CHINA

June 9 -- According to CNBC, New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy.

While the Chinese markets are far from a certain, they do appear to continue to be among the 'most promising' of economies to emerge from this economic malaise first and best in shape.


June 1 -- Manufacturing index reports out of China continue to fuel the belief that China is best poised to recover from this global economic tragedy. The index reading for May fell to 53.1 from 53.5 in April. HOWEVER, the point here is that the index remained above 50 for the 3rd straight month! As you know via the TSM commentaries, a reading above 50 indicates growth, whereas a reading below 50 is contractionary. Therefore, China is managing, albeit BARELY, to maintain a "growing" (more likely stagnant or NOT deteriorating) economy -- which says something about China considering the state of things elsewhere and in other countries. While TSM hopes that China will continue to develop its domestic demand (what a powerhouse it'd be with all its people to buy things), its also encouraging to know that as other countries come back on board, China will only benefit (given its export-laden nature).

On the other hand -- and an interesting note not included in many commentaries on this -- April has been the most impressive/strongest month for Chinese exports for the past 3 years. So, it is possible that the only peak into growth (i.e. above 50) will occur during April, May, June when demand is most strong. Now that ISNT a good sign. If we only sneak into growth territory during the strongest months of the year.


May 14 -- Some points to consider:

1. Nouriel Roubini (NYU professor and bear market/bank collapse predictor) notes that "China is a creditor country with large current account surpluses, a small budget deficit, much lower public debt as a share of G.D.P. than the United States, and solid growth. And it is already taking steps toward challenging the supremacy of the dollar. Beijing has called for a new international reserve currency in the form of the International Monetary Fund’s special drawing rights (a basket of dollars, euros, pounds and yen). China will soon want to see its own currency included in the basket, as well as the renminbi used as a means of payment in bilateral trade."

2. "China has already flexed its muscle by setting up currency swaps with several countries (including Argentina, Belarus and Indonesia) and by letting institutions in Hong Kong issue bonds denominated in renminbi, a first step toward creating a deep domestic and international market for its currency."

3. "Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets."

Sure the dollar isn't going anywhere today or tomorrow, but then again, i think it's safe to say that the dollar may not be going anyway (in terms of increase in value and strength) in 3, 5, or 7 years either.


May 13 -- I don't have any information on this category just yet, but the reasons I've included it is:

1. I've heard that there is significant growth in 2nd and 3rd tier cities, which almost serve as mini-emerging markets within an already growing and powerful country.

2. They are a surplus/saving nation. So they can effectuate stimulus plans without going into debt. The question will be if their stimulous can create DOMESTIC demand. If China ever finds a way to really sell to its own 3 billion people, then it will be the world's economic powerhouse.