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Some interesting articles on China which i think fits in with the current theme.


Andy Xie, Caixin Online – http://english.caing.com/2010-12-23/100210360.html

China know they are in the race

China has an opportunity to gain immunity against the next crisis.

The last crisis started in the U.S. If China hadn’t reformed a decade ago, it could have started in China. An economic crisis in China would have prolonged the U.S.’s economic cycle by bringing down oil and other commodity prices, which would have improved the U.S.’s cash flow.

The most likely candidates to trigger the next global crisis are the U.S.’s sovereign debt or China’s inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.

On the other hand, if China has a hard landing, the U.S.’s trade deficit can drop dramatically, maybe by 50 percent, due to lower import prices. It would boost the dollar’s value and bring down the U.S.’s treasury yield. The U.S. can have lower financing costs and lower expenditures. The combination allows the U.S. to enjoy a period of good growth.

One could describe the global economy as a race between the U.S. and China, to see who goes down first.

This coming year is China’s opportunity.

and also understand the competition

I have argued several times before why the U.S.’s stimulus won’t bring lasting growth. I’m not sure that the stimulus advocates in the U.S. believe what they say. The real intention for the new Obama tax cut is to get him re-elected in 2012. The mid-term election this year shows that, unless the U.S.’s unemployment rate drops significantly, he will lose his re-election bid then.

Yu Yongding, China Dailey – http://www.chinadaily.com.cn/opinion/2010-12/23/content_11742757.htm

China’s progress over the past three decades is a successful variation on the East Asian growth model that stems from the initial conditions created by a planned socialist economy. That growth pattern has now almost exhausted its potential. So China has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost.

Michael Pettis – Chinese Growth in 2011 – http://mpettis.com/2010/12/chinese-growth-in-2011/

It is proving very difficult to keep growth up in China except with massive increases in bank-driven investment, even though this year China got a lot of help from the surge in the trade surplus.  Next year I suspect it will be much more difficult to count on a surging trade surplus to generate domestic growth, and consumption is not going to kick in, so we are pretty much left with growing investment if policymakers want to keep growth rates in the 9-10% range, which they almost certainly do.

Fitch Ratings – “Stress Test” – Impact of a China Slowdown.

http://asianbondsonline.adb.org/publications/external/2010/The_Impact_of_a_China_Slowdown_on_Global_Credit_Quality_FR_30_Nov2010.pdf

http://www.shanghaidaily.com/article/?id=460278&type=Opinion

Chinese property on verge of bursting.

BHP the largest iron ore producer in the world is trying to diversify their business in agriculture and enrgy aligned business. Failed to aquire the Canadian company Potash Corp and now “rumoured” to be bidding for US energy compoany Anadarko.

http://www.theaustralian.com.au/business/city-beat/anadarko-gains-as-bhp-rumour-returns/story-fn4xq4cj-1225979264045

With China heading toward a new normal of slower growth, this will slow the purchase of commodities, commodity driven countries and their currencies.

China news growing in the Australian mainstream media and very lively in Australian blog sites. For good reason.

Think i over did it.

Mike

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