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China

U.S. China Currency Dispute Heating Up

The heated debate between China and the United States over the value of its currency intensified yesterday (Thursday) when a senior Chinese trade official warned that further appreciation of the yuan could put many of its exporters out of business – something China can't afford.

Those remarks came shortly after a key International Monetary Fund (IMF) official flatly stated that the currency is severely undervalued.

China's Vice Commerce Minister Zhong Shan told The Wall Street Journal in an exclusive interview that the profit margins on many Chinese export goods were less than 2% and any further increase in the currency's value would endanger more exporters' survival.

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Chinese Premier Wen Rejects U.S. & European Pleas, Says Yuan to Stay Stable

China's Premier Wen Jiabao vigorously defended his country's economic policies on Sunday, rejecting calls to let the yuan appreciate, and ratcheting up trade tensions with the United States where lawmakers and economists insist his stance is hindering a global recovery.

"I don't think the renminbi is undervalued," Wen said at a press conference in Beijing, using the Chinese currency's official name. "We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency."

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China's Exports Surged by 46% in February, Adding to Currency Pressures

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.  […]

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China Standing Firm on Currency Policy Despite Mounting Pressure

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.

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China Draws Plan to Reduce Risk While Continuing Economic Growth

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.

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Prudential Takes Control of Asian Insurance Market With Purchase of Foreign AIG Unit

London-based Prudential PLC (NYSE ADR: PUK) showed its confidence in Asian market profitability by agreeing to buy American International Group Inc.'s (NYSE: AIG) Asian insurance-unit – AIA Group Ltd.

The news follows AIG'S announcement Friday that it lost $8.9 billion last quarter and would continue to divest assets to repay its billions in debt. AIG was planning on an initial public offering for AIA Group in Hong Kong, but recognized a sale to Prudential as a better deal.

Showcasing its bullish outlook, Prudential will pay $35.5 billion for AIA – $25 billion in cash and $10.5 billion in stock and other securities. The company plans to raise $20 billion in a rights offering and sell $5 billion in bonds to finance the deal's cash portion.

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How China Will Drive Silver to $250

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…

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Saudi Arabia Shifts its Focus to China as the United States Falls Out of Favor

Saudi Arabia, the world's largest oil producer, last year shipped more oil to China than it did the United States for the first time ever – a shift that highlights China's ascension to the ranks of the world's economic elite, as well as its position as the new focal point for the world's energy producers.

The flow of oil from Saudi Arabia to China rose to more than 1 million barrels per day (bpd) last year, just as demand in the United States fell below that level for the first time in more than two decades.

China in December alone imported a record-high 1.2 million bpd of Saudi oil, as its economy rode the momentum of Beijing's $585 billion (2 trillion yuan) stimulus package. U.S. imports of Saudi oil, on the other hand, fell to a 22-year low of 998,000 bpd in the first 11 months of 2009, as the world's largest oil consumer clawed its way back from its worst recession in 70 years.

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The Chinese Are Selling Treasuries – So What Are They Buying?

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.

To discover the details of China’s global investments, please read on…

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How to Profit From China's Next Move

For many investors who don't have the benefit of 20 years of experience in Asia like I do, figuring out what Beijing is up to is both puzzling and difficult.

But a handy little tool called a "Form 13F" can help.

In case you're not familiar with it, the 13F is a disclosure document that the U.S. Securities and Exchange Commission (SEC) requires institutional-investment managers to file when they hold $100 million or more of certain U.S.-listed stocks.

China's $300 billion sovereign wealth fund (SWF) – the China Investment Corp. (CIC) – just filed its first-ever 13F with the SEC, revealing that it purchased about $9.6 billion worth of U.S. stocks last year.

And it confirms much of what we've been telling you since the global financial crisis began – namely that China would take advantage of the crisis by purchasing beaten-down stocks, resources, and hard assets … and in a big way.

Even more important, this filing hints at what China is likely to do next – an insight that will help investors figure out where to put their money in order to maximize their personal profits.

To discover how to profit from China's next move, read on...