A comprehensive collection of scholarly, personal, and editorial articles relating to the growth and development of economic / political ties between China and South America-- with a focus on commodity rich countries in South America and commodity/energy markets.
Showing posts with label chinese economy. Show all posts
Showing posts with label chinese economy. Show all posts
On the ground, things don't seem so bad in China. As I report from Suzhou, China I see construction booming on both a residential level on in terms of infrastructure. However as Bloomberg LP paints in a article you can view here, things aren't so pretty on a macro level.
Actually they may depend on what you think "pretty" is. Economic growth will slow this year. 3rd Quarter growth in 2008 when released is expected to come in at around 9%, down from 2007's astounding 11.9%. Considering the state of the global economy many argue 9% is still quite healthy. However for a country seeking to fast track its economic development and solidify its position in the global economy the slowing growth rate is not welcome news.
The government is acting quick to stem the problem, having already reduced interest rates three times in the past two months. Will it be enough? Probably not...
For one, the reckless speculation from abroad and domestically on Chinese equities has fully exploded in investors faces this year (including my own). The CSI 300 is down a whopping 69% in 2008 so far, and has not seen the rallies other Asian markets like Hong Kong, Korea and Japan have seen when the west introduced their respective bailouts, lowered interest rates and set up new lending facilities.
Chinese Media, Xinhua reports export orders dropped in the 3rd quarter to their lowest level since 2005. Home sales have plunged 59% in Beijing and 39% in Shanghai so far in 2008.
All this looks bleak, but a casual observer may add that between 2005 and 2008, both Beijing and Shanghai have continued to grow rapidly. Few can deny the changes which have manifested in each city in the past 3 years, not to mention the rapid change which occurred between 2000-2005.
My observations are simple. China was indeed growing too fast for its own good, this financial crisis is simply bringing it back down to reality. China will continue to grow but due to the nature of its export oriented economy it must do so within the context of the world economy. All the while it does have the capacity to cushion its own slowdown with its domestic economy and macro policies which will help spur growth in the domestic market.
Zhang Shidong and Dingmin Zhang of Bloomberg LP report Chinese stocks have plunged ahead of the Olympic Games due to what analysts and investors say was a failure on the part of the Chinese Government to announce "market stablalizing" measures ahead of the games.
A great deal can change in China in just a months time. Considering the last time I visited was back in Sept-Dec of 2006, I'm sure a great deal has evolved. One thing, no matter the time difference in which people visited China or more particularly Beijing that seemed to remain with time was hope that the games would boost Chinese equities.
This has been a good lesson to avoid heading into markets with the "herd" or in laymen terms... the masses.
Beijing definetly has a boom town feel, but so do other cities in China. Other places, such as Shaang Xi province, a coal producing region do not (or did not back in 2006). Chinese people from Southern Economic Zones created in the late 90's and other regions which have grown rapidly over the past decade expressed concern the country was spending too much on the games to me.
One young man of 20 years from Guang Zhou, a Cantonese speaking region ajacent to Hong Kong told me "Beijing has the boom but is only able to back it up becuase of the government. Places like Shanghai and Shenzhen are boom towns but can back the talk and boom."
He may be right, as Olympic spectators are dazzled in the capital, they are seeing quite a show... trust me it will be a show when the games opening ceremony comes on TV at 8am (Eastern Standard Time).
The boom feeling in China is real, but not substantial enough to defy slumping global equities. The Shanghai Stock Exchange has grown 7 fold in the past 2-3 years. With the global credit crises, there is no mystery as to why China and other boom markets like Vietnam and India are plunging.
This will be a good lesson to the thousands of investors picking stocks based off lucky numbers and the belief that their investments can only grow. US investors are still learning this despite being from a country with long established financial markets.
When I was born in the mid 80's, Stock Exchanges did not even exist in China. Now that they do, both independent and institutional investors in China must learn to ride the bad times. Learn how ot depend on an income flow from investments. Learn how to not hit or yell sell when things drop. Learn how to properly evaluate equities, instead of using lucky numbers of other ways to pick stocks.
Moving back to previous topics and the video topic of the last few days, I return to food, and agricultural commodities. Food prices are rising. This video, displayed both above at times in the youtube provides videos explains the situation on a human level. It is form a news agency from New Zealand, and they explore the impact in the Philippines...
And I must say, I do not agree with everything in the below video or even the things the man, Carlos Mencia says on his tv show. However, in the wake of the food crisis, and having recently seen this video on TV, here is a clip offered by Comedy Central.com/videos
I don't mean to be crude and I warn readers under the age of 14 (personally decided age limit... officially I should say 17), to be warned there might be questionable footage in the video below, please exercise self control and do not watch it if you are underage.
Even the big guns of comedy central know there is a problem, it is ridiculous instead of action we see speculation on agricultural commodities and other foodstuffs. I can't admit it does not make me happy to see Peru, the country my mother was born and raised in, actually making money and growing from the sale of fish meal, but at the same time in today's day and age lets not make people go hungry. Maybe a humorous approach towards this topic will connect to some... Keep in mind the younger generations of the WORLD, grow up on these shows... so it might do some readers well to keep informed with the messages being conveyed to today's youth via media.
I will say on a side note I am slightly bias, and do like Carlos Mencia, if only everyone understood Spanish... and the latino culture, his jokes would make so much more sense. I must also thank Comedy Centralfor offering video of their highest rated shows on the video section of the homepage.
Decompressing all the data and news developments in this world can be difficult. Despite a focus on China and South America, it is difficult with the increasing interconnectivity of this world to ignore many international developments... which now influence, sometimes quite significantly... China and Latin America.
In general, this week ended with energy and oil prices heading downward and major stock markets around the world responded in kind with rallies of their own. Sadly this will all be short lived in my opinion. The scope of the global market is generally very unstable at the moment.
As the article,Gold, Silver Rebound on Investor Demand for Inflation Hedgefrom Bloomberg LP investors and money mangers around the world don't think this rally is sustainable, as more have moved back into gold and silver markets to protect themselves from further inflation, the low dollar and rising fuel and energy costs--just as the majority of the western/industrialized world enters summer and turns on their air conditioning.
The lower fuel/energy prices we saw at the end of the week, the thereafter rally in airline stocks and other fuel intensive industries in the stock markets is nice, but in my opinion a general sign of investor speculation and ignorance, whom are desperate to make a quick buck $$$ in the wake of declining asset classes. Second thanks to comments by Saudi Arabian Oil Minister, Ali al-Naimi who stated "record prices are unjustified," (see full story - Crude Oil Falls as Naimi Says Record Prices are 'Unjustified' on bloomberg.com)Fuel prices will continue to inch up, my prediction is by September my rough estimate is it will peak at around 155-160 a barrel despite the efforts of international producers. Supply simply will not be able to keep up with demand, and despite rising prices, people will keep demanding. I know I'll be filling my car up in about a day or two, and putting the AC on while I drive.
"The world economy continues to face uncertainty and downside risks persist," the officials of the G-8 said in a statement they released after the meeting in Osaka. It is clear, we're not through the worst of this global downturn. Other statements from the meeting of the global elite so to speak include:
"The G-8 is turning up the volume in terms of its inflation concern," said Claudio Piron, a currency strategist from JP Morgan Chase". "
"Elevated commodity prices, especially of oil and food, pose a serious challenge."
It's nice to know the leaders of the world are at least talking, but it seemed more talk and arguing was done than actual planning of actions to be taken. Oil output, weak dollar, inflation, etc where debated... sadly, while people go hungry around the world. So I'll use this opportunity to mention to all the readers out there, who like to exhaust their "downtime" on the internet, PLEASE do so by playing the vocab game at FreeRice.com and your efforts and vocabulary improvements can also go towards feeding people (see previous post on FreeRice.com if you want my take on it).
While all this looms in the background, China, which many back in 2006 already was on the brink of emerging as the new global center of economic activity has had a tough year not only because of the poor condition of the global economy, but because of touchy international relations and bad press from the "Free Tibet Protests" and people disrupting their Olympic torch relay... in addition, China's has had a tough year with good old mother nature-- the planets toughest and sometimes very cranky mother you can't exactly fight or argue with (like most mothers hehe).
Adding to the 8.0 earthquake, the aftershocks, the land slides, draining lakes created by the quakes, preventing dams from bursting and flooding 100,000 + people towns/cities, helping minimize the spread of disease among 100,000's of quake victims and displaced people around the country... Might I remind everyone that China also dealt with a devastating snow storm that practically froze southern China. This is something that rarely happens, it would be like witnessing the South East of the US (Florida, Alabama, Mississippi, etc) freeze. Southern China, which represents the center of economic activity was disrupted in the middle of the Chinese Lunar New Year, when people in China tend to move a lot of money around and invigorate the economy... this year that did not happen, if anything the country is still paying for it. Now as you can see below in video footage and report provided by Reuters.com, China must now also deal with flooding across 12 provinces. These 12 provinces, include both Sichuan province which suffered the earthquake, and also many of the regions most affected by the snow storms earlier this year. Images have been provided by Xinhua, China's premier news agency. See Video here -- (embed feature keeps putting wrong video on site)
Time will tell if China and the global economy as a whole will see some recovery this summer. The Olympics will as usual bring speculation, price rises in Beijing, and some short-term help to the economy. However, with the natural disasters this year, and the potential political issues that may arise during the games and the looming issue of Tibet-- China is going to have a rough rest of 2008, as will the rest of the world.
South America from a very general macro economic perspective seems poised to ride this downturn out. Commodity prices will continue to help their economies grow, even if they grow at a slower pace compared to the recent boom years (2003-2007), considering Latin America's history and second when the international investors and analysts around the world compare their current growth with other regions in 2008, they will see South America coming out on top.
However, problems are developing in Venezuela and Argentina in particular, where inflation as it does in other areas is picking up. None the less, unlike central bankers in the more fiscally more responsible countries as of recent; Chile, Peru, Brazil and Colombia; Argentina and Venezuela are not acting as they should.
Central bankers and finance ministers in Venezuela and Argentina lack independence are very biased towards supporting spending and keeping price controls in check with the government objectives. In Chile, Peru, Brazil and Colombia, even when influenced by the central government, bankers and finance ministers have exercised incredible restraint and shown great ability to at least manage inflation. For these countries this is a great accomplishment, for these countries that have had a history of being unable to combat inflation and experience's with long periods of hyper-inflation. For this region dangers remain in the form of the commodity bubble bursting from too much speculation--which I personally don't think will happen. The bubble may "burst," but it will be far from the dotcom crash of the late 90's.
Captivated observer and active participant in the growing exchange between countries in the Americas and East Asia.
Exhilarated by the process of identifying and growing local and international business opportunities.
Committed towards expanding my reality and nurturing a network of like-minded individuals and organizations from across the globe. Including but never limited to -- entrepreneurs, creative talent, educators, students, innovators, investors and new media journalists.
Posts
