Brad Setser thinks that China is again holding the RMB down to maintain export volume in the face of softening global demand. From the comments (my emphasis):
China prefers subsidizing US consumption of Chinese goods to subsidizing Chinese consumption of Chinese goods… if China’s foreign asset accumulation continues at $800b a year, it will add $3.2 trillion to its foreign portfolio over the next four years — more than it added in the preceding twenty…
Bloomberg also points out that by dodging the debt bubble bullet China’s banks have drifted to the top of the market cap tables as well as providing some of the only investment gains for their competitors:
Chinese banks hold three of top six spots among the world’s largest financial companies based on market value… The Chinese banks owe their rankings in part to having avoided almost all of the $480 billion in writedowns and credit- market losses that have sent bank stocks tumbling worldwide… Only two years ago, the world’s biggest banks were led by Citigroup Inc. and Bank of America Corp. of the U.S. and UBS AG in Europe… ICBC’s unaudited figures… show first-half profit rose more than 50 percent… Beijing-based China Citic Bank Co. said earnings jumped more than 150 percent in the same period. China Construction Bank followed, saying net income may have advanced more than 50 percent… Chinese funds and companies spent $19.3 billion buying stakes in Blackstone Group LP, Morgan Stanley, Barclays Plc, Fortis and Johannesburg-based Standard Bank Group Ltd. since May 2007 that are now worth $7 billion less on paper… China Investment Corp.’s $5 billion purchase of a 9 percent stake in New York-based Morgan Stanley, the second-biggest U.S. securities firm… has declined 18 percent… The $200 billion sovereign wealth fund also invested $3 billion in shares of New York-based Blackstone, manager of the world’s largest buyout fund, only to see their value decline 41 percent… By contrast, foreign banks’ investments in Chinese financial firms have fared much better, showing $50 billion of paper profits… HSBC is sitting on a $16 billion gain… Bank of America, which bought 9 percent of China Construction Bank for $3 billion in 2005, has a $14 billion paper profit…
And, for those many investors bullish on both oil and the RMB, has the FT got a deal for you:
Shareholders in Petrochina have approved a plan for China’s largest corporate bond sale by a listed company… up to Rmb60bn ($8.77bn) through one or more tranches of bonds with maturities of up to 15 years… In the first half of this year, 21 listed Chinese companies issued a combined Rmb74.5bn of domestic bonds. While tiny compared with more developed economies, this amount was 6.35 times larger than the corresponding period last year…
The moment of truth for the un-coupling thesis is at hand; as pretty much everyone agrees (which is a sign for extreme caution) that there will be a post-olympic slump in China. In order to beat the rush, the IHT has already come out with their announcement: “China’s post-Olympics economic slowdown has started before the Games have even begun.”
New orders at Chinese factories plunged last month. Exports are barely growing, after adjusting for inflation and currency fluctuations. The real estate market is weakening, with apartment prices sinking in southeastern China… Any slowing of growth, which has been spurred in part by China’s herculean investment program to showcase the Olympic Games that open this week, could prove a shock to Chinese workers who have been receiving double-digit pay increases each year… any significant slowing below its recent pace of 11 percent or more a year would also make it much harder to find jobs for the millions of people moving from rural areas to cities each year in search of work. Economists have been forecasting growth of 9 percent to 10 percent over the coming year, and these estimates are being ratcheted downward.
I’m pretty sure this is just MSM type spin and speculation – no sources, no hard data. Rodger Baker at Stratfor is also concerned at the difficulty business VIP’s are having getting visas for the Olympics, and reads into this a wider post-Olympic crisis lurking:
China’s rapid and contradictory economic and security policies, rising social tensions, and seemingly counterproductive visa regulations appear to be signs of a government in crisis. They are the reactionary policies of a central leadership trying to preserve its authority, stabilize social stability and postpone an economic crisis. At the same time, we see signs that the local governments, and even organs of the central government, are putting up steady resistance to the announcements coming from Beijing… It may be that the contradictory policies Beijing is tossing around these days will simply fade away after September and things will get back to “normal.” But already, Chinese officials are downplaying the previously hyped political and economic benefits of the Olympic games. They are now warning that economic conditions may not be so strong in the future, and at least internally discussing the distinct possibility that at least certain regions of China are facing the same economic crises faced by their mentors Japan, South Korea and the Asian tigers.
A few more specific items which may argue against the post-olympic slump thesis:
China’s tax revenues rose 30.5% in the first six months of the year. The country collected about $472 billion on a surge that reflected corporate profits in 2007. Almost half of the tax revenue came from value-added, consumption and turnover taxes, which rose 22.4 percent, 18.5 percent and 25.7 percent, respectively. Import tariffs showed the fastest growth, rising 34.9 percent to 395.6 billion yuan, followed by stamp tax on securities trading, which rose 34.2 percent to 83.7 billion yuan.
China’s booming Internet population has surpassed the United States to become the world’s biggest, with 253 million people online… a 56 percent increase from a year ago… The United States had an estimated 223.1 million Internet users… Total revenues for China’s Internet companies soared to 40.5 billion yuan ($5.9 billion) in 2007, up 48.6 percent from the previous year… revenues should keep growing at an annual rate of at least 30 percent in coming years, reaching 137.5 billion yuan by 2010… By contrast, U.S. online advertising revenues alone in 2007 were $21.2 billion (145.2 billion yuan)… China’s online population should keep growing by 18 percent annually, reaching 490 million by 2012…
A survey of 3,591 US companies with annual revenues of $25 million or above ranked China as the most favourable location for offshore investment… India was second with 45.1 percent, followed by Mexico with 30.1 percent, the United Kingdom with 25.4 percent and Canada with 22 percent.
(Posted by Paul from Technology Investment Dot Info)