BRIC+ News & comments

So? What does that have to do with rail transit?

Air transit is appropriate for low-density regions - such as the American west. This is the case because you don't need to maintain thousands of miles of railroad tracks (let alone, high-speed rail tracks) between distant cities with small populations. Instead you build an airport, and agglomorate all the traffic into big hubs. Also, planes move much faster than even the fanciest high-speed rail systems.

There is indeed a need for rail transit between reasonably-close major hubs. And, indeed, we already have such rail systems, and plans in place to make them faster.

The definition of "high speed rail" is given in terms of peak speed, not average travel time. Again, that route is being upgraded to bring travels times down to where they'll compete with air travel. And, regardless, it's still much faster than regular passenger trains in the US, which are quite slow. This is partially because many of the routes haven't been upgraded for high speed transit, and partially because commercial freight has the right-of-way in the US (this is not the case in most other countries).

As I just told you, construction on the CA route starts in 1 year's time. The bonds have been issued, the money allocated, and the studies and contracting are being completed as we speak. Upgrades to the Acela route have been ongoing for years now.

 

Log in or Sign up to hide all adverts.

Quad Let me expose the inconsistency that follows from your false claim that the US lacks the density to support high speed (>200km/h between stops) rail this way:

On one hand you assert the population density is too low in the US to support a high speed rail line.

and on the other hand claim:

California has already issued the bonds, hired the enginners, and will start constuction of a high speed line in one year.

You should thank god, you only have two hands to self confict with.

Please Register or Log in to view the hidden image!

 

Log in or Sign up to hide all adverts.

“… Billionaire Wang Wenxiang was sentenced to death Friday for hiring two people to murder a former business partner. Wang, 49, a native of Heilongjiang Province, was convicted of having contracted the killing to his personal secretary Bai Peng and a migrant worker Yu Yi, according to the court verdict handed down by the Municipal Intermediate People's Court of Harbin, the provincial capital. …”

From: http://english.people.com.cn/90001/90776/90882/6846807.html

When was (if ever) a billionaire executed for murder in the US? I don’t think OJ was a billionaire, but his lawyers got him off anyway. Clearly this shows China lacks the high-priced lawyers it needs.

Please Register or Log in to view the hidden image!

For how China treated lady I called “Mini-micro–madam Madoff” (death sentence) and some details of her Ponzi crime, see:
http://www.sciforums.com/showpost.php?p=2441884&postcount=27

 

Log in or Sign up to hide all adverts.

More on China's high speed trains (and high speed high society at end):

"Dec. 22 (Bloomberg) -- Train C2019 covers the 120 kilometers between Beijing and Tianjin in 30 minutes, {Billy T insert: That is more than twice as fast as the fastest the US has. See proof in post http://www.sciforums.com/showpost.php?p=2436140&postcount=218}

The line is part of China’s 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast. …
China accelerated its high-speed-rail development plan last year in the wake of the global financial crisis, saying it would increase the passenger network by a third to 16,000 kilometers (9,944 miles) by 2020. …”

The centerpiece of the service is a 1,318-kilometer line with 16 kilometers of tunnels that will cut the trip between Beijing and Shanghai to five hours from 10. Set to open by 2012, the 221 billion-yuan project currently employs 127,000 workers and is the most expensive engineering program in Chinese history,* eclipsing the Yangtze River’s Three Gorges Dam, the world’s biggest hydroelectric project, which cost 203.9 billion yuan.

Spending on railroads is growing faster than on any other area of investment, rising 80.7 percent to 464.6 billion yuan in the first 11 months of the year from the same period in 2008, according to China’s National Bureau of Statistics.
Investment in fixed assets such as factories and the rail network accounted for more than 95 percent of China’s 7.7 percent growth in the first three quarters of 2009 and made up 45 percent of gross domestic product, which is higher than any major economy in history, according to Morgan Stanley Asia Chairman Stephen Roach.

From: http://www.bloomberg.com/apps/news?pid=20601109&sid=aFw2m.3un3dk&pos=10

One should note that China only makes the high speed tracks and parts of the trains:
“Montreal-based Bombardier Inc., the world’s largest maker of passenger locomotives, and Munich-based Siemens AG are helping to build the system. Bombardier’s Chinese joint venture won a $4 billion contract in September to build 80 high-speed trains. Siemens, Europe’s largest engineering company, and Chinese partners received a 750 million-euro ($1.08 billion) order in March for 100 trains. …” - From same source.

-------------
*Perhaps not for long. China already has the longest (35km) bridge in the world (and the No. 2 also) but has just started work on a 50km bridge which will link Hong Kong, Macau, and the main land over the ocean. Part of the bridge structure would be in the flight path of Hong Kong’s run way. Thus, at least one artificial island will be built as one end of a 16 km tunnel under the ocean. That island will be many acres large and house the customs facilities. There are serious engineering studies under way for the bridge to Tiawan!
-----------
-----------
On a lighter note: 21 unmarried Chinese billionares paid 100,000 Yuan each to attend a dinner dance Sunday night in Beijing Jun Wang Fu, a luxury hotel, where 22 very selected for talent, education and beauty single ladies would be present. Details at: http://english.peopledaily.com.cn/90001/90782/90872/6849357.html

China certainly is rapidly changing in every way one can imagine!

Please Register or Log in to view the hidden image!

 

Note that this is the stuff I keep pointing out to you when you bring up domestic consumption. Essentially all of the growth, and an exorbitant segment of GDP, consists of investment. So much so that consumption has markedly declined as a percentage of Chinese GDP over the past 20 years or so. One reason for the heavy emphasis on investment is that it represents government control: the commercial banks are state-run, and award loans through a corrupt process to politically-connected businessmen and local officials. That many (most?) of these loans do not perform doesn't matter; the state banks are simply propped up by the central government.

It is thus extremely difficult for the central government to pursue industrial policies that would shift the economy towards a more consumption-oriented posture. Any reduction in investment represents the abrogation of purchased political allegiances, decreasing the central government's power over the economy and society as a whole. Consumption spending provides no replacement for this, as it is widely distributed and difficult to channel into politically-favored groups. It also will create lots of pressure to stop depressing the yuan, and so eat heavily into exports (and thus, the foreign exchange reserves of the central government). All of which adds up to the power of the CCP being in conflict with such changes.

So while it seems clear from a the standpoint of developmental economics that China should transition away from export-orientation and towards domestic consumption, it remains unclear how (whether?) the political economy of China can accomodate that, even if the CCP does like the idea of reduced exposure to foreign upheavals. And in the meantime, the existing industrial policy lumbers on, entrenching corrupt businessmen and increasing the role of investment in the economy at the expense of consumption. At some point things will come to a head, but I have a difficult time seeing how it can work out in any nice, clean way.

 

To Quad:

I agree that as China converts to a domestic market (instead of the old export economy) the CCP’s control is more at risk. None the less they have no choice but to build their domestic market and reduce exports as a percent of GDP – Joe American is saving now and lost much of his wealth, which was in his house and is not sure of his job, so very reluctant to buy as he once did. Not having adequate jobs is a much greater risk to the CCP.

Also, China is no longer the low cost produce of much of what Wal-Mart sells. I don't live in the US but bet if you look at Wal-Mart's clothing labels many will not be Chinese now. Hell even China imports shirts and shoes from Vietnam now!

Also most of China’s stimulus is going for domestic infrastructure not factories for export. This not only makes rapid domestic growth* but also the jobs that the workers in the now closed toys for export factories, etc. need. I think you are exactly wrong that that exports are a growing part of GDP. China is not like Brazil with 85% of GDP the domestic market but soon will have 50% its GDP the domestic market as salaries are rapidly increasing in purchasing power and the new infrastructure is making that possible.*

What you said about the SOEs WAS true, but no longer. China’s banks are now actually sounder than those of the US by far. Their books are no longer filled with questionable loans to SOEs. Some of the world’s largest and most profitable banks are now in China. – None need bail-out to avoid going under. Western banks are buying them as fast as the CCP will allow.

-----------------
*For example, the rails and new airports are greatly expanding travel and vacations – Disney is even building a “Disney land” there now. Huge numbers of new hotels and short hop airplane are being ordered as the Chinese now can afford to see China. This new infrastructure is growing the DOMESTIC market, not exports. In fact export factories with less than 80% of capacity utalized are now prohibited from expanding – cannot get financing.

 

You're using the present tense: where is the evidence that such a conversion is underway?

Domestic consumption has been shrinking as a share of GDP there for many years, and this trend should continue once the stimulus ends and the world economy recovers:

http://www.pekingduck.org/2009/12/chinas-domestic-consumption-a-myth/

Sure they do. They can hammer their currency down even harder, and try to displace more producers in other countries.

That's a temporary situation which won't persist much longer, and anyway Americans are not the only consumer market out there.

Hence the huge reliance on investment: you build factories and roads, and so put low-skill laborers to work.

It's been that way for a long time. China was never the sole, or even primary, low-cost producer of everything, particularly clothes (which have long come from southeast Asia and the Phillipines).

But the cost that appears to export markets is controlled by the exchange rate, which the CCP has a long history of aggressively manipulating to boost export competitiveness.

Those are not exclusive categories. A great deal of that "infrastructure" was loans for factories and equipment. And the resulting products will end up exported if China continues with its monetary policies.

Where did I say that? I've been talking about the huge and growing percentage of the GDP that is investment.

Possibly in another decade, according to the experts. But that's still far below what we'd consider a "consumption-led economy." Investment looks to continue to loom large.

I didn't say anything about SOE's.

No they aren't. But since they are government banks, and not private banks, their solvency doesn't affect their operations. The government gives them money, and tells them who to loan it to, and they do so. If loans don't perform, the government simply eats the losses.

Oh, those are still on the books, just no longer a growth sector. Now the action is in questionable loans to "private" companies run by CCP-connected businessmen and functionaries.

http://www.theglobalguru.com/article.php?id=162&offer=guru001

"Estimates of bad loans on the books of China's banks by the leading rating agencies in the world range from 40% to 60% of China's current GDP. [...] No wonder that Moody's Global Credit Research rated the average bank financial strength rating of E+ for Chinese banks, one of the lowest on Moody's global scale.

[...]

How did Chinese banks get into this mess? Investors forget that China is a Communist, centrally planned economy -- complete with five-year plans. As in all centrally planned economies, China's state-owned banks' role is to bankroll the government's massive infrastructure projects and to keep otherwise bankrupt, state-owned enterprises afloat. That's why state-owned enterprises account for 25% of gross domestic product, but receive 65% of loans. Credit management problems, a lack of qualified staffers and deep-rooted corruption are more characteristic of China's banks than world-beating financial savvy.

[...]

China bulls will argue that -- thanks to a combination of capital injections and improved operations -- a bank like ICBC has cut its non-performing loan ratio to about 4% from a high of 34%. Yet the ability of the Chinese banks to change their stripes so quickly and emerge as global powerhouses virtually overnight is doubtful. Moody's notes that many former non-performing loans have been simply re-classified as "special mention" and often represent a huge part of Chinese banks' borrowing activity.

Record profits are fueled by record loan growth. New loans totaling 3.08 trillion yuan (409.6 billion U.S. dollars) were approved in the first eight months of this year, a figure that already almost matches 2006's total level of 3.18 trillion yuan (422.9 billion U.S. dollars). Of course, making bad loans only increases the level of bad debt. And the bailout money pumped into banks to dress them up for IPOs is a classic moral hazard. Jawboning from the Chinese authorities aside, there is little incentive for Chinese banks to avoid lending to state-owned businesses that show scant regard for risk or return.

The reality is that once the Chinese locomotive slows, the risk of bad loans skyrockets. The rating agency Fitch estimates that even in a moderate economic slowdown, 10% of loans could turn bad. A severe slowdown -- say, if China's GDP growth slumps to 3-4% a year -- would send the entire banking sector into a tailspin. And the repercussions are likely to be much worse -- and the bailout much more expensive than after the last bust. Loans to the Chinese private sector and non-financial government enterprises now are clocking nearly 160% of gross domestic product versus about 120% in 2000. A back-of-the envelope calculation shows that much of China's $1.3 trillion in reserves could be eaten up by banking bailouts."

 

Thank you for your reply, but I will need time to show most of it is false. I.e. you are forcing me to do some searching for documentation I can quote, rather than just rely on my memory of what I have recently read. Thus, I plan a separate post responding to each of your claims. The first follows your first implied claim that China has not yet begun to move to more domestic and less export economy as I stated.

“An Organization of Economic Cooperation and Development (OECD) report issued Tuesday, however, said next year's growth rate could be 8 percent, while the International Monetary Fund put it at 8.5 percent. …
The country's exports are likely to fall, … the World Bank said. Private sector demand is also likely to fall, though government spending would increase dramatically to fill the gap. Absorbing the shock and maintaining the overall growth of the economy will be the biggest policy challenge for China next year, said David Dollar, World Bank's country director for China.
China announced a $586-billion economic stimulus package on Nov 9 to boost domestic demand and insulate the economy from the effects of the global financial crisis. …”
From: http://www.chinadaily.com.cn/bizchina/2008-11/25/content_7237961.htm (11Nov08)

My next quote, only two months old, will show that the first quote’s year old prediction that exports would fall and that the 586billion stimulus would fill the gap and keep domestic spending rising has proven to be true. I.e. exports are down and domestic spending is up so China IS NOW switching to a more domestic economy.

“China's GDP increased 8.9 percent for the third quarter, … The growth was in line with analyst expectations, although there are rising fears that the government's massive stimulus package may be inflating stock and property prices. … "We have obtained obvious achievements and further strengthened the steady upturn trend of the economy. The overall situation of national economy is good," said Li Xiaochao, of the National Bureau of Statistics. … Foreign trade has continued to drop, but its rate of decline is slowing. The total volume of imports and exports in September was down 10.1 percent compared to the same month last year …”
http://edition.cnn.com/2009/BUSINESS/10/21/china.gdp.announce/index.html (22Oct 09)
If GDP growth is up and exports are down, it seems reasonable to conclude that a conversion to a more domestic economy is NOW under way. I.e. the present tense is justified.

----------------------
Now I anticipate you will counter by claiming that it is the investment, not domestic spending, that has made GDP grow despite falling exports, and that this investment is the CCP’s effort to keep the old export dominated economy growing, (as you claimed in post227) not China switching to a domestic consumption economy. That it just takes time for the investment in new and expansion of existing export factories to show up as greater exports. So I respond to that now as it may be some days before I can complete a series of posts replying to your post 227.

My first counter to that claim is to note the part of 2nd quote I made bold. Yes, there is a great deal of growth due to investment in stocks and new apartments etc. But NONE of that is factories for expanding export. That is 100% domestic spending.

Note that half of the total stimulus investment is being spent on development of the rail system. Proof:
“The line is part of China’s 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network…”
From: http://www.bloomberg.com/apps/news?pid=20601109&sid=aFw2m.3un3dk&pos=10
I.e. 293/586 = 0.5 and I don’t see how one can export a railroad!

Please Register or Log in to view the hidden image!

Also most of the remainder is being spent on fixed energy infrastructure such as wing farms, solar cell farms, new dams, and power plants. These too cannot be exported but the power is need for all the new electrical appliances being sold. They do however provide jobs for workers who previously had jobs in the now closed export factories.

My second reply is to note that factories with less than 80% of capacity being utilized (mainly those that export products, as there are waiting list to buy many domestic products) are PROHIBITED from expanding -cannot get loans, etc.! I.e. it is the factories for domestic consumption that are expanding. For example, the wait for delivery of the more popular cars in some case is now more than nine months! Chinese cars sales have doubled in less than two years. China now sell at least 2 million more cars annually than the US does. The Chinese version of “cash for clunkers” is focused on domestic appliances, not cars, with deep price reductions for first time rural buyers. Some electrical appliances also have waiting periods.

SUMMARY: The new factories part of the “investment” part of the GDP growth is being invested in domestic product factories, not the export ones; however, the CCP is expanding factories with only a very small part of the total stimulus package. Export factories get nothing of the stimulus investment and exports as percent of GDP are already dropping! Greater than 90% of the stimulus is going into new infrastructure. The stimulus dominates all FDI, which mainly is just buying stocks or expanding domestic production capacity – not factories for export.

Face it: The export aspect of the Chinese economy is now SHRINKING compared to the domestic market GROWTH.
I.e. Your claim to the contrary is False.

I will admit your claim that the CCP invested in the less treating export economy WAS true up till the fall of 2008, but then with the US economy’s deep recession, The CCP (and 99% of all economists) understood that China had to grow it domestic economy and become less dependent upon exports. Thus the fact is that China IS NOW switching to a domestic led economy, but of course exports will be important for many years, but as a decreasing component of the GDP.

PS Your own link, (http://www.pekingduck.org/2009/12/chinas-domestic-consumption-a-myth/), Is not about whether or not China is switching to a more domestic economy or not. It is about whether of not China is now decoupled from the global economy. It fact your link supports my POV as follows:

“while there is an increase in retail spending, local consumption is not likely to become China’s main growth engine any time soon.”

It does not mention that China’s exports are falling, September 09 down 10.1% from September 08. – There is no need to mention that as everyone agrees China’s exports have dropped with the US crisis.

Again exports down domestic consumption up certainly does imply that the Chinese economy is beginning the switch to a more domestic and less export oriented economy as I said.

BTW what sort of source are you reduced to quoting? The PekingDuck sound like a restuarant! - Not in the same league as my reply sources (World Bank’s China director, Organization of Economic Cooperation and Development, International Monetary Fund, www,ChinaDaily, www.CNN.com/2009/ Business, www.Bloomberg.com, and the {Chinese } National bureau of Statistics.)

 

To imply China has hammered the Yuan down is at best a gross distortion or more likely simply false.

China’s currency was pegged at ~8 Yuan (by memory) to the dollar for many years and then China “hammered it UP” against the dollar to 6.83 Yuan/ dollar by July 2008 where it has remained to the present. Almost all who have an informed opinion expect China’s next move will be to further APPRECIATE the Yuan, not hammer it down.

A huge amount of money, including tiny part of mine, has gone to China with that expectation because in addition to GDP growth of about three times greater than the US there is also the strong probability that the Yuan will appreciate.

It is only your opinion that Joe American’s depressed buying from China is “a temporary situation.” Mine is that will remain true at least until total real unemployment (now about 15%) is below 6% and that most think will be some years. During those years, the US government debt will annually be growing about 1.5 trillion / year. Thus the purchasing power of the dollar is sure to continue it long term decline, even if there is no “run on the dollar.” Investors are already avoiding the 10 year and longer term bonds – the yield curve is very steep now 2.85% more interest required to get them to buy the 10 year bond than the 2 year note.

You may expect that soon Joe American will be back to his old spend thrift ways, but not many others do. Most think Joe has learned his lesion and will be saving for at least a decade. I.e even if the recovery is “real” and not just a repeat of what happened in 1930 with an even greater crash to follow, Joe will not be China’s good customer that he once was.

Agreed that the US is not China’s only export market. In fact I think the EU recently claimed first place from the US but with the Euro now at 1.43$/€, down from 1.51$/€ the US may be the main export market of China again, if the buying power of the Euro remains as reduced as it is now wrt the dollar.
Idid not say the US was China's only market - but just noted it was buying less now than at start of 2008, and that is true of most of China's trading partners (not Brazil's however; that trade is rapidly growing as both their economies are.) I.e. I was only using the US as a typical example - I could not list all who are buying less from China now so that China's exports are down 10.1%.


SUMMARY:As I said, China has no choice but to switch to a more domestic economy (as my first reply posts shows it is now doing)

More replies to your post 227 pointing out other false parts tomorrow (or after Xmas?)

 

Please Register or Log in to view the hidden image!

In last post, my 2.85% for the 10 to 2 year interest rate spread is wrong. It is now 3.07% on new issue.
I do not know why the above curve shows about 2.85% spread. Must have something to do with older bonds with 10 years more to maturity OR Bloomberg does not up date its graphical displays every day.

I think tomorrow some 7 year bonds will be offered - I bet even they will need higher interest rates to move. Perhaps even 3.5% interest.

 

"... China National Offshore Oil Corp (CNOOC), the country's largest offshore oil producer, has signed an agreement to develop oil and gas resources in Venezuela, the latest step in its overseas expansion.

CNOOC has signed a memorandum of understanding with its Venezuelan counterpart for the development of heavy oil and offshore oil and gas resources. The agreement was signed in the South American country on Dec 22, said a company executive yesterday.

It is the company's first entry into the country, said the executive who declined to be named, adding that it was a framework agreement.

CNOOC will help Venezuela to develop the Boyaca 3 oil block in the Orinoco belt, a large heavy-crude basin in eastern Venezuela, Wall Street Journal reported yesterday. ..."

From: http://english.people.com.cn/90001/90778/90861/6850659.html

Billy T comments:
This could get to be a dangerous situation. The US is building or expanding 11 air bases in Columbia for fighter/ bombers - under the pretense that they will be used in Columbia to fight the drug trade. No one in South America believes fighter bombers would be useful in the jungles of Columbia.

I think there real purpose is to again try to depose Chavez, with greater force this time. However, Brazil is concerned that they may be used against Brazil.

Brazil has ordered 50 troop carrying helicopter and five submarines from France. The US has a long history of using military power when necessary to get control of oil and Brazil now has discovered some large off-shore oil fields. Presumably the subs would be to help defend the off-shore oil platforms and the helicopters to counter attack the US bases in Columbia if fighter bombers attack Brazil. Brazil is also negotiating with Russia to buy their most modern ground to air defense missiles. - The latest version - one more modern than Russia has supplied to either Iran or Venezuela.

There have been several point of increasing friction between Brazil and the USA. Perhaps the most serious was Brazil (and most other South American countries) did not recognize the right-wing military coup in Honduras. In fact Brazil gave shelter in the Embassy to the elected President the coup deposed. The US speaks of democracy but always supports right –wing coups if the alternative is to accept the popular elected left-wing president. At least this time he was not killed, as Allende was on 9/11 (of 1973) in Chile. More details in my 25Nov09 post, here: http://www.sciforums.com/showpost.php?p=2423419&postcount=205

 

“… China’s currency regulator, which oversees the country’s $2.27 trillion of foreign-exchange reserves, said on Dec. 8 it will “actively support” companies investing overseas. Overseas investment by Chinese companies surged 190 percent to $20.5 billion in the third quarter from a year earlier, according to the Ministry of Commerce.
{I.e. as I predicted, China is now rapidly converting Treasury paper into real assets. Below is today’s effort.}

China Railway Construction Corp. and Tongling Nonferrous Metals Group Holdings Co. offered C$679 million ($651 million) for Canada’s Corriente Resources Inc. to gain copper resources in South America. …
China’s biggest railroad builder and Tongling, the nation’s second-largest copper producer, would gain mining rights to 17 deposits in southeast Ecuador. China has been scouring the globe for raw materials to sustain the world’s fastest-growing major economy, buying assets from iron-ore mines in Brazil to oil fields in Canada in the past year.
Zijin Mining Group Co., China’s third-largest copper producer on Dec. 1 agreed to pay $500 million for Indophil Resources NL to gain a stake in Southeast Asia’s largest untapped copper and gold deposit. ….”

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aTLgCsLzEt0k&pos=7
-----------------------
China is not only spending reserves for assured supplies of raw materials, food stocks and energy, it is also importing very advanced infrastructure items {E.g. 80 high speed rail cars from Canada & 100 from Germany with some local construction of cars and all of the high speed rails, of course.}:

Please Register or Log in to view the hidden image!

Please Register or Log in to view the hidden image!

“The Wuhan-Guangzhou high-speed railway with the world's fastest train journey with a 350-km-per-hour average speed, started operation on December 26. {On Dec. 9, test run reached a maximum speed of 394.2 km per hour.} The 1,068.6 km journey was cut to three hours from the previous 10 and a half hours. … The average of high-speed rail ways is 243 km per hour in Japan,232 km per hour in Germany and 277 km per hour in France. …”
From: http://english.people.com.cn/90002/98668/99300/index.html and sub links there.

 

Thanks. A good over view ariticle, lacking only the mention of excessive corruption and government that now pays employees 5% of GDP (and there numbers have increased 10% in the last 4 or 5 Years.) If Brazil could get rid of most of the corruption and reduce the size of government - look out - a power to be reconned with.

 

I'm betting that train will derail and cause a huge mess within a few years.

 

"China imported products valued at 19.9 billion U.S. dollars from Brazil, while the U.S. bought 15.7 billion dollars worth of goods, Foreign Trade Secretary Welber Barral said when presenting the annual commercial report.

The U.S. was the largest buyer of Brazilian products in 2008, purchasing 27.6 billion dollars, while China's imports from the country were 16.4 billion dollars. ..."

From:http://english.peopledaily.com.cn/90001/90778/90861/6859648.html

Today my local paper (Folha de Sao Paulo) has more details, some of which confirm my predictions of more than 4 years ago that Brazil's destiny is to become an "economic colony" of Asia (mainly China) as US & EU sink into deep depression (triggered by a run on the dollar).

Brazil's exports in 2009 in billions of dollars by country with percent change from 2008:

China...................................... 19.948 (+23.1%)
European Union …................. 34.034 (-25.8%)
Latin America & Caribbean ... 34.374 (-32.1%)
United States ......................... 15.739 (-42.4%)
MercoSul* ............................. 15.063 (-29.9%)
Total to all countries ………. 152.252 (-22.2%) with $69.3 billion being agricultural products. (Only soy beans + meat (mainly beef**, but chicken and pork too) + Sugar/ alcohol totaled 48.6 billion dollars in 2009)

* A reduced tariff trade union with Argentina, Paraguarí & Uruguay, which no longer uses the dollar in bilateral trade. Three of the members have voted to accept Venezuela’s request to join. (Uruguay has yet to vote.)
** Brazil has world’s largest cattle heard and they make large part of Brazil’s GHG release (belched methane) as >90% of electric power is cheap hydro-electric and most cars now burn alcohol fuel (Very slightly a net negative release of CO2 due to stored fuel and left in ground roots).

The composition of the exports reflects Brazil’s conversion into an economic colony of China too. Brazil’s GDP increase in 2009 was 5% and exports were only 13% of the total. Manufacturing (called “industrial transformation” in reports) grew only 0.85%. I.e. Brazil is undergoing a process of “de-industrialization” as I predicted years ago. This is mainly caused by the strong Brazilian currency, which makes it hard to export competitively manufactured items and easy to import them. The imports cut more deeply into manufacturing activity than the reduced exports as they “steal sales” from the domestic market, which is 87% of the GDP.

To try to support the dollar (make the Real weaker to slow the deindustrialization), the central bank buys dollars. (On 31/12/09 Brazil’s reserves were USD239 billion (vs < 207 at end of 2008) making Brazil the fourth largest creditor of the USA (holder of Treasury paper) behind only China, Japan & England.

Despite central bank buying dollars, Brazil’s currency is still growing stronger because the trade balance in 2009 was +24.62 billion dollars AND foreigners invested 20.45 billion dollars in Brazil. (They were well rewarded as in dollar terms as Brazilian stocks appreciated 145% and they bought 65% of all IPOs offered.) The central bank bought less than 32 billion dollars in 2009 and 24.62 + 20.45 = 41.07 billion dollars entered Brazil (not counting the funds sent to family by expats living outside of Brazil)

The FED’s near zero interest rate is “economic warfare” against many other countries with sound/ growing economies! (The “carry trade” come from the USA now. To slow it, Brazil now has a 2% tax on funds entering or leaving Brazil.) Fortunately Brazil is mostly a closed and booming* economy (87% of GDP is local)
*For example car & truck sales up 17% in December vs. November 2009. (And traffic is impossible. It took 6.5 hours to go ~200 miles to the beach on 30Dec09. On downhill stretches motor was turned off to save fuel / prevent over heating as flow was often completely stopped.)

-------------------

Are you just blowing hot air or can you predict earthquake locations?

 

"... Argentina’s President Cristina Fernandez de Kirchner fired the head of the central bank, Martin Redrado, over his failure to back a government plan to borrow $6.6 billion {of total of 48 billion} in reserves to pay debt.

Redrado, who almost tripled reserve since taking office in September 2004, told opposition politicians he won’t leave his post, Senator Geraldo Morales said after a meeting at the central bank with Redrado. Morales told reporters in Buenos Aires that only lawmakers have the power to fire him.

Fernandez named former central bank chief Mario Blejer to replace Redrado. “This is a serious crisis,” Claudio Loser, an Argentine and former Western Hemisphere director for the International Monetary Fund said. ... “The fact that Fernandez wants to run over the central bank creates doubt there are any institutions left at all in Argentina.” The standoff caused Argentine bonds to decline the most since Nov. 30. It may also spook {bond} investors ..."

{By paying off some debt Argentina hopes it can float new bonds - none have been sold since default in 2001. If it can, it will only be with "sky high" interest rates. Argentina is a miss managed basket case, IMHO - Billy T}

Quote from: http://www.businessweek.com/news/20...entral-bank-head-over-debt-plan-update3-.html

BTW she / the president, wife of the former president who could not run again / is always referred to as Cristina and never as Fernandez in Brazil (and other parts of South America, I think).

 

Here is graphical demonstration that China is using even stock pilling of metals to avoid losses by holding too much US Treasury paper:

Please Register or Log in to view the hidden image!

Most of China's conversion of US paper promisses into real assets is of course by signing long term (up to 30 years) contract for supplies of energy, raw material and food stocks (buying farmland also), but obviously China now thinks piles of copper and aluminum etc. are a smarter investment than piles of US Treasury bonds. - Exactly as I predicted China would do years ago and makes me more than ever confident that some day, less than a decade away, China will tell the US:
"Go to Hell - Your green paper is worthless now. We don't need you to buy our production now that the domesting market and contract payments* is doing so."
-----------------
*Quite a lot of how China will pay for the essential imports under the long term contracts is the export of heavy equipment, telecomunication equipment, port cranes, railroad rails and rolling stock, new dams & power plants etc., especially for its African suppliers. Here is today's example:

"... China and Turkey signed 38 contracts worth of 1.05 billion U.S. dollars at the end of the forum on economic cooperation and investment here on Friday. The deals cover Chinese imports of minerals, marble and other products from Turkey as well as contracting power plant projects in Turkey. ..."

From: http://english.peopledaily.com.cn/90001/90776/90883/6864065.html

I.e. As China signs more long term contracts that require it to build infrasturcture in developing countries, China will have less need to send products to the US & EU. These exports made under contractual obligations and the rapidly growing domestic market will keep Chinese factories "humming." Thus, China will not need to support the dollar by buying US Treasure paper. - All as I forecast years ago.

 

Chinese exports fell for 13 months in a row with the global crisis as did many other country's, but in December they increased 17.7% allowing China to claim from Germany the title of world's greatest exporter; however, one should also note that Chinese imports grew 55.9% in December!

Above data from: http://www.bloomberg.com/apps/news?pid=20601087&sid=apC5ThWF7_ig&pos=1

Billy T comment:
China's domestic economy is becoming a larger part of China's GDP, even though many of the imports will ultimately be part of still increased exports. The real wealth of the typical Chinese is growing rapidly and they are eating more meat (pork, mainly), buying more motor bikes, TVs, cell phones, computers, cars, homes, etc. and starting to show signs of saving less. I.e. some are now even saying "charge it" (in Chinese, of course) with their new credit cards. (Only a few years ago less than 3% even knew what a credit card was!) China, of necessity, is trying to emulate Brazil, where 87% of GDP is the domestic market, but still has a long way to go in this process.