In response to reader feedback, here are some alternate representations of China:
CHINA’S economy rebounded in November with industrial production and retail sales growth accelerating, while fixed-asset investment maintained its upward momentum, the National Bureau of Statistics said on Saturday.
Industrial production rose 6.2 percent year on year in the month, accelerating from 5.6 percent in October, and it’s quickest rate since June.
Retail sales increased by 11.2 percent to 2.79 trillion yuan (US$432 billion), which though only slightly faster than the 11 percent growth seen in October, extended an almost flawless upward trend from a year-low of 10 percent in April.
Commodity prices are trading at their lowest levels since June 1999, according to a 22-member index compiled by Bloomberg.
The Bloomberg Commodity Index, which tracks everything from lean hog and coffee futures to natural gas, fell 2.1 per cent on Monday to 79.97, breaching the 80 level for the first time in more than 16 years.
The 2.1 per cent fall is also the biggest daily decline for the index since September 1.
Commodity prices are weakening across the board as the US dollar – the reserve currency for purchasing most commodities – continues to rise, while demand from China wanes and output among major commodity producers fails to slow down.
Year to date the index has lost 23 per cent of its value. From a peak in June 2008, it’s down by two thirds.
Among the notable losers, the price of Brent crude oil is now down 4.1 per cent to $41.24 a barrel, the lowest since March 2009.
The price of iron ore – Australia’s top export and the key ingredient in making steel – fell below the $40 per tonne mark, to $39.06, for the time since Metal Bulletin prices started in 2008.
China has paved the way for a further weakening of its currency by announcing changes in how it measures the renminbi’s value.
The move, announced on Friday, has raised investors’ alarm at the prospect of a new currency war — just as the US prepares to raise interest rates.
As markets gear up for next week’s Federal Reserve meeting, the People’s Bank of China signalled it would measure the level of the renminbi (or yuan) against a basket of currencies rather than just the US dollar.
Adopting such a basket would make it easier for the PBoC to guide the RMB lower against the dollar, according to Stuart Oakley, head of emerging markets at Nomura.
“By showing that the yuan has actually appreciated against a trade-weighted basket of currencies, it will be very hard for the US authorities to criticise Chinese policymakers for allowing the yuan to weaken against the dollar,” he said.
The move was transmitted in an article posted on the central bank’s website late on Friday, and comes at the end of a week when the RMB’s value has steadily declined against the greenback.
Investors are nervous about the pace and size of weakening in the value of the RMB, after the unexpected devaluation of the currency in August triggered a shock market sell-off, prompting the Fed to postpone its rate rise plans.
The offshore yuan has dropped 1.3 per cent over the week, driven by a sharp fall in China’s foreign exchange reserves and the PBoC relaxing the reference rate that sets the trading band for the onshore currency to its lowest level in four years.
The PBoC had acted to steady the currency and had focused on a campaign to win reserve currency status from the International Monetary Fund, which it achieved last week.
But with the Chinese economy coming under strain, the strength of the currency hurts its competitiveness. Combined with fears that a stronger dollar would lead to greater capital outflows from China, analysts have been expecting the PBoC to conjure up a gradual weakening of the RMB.
Stephen Jen, of the hedge fund SLJ Macro Partners, said: “Announcing a basket peg or a basket reference could also absolve them of the guilt of conducting competitive devaluation.”
In 2001, China joined the World Trade Organization and immediately began flooding U.S. markets with illegally subsidized exports. In heavily lobbying for China’s accession to the WTO the year before, then-President Bill Clinton insisted the deal would allow American workers and American factories to produce goods on U.S. soil and sell them into a Chinese market of over a billion consumers.
Instead of Clinton-esque prosperity, all we have seen is the flight of American corporations to the sweat shops and pollution havens of China, the closing of over 70,000 factories, the long-term unemployment of over 20 million Americans, the reduction of our historical GDP growth rate by one-third, a $3 trillion debt to the Chinese, the mother of all budget crunches from a hollowed-out manufacturing base and shrunken tax base, and meat-axe, across-the-board defense cuts now threatening national security.
The idea that another Democratic president and Republican Congress would try such a charade again is laughable on its face, yet here we are on the verge of passing the Trans-Pacific Partnership. To be clear, this is not a “free trade” agreement as journalists often describe it, and it is certainly not a “fair trade” agreement.
Rather, the TPP is a backroom deal among the usual suspects — Wall Street capital seeking to make a killing overseas and multinational corporations with American names like Apple, General Electric and Caterpillar that love to evade U.S. taxation and regulation and salute no U.S. flag.
Sadly, to seal the political deal there are also U.S. agricultural interests that are more than happy to sacrifice America’s blue-collar manufacturing workers on the altar of selling more corn, soybeans, rice, and wheat to Asia.
In fact, this backroom deal is breathtaking in scope. It includes America’s neighbors Canada and Mexico. On the other side of the Pacific, it includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Most importantly, there is also the world’s third largest economy, Japan, and quite possibly the world’s 12th largest economy in South Korea. Together, these TPP nations account for about 40 percent of world GDP and about a fourth of world trade.
Conspicuous in its absence from this list is the People’s Republic of Mercantilist China. Yet the world’s most populous nation and biggest cheater in the global-trading arena nonetheless casts a long shadow over the TPP debate. This is because the Obama administration incessantly spins the TPP as a necessary counterweight to China’s rising economic and military might.
The cynicism behind such spin is equally breathtaking. For all the TPP will do is further weaken America’s economic base and defense capabilities while strengthening China’s. Here’s just a glimpse of that grim future.
As soon as the ink is dry on the TPP, Wall Street capital will begin heading to Asia instead of financing domestic investment. Shortly thereafter, America will begin hemorrhaging jobs in key manufacturing industries — and the U.S. auto and auto-parts industry has the biggest bull’s eye on its back.
Even our agricultural industries will be in for a surprise as the signatory countries will find myriad Asian, non-tariff barrier ways to keep American products off their shelves. The abiding fact here is that while Uncle Sam, AKA Uncle Sucker, will keep its part of the TPP deal, most of the other countries will find ways to cheat. Just witness the ballooning U.S. trade deficit with South Korea after a TPP-like deal in 2012.
Under TPP rules, China will still be able to invest in TPP countries and ship its “Made in China” products to the U.S. under the cover of foreign flags.
As for China, it won’t miss a mercantilist beat. Under TPP rules, it will still be able to invest in TPP countries and ship its “Made in China” products to the U.S. under the cover of foreign flags and with the benefit of even lower tariffs than it might face today.
Here’s the worst part — and a key factor missing from the current 2016 presidential debate: No one inside the Beltway or on the campaign trail seems to be able to connect the dots between the crushing negative effects of trade deals on America’s manufacturing and tax bases and our increasing inability to defend our national security interests.
The canary in the coal mine here is the U.S. Navy — down from a high of about 600 ships in the Reagan years to close to 200 ships today. Indeed, the U.S. Navy is one of the worst casualties of a series of trade deals that have allowed other predator and mercantilist nations like China to grow at America’s expense.
The math here is simple. Bad trade deals equal slower growth equal a smaller tax base equal defense budget cuts.
Clive Maund appears to be predicting that stock markets around the world will decline sharply, and that the final decline will be a crash of the USA’s financial system. For example, the Dow Jones might fall from about 18000 to 6000.
The interesting question is: if the USA’s Dow Jones does drop sharply, will Chinese financiers be able to seize the opportunity to replace the United States dollar as a reserve currency?
Comment: I expect no shocking news from China for the rest of December. The next big event should be their reaction to whatever the Federal Reserve does.