting Trade Surplus

November 11, 2008

A huge trade surplus amid all the doom and gloom suddenly surrounding China’s exporters seems counterintuitive. Yet, China has just racked up its third record trade surplus — and markets are spooked.

The newly released October trade figures show that exports, at $128.3 billion, were up 19.2% year on year. That was the third consecutive monthly deceleration in export growth, but it was better than expected, especially as the export-driven south of the country has seen a wave of factory closings and layoffs. ( See “Cold Christmas For China’s Manufacturers”) It was also impressive when you consider that China’s European export markets are in recession and those in the United States and Japan contracting.

But a trade balance has two components and imports, at $93.1 billion, were up a less-than-expected 15.6%. That faster deceleration than exports is the reason the trade surplus widened and points to an accelerating cooling of domestic demand, though falling commodity prices would also have contributed to the value of imports.

The figures were announced after Asian markets closed but European stocks fell on the news as investors questioned whether the slowdown in domestic demand implied by the trade figures meant China would not be an effective engine of global growth. (See “Europe Worries About China Trade Surplus.”) At midday in New York, U.S. stock indexes were showing losses of around 3.0%, and the iShares FTSE/Xinhua China 25 Index (nyse: FXInews people ), an exchange-traded fund that reflects large companies in China that are available to international investors, slid 5.6%, or $1.49, to $25.12.

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Best Analysis of Obama’s Economic Challenges, From The BBC and Peter Morici, Univ of Maryland

November 6, 2008

This is an audio feed from the BBC, Thursday, November 5, 2008. 

The second audio segment features Professor Peter Morici of the University of Maryland, which is an excellent review of the challenges facing President Elect Obama….


China-US ties seen smooth under Obama presidency

November 6, 2008

China-US ties should remain steady under an Obama presidency, due largely to Washington’s need for cooperation on the global financial crisis from an increasingly powerful Beijing, experts said.

Obama, who won office on Tuesday, criticised Chinese trade policies during his campaign, but not in particularly strident terms.

Chinese President Hu Jintao at a G8 press briefing in Sapporo ... 
Chinese President Hu Jintao at a G8 press briefing in Sapporo in early July. China-US ties should remain steady under an Obama presidency, due largely to Washington’s need for cooperation on the global financial crisis from an increasingly powerful Beijing, experts have said.(AFP/File/Jewel Samad)

And with myriad other problems to face, including two wars and the US financial meltdown , his attention will be diverted from such concerns as China’s currency policy and its military build-up, analysts said.

By Dan Martin, AFP

“It should be a very smooth transition. Obama is not a president who ran against China,” said Professor David Zweig, an expert on Chinese foreign relations at Hong Kong University of Science and Technology.

By contrast, he said, the campaigns of the past four US presidents, with the exception of the elder George Bush, all featured tough words for Beijing.

“This could be the smoothest transition since 1980,” Zweig said.

The need to coax China into global efforts to address the world financial crisis could force Obama to mute criticism on other issues, observers said.

“Obama will not try to project China in negative terms,” said Bahukutumbi Raman, a fellow with India’s Chennai Centre for China Studies.

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Economy Hammered by Toxic Blend of Ailments

March 14, 2008
Almost everything seems to be going wrong for the American economy at once. People are buying less, but most things are costing more. Mortgage rates are rising, the dollar is falling and prices of key commodities like oil are leaping from one record high to the next.
.On Thursday, the dollar plumbed new lows against the Japanese yen and several other major currencies; the price of an ounce of gold jumped above $1,000 for the first time; and lenders raised home loan rates once again. Government figures showed retail sales fell in February as consumers cut back on cars, furniture and electronics.

Stocks fell sharply after the retail sales report was released early in the day, and a large investment fund said it was nearing collapse. The volatility that has defined the market lately continued unabated.

The Standard & Poor’s 500-stock index fell 2 percent in the morning, then rebounded partly in reaction to a report that said banks were nearing the end of subprime mortgage losses. It was up nearly 1 percent in the afternoon before paring that gain to close up 0.5 percent, to 1,315.48 points. The Dow Jones industrial average closed up 35.5 points, to 12,145.74 points.

A toxic blend of economic and financial developments is testing policy makers and lawmakers who are struggling to contain the slump brought on by the collapse of the mortgage market, a downturn that now looks sure to push the economy into a recession. Though current conditions are a far cry from the 1970s, resurgent inflation is raising the threat of stagflation — a condition in which unemployment and the price of goods and services both rise.

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Dollar’s clout sinks worldwide

March 13, 2008
By ALAN CLENDENNING, AP Business Writer 

SAO PAULO, Brazil – Antique store owners in lower Manhattan, ticket vendors at India‘s Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don’t want U.S. dollars.

These handout images provided by the Bureau of Engraving and ... 
The new Five Dollar note.  But is it only worth $4.30 today?
Image from the Bureau of Engraving and Printing for illustration

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

A man looks out from a currency exchange office in Brasilia, ...
A man looks out from a currency exchange office in Brasilia, Feb. 28, 2008. From antique stores in lower Manhattan to the gates of India’s Taj Mahal, euros and British pounds are now more welcome than the U.S. dollar, as the greenback continues weakening with no apparent end in sight.
(AP Photo/Eraldo Peres)

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

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Taiwan holds world’s 4th-largest foreign currency reserves

January 5, 2008

Taipei – Taiwan holds the world’s fourth-largest foreign currency reserves after China, Japan and Russia, the central bank said on Friday. By the end of December 2007, Taiwan’s foreign currency reserves totaled 270.3 billion US dollars, up 221 million US dollars from November, the central bank said. The foreign currency reserves of the other three countries were China’s 1.433 billion (3rd Quarter of 2007), Japan’s 946.1 billion (November) and Russia’s 354.6 billion (November).

Taipei - Taiwan holds the world's fourth-largest foreign currency reserves after China, Japan and Russia, the central bank said on Friday. By the end of December 2007, Taiwan's foreign currency reserves totaled 270.3 billion US dollars, up 221 millio...



What if China weighs up the risks to growth?

January 4, 2008

By Alan Wheatley
January 4, 2008

China’s growth is strong, its currency is rising and a huge stash of foreign reserves insulates the economy from the sort of external payments crisis that rocked Asia a decade ago.

But that is not keeping economists from playing “what if?”

What if China’s export engine suddenly seized up? What if the resulting overcapacity exposed a new crop of bad bank loans? What if share and property prices plunged, sapping confidence and triggering capital flight that rattled banks and hit the yuan?

Unlikely, yes. Impossible, no.

Stephen Jennings, head of Russian investment bank Renaissance Capital, told Reuters in Moscow that China’s double-digit growth and soaring equities could drop so hard that it would ….

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A Revisionist Tale: Why a Poor China Seems Richer

December 21, 2007
HONG KONG — Should China be treated differently because it may not be so rich after all? That is one of the central questions raised by new calculations from the World Bank that suggest the Chinese economy may not be as large as previously thought.To be sure, some economists question whether the new figures are more accurate than the old ones, but others argue that they paint a picture of a poorer China that warrants reconsideration of the West’s efforts to change Chinese currency policies.The World Bank issued preliminary figures on Monday that recalculated the economic output of 146 countries, including China, after excluding differences in domestic prices and currencies.

The calculations of so-called purchasing-power parity, which compare the buying power of citizens around the world, put China’s output at roughly 40 percent less than the bank’s previous estimates.

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