Living4Dividends

The Importance of China's Foreign Exchange Holdings

On Jul 30 02:28 PM Arthur Hau wrote:

> Unfortunately, I think they are stupid. By "diversifying" their reserve
> portfolio, they are actually messing up the markets of raw material
> (including crude oil and gold), real estate property markets all


china has been buying commodities cheap during the recession. If you own a huge chunk of commodities, especially your needs for the next 5 years, why would you care if the price goes up? They are stockpiling.

The Importance of China's Foreign Exchange Holdings

Thanks, Firat - I agree that the move to shorten durations is scary.

You did outline a third alternative in your article: that China is merely uncertain and when investors are uncertain they tend to move to cash. It is a good position to be in during deflationary times.

I do not particularly support the above hypothesis, but it it is good to consider all the options.

On Jul 30 12:50 PM Firat Ünlü wrote:

> @Living4Dividends
>
> There's two sides to this, while some people may look at recent numbers
> that show an increase in Chinese Treasury holdings and thus conclude
> that they are in fact even getting further entangled others could
> point to the move into the short term and thus conclude that despite
> superficially seeming to increase holdings they are preparing their
> way out of them. Sometimes in order to move forward you need to take
> a step back.

The Importance of China's Foreign Exchange Holdings

Firat - you have written a very comprehensive article. Splendid job.

There seems to be a contradiction in your article, in one paragraph you said:

"China’s been quickly adding to its holdings of Treasuries"

Indeed - the net holdings have increased from 2005 to 2007 to 2009. This is Brad Setser's conclusion: China keeps on buying US Debt.

In another paragraph you said:
"Recently a shift from long-term bonds to short-term bills has been visible. China is moving towards the shorter end for now and possibly trying to unwind as much long-term Treasuries as possible.

Thus China has to gradually ease out of the bond market. They are still earning money from their trade surplus and may decide to invest it in natural resources or keep it simply in cash; in such times, many investors value return of money higher than return on money."

Firat - How can China be ramping up its purchases of US Debt while at the same time looking to get out of US Debt? Can you resolve the contradiction? What is your conclusion ?

Even the Price of Tea Is Controlled in China

Cameroni - I couldn't have put it any better.

In the US - CPI & GDP figures are fudged - but at least one has reasonable figures available elsewhere by which to do a correction of US official figures.

As for openess and transparency in corporate accounting. Well, we don't have alot of that here in the US either.


On Jun 25 03:58 AM cameroni wrote:

> Got to agree. The words "openness and transparency" don't seem to
> translate well into the Chinese "managed economy". What is public
> about a publicly held company that gets micromanaged by the top bureaucrats?
>
>
> I have so many doubts I hardly know where to begin. I will keep my
> distance until those companies get responsible, follow international
> protocols, disgorge themselves of government cronies and act like
> real business's.
>
> We often complain about data being manufactured and manipulated here
> at home. But most of the time we are just splitting hairs. At least
> here in North America we know the pitfalls of statistical management
> and there are clear cut rules for how the counting is done, (or not
> done).
>
> The CPI, unemployment figures and calculations for inflation come
> immediately to mind. The closed circuit of Chinese methods is beyond
> frustration though. They don't even hide their figures. they just
> don't give you any real numbers to start with.
>
> Like I said, openness and transparency are yet to be resolved.

Even the Price of Tea Is Controlled in China

Nice point , HaavBline

On Jun 24 12:33 AM HaavBline wrote:

>
> If you don;t understand this, better stay with the proven strategy
> of buying 'blue-chip, industry leader', 'secure-dividend' companies
> in the most 'investor-friendly', 'open-free-market' country in the
> world.
>
> I'll bet 2, 3 years ago, this meant loading up with 'proven quality
> stocks: Citigroup, Wachovia, GM, AIG, GE, ......

Even the Price of Tea Is Controlled in China

I appreciate your comments on the article, Thanks Sober Realist