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China needs the agenda working, that's all | Advantage Research

1 yuan, 90% silver, commemorative; President D...

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With its wild west frontiers opening up to more central attention, the local governments and private enterprise in the state may well be able to take a lead in building up the economy out west.  This will be done within the ambit of the new 5 year plan, totting up score for new manufacturing at lower costs which spiral out of control in the east, take attention away from an overheating real estate market and the commodity cycle double play that China is running to the ground this year.


Is China’s wild west frontier ready to open up to business tourists? 

The moving out west also gives the pioneers another chance to rebuild from the ground up making statistics of growth and inflation so much happier than the current 200 city odd cluster concentrated on the East Coast. With the new Strategic Economic Dialogue and the currency moving out to the Island of Hongkong on cue ( nearly 20% of the deposits in HK will likely be yuan at the end of 2011, which is giving them liquidity eruptions all over as only 25% of the Deposits are now in USD in the significant Inter Bank Market) but is moving towards significant CNY Capital flows and the inevitable significant position for the Yuan in the new global order, with or without reserve currency status


That inflation thing, not after all

Also, with due apologies to Krugman and his beating up of the Middle East Economic Review authors, USA and Europe with 2.7% inflation(ECB reports of May30, 2011) are still not getting traction in employment pull back while those with hothead inflation ( China 5% and India 10%) are talking of comfortable growth beyond 8% despite the dipping PMIs ( India’s dropped forecasts of GDP and PMI remain at 8% and 55 and that for China remain 8.5% and 51.6 – HSBC MarkiT) thus the oversimplified , though I agree it is shoddy for an official public economic review, assrtion by ME in favor of rising OIL passed muster.

Japan in the mean time is reporting around 59 million unemployed without the 3 quake affected districts and China’s role there is likely to grow in significance even as things cool down in Brazil. Chinese Yuan denominated trade is already more than 25% of its trade (even 50%) with its major trading partners and all these special situations as in Aussie and now Japan, mean that China will be well in charge of how the money flows, giving them positive contribution yet in the US Treasury, imperfect Europe and the Commodities markets.

The Commodity Cycle Double Play

Aluminium producers are the first to feel the heat as the power companies as expected, decided for the Aluminum companies here that lesser Aluminum products need to be rolled after take off has subsided and warehouses are probably choc-a-bloc. The Power shortage though on the bright side may thus find enough vents open to let off shortages and maintain happiness in other factories in China. Also rumored is that Zinc is available in large quantities to such Chinese commodity entrepreneurs and no domestic demand to speak of, making Zinc sales (Exports) the current hot item on their sub agenda

International Trade

Significantly, US as a trading partner is no longer an important item on the agenda for the middle Kingdom’s anarchic council but internal political dissension and the taming of the natives in Tibet and Western Chinese plateau may well be a bigger challenge for the kingdom’s state councils yet used to almost perfect execution of each planned agenda factor from Shanghai’s Central Business District to even the unsupported military action against Taiwan, where unlike others fron the non Us world, the censorship heavy state continues to call the shots in each political crisis making fun of the pressure from the international community and even flirting with dangerously weak state models in France and Russia

Also remain minor irritants of financial misreporting ( Did you hear about the Satyam like IS services company that falsified cash balances and disowned auditors at Deloitte this week)  and piracy that china continues to parry and the currency is expected to become a stable bulwark in the region with a 5-10% rise every year. Things seem to be moving slow on boosting manufacturing as inventories have been used to the hilt and even substitute production for quake hit Japan has not picked up to the extent expected.

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The new look Crisis Control Mechanism

With a dual reporting structure, PBOC and CBRC may have a tractable method on hand to control the various aspects of the unhindered growth. The fiscal mismanagement by local governments for example to the extent of CNY 2-3 Trillion ( 1 CNY = 0.164 USD) will now belong to the Center’s books (PBOC) thus giving the bad news a rest . Local defaults were likely to sspiral out in a few months after new infrastructure remains unused and real estate prices and compensation for project land acquisitions creating unnecessary expenditure even as local governments move to rely on PE from here with the new Yuan funds from GS and JPM also bringing in fresh funds for future growth and consumer spending sprees afforded without the overhang of 2008 This would mean SPVs created to finance local government projects will hand over ownership to the Central administration units That still leaves more than 7 trillion Yuan borrowed by State governments in play. Also, state controlled big 4 will absorb losses on unpayable debt as part of this exercise already termed a bailout in the run up to more ECB auctions where China is buying internationally from its new surpluses and reserves that have crossed USD 3 trillion

Inflation will continue to rule at 5% as US and China continue exchanging $100 and $60 billion in FDI this year, China making investments in equities while US staying away from the indigenous innovation bear sectors that continue to strangle their growth while a few like Caterpillar and Starbucks find easy recognition in this vast country which still has to go far and wide in creating social welfare, education and health pathways in 2/3rds of its landmass out west. 

5 comments on “China needs the agenda working, that's all | Advantage Research

  1. Pingback: Memorial Day weekend’s gone, is there any for the Dollar? | Advantage zyaada | The Banking and Strategy Initiative

  2. the agenda model no matter how well conceived can undoubtfully provide a framework of further understanding. I have nothing else to add to this topic other the need to further understand it. Another good post zyakaira.


  3. Pingback: The China inflation ticks up | Advantage China | The Banking and Strategy Initiative

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    June 21, 2011

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    June 27, 2011

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