Spot China’s “Hot Money” Time-Bomb [zerohedge]

Over the weekend, FT noted that China’s central bank reported that companies and individuals sold RMB 684 billion ($109 billion) worth of foreign exchange and bought an equivalent amount of Chinese currency in January, a record for a single month. On the chart below, please point out the Chinese “hot-money” inflationary ticking time bomb (hint: highlighted).

Why “time bomb”? For the answer, we go to the simplest definition of inflation, which is as follows: “when too much money chases too few goods and services.”

In January, the money in domestic circulation via FX conduits just soared by a record amount, without a comparable increase in goods and services. All else equal, this is called the “hot money” effect, and manifests itself in a surge in Chinese inflation usually with a 3 month lag to whenever the Chairsatan starts experiment with the US monetary base.

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China Central Bank Says It Is “Fully Prepared For Looming Currency War” [Zerohedge]

Just in case Lagarde (and everyone else except for the Germans, who have a very unpleasant habit of telling the truth), was lying about that whole “no currency war” thing, China is already one step ahead and is fully prepared to roll out its own FX army. According to China Times, “China is fully prepared for a looming currency war should it, though “avoidable,” really happen, said China’s central bank deputy governor Yi Gang late Friday.” We look forward to the female head of the IMF explaining how China is obviously confused and that it is not currency war when one crushes their currency to promote “economic goals.” Of course, that same organization may want to read “Zero Sum for Absolute Idiots” because in this globalized economy any attempt to promote demand (by an end consumer who has no incremental income and stagnant cash flow) through currency debasement has no impact when everyone does it. But then again, this is the IMF – the same organization that declared Europe fixed in 2009, 2010, 2011, 2012, 2013 and so on.

More on China’s FX troop deployments:

Yi, vice governor of the People’s Bank of China, made the comment amid widespread concerns that the world’s major economies would drive down their units to gain a trade advantage through monetary easing policies. 

A currency war could be avoided, Yi said, if policymakers in major countries observed the consensus, reached at the recent G20 meeting, that monetary policy should primarily serve as a tool for domestic economy.

G20 members promised that they would not wage a currency war, but none have shown signs of scaling back monetary easing that has injected a flood of cash into global markets. They worry that removing the stimulus will plunge their economies into another recession.

“China is fully prepared,” Yi said. “In terms of both monetary policies and other mechanism arrangement, China will take into full account the quantitative easing policies implemented by central banks of foreign countries.”

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Ecobank sees more benefits in China-Africa trade [xinhuanet]

NAIROBI, Feb. 6 (Xinhua) — Pan-African commercial bank Ecobank Group is positioning itself to play a bigger role in facilitating the growing trade links between China and Africa, the head of the bank’s operations in Kenya said on Wednesday.

Ecobank opened a representative office in Beijing in December 2012 and has a strategic partnership with the Bank of China.

The intention is to make it easier for businesses easily settle their transactions by using integrated banking infrastructure in different countries.

“There is a growing interest by Chinese and African business people to use a financial provider with presence in many countries because this makes it easier to settle transactions,” Ecobank Kenya MD Tony Okpanachi told Xinhua in Nairobi.

He said there has been sustained increase in foreign direct investments from China to Africa in the last few years and this is bound to continue, underlying the bank’s plan to upscale its operations to benefit from the high volume trade.

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Chinese companies to make larger investments in Iran: Ambassador [presstv]

Yu Hongyang told IRNA on Wednesday that the illegal moves by certain countries in imposing unilateral sanctions against Iran will not shake Beijing’s determination to invest in the country.

He added that 70 Chinese companies are currently active in various infrastructural projects in Iran.

Yu further noted that Chinese firms are offering their services to Iranians in the fields of railroads, dam construction, and drip irrigation.

The Chinese ambassador stated that the determination of the Chinese and Iranian governments and nations to expand bilateral relations has led to ever-increasing trade exchanges between the two Asian countries.

 
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Why the Chinese Demand US Gun Control [thedailybell]

Chinese State Media Demands US Citizens Be Disarmed …The official Chinese government news agency, Xinhua, has demanded the US immediately adopt stricter gun control measures to reduce the number of firearms the US populace is permitted to possess. The Chinese state-controlled media’s statement, titled “Innocent Blood Demands No Delay for US Gun Control,” is primarily focused on the Newtown tragedy in which 26 Americans were killed by a mad gunman. Twenty of the victims were young children. The Chinese government stated, “Their blood and tears demand no delay for the U.S. gun control.” – Breitbart

Dominant Social Theme: The Chinese are rightfully concerned with US violence.

Free-Market Analysis: The Chinese have weighed in … Breitbart is reporting that the Chinese government is concerned about US gun violence (see above excerpt). This is notable because it tends to support certain dominant social themes we have noted before.

We do believe that the Chinese, like the Russians and the rest of the BRICs, are part of an effort to create global governance. The British – the City of London being an integral part of this larger effort – virtually ran China and India once upon a time.

While British influence has eroded among the civilian population, chances are the power elite behind past depredations remains quite influential with the political and military class.

There are suppositions that Western powers wanted communism to come to China in the form of Mao because that helped crush China’s unique culture and set the stage for the current quasi-capitalism that now engulfs China.

And as we have pointed out recently, both China and the US are converging on a new kind of sociopolitical and economic system that may mimic Germany’s National Socialism more than any other political paradigm.

For this reason, we’re not surprised top Chinese officials are calling for more gun control in the US. This suits the Chinese system, which is intended, we have no doubt, to more closely merge with European and North American systems over time.

The availability of guns is an impediment to totalitarian, fascism or whatever else the power elite has in mind. Here’s more from the Breitbart article:

The Chinese government states:

“The past six months have seen enough shooting rampages in the United States. Just three days ago, three people were shot dead at a shopping mall in Oregon. Two weeks ago, a football player shot his girlfriend dead and then committed suicide. Five months ago, 12 people were killed and 58 wounded in a shooting spree at a midnight screening of a Batman film in Colorado.”

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China’s retail investors have given up on the stock market; could we be approaching the bottom? [SoberLook]

China’s retail investors have lost all confidence in the nation’s stock market. In spite of improving economic fundamentals (see discussion), the market continues to plunge. Unlike many other emerging markets, China’s domestic stock market trading is dominated by retail investors. And many feel they have been duped, as the market hits new lows.

JPMorgan: – Of the households with stock market investments, 77% had not made a profit. The stock market has been the worst performing asset class over the last 5 years from various investment instruments available to the retail investor. If a retail investor put Rmb100 into the CSI300 5 years ago and left it, it would only be worth roughly Rmb 47 today…

Shanghai Stock Exchange Composite Index (source: Yahoo Finance)

China’s brokers have spent the last few years hyping the market, with a positive projections each new year. And each year retail investors have been disappointed.

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U.S. Intensifies Military Encirclement of China [BoilingFrogPost]

With the emergence of China as the world’s second-largest economy and its concomitant renewal of (comparatively minor) territorial claims in the East China Sea and South China Sea, the stage is set for a U.S.-Chinese confrontation of a nature and on a scale not seen since before the Sino-Soviet split of 1960.

Following the expansion of the North Atlantic Treaty Organization throughout Europe over the past thirteen years – every European nation is now a full member of or involved in one or more partnership arrangements with the U.S.-led military bloc except for Cyrus, which is under intensified pressure to join the Partnership for Peace program – which has enforced a cordon sanitaire on Russia’s western and much of its southern frontier, it was inevitable that the U.S. and its allies would next move to encircle, quarantine and ultimately confront China.

In the past decade the Pentagon has begun conducting annual multinational military exercises in nations bordering China (Khaan Quest in Mongolia, Steppe Eagle in Kazakhstan) and near it (Angkor Sentinel in Cambodia), has with its NATO allies waged war and moved into bases in nations bordering China – Afghanistan, Kyrgyzstan, Pakistan and Tajikistan – as well as nearby Uzbekistan, and, even before the official announcement of the strategic shift to the Asia-Pacific region, acquired the use of new military facilities in Afghanistan, Kyrgyzstan, Pakistan, Australia, Singapore and the Philippines.

President Obama’s current visit to Cambodia, Myanmar and Thailand and Defense Secretary Leon Panetta’s simultaneous trip to Australia, Cambodia and Thailand are exemplary of this trend.

Early this year NATO announced the launching of its latest, and first non-geographically specific, partnership program, Partners Across the Globe, which began with the incorporation of eight Asia-Pacific nations: Afghanistan, Australia, Iraq, Japan, Mongolia, New Zealand, Pakistan and South Korea.

Since the summer of 2010 the U.S. has been courting the ten members of the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), several of whom are embroiled in island disputes with China, for inclusion into a rapidly evolving Asian analogue of NATO which includes the eight above-mentioned new NATO partners and is intended to be a super-Cold War era-like bloc subsuming the former members of the Central Treaty Organization (CENTO), Southeast Asia Treaty Organization (SEATO) and Australia, New Zealand, United States Security Treaty (ANZUS) into a systematic initiative aimed against China.

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Tax bills prompt Chinese to ditch US passports [scmp]

For many wealthy mainland Chinese who immigrated to the US, an American passport is a genie that cannot be put back in the bottle.

More and more of them are thinking about renouncing their US citizenship, something that would have been almost unimaginable a decade ago, when getting a US passport was the ultimate status symbol in China.

Wu, a 31-year-old housewife who asked to be identified only by her family name, said she started toying with the idea about a year ago. “I regret it to death, all of my friends regret it to death,” said Wu about taking out US citizenship. “I’m never going back.”

Behind her change of heart is tax. Under US law, American citizens and permanent residents, known as green card holders, are taxed on their worldwide income regardless of where they live. Other countries, including China, tax their citizens’ global income. But it is the US, with its sophisticated systems and the long arm of its taxman, that has the highest profile.

In March 2010, Washington stepped up its tax collection efforts by enacting the Foreign Account Tax Compliance, or Fatca, aimed at cracking down on tax dodgers abroad. The regulations are set to be finalised before year’s end, and the US Internal Revenue Service (IRS) expects the tightened compliance to generate as much as an extra US$9 billion over the next decade.

America’s long history of tax collection, starting with the 16th amendment to the constitution that gave Congress the power to levy and collect taxes, makes paying tax a serious legal issue that many immigrants do not realise when they decide to become citizens. The law even extends beyond life to a dead person’s estate.

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The Gini Is Out Of The Bottle: Did China “Outcapitalism” The US, Or Did America “Outcommunism” China? [Zerohedge]

In several days, the ornate theatrical spectacle that is the Chinese Communist Party’s 18th Congress (captioned here) will come to a triumphal end, with a new leader, Vice President Xi Jinping,carefully hand-picked after the Bo Xilai fiasco, from among the equal of equals, with just one thing on his mind. No, not how to transfer $5 billion from that Swiss bank account to Singapore without being noticed.

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Google services blocked in China [computerworld]

Computerworld – Google confirmed a dropoff in traffic to its sites in China on Friday, echoing an online report that the company’s services are being blocked there.

All Google services are inaccessible in China, according to the Google Transparency Report , which monitors traffic to the company’s sites around the globe.

The Web site Greatfire.org , which tracks Internet access in China, also reported that Google sites and searches were being blocked there.

“We’ve checked and there’s nothing wrong on our end,” wrote a Google spokeswoman in an email to Computerworld.

As of 5 p.m. ET Friday, (6 a.m. in Beijing) the blockage had been going on for 12 hours. Industry watchers will keep an eye on China to see what happens when its citizens wake up and attempt to go online to check their Gmail accounts or perform Google searches.

This latest blockage comes as China is ushering in a change in its government. Every 10 years, China holds its Communist Party Congress, which is focused on appointing new leadership. The 18th Party Congress began on Thursday.

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China police crack down after riot over new factory [france24]

AFP - Authorities in east China ordered a security crackdown Sunday after thousands of locals clashed with police during a protest at the construction of a chemical plant.

In the latest environmental unrest to erupt in China, police at Ningbo city in Zhejiang province fired tear gas Saturday night after six days of demonstrations over the project, online reports said.

“In recent days some unreasonable activities such as illegal gatherings and rioting have occurred, seriously impairing the normal work and life of the people and severely impacting overall development and stability,” said a statement on the website of Ningbo’s Zhenhai district government.

At an emergency meeting late Saturday local Communist Party officials insisted that the chemical plant project had not been formally approved and agreed to listen to the protesters’ demands, the statement said.

The government also ordered police to “maintain stability in accordance with law”, rhetoric that often signals a heavy-handed crackdown.

Photos posted on the www.molihua.org website, which monitors social unrest, showed protesters facing off against thousands of riot police as security forces streamed into Ningbo’s Zhenhai district where the 55.9 billion yuan ($8.9 billion) plant is to be located.

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The “Renminbi Bloc”: China’s next step to the end of dollar supremacy [dailyreckoning]

China has quietly taken a huge step toward supplanting the dollar as the world’s reserve currency.

A report from the Peterson Institute for International Economics concludes a “renminbi bloc” has formed in East Asia. That is, since the Panic of 2008, seven out of 10 major economies in East Asia have tracked the renminbi closer than the dollar. That includes South Korea, Indonesia, Malaysia, Singapore and Thailand.

The lone holdouts are Hong Kong, Vietnam and Mongolia.

Indeed the report finds the currency’s influence extending beyond China’s backyard. Turns out the renminbi is now the dominant reference currency in India, South Africa, and Chile.

Read more: The “Renminbi Bloc”: China’s next step to the end of dollar supremacy http://dailyreckoning.com/the-renminbi-bloc-chinas-next-step-to-the-end-of-dollar-supremacy/#ixzz2AUmF3duZ

China vows to boost ties with Gabon [xinhuanet]

LIBREVILLE, Oct. 25 (Xinhua) — China is determined to widen cooperation with Gabon and boost existing pragmatic relations between the two sides, according to a senior Chinese official on a visit to the Central African country.

The pledge was made at a meeting held Wednesday between Gabonese Prime Minister Raymond Ndong Sima and Ai Ping, deputy head of the International Department of the Communist Party of China (CPC) Central Committee.

Ai hailed the Sino-Gabonese friendship forged by leaders of generations of the two nations, saying it has taken root in the heart of the two peoples.

He pointed out that the friendly exchanges and cooperation between the two nations have yielded abundant fruits.

“In the new international situation, the cooperation between China and Gabon is very essential because the two countries are both engaged in reinforcement of their economies, protection of the environment and improvement of the well-being of their citizens,” he said.

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China Sums Up US Financial Innovation: “Smart Kids Picking People’s Pockets Is Not Very Good” [Zerohedge]

When fringe-blogs highlight the reality of the US banking system and its financial engineering as nothing but overly complex three-card-Monte, it can be shrugged off; but when the head of China’s sovereign wealth fund (yes the same one that will bail the world out) notes that the JPMorgan loss highlights a system that has become too complex, perhaps some should listen. As Bloomberg BusinessWeek reports, Gao Xiqing of CIC stated that “I think we do need to slow down a little bit instead of rushing up to all these fancy derivatives.” The fact that the ‘whale’ loss was not a rogue trader but a systemic decision gone wrong on weak risk management of an overly-complex position was “the single most revealing thing” to Gao as he expressed concern about a society in which “all the best engineers are engineering financial products.” Summing up the entire ethos of US financial innovation he concluded: “You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets, that is not very good.”

Via Bloomberg BusinessWeek:

JPMorgan Chase & Co. (JPM)’s $5.8 billion trading loss this year showed that the financial system is getting too complicated for even respected institutions, the president of China’s sovereign-wealth fund said.

 

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Marc Faber vs. Jim Rogers Conversation