Shiv Kapoor

Why Decoupling Failed

I do not think either country trying to crush the economy of the other is what this is all about. This is about mutual collaboration to optimize global allocation of resources and capital; to facilitate mutual prosperity. Having said that, I do note your point - like efforts at global military domination exist, so too will efforts at economic domination.


On Jul 13 10:45 AM Alex Filonov wrote:

> It would be a good idea to look at all financial flows when analysing
> international financial system. True, lots of countries and institutions
> invested in US Treasuries. It looks like huge US trade deficit is
> financed by debt. But at the same time a lot of US companies earn
> huge money abroad and don't repatriate in in US. China buys Treasuries,
> but Chinese affiliates of US companies don't repatriate profits from
> China, they reinvest them on site. There is a lot of crying that
> China can crash the market of Treasuries by selling them all at once.
> Well, US can crush Chinese economy by requiring all US companies
> to repatriate profits. Or even by taxing profits which are not being
> repatriated.

Why Decoupling Failed

Old Trader

Actually what I am angling for is transparency. For example, a US entity raises debt for unrestricted investment in India. The US entity infuses the debt as equity into a Mauritius entity, which in turn invests into India. The Indian entity then levers itself. At a group level the business is twice levered; but in India the degree of leverage looks okay because the seed capital is all characterized as equity. Something as simple as a globally agreed lifting of the corporate veil and disclosure of the full substance of a transaction will help regulators at both ends.

Also do not see China as having a choice; they have to float. Once they understand the unintended adverse consequences of a controlled currency, they will have no choice other than to float. I believe this is a lesson they will have learnt as a result of the risk to the value of their portfolio of US treasuries.

On Jul 13 11:05 AM Old Trader wrote:

> "Some of these methods can lead to excessive risk taking with sound
> domestic regulation at both ends; for policy to achieve its objective
> regulation will need to be globally coordinated."
>
> A valid point, but does the author believe the individual countries
> can put aside their various conflicting interests to make this happen?
>
>
> Re: Chinese currency, it appears China has been taking some steps
> to loosen their stranglehold on it, by allowing its use to settle
> accounts with various trading partners.
>
> On balance, a good article....thanks.
> On balance, a good article....thanks.

Why Decoupling Failed

I could not agree more. I think what is happening with Rio Tinto is shameful as is the human rights record. It still remains my view that China will have to lead the way out. I also think (more like hope) China will over time be forced to change.

On Jul 13 06:09 AM Ryu Mei Co wrote:

> "We see China as being the single most important economy to lead
> the world out of the crisis. "
>
> We all know China may lead the world out of the crisis. However,
> I am a little skeptical of the overbought recovery hype coming out
> of China while at the same time horrified at the Chinese government
> holding Rio T.'s top "hostage" over the Chinalco-Rio Tinto deal.
> Moreover, the closing down of Google, the attempt to manipulate the
> internet content and shutting down Chinese bloggers are some of those
> things that does not sound positive as a businessman's point of view.
> The Urumqi riots every day and the Tibetans are not far behind too.
>
>
> What I am simply saying is China may lead the world out of the crisis
> if we like China pointing guns at their own citizens. If China does
> not maintain stability among its many ethnic people, troubles brew
> hotter and we may see a Chinese 9/11 by its own people. Yikes!