China

Obama Gains Ground on China Trade Policies as Hu Refuses to Rule Out Floating Yuan

President Barack Obama pushed against potentially unfair trade policies on two fronts in Monday's meeting with Chinese President Hu Jintao and appeared to win a small victory when Hu didn't completely rule out letting the yuan appreciate.

After Obama urged China to move toward a "more market-oriented exchange rate," Hu told him that his country wouldn't yield to "external pressure" in deciding when to adjust the yuan, Bloomberg News reported.

Obama also expressed "his concern" about some "market- access barriers in China," Jeff Bader, senior director for Asia at the National Security Council, told reporters after the meeting, which was held in conjunction with a gathering of world leaders in Washington to discuss nuclear security.

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Washington – Not China – Is the Real Manipulator Here

SHANGHAI, People's Republic of China - China just posted its first monthly trade deficit in nearly six years, a $7.24 billion shortfall for March that essentially torpedoes Washington's argument that the Asian giant is a "currency manipulator" of the worst kind.

The Obama administration's assertion that China is artificially keeping the yuan undervalued to gain a global competitive advantage isn't just misguided: It actually demonstrates that Washington lacks even a basic understanding of global economics. Given that the same U.S. leaders who have been pushing to hang this manipulator label on China and impose sanctions are the same ones who tried to end the financial crisis by creating a river of debt that will haunt us for years, I can't say that I'm surprised.

As the U.S. argument goes, pegging its currency to the dollar gives China a distinct advantage when it comes to less-expensive manufacturing and a strong export market. The implication is that somehow this is negatively impacting our economy, or - in a variation of the same logic - holding back our recovery. Washington points to the massive trade deficits we regularly run with that country as evidence of China's currency-market wrongdoing.

In reality, China's pegged currency has done two things. First, it's allowed the United States to keep its inflation rate at a much lower (and more-manageable) level than it should have been in view of the $14 trillion in debt that this country has taken on.

And, second, it's allowed China to fuel its own stimulus package while at the same time assuming a meaningful role in the ongoing global recovery.



Let's take a minute to talk about why this is true.

China Auto Sales Off to a Strong Start

China topped the United States in auto sales for the first time ever last year, and it looks poised to keep its crown as the world's largest auto market this year as car sales in China got off to a strong start in the first quarter - soaring 76% from 2009.

Some 3.52 million cars were sold in China in the January-March period, according to the China Association of Automobile Manufacturers. The strong showing was partly the result of weak 2009 sales but it was enough to convince carmakers to raise their regional sales forecasts.

General Motors Corp., which leans heavily on its joint venture Shanghai General Motors Co. Ltd., said it would hit its target of 2 million sales in China this year, putting the company four years ahead of schedule.

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Foreign Markets Outshine U.S. on Investors' Increasing Appetite for Risk

U.S. stocks carved out one of their patented half-percent advances last week -- a little sloppy, to be sure, yet not bad at all considering their very overbought condition.

The stars of the global capital show this month, though, have been markets in China and Europe, as they shook off their multi-month torpor to score big wins. With a scorching 6% advance in the past two weeks, ishares FTSE Xinhua China 25 Index (NYSE: FXI) nosed up to log a +5.5% gain for the year after being negative for three months. And the ishares S&P Europe 350 Index (NYSE: IEV) rose 1%, putting it at flat for the year after malingering below zero.

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Click Here to Read more on which foreign markets are moving higher

China May Let Yuan Appreciate Despite First Trade Deficit in Six Years

China's imports pushed higher in March, which may cause the Asian economic powerhouse to post its first trade deficit in six years.  But even though the deficit bolsters its argument for keeping the yuan pegged to the dollar, it appears Beijing will let its currency appreciate in the near future.

Rising commodity prices probably led imports to outpace exports by $390 million in March after a $7.6 billion trade surplus the previous month, according to the median estimate in a Bloomberg News survey of 26 economists.

Nevertheless, a change in China's currency policy is "imminent", and may occur in the next few weeks, Ben Simpfendorfer, a Hong Kong- based economist at Royal Bank of Scotland Group Plc (NYSE ADR: RBS), said Friday on Bloomberg Television.

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Geithner's China Jaunt May Signal Easing of Tensions on Yuan

In a surprise move, Treasury Secretary Timothy Geithner will meet with Chinese Vice Premier Wang Qishan in Beijing today (Thursday), as speculation increases that China is considering letting its currency, the yuan, rise against the dollar.

The unexpected meeting was arranged on-the-fly after Geithner's scheduled trip to India, and may be a sign that both countries are seeking to defuse the currency issue ahead of Chinese President Hu Jintao's trip to Washington next week.

The move follows the Treasury Department's decision last weekend to delay a decision on whether to label China a "currency manipulator."

"[China is] becoming more open to the world, and with that, you're going to see the [yuan] take on a broader role internationally," Geithner said in a Bloomberg Television interview in Mumbai as he finished preparations for the previously unscheduled visit to China. "That's a healthy, necessary adjustment."

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How to Protect Yourself – And Even Profit – if Foreign Creditors "Strike" U.S. Treasuries

The odds are good that China won't dump its holdings of U.S. Treasuries anytime soon. But by substantially reducing its purchases of U.S. debt - or halting them completely in the form of a buyers' strike - the Red Dragon could absolutely shatter the myth that it is the U.S. Federal Reserve that controls U.S. interest rates.

And that could also crater the bond market in the process.

To find out how you could protect yourself if foreign creditors ditch the dollar read on...

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Pacifying the Panda: U.S. Companies Must Take a New Approach to China

There's no question about what kind of profit opportunities the Chinese market offers. Moreover, the willingness of U.S. companies to partner with China in the pursuit of profit is equally blatant.

So why is it that more U.S. businesses feel less welcome in China now than they did four years ago?

The fact is that in the past four years, China's economy has continued to grow by leaps and bounds, while a humiliating financial collapse and soaring debt have tarnished much of the shine that once adorned the U.S. market.

Indeed, for the first time in perhaps more than a century China has the upper hand. How long that will last is a difficult question to answer, but right now, China wants to use its leverage to support domestic companies - and it's doing so unapologetically.

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Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull

Face it, commodity prices are in a secular rally - and there are three big reasons why.

  • Loose Monetary Policy
  • Growing Demand in Emerging Markets
  • And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader.  And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).
First, let's talk about policy. Immediately following the 2008 financial crisis, the Group of 20 (G20) countries agreed to stimulate their economies simultaneously.  And, while the emerging economies almost unanimously have already returned to strong rates of growth, most advanced economies are just now turning the corner.

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China, Europe Lapping the United States in the Clean Energy Race

If the United States doesn't take drastic measures to engineer new clean energy policies and investment initiatives, it will continue to take a back seat to China and Europe, which are driving the clean energy market toward a profitable future.

Both clean energy companies and a skilled workforce are heading overseas, where government policies are creating a more welcoming and promising market for clean energy products.

Take Massachusetts-based Evergreen Solar, Inc (Nasdaq: ESLR). In 2008, it used $58 million in government aid to open a new Massachusetts factory to build silicon wafers and cells and assemble solar panels. But in November 2009, it announced the assembly of solar panels would be moved to Wuhan, China, where solar panel manufacturing will cost far less than in the United States.

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China Manufacturing Data Could Presage a Rising Yuan

Manufacturing activity in China and much of Asia continued to expand in March, underscoring the region's role as a driving force in the global economic recovery.

China's official Purchasing Managers' Index (PMI) rose to a seasonally adjusted 55.1 from 52 in February, according to Li & Fung Group, a Hong Kong-based company that releases data for the Federation of Logistics and Purchasing. It marked the 13th straight month the index showed expansion and was in line with the median estimate in a Bloomberg News survey of 13 economists. A reading above 50 indicates growth.

Another PMI for China released by HSBC Holdings PLC (NYSE ADR: HBC) was even more positive, showing a rise to 57.0 in March from 55.8 in February.

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Historic Agreement Ends 40 Year Old Iron Ore Benchmark as Miners Get Short-Term Pricing Contracts

In a historic moment for commodities markets, two of the world's largest iron ore producers, Vale SA (NYSE ADR: VALE) and BHP Billiton Ltd. (NYSE ADR: BHP) signed short-term contracts for record prices with Asian steel mills that effectively replace a 40-year-old system of setting prices annually.

The landmark move by Vale and Anglo-Australian BHP ended the annual benchmark system when they signed new short-term deals linked to quarterly prices on the spot market, with the Brazilian company winning a 90% increase. Another large iron ore producer, Rio Tinto PLC (NYSE: RTP) has yet to sign any new contract, but is expected to soon follow.

The primary mineral used in steel, iron ore directly affects steel prices and the cost of everyday goods, including refrigerators, cars, and washing machines. That made the recent negotiations one of the most important issues for the global economy and commodity markets.

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Indonesia Catching China's Eye

It's an open secret that Indonesia's economy is on the rise. In the spirit of March Madness, it's something of a sleeper.  That's why China, which is always looking for promising new investments, is looking to make inroads there.

Indeed, China's appetite for commodities makes Indonesia - with its close proximity and abundance of natural resources - an ideal partner.

PetroChina Co. Ltd. (NYSE ADR: PTR), Sinopec, Sinosteel, Minmetals and China Investment Corp (CIC) - Beijing's $300 billion sovereign wealth fund - are all aggressively scouring South East Asia's largest economy for takeover targets and joint venture partners, the Live Trading News reported.

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Despite the Near-Record Run in U.S. Stocks, Oil, Commodities and China Will be the Long-Term Winners

Although U.S. stocks have made a fairly smooth transition into Year Two of what's so far been a near-record bull market, there are still many traps that can quickly ensnare a less-than-cautious investor.

Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."

In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:

  • Predicted that oil and commodity prices are headed higher, making them "must-invest" asset classes for investors who don't want to be left behind.
  • Stated that ongoing miscues in Washington coupled with higher growth abroad make it imperative that U.S. investors embrace a truly global view when planning their investing strategies.
  • And predicted that many blue-chip U.S. companies will go for dual-listings, listing their shares on China's Shanghai Stock Exchange (SSE), providing those U.S.-based firms with access to the plentiful capital and robust growth available in that Asian giant's marketplace.

For a full transcript of this interview, read on...

Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery

Question: How can banks justify not giving out mortgage money in light of the fact that they can now qualify their applicants to a level not previously seen? I am talking about literally millions of people applying for loans with 800-plus FICO scores and Loan-to-Value (LTV) Ratios that are better than ever before.

How can banks and lending institutions take our money and then turn around and shut nearly everyone out - which simply prolongs this recession? Can anyone explain why the present administration and regulatory bodies are not forcing the banks to loan monies to qualified applicants?

At this rate, we will be dead soon.   Without borrowing, we will die.  

•  (Signed) Living in Costa Rica

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