April 01, 2006

We've lost our majority stake

I hope our new Chairman of the Board Hu Jintao is a good guy.


Anonymous said...

Please don’t turn off the anonymous posting again. I have too many passwords, and I don’t want another one!

Anonymous said...

Is this good for America? Hell NO!

I want people to think about this … this is how a communist country can screw America:

The Chinese have manipulated their currency as a way to enhance trade with America. The most efficient way for them to do this is by purchasing US Treasuries (debt). They purchase these bonds without regard to price or economic data. This creates 2 perfect situations for them; first it attaches their currency to our currency and gives them an unfair trade advantage, and it also keeps long-term interest rates depressed in America despite the FEDs recent hawkish actions. This is the “conundrum” Greenspan talked about last year. And this of course keeps the USA spending machine on track.

Now, here’s how they could blackmail us:

The Democrats win congress in November.
Many powerful democrats want the Chinese to stop manipulating their currency.
The Chinese refuse.
The Congress creates legislation to punish the Chinese with tariffs.

All the Chinese have to do at this point is threaten to dump all US owned assets, including all those treasuries on the market the following day to cripple the American economy. This would cause bond prices to decline, and interest rates to increase dramatically. If interest rates increased overnight by 300-500 basis points, the DOW would likely have one of the worse days in history. The American economy would likely go into a deep recession if not a depression, and assets in this country would crash … most notably housing.

Tom DC/VA said...

50%, eh? Wow, never saw that coming.

So when does the mainland take over Taiwan?

Jin Lintao said...

We will notify you when we have completed the proposed austerity budget program for your country....

Awaiting Bubble Rubble said...

Thanks for posting this chart and returning to housing bubble related topics. There was a news item recently at http://news.yahoo.com/s/afp/ 20060303/bs_afp/ chinaforexyuan_060303055128; _ylt=AjBJqA.pwvV7ugBcyOWdsVSmOrgF ;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA that was not widely circulated. The Chinese will probably start reducing their exposure (ie., buy fewer 10 yr treasuries) soon, even if the US economy doesn't slow substantially. That is, 10-year T bill yields (the one that determines mortgage rates for the most part) will go up significantly. Here's the text in case the link doesn't post properly:

China's forex reserves much too big, offer US cheap financing Fri Mar 3, 12:56 AM ET

China foreign exchange reserves are too large and investing them in US Treasuries is providing Washington with cheap financing at the expense of Chinese returns, state press reports.

"China's foreign exchange reserve hit 818.9 billion dollars at the end of last year but what China really needs should be no more than 250 billion dollars," economist Xiao Zhuoji told the Shanghai Securities Times.

"The current (holdings are) way above actual needs," he said.

Chinese reserves should be cut by more than two-thirds from current levels, said Xiao, who is also a member of the Chinese People's Political Consultative Conference (CPPCC), an advisory body to the government.

The advisory body is currently holding its annual meeting in Beijing ahead of the full parliamentary session of the National People's Congress starting Sunday.

China's reserves have doubled in the last two years, up from 403.3 billion dollars in 2003 on the back of strong investment flows and funds betting on a future revaluation of the currency.

Analysts widely expect Beijing's rapid build up of reserves to overtake Japan, the world's largest holder of foreign exchange reserves of 846.9 billion dollars at the end of last year.

Xiao, who made similar comments last week, said that most of China's foreign exchange reserves are mainly invested in low yielding US treasuries (government bonds), effectively providing "low-cost" financing for Washington.

The government needs to change its conservative mind-set and encourage capital outflows and should allow companies and individuals to hold more foreign currency, Xiao said.

Liberalizing money outflows is part of China's overall reform to make its currency regime more market-oriented but regulators have yet to take any significant steps towards loosening strict regulations given concerns over the health of the country's financial system.

David said...

This graph needs to be showed. Thanks for posting it.

Bubble Meter Blog

waiting said...

Yeah. I saw that article a few weeks ago re. the Chinese reducing from 850 billion to 250 billion.

Pretty huge reduction eh?

And now the new "5 year plan" calls for a fairly abrupt change from focusing on foreign consumers to the Chinese domestic consumer.

Looks like they know what they're doing.

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