M.R. Henderson

China Investor Update

To have China pay for expensive Brazilian deep-water exploration which no one else would pay for, can only open up cheaper supplies to everyone else. Even if China takes all the oil, it is oil they are not taking from somewhere else. This is clearly a win for Brazil, for China, only time will tell if they are spending too much.


On Apr 22 10:44 AM CautiousInvestor wrote:

> Chinese corporations and the state owned sovereign wealth fund are
> striking keen deals across the globe and and are securing long-term
> access to needed resources at bargain prices.
>
> The Chinese have what nobody else has at the moment: cash. This gives
> them tremendous leverage as does their willingness to strike deals
> with countries that have strained relationships with the US, e.g.
> Venezuela.
>
> They appear to be focusing upon oil and minerals, both essential
> to the Chinese economy. In the literature there is a debate of sorts
> whether these deals will expand supplies or simply give China secured
> access at the expense of other buyers such as the US, Europe and
> India.
>
> However it unfolds, China is doing whats best for China..........and
> I wish the US would follow its example.
>
>

China Investor Update

Regarding interesting articles, a (subscription) FT article on Chinese property (quoted here: sinocircle.wordpress.c...) has a comment I found interesting, that even if Chinese lending is being fraudulently diverted into dead mortgages, this will serve the purpose of shoring up demand in the near term.

Also, an article in the WSJ (online.wsj.com/article...) suggests Chinese bank regulators may retroactively ask banks to reappraise their short term loans, which have been leaking into stocks. If this happens, in the next few days and weeks there may be quite a bit of selling of Chinese stocks as these short term loans are repaid or reallocated out of domestic equities.

With exports still contracting - falling 17% in march - this is not yet bottoming. FXP, anyone?

Momentum for Infrastructure Is Building in Both U.S. and China

In reference to China's stimulus, we cannot repeat this huge ghost number without repeating that Beijing has now said it will only pay 1/4 of this amount, relying on municipalities, banks, and companies to pay the rest. Municipalities for one will NOT be footing this bill. And Chinese companies, far from being helped, will likely be forced to milk themselves to pay for these "projects". Finally, much of this stimulus has already been spent. Once and only once these characteristics of China's stimulus have been addressed, can we begin to discuss China's stimulus effect.

Will U.S. Growth Beat China's in 2009?

Or will China continue to juice its stimulus package of export rebates by devaluing the RMB, and the rest of the world, fearful of depression, will not respond with tariffs but rather swallow, sinking deeper into debt, while China accumulates more savings and continues to expand?

China’s Manufacturing Crisis: The Real Story

Everyone talks about Chinese savings, but the tragedy may be where they saved: what happens when it becomes apparent that the "banks" have invested this money in bust property schemes?


On Nov 07 09:28 AM www.rapidtrends.com/bl.../ wrote:

> Difference between China and USA from a consumer perspective is acutally
> quite huge. Chinese citizens have shown a respectable 40%+ savings
> rate, whereas US Citizens spend more than we make with a negative
> savings rate of around -2.5%.
>
> This alone is a massive difference.
>
> Weathering a storm while one has reserves built up is very different
> than entering a storm without anything to fall back on, worse, being
> the largest debtor nation in the world.
>

China’s $585 Billion Renovation

On WCC: I would want to know over the past few years what percentage of WCC sales have been to infrastructure projects before I considered cement after the last eight years of booming cement. Will infrastructure increases make up for the declines in property and manufacturing? Fixed asset investment in China 2007: 24% property investment, 30% manufacturing, 30% infrastructure. What companies beside Microsoft are increasing their investment in China? Apartment sales are slowing as prices are falling; how deep this goes remains to be seen, but few are brazen enough to be starting new property projects. And there has been a lot of building here. A Bank of China manager gave us a tour of an empty skyscrapers built just to improve property values. He said this has been done all through China to help prices. What would happen if these building managers started renting space on the sly?

As for a railway service provider from Guandong? That's the area hit hardest by the manufacturing slowdown so far. After this company is done shipping all the workers home, they aren't gonna be carrying more freight than they did last year. And with newly launched competition?

The last company mostly builds railroads. I invested in them after the Nigeria contract came up for renegociation, but this new developement that Beijing wants already strapped local governments to pay 3/4 of the BOLD infrastructure stimulus makes me worry that instead of helping a railroad builder, this package could saddle them with more debt.

From the FT: Beijing offers just quarter of stimulus funds
By Geoff Dyer in Beijing
Published: November 14 2008 23:35

Mu Hong, vice-chairman of the National Development and Reform Commission, a government economic planning agency, said Beijing would increase spending by Rmb1,180bn ($172bn, €136bn, £116bn) over the next two years – leaving local governments, state-owned banks and companies to provide the rest of the new funds.

If there's a way to create problems with the rapid ramp up of this "stimulus", I would say Beijing found it.