China exports in February rose for the third month in a row, beating forecasts and putting added pressure on government officials to rein in stimulus spending and loosen currency policies. Exports in February jumped 45.6% from a year earlier after a 21% advance in January, the customs bureau reported today (Wednesday) on its Web site. […]
China's rigid stance to not appreciate its currency continues to cause problems with "hot money" and foreign trade relations.
A report from Yi Gang, China's director of the State Administration of Foreign Exchange (SAFE), today (Tuesday) shrugged off calls for currency appreciation. Yi said China's foreign-exchange reserves – which are the largest in the world at $2.4 trillion – are safe and stable, and the country will strengthen its supervision of speculative cash inflows.
Speculation that China's currency, the yuan, is soon to rise has increased investment, but such speculation is not particularly welcome. "Underground money shops" disguise funds as foreign direct investments and trade accounts in an attempt to profit from the increasing spread on interest and exchange rates, according to Yi.
Chinese Premier Wen Jiabao on Friday pledged to maintain economic growth of at least 8% in 2010, while gradually drawing down government spending and taking measures to guard against inflation and potentially devastating asset bubbles.
The remarks came during Wen's annual report to the National People's Congress in Beijing – which is the equivalent of the United States' State of the Union speech – and they highlight the central government's determination to promote responsible levels of growth.
The call for 8% annual economic growth is the same goal that has been maintained since 2005 – and one that was easily passed last year with the implementation of a sprawling $586 billion stimulus package.
Silver is up over 44% in the last nine months. But thanks to a new campaign by the Chinese government, silver is about to take off higher. Much higher. Here's how to play silver for a "triple" this year…
In the monthly U.S. Treasury report this week, it was announced that China had sold $34.2 billion of Treasuries in December (or allowed short-term ones to run off), making Japan once again the largest holder of U.S. Treasuries.
The battle between China and Japan for the title of largest holder of this dubious asset is not very interesting. What's more interesting is the question of where China is instead opting to invest. After all, $34.2 billion is a fair chunk of change, and China's overall reserves are growing – not shrinking – and now total $2.4 trillion.
The People's Bank of China usually keeps its holdings a carefully guarded secret, much more so than for most central banks – our knowledge of its holdings of Treasuries comes from U.S. data, not from China. We do, however, have some evidence about the Chinese government's investment thinking, thanks to the holdings of China Investment Corp., the country's $200 billion sovereign wealth fund.
I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.
The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.
China is the greatest growth zone in economic history. The third largest economy in the world, China is projected to pass Japan in the coming year and to surpass the U.S. economy as soon as 2020. So, when you're deciding how to allocate your investment portfolio, do you want to put your money in the U.S. – a country projected to grow by less than 3% in 2010 – or in a country that is expected to more than triple that? Here's why I'm putting my money in China.
Legendary investor, Bill "The Bond King" Gross made headlines recently when he said that China will one day have to contend with a bubble of its own making. Gross runs the world's biggest bond fund at Pacific Investment Management Co. LLC (PIMCO). Millions of investors reacted just as you would expect when someone of his prominence makes such a pronouncement – they panicked.
While I can see how Gross would arrive at such a conclusion, his comment about China is akin to the economist who tells us that "the U.S. economy will recover."
In either case, just when and how isn't clear.
Back in May I recommended that readers should buy shares in Ford Motor Co. (NYSE: F) on the grounds that the U.S. carmaker would gain market share from the bankrupt General Motors Corp. (OTC: MTLQQ) and Chrysler Group LLC. Ford’s third-quarter profit and healthy October sales growth show I called that one right. One doesn’t like to blow one’s own trumpet excessively, but if you’d followed my advice in May, you would today be sitting on a profit of nearly 50%.
However, while I admire Ford for its brilliant strategic decision not to cave in and accept government-sponsored bankruptcy, and wish it well in its future battles with GM and Chrysler, I’m not sure the company that Henry founded represents the future for the global automobile industry.
More likely – while Chrysler will become a money-pit that is closed only by political means, and GM will limp on as a smaller and marginally profitable U.S. and European producer – Ford will slim down to become a specialty producer of cars tailored to the tastes and needs of the U.S. market. It’s well known that the auto preferences of U.S. consumers differ greatly from those of their European counterparts.
[Editor's Note: Money Morning Investment Director Keith Fitz-Gerald is currently in Mainland China. Look for additional installments of his investment travelogue later this week.] XIAN, People's Republic of China – During the politically charged period in the late 1980s and early 1990s – when China believed it really needed friends – a small number of […]