New data from the HSBC Flash Purchasing Managers Index confirms that factory orders in China are slowing, as it dropped from Aprils final reading of 49.3 to May's final reading of 48.7.
This is the seventh month in a row that the index has been under 50, which means the economy continues to contract.
Hopes that China's economy will rebound in the second half appear to be dashed, as the global economic slowdown continues.
HSBC's chief economist Qu Hongbin, said this, "Policymakers have been and will step up easing efforts to stabilize growth. As long as the easing measures filter through, China will secure a soft landing in the coming quarters."
This not only points to a weakening Chinese economy, but other economies around the world as well, as that's where the weakness lies, with orders plunging from overseas customers. That means those businesses don't see strong demand in the near future.
According to Markit Economics Research,, for new export orders, the sub-index fell from 50.2 in April to 47.8 in May, bringing it down to close to March's final reading of 47.7.
Other weak economic indicators in China for April resulted in the Chinese central bank cutting the amount of cash banks must hold in reserve in order to provide more liquidity in the economy.
That hasn't worked so far, as there is more than enough liquidity, but not much demand for capital. That has resulted in few loans.
Unfortunately, the failed Keynesian idea of spending more money by the government in an attempt to boost growth is being considered by Beijing, which is now going to go further into debt by financing infrastructure projects, which of course means an attempt to artificially prop up the economy in hopes the private sector will rebound.
You would think China would look to the fiasco in Europe and the extraordinary debt in the U.S. as examples of what not to do. But they are ignoring all that, apparently thinking they won't face similar issues by participating in the same practices. They're wrong!
This is also the outlook of new socialist French President Francois Hollande, who wants to stimulate the French economy as well, by focusing on "growth" rather than fiscal discipline.
To think of this a novel idea is of course ridiculous. Some even call it 'game-changing.' What's changing the game about governments spending themselves into failure. What doesn't Hollande understand about the sovereign debt crisis in the region?
He's a socialist of course, so he's even more blinded by the idea of government as savior than most. Yet encouraging more spending will lead Europe quickly closer to the economic precipice than they are now.
Most of Hollandes idea is centered around eurobonds, which is pooled European debt. What it would do is destroy the free markets once and for all, as the market wouldn't be allowed to punish poorly run countries, but rather the cost of money would be the same no matter what the credit rating or outlook of the country is.
In other words, it would take even more incentive away for countries to to get their financial houses in order, and they would attempt to spend themselves out of the dilemna. This is another spin on failing Keynesianism, and will itself fail over time.
Out of control spending and political promises in Italy and Spain has resulted in the countries having to pay close to five times as much interest as Germany does when issuing national bonds.
To socialists like Hollande this is an outrage. He doesn't like the idea of markets forcing discipline on governments, and wants to eliminate that altogether.
It will be a disaster if it is ultimately agreed to, as the last bit of restaint would be taken off of the irresponsible governments in the region, and they would be able to be able to just about spend with impunity, as the cost of failed policies couldn't be interfered with by the market through higher interest rates.
That means the countries in Europe would all be viewed the same in regard to eurobonds, even though they would widely differ in financial health.
Chancellor Angela Merkel rightly opposes this, and would be irresponsible to the German people if she were to agree to it. Her concerns are rightly that the German people would have to underwrite the weaker and vastly irresponsible nations of the eurozone in perpetuity. She is right.
If she does agree to it, it will show that the obsessive idea of keeping the eurozone and European Union in tact is more important than the people of the nations represented; especially those that have their financial houses in relatively healthy order.
Going back to China, it needs to learn from this fiasco if they're going to avoid the same fate in the future.
Showing posts with label China Economy. Show all posts
Showing posts with label China Economy. Show all posts
Thursday, May 24, 2012
Monday, November 15, 2010
US Dollar, Economic Influence, Waning on Global Stage
The rebuke and rejection of the request by the U.S. to pressure China to into increasing the value of the renminbi by the G-20 underscores the declining economic influence of America in the world, as well as the U.S. dollar, which has become a disaster.
Not only was the idea of pressuring China on their currency rejected, but the U.S. and the disastrous Federal Reserve were castigated by economic powerhouses like China, Germany, Brazil, France and Korea for their policy of acquiring U.S. government debt and flooding the world with U.S. dollars.
Even with all of that being true, it's interesting to see European countries hit out at the U.S. when Europe is still a disaster as far as sovereign debt goes, although Germany and France are healthy in that regard.
It's the unwillingness of the Obama administration to introduce austerity measures like most countries in Europe have that is outrageous to most, who have said the U.S. must stop the economic strategy of growth through going into deeper debt.
Europe has already proven these socialist plans don't work, and even though there will be a lot more pain to go through in Europe, the pain is coming from taking the right steps, not from misguided policies.
Many laugh at the foolishness in Europe from their coddled classes who have become "kept" by the governments, but how far is the U.S. behind that scenario, as the inability to pay for reckless promises by the U.S. government over the decades is coming home to roost.
As far as the trade surplus that always comes up in difficult economic times, American consumers have made the decision to buy quality and inexpensive products from China and other countries. This same nonsense was brought up when Mexico was producing many of the goods Americans bought.
That has to do with the overpaid American workers, especially those in unions who can't compete with their counterparts in other areas of the world. Until those problems are addressed, America will have this problem no matter which country is the latest to enter the manufacturing sector.
The Obama administration, as have most previous administrations, give lip service to this to play to their base, but the cat has been long out of the manufacturing bag, and there's no bringing back what has been a past that is no longer relevant.
America's economic day is over. They've allowed the Federal Reserve to destroy the value of the U.S. dollar and create a class of consumers based on debt consumption, which had been driving the global economy. That day is now past, and will never return to levels before the economic crisis hit.
The only reason the U.S. dollar even remains the reserve currency of the world is no one else really wants to allow their currency to replace it, as it would drastically reduce the flexibility they now enjoy.
If a country like China eventually were to allow their currency to become the reserve currency, it would only be done for national pride and not for any benefit to themselves. I wonder if they'll end up getting suckered into that?
Some nations in the East have already been making transactions without the U.S. dollar being part of it, and calls for a variety of different ways of going forward have already been suggested, including possibly a basket of currencies, or even returning to some type of gold or commodity standard currency could be based upon.
For the U.S., they need to drop their being the policeman of the world, drop being a nanny state, and get their hands out of the free market. Until that happens, the country will continue to spiral downward economically itself, and in its economic influence around the world.
Not only was the idea of pressuring China on their currency rejected, but the U.S. and the disastrous Federal Reserve were castigated by economic powerhouses like China, Germany, Brazil, France and Korea for their policy of acquiring U.S. government debt and flooding the world with U.S. dollars.
Even with all of that being true, it's interesting to see European countries hit out at the U.S. when Europe is still a disaster as far as sovereign debt goes, although Germany and France are healthy in that regard.
It's the unwillingness of the Obama administration to introduce austerity measures like most countries in Europe have that is outrageous to most, who have said the U.S. must stop the economic strategy of growth through going into deeper debt.
Europe has already proven these socialist plans don't work, and even though there will be a lot more pain to go through in Europe, the pain is coming from taking the right steps, not from misguided policies.
Many laugh at the foolishness in Europe from their coddled classes who have become "kept" by the governments, but how far is the U.S. behind that scenario, as the inability to pay for reckless promises by the U.S. government over the decades is coming home to roost.
As far as the trade surplus that always comes up in difficult economic times, American consumers have made the decision to buy quality and inexpensive products from China and other countries. This same nonsense was brought up when Mexico was producing many of the goods Americans bought.
That has to do with the overpaid American workers, especially those in unions who can't compete with their counterparts in other areas of the world. Until those problems are addressed, America will have this problem no matter which country is the latest to enter the manufacturing sector.
The Obama administration, as have most previous administrations, give lip service to this to play to their base, but the cat has been long out of the manufacturing bag, and there's no bringing back what has been a past that is no longer relevant.
America's economic day is over. They've allowed the Federal Reserve to destroy the value of the U.S. dollar and create a class of consumers based on debt consumption, which had been driving the global economy. That day is now past, and will never return to levels before the economic crisis hit.
The only reason the U.S. dollar even remains the reserve currency of the world is no one else really wants to allow their currency to replace it, as it would drastically reduce the flexibility they now enjoy.
If a country like China eventually were to allow their currency to become the reserve currency, it would only be done for national pride and not for any benefit to themselves. I wonder if they'll end up getting suckered into that?
Some nations in the East have already been making transactions without the U.S. dollar being part of it, and calls for a variety of different ways of going forward have already been suggested, including possibly a basket of currencies, or even returning to some type of gold or commodity standard currency could be based upon.
For the U.S., they need to drop their being the policeman of the world, drop being a nanny state, and get their hands out of the free market. Until that happens, the country will continue to spiral downward economically itself, and in its economic influence around the world.
Freeport (NYSE:FCX), BHP (NYSE:BHP), Teck Resources (NYSE:TCK) Down on China CPI Report
Freeport-McMoRan Copper & Gold(NYSE:FCX), BHP Billiton Limited (NYSE:BHP) and Teck Resources (NYSE:TCK) were all down Friday as uncertainty clouded the demand picture when news China's consumer price index rose to 4.4 percent (higher than what was anticipated), leading to speculation China may tighten the economy by raising interest rates in order to fight inflation.
Gold price obviously plummeted on the news, but the diversified miners also took hits because of the demand factor all continue to rely upon from China.
Copper also took it on the chin, dropping the most in a trading session in four months. In China copper, along with zinc, cotton, rubber, sugar, corn and soybeans fell to their daily limits as concerns not only inflation, but the possibility reserves may be tapped for sales, which would cut demand.
All of this and more is affecting the share price of diversified miners and commodity-based companies, and all eyes are on China as to where the market will go next.
Freeport closed Friday at $103.92, losing $4.09, or 3.79 percent. BHP was down to $86.97, falling by $2.63, or 2.94 percent. Teck Resources closed at $49.12, dropping by $1.07, or 2.13 percent.
Gold price obviously plummeted on the news, but the diversified miners also took hits because of the demand factor all continue to rely upon from China.
Copper also took it on the chin, dropping the most in a trading session in four months. In China copper, along with zinc, cotton, rubber, sugar, corn and soybeans fell to their daily limits as concerns not only inflation, but the possibility reserves may be tapped for sales, which would cut demand.
All of this and more is affecting the share price of diversified miners and commodity-based companies, and all eyes are on China as to where the market will go next.
Freeport closed Friday at $103.92, losing $4.09, or 3.79 percent. BHP was down to $86.97, falling by $2.63, or 2.94 percent. Teck Resources closed at $49.12, dropping by $1.07, or 2.13 percent.
Thursday, November 11, 2010
Moody's (NYSE:MCO) Upgrades China's Credit Citing Strong Economy
Moody's (NYSE:MCO) upgraded China's debt today from A1 to Aa3, saying the sound balance of payments and the strong economic performance of the company has found support and will continue on, generating a positive outlook for their credit.
Moody's senior vice president Tom Byrne noted, "The record of the past year demonstrates that China's policy response to the 2008 crisis has been effective. Real GDP growth initially rebounded rapidly in response to the stimulus measures, and is moderating to a more sustainable rate of growth, which seems likely to be around 9%-10% this year, and perhaps 8%-9% in 2011."
This upgrade follows the opposite for the credit of the U.S., which was recently downgraded by Dagong, a rating agency based in China.
They felt the U.S. was entering into debt waters which aren't sustainable, and the U.S. won't be able to repay what it owes. They also believe the U.S. government's intention of paying the debt is suspect.
U.S. debt was downgraded because of the implementation by the Federal Reserve of another round of quantitative easing, this time $600 billion over the next eight months.
Other countries like Germany has stated similar concerns, as the first stimulus did nothing to help the economy, and this one will be a huge waste of money America can no longer afford.
Moody's senior vice president Tom Byrne noted, "The record of the past year demonstrates that China's policy response to the 2008 crisis has been effective. Real GDP growth initially rebounded rapidly in response to the stimulus measures, and is moderating to a more sustainable rate of growth, which seems likely to be around 9%-10% this year, and perhaps 8%-9% in 2011."
This upgrade follows the opposite for the credit of the U.S., which was recently downgraded by Dagong, a rating agency based in China.
They felt the U.S. was entering into debt waters which aren't sustainable, and the U.S. won't be able to repay what it owes. They also believe the U.S. government's intention of paying the debt is suspect.
U.S. debt was downgraded because of the implementation by the Federal Reserve of another round of quantitative easing, this time $600 billion over the next eight months.
Other countries like Germany has stated similar concerns, as the first stimulus did nothing to help the economy, and this one will be a huge waste of money America can no longer afford.
Thursday, June 17, 2010
Gold Explodes Again on Weak Economic News
The attempt to paint a rosy economic picture is being ignored or not believed by investors, and gold prices are again exploding upward as it's considered the safest place to put your money in these difficult times.
At just before 1:30 PM EDT, spot gold prices were at $1,247 an ounce, a gain of $16.50 for the day.
People are starting to see that every time new, negative or weak economic data come out, the term "surprising" or "unexpected" is used, implying either the economists and government are completely inept, or it's a buzzword used in an attempt to manipulate people into thinking it's a temporary situation.
That strategy is no longer effective, as what is really being seen is when you use those terms month after month, the inevitable conclusion is there is no real recovery, and it's highly unlikely we've ever moved out of the recession in the first place.
No matter, gold prices are reflecting the growing disbelief in the economy picture attempted to be painted by the Obama administration, and other governments around the world.
Date from China, Europe and the United States confirm we're still in economic trouble, and gold prices will continue to rise in response to that economic reality.
One confirmation of this is the latest consumer price index data which dropped 0.2 percent in May, the largest fall since December 2008, confirming demand is slow and retailers are having to continue to cut prices in order to encourage consumers to spend.
At just before 1:30 PM EDT, spot gold prices were at $1,247 an ounce, a gain of $16.50 for the day.
People are starting to see that every time new, negative or weak economic data come out, the term "surprising" or "unexpected" is used, implying either the economists and government are completely inept, or it's a buzzword used in an attempt to manipulate people into thinking it's a temporary situation.
That strategy is no longer effective, as what is really being seen is when you use those terms month after month, the inevitable conclusion is there is no real recovery, and it's highly unlikely we've ever moved out of the recession in the first place.
No matter, gold prices are reflecting the growing disbelief in the economy picture attempted to be painted by the Obama administration, and other governments around the world.
Date from China, Europe and the United States confirm we're still in economic trouble, and gold prices will continue to rise in response to that economic reality.
One confirmation of this is the latest consumer price index data which dropped 0.2 percent in May, the largest fall since December 2008, confirming demand is slow and retailers are having to continue to cut prices in order to encourage consumers to spend.
Thursday, June 10, 2010
Freeport-McMoRan (NYSE:FCX), Copper and China
Freeport-McMoRan Copper & Gold (NYSE:FCX) has been under pressure lately based on slowing imports of copper by China.
For May, the number of metric tons imported dropped to 396,712, a decline of 9.1 percent from April, and 6.1 percent from May of 2009.
While copper imports from China are up 8.2 percent in 2010 over 2009 at the same time last year, that is expected to continue falling through the rest of the year.
All of this is the result of urban centers in China whose property markets have skyrocketed, generating inflation pressure and concerns, which resulted in regulatory measures and the raising of interest rates to cool them off.
The rural areas aren't as affected, and so the idea of a Chinese housing bubble is overplayed, as they're located almost solely in the large cities.
Either way though, Freeport and others with strong exposure to copper will be under pressure for some time, at least as far as prior expectations of a China growth rate in the lower double-digits.
That will probably fall to around 7 to 8 percent, which many feel would a much healthier and predictable China.
There will be a temporary drop in raw material demand in China, but once things smooth out, companies should be able to make more accurate projections of sustainable growth.
But add this to problems in Europe and a stagnant American economy, and times are going to be tough for a while.
For May, the number of metric tons imported dropped to 396,712, a decline of 9.1 percent from April, and 6.1 percent from May of 2009.
While copper imports from China are up 8.2 percent in 2010 over 2009 at the same time last year, that is expected to continue falling through the rest of the year.
All of this is the result of urban centers in China whose property markets have skyrocketed, generating inflation pressure and concerns, which resulted in regulatory measures and the raising of interest rates to cool them off.
The rural areas aren't as affected, and so the idea of a Chinese housing bubble is overplayed, as they're located almost solely in the large cities.
Either way though, Freeport and others with strong exposure to copper will be under pressure for some time, at least as far as prior expectations of a China growth rate in the lower double-digits.
That will probably fall to around 7 to 8 percent, which many feel would a much healthier and predictable China.
There will be a temporary drop in raw material demand in China, but once things smooth out, companies should be able to make more accurate projections of sustainable growth.
But add this to problems in Europe and a stagnant American economy, and times are going to be tough for a while.
Tuesday, June 1, 2010
Gold Prices Soar Today on EU Bank Loan Loss Fears
Gold prices took off early in the day as reports from the European Central Bank said the banks in the region could experience another round of loan losses, this time up to $237 billion over the next year and a half.
The uncertainty of the economic fallout from Portugal, Italy, Ireland, Greece and Spain have investors concerned over how deeply it will impact the economy, and how far it'll spread to other nations, making gold the choice for those looking for safety.
News that China manufacturing dropped in May also reminded investors of some of the vulnerabilities there which could dramatically reduce economic activity there and abroad.
Gold futures were trading at a two-week high Tuesday in response to the news.
The uncertainty of the economic fallout from Portugal, Italy, Ireland, Greece and Spain have investors concerned over how deeply it will impact the economy, and how far it'll spread to other nations, making gold the choice for those looking for safety.
News that China manufacturing dropped in May also reminded investors of some of the vulnerabilities there which could dramatically reduce economic activity there and abroad.
Gold futures were trading at a two-week high Tuesday in response to the news.
Tuesday, May 11, 2010
Barrick Gold (NYSE:ABX) Newmont Mining (NYSE:NEM) Agnico-Eagle Mines (NYSE:AEM), Gold Fields (NYSE:GFI) Jump on China, Sovereign Debt Fears
Concerns over the sovereign debt crisis and China austerity measures have gold mining companies like Barrick Gold (NYSE:ABX) Newmont Mining (NYSE:NEM) Agnico-Eagle Mines (NYSE:AEM) and Gold Fields (NYSE:GFI) jumping today, as they have been up from 4 to 5 percent today, while gold prices today are closing in on all-time records.
After the euphoria over the almost $1 trillion being provided to bail out European countries passed, investors have taken in the potential consequences and possible irrelevance of the $1 trillion, which many are saying will just postpone the inevitable, and after spending that much will still have to deal with the underlying causes and consequences of the economies of these countries and the response of their people to having their outrageous wages and perks being taken away.
That has investors nervous, and rightly so, and gold should be the beneficiary of that in the years ahead.
As for China, they're having to face their own potential bubble bursting, and they're putting measures into place which could cut back on demand for raw materials, which will also be a good thing for gold prices, and ultimately gold mining companies.
After the euphoria over the almost $1 trillion being provided to bail out European countries passed, investors have taken in the potential consequences and possible irrelevance of the $1 trillion, which many are saying will just postpone the inevitable, and after spending that much will still have to deal with the underlying causes and consequences of the economies of these countries and the response of their people to having their outrageous wages and perks being taken away.
That has investors nervous, and rightly so, and gold should be the beneficiary of that in the years ahead.
As for China, they're having to face their own potential bubble bursting, and they're putting measures into place which could cut back on demand for raw materials, which will also be a good thing for gold prices, and ultimately gold mining companies.
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