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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4841)	5/23/2005 2:11:53 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China in for 'rude shock' over asset bubble By Ambrose Evans-Pritchard (Filed: 23/05/2005) China is repeating Japan's worst mistakes in the asset bubble of the 1980s and could soon come down to earth with a "rude shock", a top Japanese official has warned. Hiroshi Watanabe, head of international affairs at Japan's finance ministry, said the speculative excesses in China could set off a regional crisis. He added: "We are very worried about the situation. The enormous inflow of funds into China over the last year is creating excess liquidity, which the authorities have so far been unable to sterilise in the domestic markets. We're seeing a bubble similar to what we had in Japan in the 1980s. Just look at property prices in Shanghai," he said. "We have an old Asian proverb: the higher the mountain, the deeper the valley," he said, predicting an "abrupt adjustment" with serious knock-on effects on South Korea, Thailand and, less directly, on Japan. Japan's property and stock bubble peaked with a speculative surge in 1989, when a single square mile of Tokyo was theoretically worth more than many of the world's countries. More than 15 years later, the Nikkei stock index is just 28pc of its former value, while the economy is facing its eighth year of outright price deflation. Mr Watanabe said Beijing faced the risk of a peasants' revolt as it prepares to revalue its currency under US pressure. He added: "Let's not forget that China's agriculture is very uncompetitive and would risk being driven onto the ropes by imports of foreign food. "Beijing cannot allow a surge in the numbers of unemployed farm workers, especially at a time when coastal industry is absorbing less manpower," he told the Italian financial newspaper, Il Sole. Professor Steve Hanke, a leading currency expert at Johns Hopkins University, said China would be "foolish" to let their currency revalue, even if this means US trade sanctions before the end of the year. He warned that revaluation could set off a catastrophic deflation in asset and property prices. "Non- performing loans would just explode. You would have a real crisis on your hands in China. They're aware of this, so I don't think they'll change." He said a currency revaluation in 1934 played a key role in undermining the pro-western regime of Chiang Kai-Shek, preparing the way for the communist revolution. Under pressure from Congress, US Treasury secretary John Snow is pushing hard for a revaluation, claiming that it will help cut America's massive trade deficit. He called the dollar-peg "highly distortionary", though he has stopped short of calling China a "currency manipulator", tantamount to a declaration of economic warfare. Beijing has held the renminbi down through the massive purchase of US Treasury bonds, keeping the consumer boom alive throughout the United States in the process. Meanwhile, Alan Greenspan, head of the US Federal Reserve, distanced himself from American policy over the weekend, saying it that was "quite unlikely" that a Chinese revaluation would improve America's trade deficit - a record $617billion last year. Americans would merely switch demand for imports to another country, as well as pushing up inflation in the United States. But he predicted that Beijing would have to act eventually in its own interests to curb inflation. telegraph.co.uk

To: RealMuLan who wrote (4841)	5/23/2005 3:09:29 PM
From: regli	Read Replies (1) \| Respond to of 6370

I have speculated that China might do a similar thing as Argentina and use gold as one of the basket currencies. Even the threat of it might give U.S. financial circles pause as gold is a major indicator of dollar health. From my perspective it would be an excellent tool to use in negotiations with the U.S. as the common man is not aware of gold's still strong role in currency management. Therefore in the press this would likely not be perceived as significant and could therefore not be as easily turned against China in the contest of popular opinion.