Posts Tagged China

No country on earth has ever bought so many cars in so little time as China. Little surprise then that the Shanghai motor show, which opens on Thursday, has in a few short years become one the largest events in the motoring calendar.

Strictly a second-rate affair until a few years ago, Auto Shanghai has become the place to be for automakers scrambling for a piece of the world’s largest auto market.

I still don´t understand why so many investors believe China will implode. The economy has decidely grown like a marching band for decades while economic managers kept doing the right thing to fly the balance of inflation vs growth.  Their industrial policy and “hybrid company model” has been blatantly successful. Bloomberg reported this morning, “The worst of China’s economic slowdown has passed and inflation won’t worsen,” Wei Li, economist at Standard Chartered Bank (China) Ltd., said in an interview in Shanghai.Industrial output will slow to about 10 percent in the second half, Xin said. Real-estate curbs and a higher base for comparisons will also contribute to smaller output gains.  The nation’s economy, the world’s second biggest after overtaking Japan in the second quarter, is still growing steadily and isn’t at risk of a “second dip,” Xin told reporters.

I read both sides of every argument I can find and there are some pretty deep thinkers whom are questioning the sustainability of the Chinese growth model.  Perhaps the believers in China´s long term growth prospects are wrong, but it would be of character for the Chinese economy if they were.  Is it practical to bet against proven winners with strong national-sector-company balance sheets?

One, they calmed markets by affirming that they would not abandon the Euro as a reserve currency and clarified that rumours otherwise were groundless. Two, China is moving quickly to cool the tensions on the Korean penisula. At some point China had to start behaving like global stakeholders, and these are two encouraging signs they are adapting to their newfound role in the world. ít´s a good thing.

The book, “The Myth of the Efficient Market Theory” by Justin Fox is a timely footnote to our last post about China’s approach to economic development.  Wall Street bought the ideas of the efficient-market theorists, in many cases literally: professors were lavishly paid to design complex financial strategies. And these strategies played a crucial role in the catastrophe that has now overtaken the world economy.

As we have said in the past, planners and engineers are running the ship in China, not debaters or intellectuals. Big difference.
http://www.nytimes.com/2009/08/09/books/review/Krugman-t.html

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Realistic Wealth Management

When I read this article two things jumped out at me. One, China is set to tighten its hammerlock on the market for some of the world’s most obscure but valuable minerals. That means that China is ready to create new rules for the “free” market which is another affirmation of centralized policy. I wouldn’t call in post modern neo-mercantilism or anything but you get the idea.

China is cutting exports of elements like terbium, pressuring manufacturers to open factories there. Toyota’s Prius hybrids use several pounds of neodymium, a rare earth, in their electric motors. China currently accounts for 93 percent of production of so-called rare earth elements — and more than 99 percent of the output for two of these elements, vital for a wide range of green energy technologies and military applications like missiles. The other thing that jumped out was how clear it is becoming that China as a nation state has her eye on the goal over creating a geopolitical bipolar dynamic within the next decade. The difference between China and the unipolar American era, is the Chinese will not have any idealogical hangups….just a brutal pragmatism. Every investor on earth should have China exposure and by directly holding shares in titled in your own account (see Managed Accounts Program) in the jugernauts of this rising economic powerhouse.

A positive balance of trade

http://www.nytimes.com/2009/09/01/business/global/01minerals.html?_r=1&ref=business
www.crinvestmentadvisors.com
International Asset Management