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China the monster.


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Premier Wen Jiabao said Beijing would do whatever was necessary to maintain growth at "about 8 per cent" this year


That includes fudging the numbers if need be.


The CCP has alot riding on the set of figures pending for FY2009, not least of all the transitory group of migrant workers caught somewhat in limbo between their metro employment and rural homestead. Not everybody can just go home and start farming again from scratch. The great capital works uptake has died down and government stimulus aside, people are refusing to dig into their savings - not something unexpected as nations less conservative than of Asia are battening down the hatches. There is money there but private enterprise has been unwilling to commit themselves without regulatory guarantees. There has been great expectations, external as well as internal, placed upon China and her efforts to modernise the economy, markets, infrastructure, policy and all. Just prior to the realization of this latest downturn ramifying across public sentiment, many in the market were still staunchly subscribed to the idea of decoupling. Those views have since dropped like a BRIC. There was no miracle element in the emergence of Chinese production - demand was very much external and debt driven. Neither was the US economy a sign of sapient capitalism - it had attempted to fund its furious consumption by offering often redundant and duplicative services under the guise of financial intermediation. Now that the model of unsustainable growth has been stripped down to its bare minimum, we see that there is very little left to say or do save for a series of "unprecedented" write-offs headed by the heads of each respective state. As productivity has fallen off its dizzying heights, the PRC has had even deeper cuts to both the price and quantity of its imports (primarily input materials for value adding). As such, the downturn has had negligible influence over the current account gap or balance of trade figures. All signs point to a reluctance to spend anything more than the merest of investment required to meet demand from abroad. The money is there but it won't be spent on this rainy day for fear of an even rainier day later down the track. At the rates things are moving along, 6.8% (already on the high-end of what they are able to report) sounds like a probable rate of GDP growth for China in the year of the Ox. Whether or not that 8%pa can be achieved will perhaps depend more on what happens overseas that what the PRC and its people are prepared to do to boost internal demand. If history provides any indication, the Chinese populous are not about to become a consumer nation by any measure any time soon.

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I have lost count on the number of dire forecast about China or its economy over the past 10 years. They have all been proven wrong. This time around, it's not going to be different. There are, will continue to be forecasts made by economists/analysts about how and why the Chinese economy will implode, how and why the Chinese society will explode, etc etc. I tell you mate, they are wrong, they will always be wrong. Not because of any theories of economic models that have gone wrong on China, but because they don't understand that this 5 thousand year old civilization, modernized and revitalized, is determined to reclaim their rightful place in the world. And they will get there. The richness and the deep depth of the wisdom, determination, and perseverance of the Chinese nation are beyond their comprehension. This is not a 1+1=2 proposition. You will be surprised. And I have no doubt about it.
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Hi Mr Gao


Just heard a journo on ABC tv explain that the commodity supercycle is called that because...well because it was so super for profits and taxes whilst it lasted. :wacko: Apparently nothing to do with it being a long-length or super oscillation rather than a relatively short and more obvious business cycle.


It is a bit like every man and his dog calling a week by week analysis of whether there really is global warming, based on whether or not it was unusually hot or cold for that week where they live.


And it is a bit like those claiming that decoupling is not a reality because China has not emerged as the new USA so far this year.


Going on that impatient logic then tectonic plate movements do not exist because Australia has not collided with any land mass in all the time Europeans have been living in this part of the world.


I can vaguely remember back in time, or perhaps I merely read about it, when Australia was terrified that mother England was cutting us loose and telling us to get on as best we could, out and away from her skirts. But how could we possibly survive, decoupled from our primary sustainer??? Surely we could not get by from scavaging for exports from a bunch of third world tin pot countries like Japan and Korea and HK??? Well as it turned out, we actually prospered, in many ways, from becoming uncoupled from the old dart, and catching a ride on the east Asian wave.


Unlike Australia, both the US and China have big enough populations and economies to largely sustain themselves, and just as the US in the latter part of the 19th century became increasingly less dependent on the Brits so in time will China become more self-supporting, away from the yanks. That China is not yet uncoupled from the US does not mean that it is not in the process of being decoupled. And the uncomfortable fact that exporting to the US at this time is not as good a thing to do as it has been up till now will probably force China to quicken up the decoupling process. But the process is happening now. Look back in 10 years time and it will be obvious IMO that the horse to have backed in 2009 was China, not the US.



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Wen looks at fresh Chinese stimulus (from London's FT)

By Lionel Barber, James Kynge and Geoff Dyer in London


Published: February 1 2009 22:00 | Last updated: February 1 2009 22:00


China has pledged to take all necessary measures to stimulate its economy and fuel consumer spending, but has rejected as "ridiculous" suggestions that its huge pool of domestic savings has been partly to blame for the global financial crisis.


In a rare interview, Wen Jiabao, China's premier, said in London on Sunday that Beijing was considering fresh measures to boost its economy beyond its Rmb4,000bn ($585bn, ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬458bn, ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚£404bn) fiscal package launched late last year.



Jane---when you consider the US is now contemplating A TOTAL DEBT RAISING OF USD 3 trillion, on one hand

and China actually OWNS USD3 TRILLION of PAST US debt on the other hand, talk of any Chinese demise is

laughable, what a situation to be in--solve the US crisis with 3 trillion of DEBT, or SOLVE the Chinese problem

of possible labour unrest by SPENDING the 3 Trillion thay have in CASH and bonds---------------


Doesnt take a Rhodes Scholar to see who wins!!!!!

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Brad Setser discusses a recent article from The Economist. The gist of it is that whilst China has indeed been shortened up from the bodyblow of collapsing exports due to the US originated credit crisis what really laid China out was a self-inflicted hit to the groin in the form of an over-reaction to locally sourced real estate and consumer price inflation. But seeing that the Chinese authorities bruck it then it should be far easier for them to fux it (whether that be through an re-emphasis on further investment or on an inducement for greater domestic consumption).


This is a quote from The Economist:


AsiaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s export-driven economies had benefited more than any other region from AmericaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s consumer boom, so its manufacturers were bound to be hit hard by the sudden downward lurch ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¦. Shocking as the export figures are, they are not entirely to blame for AsiaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s woes. A closer look at the numbers reveals that in most countries imports have fallen by even more than exports, and that weaker domestic demand explains a larger part of the slump.




In China, for example, weaker domestic spendingÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ÂÂmainly the result of a collapse in housing constructionÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ÂÂaccounted for more than half of the countryÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s slowdown in 2008. In South Korea, net exports actually made a positive contribution to GDP growth in the fourth quarter, while consumer spending and fixed investment fell at annualised rates of 18% and 31% respectively. ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¦ Domestic spending has collapsed elsewhere. Over the past 12 months, retail sales have fallen by 11% in Taiwan, 6% in Singapore and 3% in Hong Kong. ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¦


And here is Setser's post




As an aside: I frequently do not fully understand what is being said when Setser breaks into economist's babble but more often than not the comments at the end of the post help fill in the blanks.



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if you group the quarters MJJ ASO NDJ etc, you will notice that this quarter is above the last quarter. this is late confirmation that the bear market for the SSEC has finished and that a new bull market is more than three months old.


the october low visited close to the high of 1993 .. fifteen years ago!

when you consider the inflation of the intervening years, in real terms, the recent low prices are incredible bargains.



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That's the scenario I'm working on also. China is the one country that is still going forward, unlike most of the world, so it makes sense. At least it's moving in the right direction - for now. Finding a bottom is only the first step.

It will be a combination of domestic & international prod that will start a new uptrend & that's not likely for some time yet. As their leader says, they can't save the world on their own.







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