BRIC+ News & comments

[Billy T]

China's Stimulus Plan (Infrastructure and jobs, not buy toxic trash as Paulson origianally wanted to stick Joe taxpayer with.):

"... China’s plan is the biggest of its kind. Adjusted for purchasing power, China’s $56 billion stimulus package is equal to nearly $2 trillion.

How can China spend such a large lump of funds? Well, the country has built up massive financial reserves during its boom years, including the world’s largest foreign reserve—nearly $2 trillion—and saving pool. And after a major clean up in the past three years, the Chinese banking system now has a lower bad debt ratio than the U.S.

So government leaders are able to use the country’s vast resources to shore up the Chinese economy. In fact, Beijing expects this stimulus package to support China’s economic growth for the next two years with funds being spent by the end of 2010.

And China is already greasing the wheels on this plan, as in the last quarter of this year alone, China will deliver 120 billion yuan ($18 billion) of new spending in low-rent housing, infrastructure in rural areas, roads, railways and airports. Investment by local governments and companies in these projects may even boost that to 400 billion yuan ($60 billion)!

Overall, though, the $586 billion stimulus plan will fund the expansion and improvements to existing projects:

15% of the package will fund the construction of railways during 2009, which will create six million new jobs and generate 1.5% GDP growth.
50% of the plan will go towards building new highways, which will create 39 million jobs in the next two years.
Boosting healthcare expenditures, especially in poor rural regions.
The construction of more affordable and low-rent housing.
Improving environmental protection and enhancing construction of sewage and water treatment facilities.
Developing educational systems in rural China.
In the end, China’s stimulus packaged should generate at least 4% GDP growth and over 50 million new jobs. And this combined with a conservative 3% GDP growth in domestic consumption, China should be able to achieve 7% GDP growth in 2009.That’s why China continues to be the best area for investment now. Not only will the country continue to post robust economic growth at a time when most nations will experience stagnant or negative growth, but also many Chinese companies will directly benefit from the new stimulus package. ..."

From: 13 Nov.08 newsletter of RobertHsu@ChinaProfitStrategy.com

 

[Billy T]

First steps towards and Asian currency, or at least fixed exchange rates between Asian currencies, which is essentially the same thing?

"... Finance ministers from 13 Asian nations, including South Korea, Japan and China, agreed in May to create a pool of at least $80 billion in foreign-exchange reserves to be tapped to protect their currencies. That was an expansion of the so-called Chiang Mai Initiative, a deal allows countries to lend each other money at favorable terms if help is needed to support their exchange rates.

South Korea, Japan and China would provide about 80 percent of the pool, according to a statement after finance ministers met in Madrid in May. The rest would be provided by the 10 members of the Association of Southeast Asian nations. South Korea already has a currency-swap agreement of $4 billion with China and $13 billion with Japan. Leaders of the three Asian nations are scheduled to meet Dec. 14 in Fukuoka, Japan. ... Finance ministers from the three nations met in Washington yesterday on the sideline of the G-20 leaders' summit* ..."

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0jZk45MSrqI&refer=home

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*At least something, other than words, may come out of this week-ends G20 meetting in DC. I doubt revival of Doha will, but that would be important too.

 

[Billy T]

Credit is tight in Brazil also now. The current low price of oil and the high cost of recovery of the extremely deep (but huge quantity of high quality) "pre-salt" oil has given the Brazilian government second thoughts about how to finance the exploitation of that recently discover deposit. (Going it alone, not so attractive now.)

Unlike the heavier oil above the salt layer, which has made Brazil a net exporter of oil energy (but a net importer in cost, as the heavy stuff has much lower value than what Brazil imports as feed stock to its refineries) the plan for commercialization of the pre-salt oil will be different.

Still not firm, but the new plan will very likely follow the Norwegian model. The old plan sold concessions to any oil found in specified areas by bid. The new plan will keep state ownership of the oil and co-developed it with some selected partner(s). There is very little risk that the drillers will end up with a "dry hole" (every one of the 18 or so exploratory wells has found commercial quantities of light oil).

This means that the Brazilian government must invest in the development of the pre-salt oil, and as noted above ~$40/Barrel and tight money is limiting their ability to do so. (Currently Brazil government has no external debt and 207 billion in strong currency reserves.) China has made an unsolicited offer of 10 billion for participation in the development of the pre-salt oil and now there are talks underway with Japan and the United Arab Emirates to see if that is the best route for development of this oil.

On Nov. 10 Beijing announced an ambitious economic stimulus plan that will pour $585 billion into housing, water-and-energy projects, airports, disaster relief and railroad construction over the next two years. There is of course, fewer dollars flowing to China from US as Joe American tightens his belt.

It appears that what I have forecast for some time is beginning. I.e. China will invest in its own country and buy long term supplies of the essential imports it needs, instead of US Treasury paper. This conclusion is also strengthen by the announcement last week of Ben Bernanke that the FED is going to start buying IN THE OPEN MARKET, long term US treasury bonds. He said to force up price/ lower the interest rates, but in my IMHO that is only a "cover" for the fact that China and the oil exporters are stopping to buy long term Treasury paper. Everyone can see /understand that the dollar, although stronger now will slide down again soon and that inflation will increase when one takes a multi-year POV. Something like 8.5 Trillion* of new obligation has been made already, with little success** in making credit available via aid to the financial system. Obama will add a few trillion more paper money debt in his first year, most believe. This is why buying long term Treasury paper is not very popular with China and the oil exporters now.
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*"... The total relief package is now up to about $8.5 trillion. The entire US debt at the end of 2007 was just above $9 trillion; $8.5 trillion is about 60% of the gross domestic product (GDP). Here's a summary accounting of the $8.5 trillion (From: http://www.moneyshow.com/investing/articles.asp?aid=GURU-15789&iid=GURU&scode=011415 )

. Federal Reserve: $5.5 trillion committed, $2.1 trillion used.
. Federal Deposit Insurance Corp. (FDIC): $1.5 trillion committed, $149 billion used.
. Treasury Department: $1.1 trillion committed, $597 billion used.
. Federal Housing Administration (FHA): $300 billion committed, $300 billion used. ..."

**Credit is still very limited for US small businesses etc. but Paulson does not admit he has wasted 330 Billion dollars. Instead he claims: "It would have been worse." But as his goal was to make credit available, and essentially none is, how could it be worse than the current "credit is not available"?

 

[adam2314]

Further to my post to you this evening.

Listened to a BBC programme a couple of months ago..

The Gist was that India Would not surpass China due to the poor education offered to the Indian population as a whole..

Must agree..

18 Official languages.. Poor education.. No infrastructure to talk about..

A reputation world wide for a poor work ethic..

Write off India.. For at least this century..

 

[kmguru]

Further to my post to you this evening.
Listened to a BBC programme a couple of months ago..
The Gist was that India Would not surpass China due to the poor education offered to the Indian population as a whole..
Must agree..
18 Official languages.. Poor education.. No infrastructure to talk about..
A reputation world wide for a poor work ethic..
Write off India.. For at least this century..

Add to that, as I heard from many Indians in USA, Indian bosses are reluctant to hire other Indians that are not from the same tribe. India has lots of them divided by languages and sub-caste. May be change will come to the new generation after the old ones die off....

 

[Billy T]

"... Chinese manufacturers are well aware that they operate in one of the few large markets that is still showing a pulse. Retail sales in October were up by 22% compared with the same month in 2007—a slight drop from 23.2% in September, but an impressive figure nonetheless...."

From: http://www.economist.com/business/displaystory.cfm?story_id=12780891

As I recall, domestic market consumption in 2006 was up 18.8%, YoY. As I have been saying for years, there will come a day* when China is hard pressed to supply the domestic demand and honor all the long term contracts it has signed for raw material, energy, and food stocks.

Then China will say:

"Go to hell USA. You green paper is worthless now. We do not need you to buy our production."

And if US and EU are not already in deep depression, it will be a great advantage to China to destroy the dollar as those contracts call for payment at market prices. - With US & EU in deep depression oil, for example, might be $15/ barrel. Thus, even if China takes a hit on the declining value of the US Treasury paper it may still hold, the net effect of dumping it will be positive for China.

I doubt, however, that China will need to destroy the US dollar by dumping its US bonds - the FED's money printing presses running 24/7 will do that.
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*That day is still probably at least two years into the future. I.e. It is still China's policy that the workers should get only modest gains in standard of living and work long and hard making exports. Exports earn the maker a subsidy but not if product is sold in the domestic market. This will change when China decides to kill the US economically, (if not already in deep depression.)

 

[Billy T]

"... Paulson, Bernanke or Bush would never admit that unlike the U.S. banking system, the Chinese banking system is much safer—with none of the exposure to the subprime mess. ... the Chinese banking system is dominated by four big state-owned banks—banks that can write a check anytime they want ... with $1.4 trillion in cash sitting in their banks, there’s no liquid crisis in China. ... and that’s exactly what they’re going to do—invest in China and not the US. Why would they?

They already lost $2.46 billion, or 82 percent of their investment in The Blackstone Group. ... Warren Buffett {invested} $230 million in China’s leading battery company ...{Then text telling that is where the "smart money" is going, etc. but you need his fee service to invest correctly in China}*"
From: RobertHsu@Chinaprofitstrategy.com

Hsu is well connected to China's industrialists and leadership. He visits China almost monthly and promotes his Chinese stock selections. He is stating flat out that China's sovern fund is now forbidden to invest in US equities and hinting that China is about to stop rolling its Treasury paper.
He has free news letter Emails that I get, but I do not invest in either China or Russia as fear someday they will just confiscate foreign holdings. (When they no longer need foreign capital influx.) In the energy field, Russia already has effectively confiscated foreign holdings under the guise of stiff environmental requirements that forced the foreigners to sell out at less than their investments.
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*I have also been telling that GWB's tax relief for the rich, did not stimulate US economy, but built the factories in China that took Joe American's jobs away. - It is obvious: Give funds to already rich people and they will invest it where they think the returns will be greatest. China with 9 to 11% GDP growth was the "no brainer" choice during GWB's 8 years and even now with China's 8+% growth instead of US's negative growth that is where the funds are going if not just being held to improve the books until end of year reporting time. (US has had two recessions under GWB. -Definitely the worst place to invest, except for already failed states.)

"Trickle Down" always works, but does not (and did not) stimulate the stagnet US economy.

 

[Billy T]

How China achieved almost 10% average GDP growth for 30 years - that is more than a 16 fold increase! (assuming some quick mental math is correct.):

"... reform progressed more by disobedience than design. Initial failure to meet state-planning goals forced Deng to back away from command-economy tactics and permit individual initiative. Peasants on large collective farms, for example, were permitted to form "work groups" to tend designated plots. Central government policies specifically prohibited these groupings from including just one family. But families started to look after their own plots--and local officials pretended not to notice.

Urban subterfuge followed rural subterfuge. Deng's Beijing strictly prohibited private industry, but entrepreneurs proceeded by operating their businesses as "red hat" collectives and enterprises--private companies operating under the flag of state ownership. Deng's reforms succeeded because the Chinese people disobeyed Deng's rules.

Such defiance would have been unthinkable in the Maoist years. Deng's great contribution, therefore, is not so much that he planned China's "economic miracle" but that he let it happen. The economy during the last three decades has grown at an average annual rate of 9.8% largely because peasants, workers and frustrated bureaucrats made themselves into entrepreneurs and pushed their country forward. By ignoring central government decrees, they built private businesses now accounting for as much as half of the Chinese economy. ..."

From:http://www.forbes.com/2008/12/16/ch...cx_gc_1216chang.html?partner=daily_newsletter

 

[kmguru]

China GDP Growth. I was there selling Automation Products
to improve Productivity in 1983 and 1984

The key is Automation....

1953 15.6
1954 4.2
1955 6.8
1956 15.0
1957 5.1
1958 21.3
1959 8.8
1960 -0.3
1961 -27.3
1962 -5.6
1963 10.2
1964 18.3
1965 17.0
1966 10.7
1967 -5.7
1968 -4.1
1969 16.9
1970 19.4
1971 7.0
1972 3.8
1973 7.9
1974 2.3
1975 8.7
1976 -1.6
1977 7.6
1978 11.7
1979 7.6
1980 7.8
1981 5.2
1982 9.1
1983 10.9
1984 15.2
1985 13.5
1986 8.8
1987 11.6
1988 11.3
1989 4.1
1990 3.8
1991 9.2
1992 14.2
1993 13.5
1994 12.6
1995 10.5
1996 9.6
1997 8.8
1998 7.8
1999 7.1
2000 8.0
2001 8.3
2002 9.1
2003 10.0
2004 10.1
2005 9.9
2006 11.1
2007 11.4

 

[Billy T]

China GDP Growth. I was there selling Automation Products to improve Productivity in 1983 and 1984
The key is Automation. ...

Have you bothered to compute the average pre and post 1983 average (compound preferred, but simple average if that too much work) GDP.

If the post 1983 average is higher, this is just another example of the only thing I still remember from my read of Das Kapital - Marx said (in my English translation):

"A capitalist is a man who will sell you the rope with which to hang him."

For another example, in the years pre WWII most of the US’s scrap iron and steel was shipped to Japan as they offered a higher price.


Where you one of those capitalists who helped China destroy the USA (economically)?

 

[Billy T]

If afraid your US bank will fail (or such a flood of printing press dollar is about to flow, that the purchasing power of your saving will evaporate) below is Forbes’ idea of a "safe haven" (released yesterday):

"... Brazilian banks have yet to suffer tribulations of banks in the advanced economies and the authorities have instituted a number of initiatives aimed at sustaining the financial sector's health:

--In October, the Central Bank announced that it would inject up to 100 billion reais into the financial system by readjusting its bank reserve requirements policy. This injection would be released on a needs basis rather than as a one-off.

--Over the past three months, the Bank has eased reserve requirements on term and interbank deposits a number of times and further expanded a program under which lenders {big banks} may use a portion of these reserves to extend loans to other {smaller} banks. The reserve requirement on deposits has been about 50%, in contrast with a norm of around 10-15% in most countries. ..." {Billy T note: This is also part of the reason why Brazil has 13.75% basic interest rates. The banks get to earn interest on only about half of their deposits, so to profit, they charge very high loan interest* and pay the world’s highest real interest rate (8% now but was even higher) to attract savers. A few weeks ago, some small, one-location, banks were in danger of being hit by a "run on the bank" as their normal credit lines from US banks were being dropped / cancelled. Brazil, like the US, does have goverment guarantee of the deposits, but Brazilians do not fully trust in them - about a decade ago, the government froze many accounts and confiscated some of the bigger ones.}

FROM: http://www.forbes.com/2008/12/17/brazil-unibanco-itau-cx_1218oxford.html?partner=daily_newsletter

Bank of Brazil has at least two offices in the US, one is in NYC (one in Miami, I think.) I use B. of B. and it sends me a "how great we are" letter every month (perhaps because I am a shareholder also). The last one told that their US deposits had grown by 20% during the prior month!

If you need a loan - contact them - they have growing amounts of cash to lend.
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*More than 100% / per year for some automatic loans, - like cashing, rather than bouncing, your overdraft check, if you have signed up for this "service" (and been pre-approved).

 

[kmguru]

Where you one of those capitalists who helped China destroy the USA (economically)?

Well my idea was like sell the Police RADAR to the Police and then sell the RADAR detector to the speedy Gongales. How do I know, the other party would not buy my antidote?

At the risk of exposing myself, I can tell you, when I came back and tried to sell my special algorithm based equipment made by my employer, Our people did not buy. We had to get special permission from the U.S. Government to sell to the Chinese. They improved their productivity 4 times that is documented. How am I supposed to know we are too dumb to catch up?

U.S. was in the forefront of automation since 1930s and had about 10 years lead. That is why our productivity was the highest in the world and hence the products were cheaper. But between 1990 and 2000, foreign countries caught up in productivity and between 2000 and 2005, they surpassed because we did not have any new technology to keep the overall lead.

 

[Billy T]

Nothing I have not said and predicted, but when published by current issue of the prestigious Foreign Affairs it has more impact:

"... China is little affected by the crisis in the West. Its entire financial system plays a relatively small role in its economy, and it apparently has no exposure to the toxic assets that have brought the U.S. and European banking systems to their knees. China also runs a budget surplus and a very large current account surplus, and it carries little government debt. Chinese households save an astonishing 40 percent of their incomes.* And China's $2 trillion portfolio of foreign exchange reserves grew by $700 billion last year, thanks to the country's current account surplus and foreign direct investment.**

This means that although China, too, has been hurt by the crisis, its economic and financial power have been strengthened relative to those of the West. China's global influence will thus increase, and Beijing will be able to undertake political and economic initiatives to increase it further. China and the Association of Southeast Asian Nations are just concluding an agreement that would create the world's largest free-trade area, and Beijing could take additional steps toward Asian interdependence and play a stronger leadership role within the region. China could also expand its diplomatic presence in the developing world, in order to further its model of capitalism and, in places such as Angola, Kazakhstan, and Sudan, satisfy its thirst for natural resources. ..."

From: http://www.foreignaffairs.org/20090101faessay88101-p40/roger-c-altman/the-great-crash-2008.html

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*F.A. forgot to mention that the Chinese have nearly zero credit card debt - less than 10% even know what a credit card is! In the USA credit cards are maxed out and interest rates on them are being jacked up, so they may be the next big systemic financial failure.

**Yes Republican "trickle Down" has greatly aidded China - built the more modern factories that killed Joe American's factory jobs.

 

[2inquisitive]

Billy T, that article was written buy Roger Altman. He was with Lehman Brothers for 14 years, and then a vice chairman for The Blackstone Group until this year, when he co-founded Evercore Partners. Lehman went bankrupt and Blackstone hasn't faired too well has it? That doesn't speak well for his ability to 'foresee' the future, does it? That article was from a podcast by Altman on Nov. 24. In it he states the "Still, the IMF is projecting that the country's economy will grow by 8.5 percent in 2009." That 8.5% growth figure is an old estimate. Here is the new figure, released on Dec. 16:

Economic growth in China in 2009 is now forecast by the International Monetary Fund to be as weak as 5% - about half of the 9.7% expansion expected this year.

The IMF's sharp downgrade of its 2009 growth prediction for China, from 8.5% as recently as last month, reflects the fast-deteriorating global economic situation.

Dominique Strauss-Kahn, managing director of the IMF, said of the series of declines in the organisation's forecasts of Chinese expansion in 2009: "We started with China at 11% growth, then 8%, then 7%, then China will probably grow at 5% or 6%."

http://www.theherald.co.uk/business...MF_downgrades_Chinas_expected_growth_to_5.php

 

[Billy T]

Billy T, that article was written buy Roger Altman. ... That 8.5% growth figure is an old estimate. Here is the new figure, released on Dec. 16:
http://www.theherald.co.uk/business...MF_downgrades_Chinas_expected_growth_to_5.php

Thanks for the more recent IMF projection. Your 16 Dec08 article does also states:

"... The IMF's sharp downgrade of its 2009 growth prediction for China, from 8.5% as recently as last month, reflects the fast-deteriorating global economic situation. ..."

so the "old estimate" is not very old. Anyway, again thanks for the newer information, I had not heard that the IMF had so drasticly lower the projection for China's GDP growth. If it turns out to be only 5% that will be a big problem as the $586 billion will not all be spent for several years.

I personnally think the impact of the recent farm land law changes will be much more dramatic in 2009. Imagine the internal demand farmers with credit mortgages and credit cards would make in the 100+ new cities of the interior.

Have you seen the BBC's series, "White Horse Village"? - That new city is nearing completion. It is like taking people from 1700s Europe and dropping them down in Topeka, Kansas of 2000. High rise buildings, large shopping centers, etc. where there were only huts, rice fields, pig farms and fish ponds a few years ago! With the rural transformations now occuring, what China is doing is unpresidented, to put it mildly.

 

[Billy T]

"... China cut interest rates for the fifth time in three months ...The one-year lending rate will drop ... to 5.31 percent and the deposit rate by the same amount to 2.25 percent ... The central bank also reduced the proportion of deposits lenders must set aside as reserves by 0.5 percentage point. ... “The central bank won’t stop the rate-cutting cycle until the economy starts to recover,” said Li Wei, an economist at Standard Chartered Bank Plc in Shanghai.
The reserve requirement will drop to 15.5 percent for big banks and to 13.5 ...
China reduced rates by the most in 11 years last month and announced the {US$ 568 billion} package of spending through 2010 on infrastructure and low-cost housing. The State Council pledged Dec. 13 to boost money supply by 17 percent next year to encourage lending and buoy domestic consumption.

Still, economic growth may slump to 5 percent in the first half of next year, less than half the 11.9 percent expansion in all of 2007, according to Royal Bank of Scotland Plc. ...
Besides the trade collapse, weakness in the property market is undermining investment, construction, consumption and economic growth. Home sales dropped 20.6 percent in the first 11 months from a year earlier, according to the statistics bureau.
The government has switched from battling inflation in the first half of the year to guarding against the risk that falling prices will contribute to the economy spiraling down. Inflation was the slowest in 22 months in November.

China needs to prepare for a “worst case scenario” as the global economic slump deepens, central bank Governor Zhou Xiaochuan said Dec. 4. China’s economy will expand by 7.5 percent next year, the least in almost two decades, the World Bank forecast last month. The nation is targeting an 8 percent expansion to generate jobs and avoid social instability, China Banking Regulatory Commission Chairman Liu Mingkang said in Beijing on Dec. 13. ..."

From:http://www.bloomberg.com/apps/news?pid=20601087&sid=aj0treTULm6w&refer=home

China is targetting 8% GDP growth in 2009 as that number is widely accepted as needed the create 10 million new jobs for the 10 million new workers that enter the labor force each year. I think they will print money and spend it to make sure this happens - This will have the obvious and desired side effect of making they Yuan less valuable so will boost exports also.

 

[Billy T]

Brazil & France drawing closer:
President Sarkozy and his lovely new wife have been in Brazil for a few days. He was the one who forced GWB to call the G-20 meeting in DC this November. France has supported Brazil as a permanent member of the UN Security Council for some time, but more actively under Sarkozy. Sarkozy is the main driving force behind the move to completely restructure international finances with much more openness and government oversight. (Does not want GWB's lax regulation via weak SEC etc to continue). He also is very pro free trade and fears World is drifting into protectionism, which made the Great Depression last so long. (Until WWII really)

Brazil will buy 50 heavy helicopters (model EC 725, carries 31 persons, 19.5 meters long, and a Brazilian subsidiary, Helibras, will at least do the final assembly and some parts to be Brazilian made. Helibras will be greatly expanded. Probably will continue to make this and related designs alone after the joint production of the first 50. I.e. this evolves full technology transfer to Brazil. Brazil is already a significant exporter of small arms and light weight military equipment, including prop-fighter aircraft and especially flight trainers (sold to many countries, even Franc, I think, but most of South America.)

Embraer is world's third largest airplane maker, the leader in the mid range jets (80 to 120 seats) and the best corporate jets (production is back logged with next available deliver about three years from now - can sell used one form more than a new one demand is so strong!) Embraer has a joint factory in Harkin China. China recently announced it will cease buying from Boeing and Airbus. These mid range jets are ideal for China's rapidly growing domestic air service with a 100+ new large cities being built in the interior to be served in the next few years.

Brazil will buy 5 submarines to protect its off shore oil better. Four are conventional, diesel/electric, model Scorpéne, and one is nuclear powered. The nuclear power plant will be Brazilian designed and made. (Design is been evaluated and tested now but finished only in 2024. Brazil is in process of closing the fuel cycle. Already does all from mining the uranium to enrichment but at present ships the yellowcake to Canada which send back the UF6 gas for the centrifuges. Delivery of first diesel sub expected in 2010.

The basic cost of this package is 1.9 billion Euros, but up-grading of equipment, weapons, etc.

If you have lost money in 2008, remember, it is only money. Merry Chrismass to all.

 

[Billy T]

In China, many are "much more equal than others." An interesting index of this, just released by Aéroports de Paris, owner of Charles de Gaulle & Orly airports is:

In the weeks before Christmass, 46,423 Euros of French wine were sold to passenger returning to Peking, including some very expensive bottles, such as 1947 Bordeaux of Rochschild etc. Last year in the same period only 23,300€ were sold.

In China: The rich are getting richer and the poor are also. - Domestic consumption has increase 22% compared to last year.

In USA in contrast:
"... Consumers facing a recession, tightening credit and the highest unemployment rate in 15 years shortened their gift lists and spent less. Retailers including Macy’s Inc. and AnnTaylor Stores Corp. responded by increasing markdowns, which stand to hurt profit margins in what may be the weakest holiday spending season in four decades. ... Sales at stores open at least a year may drop as much as 2 percent in November and December, the International Council of Shopping Centers said on Dec. 23 ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aKSolb.e58lw&refer=home

 

[Billy T]

First quote is from http://www.forbes.com/2008/12/18/ch..._1218notes.html?partner=globalnews_newsletter :

“…The Cultural Revolution was a decade {1966 to 1967 when Mao died} of collective self-destruction that left the country poor, chaotic and isolated.
Today 100-150 million Chinese are considered middle class, owning their own apartment and car and taking vacations. …”
{See post 58 also for index of how rapidly the well connected Chinese are prospering}

Following quotes are from Forbes’s four part series, Part I at: http://www.forbes.com/2008/12/16/ch..._1216chang.html?partner=globalnews_newsletter
I.e. the more pessimistic opinion of Gordon G. Chang, who wrote: The Coming Collapse of China:

“…technocrats, unfortunately, are still holed up in offices in Beijing preparing detailed five-year plans and directing the workings of the economy, allocating resources, pricing goods and awarding contracts. "Socialism with Chinese characteristics"--Deng's famous phrase--may mean many things, but it is, above all, socialism. Although analysts think China's leaders can mix two inherently different economic systems, their arguments, however persuasive, are implicitly premised on Chinese leaders continuing their decades-long program of reform. The growth we see today is largely the payoff from earlier reforms. Growth tomorrow requires reform today. China's current political system, however, cannot sustain the pace of necessary economic restructuring. …”

“… If "hot money" flows reverse and funds illicitly leave China, the consequences could be severe. Among the first victims would be the Chinese banks, which are likely counting large amounts of questionable loans as good assets on their books. … Continual growth has papered over these loan-quality issues. As money leaves the country and the economy slows, however, many bank customers--especially hard-pressed local governments--could have trouble paying back their loans. No one knows the extent of the problems in these financial institutions, but the central government's statistics showing single-digit nonperforming-loan ratios have a too-good-to-be-true quality to them. …” {Billy T observation: I made bold his negative SPECULATIONS. In the US it is not speculation that the banks are holding trillions of junk paper. Perhaps he is confusing China with California, eigth largest economy in the world, but bankrupt in less than two months? For details, See: http://www.bloomberg.com/apps/news?pid=20601087&sid=aiY_niAijUgM&refer=home}

To reverse the downturn in growth, Chinese leaders have decided to step up their investment in the economy, especially infrastructure. Early last month, the State Council, the central government's cabinet, unveiled a $586 billion spending program over nine calendar quarters. The downturn is so sharp, however, that Beijing announced it is working on a second stimulus package and now issues a continual stream of bulletins--almost all of them vague--on new initiatives. The problem is that, even after 30 years of reform, Chinese leaders have yet to develop an economy that can stand on its own. …” {Billy T observation: Fact that China is turning inward to get sustained growth is exactly what I have been predicting. The transition to a domestic consumption economy will have bumps and dislocation, but there is no reason to think China must export to US and EU to prosper. China’s trade with RoW, Brazil included, is rapidly growing. G.C. Chang is correct, however, that China cannot save the US & EU from sliding further down economically. Nor is it in China’s interest to do so as depression in US & EU will help China pay for its essential imports, oil etc.}

“…Chinese society today appears especially difficult to govern. Officials still prepare their five-year plans, but the Chinese people are making a "kinetic dash into the future" without so much as a roadmap or a compass. Once clothed in faded totalitarian garb, the Chinese today appear colorful. This mall-shopping, Internet-connected, and trend-crazy folk are remaking their country at breakneck speed as they outrace everyone else on the planet. …” { Billy T observation: That “glass” looks nearly full to me. Too bad the USA is not advancing "at breakneck speed as they outrace everyone else on the planet.”}

“…The political system is obviously having increasing difficulty channeling discontent as citizens are starting to think they have rights--and as they are becoming less afraid of their government. There may be as many as 150,000 protests each year in the People's Republic. …” {When did increasing the rights of the people imply society was about to collapse? True the CCP is changing, hardly a socialistic system anymore, but there is no alternative to it in the foreseeable future. IMHO, it will continue both to adapt and to provide every growing wealth to its citizens for decades at least. Few revolt if their wealth and consumption is growing – 22% last year. When wealth and consumption is shrinking, as In USA now, is when government systems change. The US is taking over the banks, running the economy more than ever before. Some argue US capitalism is transforming into a Chinese one- I.e. government controlled and directed.}

If Part IV has appeared, I could not find it.

 

[Billy T]

BRAZIL/ Japan & alcohol:

"... The Nansei Sekiyu refinery {was} recently acquired by Petrobras in Japan. With the refinery support Petrobras plans to begin the distribution of different oil refined products, including a gasoline with 3% of ethanol, as stipulated under Japanese law.
... Japan currently imports 500 million litres of ethanol, 380 million from Brazil and the rest from the US... Petrobrás anticipates that Japan’s consumption should reach 12 billion litres annually once the country fully instruments its energy diversification policies and contaminating gas emissions reduction.

The project to make Japan one of Brazil’s main clients was started two years ago when BrazilJapan Ethanol* was created, an association of Petrobras with Japanese government owned Nippon Alcohol Hanbai KK. Since Petrobras long term project also includes expanding sales to the rest of Asia, Japan will play a leading role in increasing sales and as a distribution hub for the area. ..."

From: http://www.mercopress.com/vernoticia.do?id=15649&formato=HTML

Billy T comment:
*As I recall, this corporation will mainly build and operate ships transporting alcohol to Japan. This article seems to suggest that the newly aquired refinery will serve as the main distribution terminal for Brazil's alcohol into rest of Asia.

The above volume numbers indicate a 32 fold increase in exports of alcohol, just to Japan, is anticipated in the next few years.
As I noted some years ago, when the US ends its stupid corn-to-alcohol program, Brazil may not have any surplus alcohol to sell to the US.
Asians, especially China, sign long term contracts. As I recall, Japan is financing a large new alcohol refinery in Brazil and taking 1/3 of its output for 30 years as the payment.