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Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: Joe Dancy who wrote (1653)	5/20/1998 7:57:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 2951

Joe, The article was hard to read. Once you break it down, it makes more sense. It covered a lot of our recent discussions concerning China. The article covered a large variety of subjects. Here's my off the cuff comments. Just thinking aloud. MikeM(From Florida) >>"All across the region - in Taiwan, Japan, South Korea, south-east Asia and China - what we are seeing is a dramatic, and I stress the word dramatic, intensification of deflationary pressures," said Michael Taylor, chief economist, Indosuez W.I. Carr Securities in Hong Kong.<< Falling prices after devaluation? This gets confusing. Counter to what we just talked about. In this case, it appears that the slowdown in output over rode the inflationary pressures as a result of devaluing currencies. >>Chinese leaders have deflected gloomy scenarios of declining growth by saying that spending on fixed assets is to total US$ 750bn (L460bn) over three years.<< I didn't realize the figure was so high. I recall Japan's stimulus program being on the order of $133 billion. China is going to out spend them. Interesting. >>But such figures can be misleading. Central government spending accounts for around 2 per cent of total fixed asset investment, meaning that China's leaders have limited direct power over investment. Most of the fixed asset spending in China is now determined by companies and banks, both of which increasingly take their cue from the market.<< Oh, that explains it. So only 2% of the $750 billion comes from government spending...I think? Or is the full $750 billion from the government coffers, but free markets determine where it goes? Confusing. But if the government has $750 billion to spend, maybe the unrest due to unemployment will be minimal. >>Exporters, who last year provided 20 per cent of gross domestic product growth, are finding competition from south-east Asian rivals increasingly tough, officials said.<< Well this is exactly what we have been discussing and why a devaluation may be necessary. >>Foreign direct investment in April plunged 19.4% to $3.12bn from the same month a year ago. In the first four months it grew by less than 1 per cent as investments from Japan, South Korea, Indonesia and Thailand fell sharply. Asian nations have provided more than 80 per cent of China's foreign direct investment, which hit a record $45bn last year.<< This is what we discussed earlier. The FDI figure. 80% comes from other Asian nations. Not good, because they are hurting so much. >> Economists said that China was becoming a two-speed economy, with the north and north-east unlikely to achieve the national target of 8 per cent growth this year but the south-east possessing the potential to surpass it. The uneven distribution of wealth is troublesome to a government worried about social unrest.<< This local pockets of problems also has been discussed recently. Exactly what a few posters mentioned that gives them concerns.