China's banks advised to sue debtors

[Dover]

China's banks advised to sue debtors


Monday 17 May 2004, 2:37 Makka Time, 23:37 GMT



The commission that regulates China's banking system has advised members to sue firms whose debts are destablilising the economy.


The body's chief executive, Liu Mingkang, used an Asian Development Bank meeting in South Korea to urge banks to "get tough" to enhance a credit culture. International credit rating agency Standard & Poor's says that non-performing loans could amount to more than 40% of the overall loan book. However, despite bad debts of more than $200 billion, few in China are keen to sue the worst offenders.

Many of them are state firms and senior individuals in influential families. And China's legal system has a poor record when it comes to dealing with debtors. But there is a need for action to be taken soon, warn experts.

Effect on growth

Bad loans could seriously check any government attempt to shift some of the imbalances in China's breakneck expansion.

2003 saw the economy grow at 9.1%, with investment in fixed assets up 47% in the first three months of 2004 compared to the previous year.

According to Stanley Fischer - former International Monetary Fund number two and now vice-chairman of Citigroup - that spells serious trouble for the banking system.......>> MORE

http://english.aljazeera.net/NR/exeres/F32A11A0-643F-4552-8E4E-4A4EB0CD8C6F.htm

[Dover]

1. China is confident it can cool economy

China is confident it can cool economy

Amit Prakash Bloomberg News Sunday, May 16, 2004

JEJU, South Korea China's government is confident it can cool its economy without causing an abrupt slowdown, Finance Minister Jin Renqing said after meeting his Asian counterparts here.
.
"We are confident that the government has the ability to realize a soft landing of the economy and smooth and sustained growth," Jin told a news conference Saturday after a meeting of ministers from the Association of Southeast Asian Nations plus China, Japan and South Korea.
.
He said that inflation was at a manageable level and that China's policies to cool its economy would take time to work. The stability of the yuan, which is pegged to the U.S. dollar, must be maintained, he said, and more study was needed before China moved to a market-based exchange rate.
.
Finance ministers of Asean plus the three North Asian countries said in a joint statement that they were reassured by China's efforts.
.

EDITED BY ADMIN: COPYRIGHT

http://www.iht.com/articles/520099.html

[frankly_fedup2]

2. Doesn't China cover our deficit?

You know the 3 trillion dollar one we have now. I read somewhere something about the US's deficit not debt was from borrowing from China? Is this true?

[Old and In the Way]

3. They are buying our debt.

They sort of have to, as the trade imbalance is pretty much driven by our business in China. If they stopped buying, our currency valuation would plummet and this trade would dry up. Both China and the US would suffer; China's loss of trade and US currency loss of value which would create a hyper inflationary situation here.

At least that's how I think it works, in a nutshell.

[Moderator]

7. Dover

Per DU copyright rules
please post only four
paragraphs from the
news source.


Thank you.


DU Moderator

[Dover]

4. Gold: The China Syndrome

Gold: The China Syndrome

John Ing

Gold lost more than $50 an ounce this month, in large part due to worries that China will cool off its current torrid pace. Investors are concerned that the People's Republic of China's seemingly out of control growth will slowdown, raising fears of a hard landing reminiscent of the early nineties. Having visited China twice in the last six months and as recently as three weeks ago, such meltdown fears are overblown. Ten years ago much of China's east coast was still a backwater. However since 1976, China's real GDP growth has averaged 9 percent per year, or three times the average of major industrialized countries. So far this year, China's booming GDP grew by 9.7 percent in the first quarter, acting as a powerful stimulus to the world as both producer and consumer.

China's astonishing economic growth in the past has provoked dire warnings of the unsustainability of its economic boom. Yet year after year, the Middle Kingdom has disproved these naysayers.

China's booming economy is heavily dependant on natural resources

China is now the number one consumer in the world of copper, platinum, steel, zinc and iron. They produce more steel than the United States and Japan combined. And there are more cell phone users and beer drinkers than in the United States. The Ministry of Commerce reported that China's foreign trade this year will top $1 trillion this year, up 17 percent. While exports will be up 15 percent to $505 billion, imports will grow even faster to $495 billion, up 20 percent. In the fourth quarter of last year, China's imports reached $124.1 billion, up 42.3 percent. China is the fastest growing economy the world, and its voracious demand for everything from oil to copper is causing a spike in prices.

In 1997, Beijing's attempt to engineer a gradual slowdown caused a hard landing. Unlike then, the boom today is much more broadly based, particularly with a newly created middle-class exceeding that of the American population. The Chinese for example have introduced two "Golden Week" holidays a year, where the nation literally shuts down, allowing throngs of people to travel and spend. Beijing alone received 3.6 million tourists during the seven-day holiday. Chinese consumer demand, which is currently among the lowest in the Far East, is expected to grow significantly.

Indeed, it is China's push to boost its infrastructure, which is fueling a large part of its growth. Moreover the needed "slower" growth still means powerful economic growth (by western standards) and a continuation of the Chinese economy's insatiable demand for resources. China has boosted spending for steel, cement, roads and power facilities. To rein in this growth, capital requirements for new steel projects were raised to 45 percent from 25 percent and real estate projects were raised to 35 percent. The People's Bank of China raised its reserve ratio to 7.5 percent from 7.0 percent. These tightening measures are more of a signal than actual depressants to growth. Beijing has a major pipeline of investment and the Olympics are an excuse for this infrastructure spending. China's real problem is allocating its resources to where it needs it the most.

Over-investment in infrastructure

China is also in the midst of a massive investment spending cycle. The last bubble was in 1993-94, when year-to-year growth in fixed investment hit 60 percent. The fixed investment share of GDP was 43 percent in 2003. While fixed investment is growing due to infrastructure spending as a proportion of GDP, it was much higher in the past. Unlike the United States, which went through an over-investment boom in technology, China's over-investment in infrastructure is to accommodate the demands of a growing population. The situation is different from that of the early 1990s with free market reforms the key driver in the Chinese economy.

Demographics: Key Driver

Demographics are a big factor when talking about the China syndrome. China has the largest population in the world, with 1.3 billion people representing 25% of the world's population. China has over 30 cities with populations over 5 million, with Shanghai topping 20 million people, and Beijing with 15 million people. In its zeal for restraining its population growth, Beijing introduced a "one child" policy. There appears to be a skewing towards more boys and thus China's sex ratios are out of whack. This policy is apparently ending and there is believed to about 300 million non-reported children that may be added to the rosters. China has a young population and the addition of 300 million more, mostly girls, would correct an already skewed gender imbalance.

Simply, while China has grown over the past decade, there is room for more growth. Sure there will be short-term shortages but everywhere we went there was the recognition for more growth. This growth is needed to provide the millions of jobs that are required. Over 60 percent of China's labour force remains in the countryside but there is a steady migration with some 30 percent of the population now living in the cities. China must accommodate this growth with respect to housing, jobs, etc.

When they build, they do come

China's policymakers have embarked on meaningful economic reforms and in this case when they build, people do come. For example, in 1989, the total number of expressways (the size of the 401) in China was only 271 kilometers. Ten years later, China had over 1,000 kilometers of expressways and at yearend there was 30,000 kilometers of expressways. On this recent trip to China's coast, everywhere expressways were being built to link up the major cities. Beijing needs these highways since all were choked with speeding trucks and kamikaze drivers who do not respect lanes or other drivers. China hopes to have 82,000 kilometers of expressways, which will link most of its major centers. The problem however is once arriving in these cities, there still exists no easy way to move through the cities. Congestion is a problem, day and night.

The Power Crisis

China is also suffering a chronic shortage of electricity and plans to install 42 gigawatts of generating plant capacity this year alone, equivalent to the UK's entire installed capacity. Having flown, traveled by rail and car, we noted the need for more rail capacity since China's roads are already choked with trucks. The list goes on, including the need for additional port and shipping facilities, water treatments facilities and environmental infrastructure requirements.

Americans forewarned

Of more concern, as goes the Chinese economy, so goes America's financial markets. By becoming the world's largest debtor nation, America has unknowingly allowed itself to be governed by the newest superpower, China. China has immense reserves now, second only to Japan. With $400 billion of foreign exchange reserves invested largely in United States Treasuries, the Chinese have financed a large part of the American deficits. Should China slowdown or alternatively decide to dump its bonds in favour of gold or euros, it would throw American financial markets into a tailspin, causing US interest rates to skyrocket - and that is the Achilles' heel of the American dream.

.America's budget deficit has been piling up, in part due to the war in Iraq. The war is harming the US economy, costing to date $200 billion and now Bush is seeking another $25 billion. Notwithstanding a stronger economy, the United State's current account deficit will exceed a record $500 billion this year. This means that every single day, the US must borrow around $1.5 billion from abroad to finance the huge gap between its imports and exports.

Be careful what you wish for

To date foreign investors, in particular the Chinese and Japanese, have financed America's twin deficits. However, having spent $137 billion on intervention this year, the Japanese did not acquire any US dollars in April for the first time in seven years, reflecting in part their own strengthening economy and stabilized currency
.....MORE

http://www.gold-eagle.com/editorials_04/ing051404.html

[drfemoe]

5. What do you make of this?

PPI | Press Release | May 13, 2004
New PPI Study Examines Emerging "Asian Union"
Report Cites Asian Economic Integration as New Competitive Challenge For the United States

For Immediate Release:
Contact: Karin K. Freedman/John Bray [phone]

WASHINGTON, D.C. -- The Progressive Policy Institute today released a study examining the dramatic increase in Asian economic integration, highlighting mainland China's rapid economic fusion with its wealthy neighbors. In The Emerging Asian Union? China Trade, Asian Economic Integration and a New Competitive Challenge, Ed Gresser, director of PPI's Trade and Global Markets Project, argues that this budding informal "Asian Union" has created a powerful new competitive challenge for the U.S., and that -- as with the Japanese challenge of the 1980s -- Americans must "raise our game" in response.

The American debate on China trade issues has become increasingly controversial over the past year, ranging from intellectual property rights to labor standards to currency rates to WTO implementation. In reality, however, these problems are no worse, and in fact are often less severe, than they were five or ten years ago.
...
The new PPI report illustrates that the results of the new Asian economic integration are already transforming trade patterns worldwide. American imports from the five wealthy Asian economies have dropped by $47 billion, reflecting their movement of final processing into China, and American imports from China have jumped by $52 billion and diversified into a range of sophisticated and increasingly high-tech manufactured goods. And while China has also emerged as one of the world's leading importers -- accounting for $250 billion in import growth since 1999, as compared to $100 billion for the U.S. -- its emergence at the center of the 'Asian Union' means that American industries at all levels feel far more competitive pressure than they did in the 1990s.

The good news: with the right approach, America is well positioned to address this challenge, and to "raise our game" by adopting a new competitiveness agenda. Gresser argues that traditional trade policy measures focusing on issues such as barriers to exports or intellectual property rights are valuable but ultimately insufficient. American manufacturers, especially in lighter, more labor-intensive industries, must address these challenges through more fundamental efforts to find new sources of comparative advantage in quality and customization and improved adjustment policies for workers.

http://www.ndol.org/ndol_ci.cfm?kaid=85&subid=108&contentid=252631

Report >>
http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=108&subsecID=197&contentID=1121

[Dover]

6. Well, it seems this is just part of the global "adjustment"

I posted an article yesterday about how the Asian countries were investigating the potentials in developing a regional trading block and their own currency.

The U.S. has been pretty much coasting for a very long time as both economic and military heavyweights. And now we are challenged to reinvent ourselves and explore new avenues of trade and for export.........well, here's what Brzezinski had to say (of course this was prior to 9/11 and the Iraq/Afghanistan invasions):

From his book, The Grand Chessboard (Chapt. 8) -

...In the long run, global politics are bound to become increasingly uncongenial to the concentration of hegemonic power in the hands of a single state. Hence, America is not only the first, as well as the only, truly global superpower, but it is also likely to be the very last.

That is so not only because nation-states are gradually becoming increasingly permeable but also because knowledge as power is becoming more diffuse, more shared, and less constrained by national boundaries. Economic power is also likely to become more dispersed. In the years to come, no single power is likely to reach the level of 30 percent or so of the world's GDP that America sustained throughout much of this century, not to speak of the 50 percent at which it crested in 1945. Some estimates suggest that by the end of this decade (by 2000), America will still account for about 20 percent of global GDP, declining perhaps to about 10-15 percent by 2020 as other powers - Europe, China, Japan - increase their relative share to more or less the American level. But global economic preponderance by a single entity, of the sort that America attained in the course of this century is unlikely, and that has obviously far reaching military and political implications.

....What will America bequeath to the world as the enduring legacy of its primacy? The answer depends in part on how long that primacy lasts and how energetically America shapes a framework of key power partnerships that over time can be more formally institutionalized. In fact, the window of historical opportunity for America's constructive exploitation of its global power could be prove to be relatively brief, for both domestic and external reasons. A genuinely populist democracy has never before attained international supremacy. The pursuit of power and especially the economic costs and human sacrifice that the exercise of such power often requires are not generally congenial to democratic instincts. Democratization is inimical to imperial mobilization.

Indeed, the critical uncertainty regarding the future may well be whether America might become the first superpower unable or unwilling to wield its power. Might it become an impotent global power? Public opinion polls suggest that only a small minority(13%) of Americans favor the proposition that "as the sole remaining superpower, the U.S. should continue to be the preeminent world leader in solving international problems". An overwhelming majority (74%) prefer that America "do its fair share in efforts to solve international problems together with other countries".

_________

The rest of the chapter is VERY interesting... he describes and seems to foreshadow the low road to power that the U.S. seems to have ultimately chosen.

The whole book available here: http://book-case.kroupnov.ru/pages/library/Grand /

--- And here is the chapter I excerpted from above (from the first link)

http://book-case.kroupnov.ru/pages/library/Grand/part_7.htm#003