Chillin' out till it needs to be funded
Since the crisis caught everyone’s fancy in 2008, when Chinese GDP growth also dipped to a significant low, China has been played up as the market maker in almost all commodities. Even before the Dollar started weakening with the exit of QE2 , theree was a China as customer over stocked on Iron ore, Metal, zinc and agricommodities like rice as well. Again while production of agricommodities has also been squeezed giving global prices a fillip, China’s recovering demand and the open plans to warehouse additional stocks of Coffee, Tea and Cotton account for the recovery in Commodities prices as much as the sngular run for Gold and the appreciation of the Dollar. Even with US and allied farming markets losing upto 70% of their produce, China would be increasing back its imports of wheat, rice, Coffee, Tea and Cotton as well as Nickel, Zinc, Copper and Iron Ore. China’s PMI crawled back from a bottom in manufacturing this month and remained in the positive zone above 50 overall
The resulting 30% jump in imports in August including duty free “Early Harvest” tools from (Ft.com) Taiwanese players according to a new agreement, means that the July surplus of $30 bln has been almost halved in August to $17 bln even as exports rose another 24%, China looking for new customers in Japan and now even North Korea.
China would also be engaging the handover of power to a new premier by 2012 and business objectives have to tailor to a new government plan which wants to push industrialisation into the interiors. The migration from the interiors is oneof the itinerant causes of higher wage and commodity inflation in China
Recently, aspersions were also cast by analysts on the ability of China and the Renminbi to appreciate faster against the Dollar and Chinese state policy is likely to unleash more non-interventionist policy measures to hold the Yuan down instead of maintaining interference in the Currenncy markets. It has recently exported its Currency with $20 bln Yuan govt bonds backing its Private Companies equal amount in Dimsum bonds in the Hong kong and even European markets directly. Hong kong business in the Yuan has increased nearly 20 times from 2 years ago. The Dimsum bonds were raised by a lot of US / Global Consumption companies like McDonalds, Unilever and Proctor & Gamble
Inflation in China continues to rule at above 6% China is likely to make public its Calendar for complete convertibility of the Yuan,. Exprts now believe the same could happen by 2015 or even before. Recently large scale hiring has been planned/announced by Banks / Audit companies in Beijing, Shanghai and Hongkong including HSBC and PWC Most companies would need local Chinese conversant talent in China and Hong kong to expand business and keep in tune with public policy September also sees the Big 4 beginning their capital enhancement drive with BoC starting IPO road shows while others roping in government investment befor ethey go fo more public monies. As commodities profits continue to bring in additional profis it may become easier for the Chinese banking sector to counter the LGFVs for local bodies counted as Off balance sheet loans till date.