Category Archives: China

Michael Pettis: Will China’s Asian Infrastructure Investment Bank Eventually Matter?

The financial media has attributed considerable importance to the fact that many of America’s close allies, including the UK, Australia, and Israel, have joined China’s new infrastructure bank against the clearly-stated desires of the US. While these moves seem to signal America’s declining influence, it does not necessarily follow that the infrastructure bank is destined to become a major international institution any time soon.

Michael Pettis deflates some of the hype surrounding this initiative, arguing that it is less significant from a geopolitical and practical perspective than virtually all commentators assume. China is simply not about to become the issuer of the reserve currency any time soon, and that limits how much financial clout it will have.

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Michael Hudson: Europe Tilts East Towards China

The sudden rush of countries joining China’s infrastructure bank, including supposed US allies like the UK, Germany, and France, demonstrates the desire of not just emerging but also advanced economies to have access to international institutions that are not dominated by the US. Whether the infrastructure bank actually winds up being better, as opposed to simply different than existing institutions remains to be seen. But as Hudson describes, the World Bank sets a low bar.

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Pepe Escobar: New Silk Roads and the Chinese Vision of a Brave New (Trade) World

As much as sightings from on the ground are critical to countering perceptions of China from afar, my experience with Japan leads me to take them with a grain of salt. Japan was seen as similarly insurmountable in the 1980s and it looked as impressive close up as it did from a distance.

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Is Power8, Sponsor of Everton FC, Fulham FC and RCD Espanyol, a Giant Ponzi?

Yves here. Richard Smith is on the trail of what looks to be his biggest international scam find ever, orders of magnitude larger than the usual below the radar single to low double digit million dollar/pound/euro operation that he has ferreted out in the past. And mind you, even though he focuses on the dubious looking inter-corporate relationships and the often evident lack of normal investors protections and business substance, these companies sell hope and glamour to typically credulous retail investors who lose their money and have no recourse.

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Michael Pettis: Is China Really Turning Away from the Dollar?

Yves here. This important post by Michael Pettis addresses whether the efforts of the Chinese to diversify their foreign investments away from the dollar will be a negative for the US. Pettis is skeptical of that thesis, and some of his reasons are intriguing. Like quite a few experts, he doubts that China’s role in sponsoring an infrastructure bank will be a game changer, and he also points out, as we have regularly, that the Chinese cannot deploy their foreign exchange reserves domestically without driving the renminbi to the moon (via selling foreign currencies to buy RMB), which is the last thing they want to have happen. A more surprising, but well argued thesis is that reduced Chinese purchases of US bonds would be a net plus for the US.

Get a cup of coffee. This is a meaty, important article.

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