IMF Addresses Today's Concerns

The International Monetary Fund,an autonomous UN agency,has been addressing the issues of the day recently.On the topic of trade imbalances,Managing Director Dominique Strauss-Kahn said not even full appreciation of the Chinese currency,the Yuan,will solve the total imbalances.Other measures are also necessary to achieve that:
1.Improve domestic demand in Asia.Asia is a global economic powerhouse.A country shouldn't hide behind its currency.
2.Maintain a strong focus on foreign investment.
3.Manage currency reserves.
4.Institute capital controls,if necesssary.
China has been bitterly criticized of late by German businessmen for hindering foreign companies,as well as by General Electric CEO Jeff Immelt.In response,China insisted foreign businesses were being treated fairly.
With regard to Friday's release of Euro-zone bank stress test results,IMF First Deputy Managing Director Joseph Lipsky hoped for broad coverage by the tests,transparency and remedial action as needed.We need a realistic scenario that provides stress and gives some good insight into the strength of the banking system.All the preconditions for the test that were needed are being fulfilled.
Mr.Lipsky wouldn't assume that any central bank is out of ammunition for dealing with the financial crisis.He doesn't fear for the political independence of the central banks,either.

Shanghai Develops Its Exchange

The Shanghai stock exchange is a growing proposition.It recently introduced stock index futures to its offerings,although it has only one-fifth of the volume of the New York exchanges and still needs a completely convertible currency.Shanghai is seeking to become a global financial center by 2020,and many new skyscrapers and apartment blocks have been built there in the past few years to support that ambition.
Dr.Fang Xinghai,Director General,Office of Financial Services,Shanghai Metropolitan Government,admitted that the Shanghai stock market is still largely closed to outsiders,but it is being opened up gradually.It will be a market of global size.Although it is not open yet,you can still call it a global financial center.The first logical step would be to open up the outflow capital account,so that their savings may be used more efficiently throughout the world.
The British bank HSBC has expressed an interest in selling shares in Shanghai.Initially,it was just financial companies who wanted to list there.Later,manufacturing firms,telecoms and consumer companies all expressed an interest.Even now,the Shanghai exchange is among the leaders in commodities futures,Mr.Fang asserted.

Asking Much of China

Pete Fisher,a Vice-President at BlackRock,the world's largest money manager,thinks we're getting to the point where China has to tighten their policy.He fears we'll have more friction,but he's hoping we won't.He's worried about too much hype.We can over-hype how much we can get out of Chinese exchange rate hikes when they do occur.It would cool down their economy.We don't want China to have inflation or a bubble.
What a revaluation of the yuan may not do is affect our trade relations,Mr.Fisher points out.It's terrific for the world economy for China to have cerated all this wealth over the past 20 years.We've got to be careful not to expect too much from what they've accomplished.
BlackRock isn't afraid of the long end in bonds.Mr.Fisher believes the economy is gonna do O.K.,but not brilliantly.BlackRock thinks if the economy is gonna do O.K.,that's gonna mean a sideways movement in interest rates,attractive to investors at the long end.Some analysts have been warning investors that the long bond will collapse under inflationary pressure.

China's Growth

The latest figures show that China's Gross Domestic Product rose 10.7%.Apartment sales in Beijing support this data,with people signing up to reserve unbuilt units.China's 580 billion dollar stimulus program is judged to have been the most effective in the world,with the spending concentrated on advanced infrastructure.China is on track to overtake Japan as the world's second-largest economy,behind the United States.Nonetheless,Chinese earnings are only a fraction of the West's.More than 150 million Chinese earn a dollar a day.
The International Monetary Fund has just raised its global growth forecast for 2010 by 0.8% to 3.9%.The U.S. is projected to grow 2.7%.The IMF says that the global financial system remains fragile.Fiscal policies need to remain supportive.

Microsoft Sticks With China

Microsoft CEO Steve Ballmer said it's clear the company is gonna operate in China.China ought to be a source of growth.Intellectual property protection is very bad there,however;it is abysmal.It's got to change.China has laws on the book,but it's important that they be enforced.If we're gonna create jobs in the U.S.,we're gonna have to export our ideas to China.
Cyber attacks won't be stopping Microsoft.Cyber attacks and occasional vulnerabilities are a fact of life,Mr.Ballmer observed.Microsoft has a whole group of people that respond to them in real time.
Microsoft sees business conditions as still being relatively flat.Fifty percent of capital expenditure goes into IT.There's been a little bit of a rebound in the consumer front.There are glimmers of hope in B2B,but it's still tough,the Microsoft executive noted.

The Baltic Dry Bubble

The Baltic Dry Index,a gauge of international shipping activity,has been surging of late.Experts believe that China is driving it.China is building a lot of infrastructure now,requiring a flow of commodities.The Baltic Dry does not reflect what's going on in the U.S. economy.It's a very volatile index.
The supply of ships will put a cap on the Baltic Dry,people familiar with the matter believe.Many ships are coming online to meet Asian demand.The surge in the index is an anomaly driven by congestion at ports and iron ore restocking for steel production.Next year will be more tempered.Even if there is a correction,most companies in the trade will still be profitable,these experts think.

Commerce Department Backs Exports

The Commerce Department is increasing its export promotion program,according to Secretary Gary Locke.That's a sure way of economic growth in tough times,Mr.Locke said.It's our fault we're not publicizing these programs,Mr.Locke admitted.We'll do background checks of foreign countries with our Foreign Commercial Service Officers.Small business really accounts for most of the exports.Up to 70% of U.S. companies' foreign business comes from this program.
Mr.Locke said the Commerce Department investigates complaints of illegal subsidies filed by industry groups.We are required by law to investigate.While we have some issues with China,we are still moving forward trying to free up trade.I am going to China at the end of the month,trying to increase trade.It's very important that both sides live up to their commitments,Secretary Locke believes.
We have companies that sell to only one country.There's no reason they can't sell to two or three countries.We have a Commerce Counsel program where they can meet with just one cross-trained person to help them with this,Mr.Locke pointed out.

China Sets Commodities Aside

A wave of stockpiling is sweeping through China.The national government is stockpiling copper and oil.Local governments are stockpiling nickel and zinc,while companies and investors are hoarding copper and nickel.
Chinese oil consumption is growing 7-10% a year.China has 25 days' supply of oil in storage.It is aiming to protect its economy by selling some of the stockpiles to stabilize commodity prices.

High Level Exchanges Begin

The U.S.-China Strategic and Economic Dialogue began at the end of July.The dialogue had been planned during the George W. Bush presidency.It encompasses both economic and political matters.On the economic front,the two countries agreed to continue working for global economic recovery by easing their trade imbalance and revising financial regulations.They will also correct protectionism and climate change,while working to reform the World Bank and International Monetary Fund,so that China's rising status in the global economy is more fairly represented.
For its part,the U.S. reassured China that it has a exit strategy from deficit spending and monetary easing,which China fears may harm its 801.5 billion dollar investment in U.S. Treasury securities.Treasury Secretary Timothy Geithner said the U.S.-China efforts were vital,not only to the well-being of the two nations,but also to the health of the global economy.

Where Sam Zell Invests

Sam Zell,Chairman of Equity Group Investments,says that Brazil is his number one country in the world for investing.It's energy and commodity self-sufficient.China isn't as transparent,but I'm just as enthusiastic about it,Mr.Zell professed,adding that they have a few companies there.As for The Tribune Company,publisher of The Chicago Tribune,The Los Angeles Times and The Orlando Sentinel,which Mr.Zell also owns,he said he thinks it will solve its problems without destroying itself.Sometime between now and the end of the year,it will emerge from bankruptcy.It's naive to think that the print business as we know it will disappear completely,Sam Zell believes.

Editor Picks China

Paul Goodwin,editor of the Cabot China and Emerging Markets Report,says China is going to be doing a lot of leading.They need to keep their populace happy.They need to create 20 million jobs a year.Their stimulus has been much more effective than the United States'.
As soon as any export growth occurs,China is gonna go through the roof,Mr.Goodwin believes.We are putting money into China;we're stock pickers in China.China right now is producing the charts we like to see,Mr.Goodwin added.