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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (21692)	1/18/2005 6:36:00 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Mish, this is from official media: “Steady progress” includes, but not excludes, all of the following: “He (Zhou) reiterated the commitment to the prudent fiscal policy and deeper reform on the financial sector. He particularly mentioned the real estate sector which he said would be put under close watch. He urged to promote innovation of financial products and market development, secure a stable financial system, and push the reform on the mechanism of RMB exchange rate forward in a positive and prudent way while keeping the Chinese currency basically stable at a reasonable and equilibrium level. He promised to deepen the reform on a market-oriented interest rate regime and give the interest rate a full play in leveraging the national economy. He required to launch the pilot project of incorporating fund management companies and securitizing credit assets. He called for persistent efforts on improving corporate governance, having a sound interior control system in place and changing the operation mechanism for the Bank of China and Construction Bank of China. Zhou urged to make researches and verification on the overall program of the rural financial reform. He thinks it necessary to accelerate the establishment of a market-based compensation system for financial risk exposure. A monitoring index system for the surveillance and assessment of a stable financial system is high on his agenda. He shows willingness to cooperate with other departments concerned on regulating the financial market exit. He also vowed to strengthen the money laundering campaign, improve the social credit environment, and promote cooperation and exchanges with foreign nations. As learn broad money is estimated to rise 14.5 percent by the end of last year. The forecast for newly extended RMB loans in 2004 is 2.2 trillion yuan which represents a slow down of 500 billion yuan. Yuan loans which have gone to rural areas, SMEs(small and medium sized enterprises), consumption and the employment have showed stark increase last year. He said the central bank would continue its support to these fields.” english.people.com.cn BTW, Zhou XiaoChuan got a Ph.D degree in applied systems engineering from QingHua University, so maybe he does have right tools<g> The following is my 2 cents<g> >>This year there will be further steps in this aspect, but generally speaking the progress will be steady.''<< Major steps this year: Continue to bring down the amount of bad/non-performing loans for the state banks; Allow more foreign banks to do RMB business (116 are now allowed); Starting this year, RMB bankcard can be used outside China; Try to offer the big 4 state banks on the stock market, at least 2 of them will be offered late this year or early next year; Yes, it is true that those steps are minor, but they are the connecting dots to the major step. The latest rumor from China is that in order to release some pressure on RMB, PBoC will raise the required deposit rate by another percentage point (last year it was raised from 6.5% to the current 7.5%). >>``Some people say'' China should maintain sufficient reserves to pay for six months of imports, he said. In addition, the central bank needs enough to meet demand for currency among foreign investors when they repatriate profits, he said.<< Yes, China should be fully prepared for foreign investment to leave since so many people claim China’s economy will collapse, including Jimmy Roger, Marc Faber, who usually were optimistic on China<g>

To: mishedlo who wrote (21692)	1/20/2005 2:40:15 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Mish, here is more from what Zhou XiaoChuan has said the other day, which I don’t see that English report mentioned. As for why China should keep a large amount of foreign reserve, Zhou said it is necessary for China to prepare enough foreign reserve. China should be prepared for the reversal of the foreign investment. Usually, foreign investors expect an annual return of 10%. [My own read: in case their expectation is not met (means when Chinese economy slows down or the US increases plenty of their interest rate), they will leave]. Zhou said foreign investment would have to leave sooner or later. There are a total of more than $500 billion FDI in China now. So China has to make sure to meet their demand when they want their money back. [, My own take, China is fully prepared for the exit of FDI in case China slows down] Zhou said most of short-term foreign debt comes from the loan of foreign banks. And some of them are from foreign reserve of the enterprises. He thinks that this short-term foreign debt may very possibly have been changed into RMB now. So when condition is right [My read, disappointed at China not going to revalue], these short term debt will be exchanged back to foreign currency, and this is another reason why China has to prepare a large amount of foreign reserves. Considering all of the above, the current foreign reserve of China ($609.9 billion and counting) is not high after all, Zhou said. [So, the main point of Zhou’s speech is to prepare for the possible expatriation of foreign investment for ….<filling your own blank<g>]