According to the Treasury Department, the global demand for US financial assets strengthened in March to a record level, as investors from China to the UK purchased, amongst others, the largest amount of US Treasury bonds since November 2009. Overall, foreign investors were buying equities, notes and bonds in amount of $140.5 billion in March, after a net buying of $47.1 billion in February. It is a clear signal that foreign institutions and investors are returning to the US as the ultimate safe haven. Not surprisingly, China remained the biggest foreign holder of US Treasuries after its holdings rose by $17.7 billion to $895 billion in March. Japan, the second-largest holder, increased its holdings by $16.4 billion to $785 billion in March. Holdings in the UK gained $45.5 billion to $279 billion. Continue reading ‘The Return To Risk Aversion’
Tag Archive for 'China'
According to the official data, China’s GDP has tripled since 2000, with annual growth rates ranging from 8 to 13 percent, reaching a level of $4.9 trillion in 2009. While some investors are reluctant to believe those numbers, one thing is for sure: China produced and saved while America consumed and borrowed. In 2009, the Chinese government approved a $586 billion stimulus package, equivalent to 14 percentage points of GDP. Meanwhile, the central bank has been buying dollars to prevent the yuan strengthening and to support the exports, driving foreign-exchange reserves to a world-record $2.4 trillion. Working against a market-driven system, the communist regime has exercised its command-and-control power over the banking system by fixing both the deposit and lending rates. Moreover, many experts believe that the Chinese authorities are mainly responsible for the current real-estate bubble. Continue reading ‘The Chinese Communist Bubble’
China took the entire world by surprise in the pre-crisis world economy, recording gigantic exports, consistently gigantic capital inflows, and imbalances in both stocks and real assets that could prove to be extremely harmful to the international economic stability in the short term and devastating to China in the long term. Some voices that called for restructuring were never heard in Beijing, simply because of the apparent success of high growth and low inflation economic dichotomy. However, China might have a very difficult time keeping inflation at its 2010 target of about 3 percent, after banks flooded the Chinese financial system with money in 2009. According to the median forecast of 14 economists, inflation may reach 4.4 percent this year. China’s GDP growth quickened to 10.7 percent in the fourth quarter, the fastest pace since 2007. The Chinese authorities affirmed a target of 8 percent growth for 2010, the same goal that the government has set and surpassed in each of the past five years. Nouriel Roubini said “this strong economic recovery implies that the super-loose monetary, fiscal and credit policy followed by China has to reverse itself or otherwise there is a risk of overheating and inflation”. Continue reading ‘China – The Wonderland’
This year, the conventional wisdom within the financial community is that the booming Chinese economy is going to pull the global economy out of recession. While the world is fighting The Great Recession, this unparallel economic system – a weird mix of communism and capitalism, records an annual GDP growth of 8.9 percent in the third quarter. During a trip to Beijing, Treasury Secretary Tim Geithner said that “China will need a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption”. Allow me to show some skepticism when dealing with the Chinese economic miracle. Continue reading ‘China – A Financial Time Bomb?’
Many of us are wondering how is US able to borrow trillions and trillions of dollars. Who is willing to lend them money, especially under current circumstances? The total US national debt is approaching $11.2 trillion. That is 11,200,000,000,000 US dollars. The Congressional Budget Office recently released a report in which they claimed that the total debt could reach $17.2 trillion dollars by 2019. What is mind-boggling is the amount of money that the US government pays every year to service this debt. For instance, the interest payments on the debt cost $452 billion last year, the largest federal spending category after Medicare-Medicaid, Social Security, and national defense. Continue reading ‘It Is Good To Be King’
On Sep 11th 2009, US administration has decided to impose excessive import duties of 35% on Chinese passenger and light truck tires, as a result of a surge of Chinese tire exports that have dented the US tire industry. Just two days after, the Chinese ministry of commerce responded that the Chinese officials were investigating US automotive and poultry product imports following complaints from local industries that some of these products are being dumped in the Chinese market or are benefiting from subsidies, seriously affecting domestic industries. Who will end-up hurt more severely from this mounting trade dispute? Continue reading ‘The Next Big Thing’
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