WONG, Your remarks did not go unnoticed. When I read the Std. that evening, I too was alarmed. It hit me instantly, like a hard slap in the face. All sorts of circumstances I then began to wonder about.
DEVALUING THE YUAN -- Who cares?!
My goodness, yes. Who really gives a hoot. Five percent and it's over. Who is affected? Malaysia? Just enough to make any resultant panic a buying opportunity. What does Malaysia export that might be so affected by the export giant, China, taking-up some slack?
Thailand gets hurt, but China and Thailand have been like this (crossing 1st and 2nd fingers) for many years. Example: Earlier last year Thailand advised China they were unable to make a scheduled rice shipment for which China was about to make a disbursement. China gave them the money, telling them essentially to "Take the money. Ship it when you can." Or words very near those. Now, this past week, China has placed additional funds which prompted the "smiling people" to tell their kind-hearted brethren that they will be hard-pressed to make payments. So, China easy the arrangements, says they are flexible. I'm uncertain about what's going on w/ the PLA and some of the Hmongs on the northern Thai border. There up to no good. That much I'd bet on.
Anyway,...Jakarta is affected by a yuan devaluation. But who cares? Well, the U.S. does for geo-political reasons. But I'll be getting to the U.S.
The Philippines. Yes, indeed, the Filipinos would be hurt. But there is a little current friction between China and Mr. Estrada anyway. Seems that ongoing joint US / Philippine military operations has furrowed Beijing's brow a bit. Additionally, and what many don't know, is that U.S. military contractors (Raytheon, et al) have reportedly constructed a new installation on Southern Mindanao in a nifty little inlet SE of Zamboanga, across the gulf. (The Phillipines is a beautiful place.) Was there more behind Gordon's boot from Subic Freeport than we may have imagined?
But China itself has some very severe, and growing, problems. Like most troublesome situations, their troubles have resulted from a combination of elements. Important to remember is the fact that the Mainland consumer -- a bit more than 50% of GDP -- is not coming out of an austerity program as in 1993. The Chinese consumer has his (and possibly his and hers) Shangling refrig, color tv, etc (FEER, 01/98). The consumer absorption expected to help the situation will not, has not. I believe the infrastructure spending is still a good move, but the nature of that type of work will not have its fullest impact on the economy until next calendar year. However, and from one aspect only, circumstances may not be as dire as depicted.
Should the U.S. economy be slowing near to the GDP rate they believe, and some say more (Steve Roach, MSEconomic Forum 08/03), the FOMC could ease rates to "tweak the economy" and receive no heat from any corner of the debate. A significant correction in U.S. equities markets would only bolster reasoning. That move, and some verbal stimulus from Obuchi and Miyazawa would adjust the forex situation more to the liking of Beijing (and GM as well).
A yuan devaluation may not be welcomed, or necessary. But throw in a 5% devaluation on top of what I've already mentioned, and circumstances don't seem so bad for Beijing. But they are.
Leaving the yuan topic, we find the CCP increasing both provincial militia and security police forces in all the provinces. Xinjiang is a hot spot where Jiang's recent visit was followed by several explosions. Xinhua reported there were no injuries. (???) Consider also what damage the flooding has caused, not only to properties but to crops as well.
The Wuhan geo-depression plays host to mainly rice crops, but further north and east the wheat crops come into play. Just a bit further north, entering Henan, the wheat changes to predominantly corn, which may or may not be effected. In short, crop damage, including crop rot, will distress the regional population.
OTHER CONSIDERATIONS
The internal fiat arrangement gives the banking system some legroom. But what of the "hidden foreign debt" that the Ching Chi Tao Pao, as I recall, reports is outside official figures? Aaagh, outa' sight, outa' mind. They'll costume it somewhere.
Later this year, after harvest, is a time of year when many agrarian Chinese would normally migrate to the factory shops of Guangdong and Fujian which will not be capable of providing as many jobs as in prior years. Also, the lending programs, intended to spur home sales, has not succeeded and wage growth has slowed to a standstill.
The troops are prepared to make an example of Xinjiang.
THE FUNDING DILEMNA
The current condition of the Hong Kong market is causing some funding problems for China that will only get worse. Beijing "hardliners" are finger-pointing anew. And some fear, should they not be capable of filling the dragons belly, the dragon may breathe some heat on their present liberties.
Also, the U.S. Congress has hurried legislation through the Senate Judiciary that intends to create a National Security Office at the SEC. Some analysts argue the effectiveness of the effort, but the Congress is intent it appears on full disclosure of foreign fund-raising efforts underwritten by Wall Street. Especially funds that may be diverted to procure weapons contracts with known belligerents and sovereign enemies of the United States.
But, really. Who cares? |
