Mark Anthony

U.S. vs. China: Has Trade War Begun?

I hope the Obama administration still has the chance and wisdom to prevent a trade war against China. It's absolutely a short-sighted action to focus on a couple of automobile tires while forgetting the much bigger picture that the USA needs China's co-operation to salvage its economy. This is no time to go into a dispute with China on trivial issues. A trade war is in neither country's best interest. But expect China to be firm on this issue, as China wants to show who is the boss this time.

In the event of a trade war, precious metal prices will skyrocket, the dollar will collapse. Every one understands that without China's support, the dollar will have collapsed already.

The Importance of China's Foreign Exchange Holdings

The answer is simple. The majority of China's recent increase of US dollar reserves came NOT from trade surplus, but from hot money flooding into China. China meremly prints more Yuan to absorb the hot money flowing into China, and use the money to go purchase raw materials and natural resources the whole world around. Mean while China does spend a small portion of its newly increased US dollar holdings to purchase short term US treasury notes, simply to mislead the world and buy itself some more time.

Read the analysis of China's smart strategy, Commodity Carry Trade (CCT):

seekingalpha.com/artic...

seekingalpha.com/artic...

On Jul 30 10:02 AM Living4Dividends wrote:

> 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 ?

China Signals End of Commodity Stockpiling

Speculation that China is halting commodities stockpiling is completely unfounded.

Mr. Yu Dongming is the head of the ono-ferrous metals and construction materials department of China's Development and Reform Committee. Please note, this is a think tank entity, not the actual policy maker. Yu himself had said he "speculate" that the government will not continue the stockpiling. He is at too low a position to have anything to do with policy making.

Please note, Yu represents the interest of industrial users of the metals, who have vested interest in seeing lower prices.

According to Yu, the China's entity for national stockpiling of metals have accumulated 590 kilotons of aluminum, 150 kilotons of zinc, 235 kilotons of copper, and other materials. That's roughly one pounds of aluminum, 115 grams of zinc and 180 grams of copper per Chinese.

China is a gigantic country. Any stockpiling will take a very long time to accumulate any sgnificant quantity. More over, the main goal of China's stockpiling is to spend out and get rid of its excessive US dollar assets. China is racing against time to divest the dollars before it is too late:
seekingalpha.com/artic...

It is a safe bet that China's commodity buying spree is far from over. Yu is just making some helpful noise to help the on-going iron ores price negotiation.

Will China Drop U.S. Debt? Unlikely

You get it totally wrong. Here is China's really smart strategy in dealing with its huge US dollar reserves:

seekingalpha.com/artic...

The strategy is obviously working so well that most people are still fooled so far.

Something Is Happening in China: How Investors Can Profit

I agree with your basic analysis of China's economic stimulus programs. But, instead of concentrate on individual base metals and raw materials, mwho not look at something which is common to all raw materials: The common thing is SHIPPING. All raw materials need to be transported to China by ocean ships.

I believe the dry bulk shipping sector is the best thing to buy to play the Chinese economic stimulus. Read here:
seekingalpha.com/artic...

All the stocks you listed look like good long term buys. But better profit potential is in shipping as this sector was way over-sold recently, judging from the strong rebound of the BDI shipping index.

Is China Pulling an Alan Greenspan?

On Feb 17 10:00 AM CeeB wrote:

> Mark Anthony -
>
> Sorry to say this, but you are the one who is wrong. Ever been to
> China? I lived in Beijing for 3 years and studied the banking system
> while I was there. The major banks are basically channels for government
> economic policy. The govt says "jump" and they say "how high?". The
> fact that banks are lending tells you nothing about their willingness
> to lend - it just says that govt wants loans to be made to goose
> the economy. Likewise businesses. You may recall that in 2006 and
> 2007, there were news articles about major Chinese companies that
> had taken loans from the banks not to "grow their business" but to
> speculate in the A-share market. I bet this is happening again.

I said already that there are two sides of a loan: A bank's willingness to lend, and the corporation's willingness to BORROW. The central bank do can order banks to loan. But they can NOT order a corporation to take up a loan. The fact that Chinese businesses are taking the loans is a very tellingsign.

Your speculation that some company might be using the loan money to speculate on stock market is nothing more than an unfounded speculation. There is no evidence to it. There is evidence to the contrary. Judging by the loan amount, even if a very small fractiion is indeed used to speculate on the stock market, the index should have rallied waymuch more than it actually did.

The Chinese government is serious about injecting money boosting domestic spending and boosting corporate activities. The things they are doing are very effective so far. No one can deny that. I guess that's an advantage of a centralized government.
seekingalpha.com/autho...

Is China Pulling an Alan Greenspan?

constructe:

No dispute of your first paragraph. But in any case, liquidity injection will always result in business activities kick up to a higher gear.

Something big is going on overnight in the FOREX market. Precious metals rally big time.Have people been fully invested in precious metal players? You can not afford to not have some precious metals in your portfolio. Read here:
seekingalpha.com/artic...

Is China Pulling an Alan Greenspan?

Also it is dangerous to take numbers out of context. I spend 45% less money on gasolines in January than last May. Does that mean a demand collapse of gasoline on my part? Absolutely NOT. I used the same amount of gasoline, the price is just cheaper.

Likewise, don't take China's 40% fall on imports out of context. The context is China mostly import raw materials and crude oils, whose prices have fallen dramatically. So even the amount measured in currency have fallen, the actual physical quantity of China's import may not have fallen much at all. Same principle can be applied to Japan's import and export, that's especially true as the same quantity in US dollars is now a much smaller number in Japanese yens.

Is China Pulling an Alan Greenspan?

Trader Mark:

The whole article is simply wrong. It starts with a wrong number, 40%. Where do you get it that 40% of Chinese economy is based on export? I think the correct number is 40% of China's economic GROWTH is export driven. China's GDP is about 4 trillion US dollars, probably bigger if calculated based on real purchase power. China's trade surplus to the US is $266B in 2008, a mere 6.66% of its GDP.
The fact that China's banks can more than double the loan from teh record breaking level a year ago is very telling. Loan is a mutual thing. You need banks willing to make the loan as well as corporations willing to take the loan. The fact that Chinese corporations are taking up the loans means they are very confident in growing their businesses.
That's very bullish for the demand on global commodities and global shipping. Read the big picture analysis here:
stockology.blogspot.co...
I advise people to keep watching news from China:
www.chinaview.cn

Ultimate Economic Showdown: China vs. the U.S.

Talking about the Ultimate Show Down. I wonder if China is behind the $2.29T nakes shorting of US Treasury Bonds? You have got to be SHOCKED out of your shell if you read this:

seekingalpha.com/artic...