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Will China Save the Eurozone?
Nathalie Weeks and Tom Stoukas of Bloomberg report, China Will Buy Greek Bonds, Support Shipping Industry, Wen Says in Athens:
China
plans to buy Greek bonds to support Greece’s shipping industry and
strengthen relations with the European Union, Chinese Premier Wen Jiabao
said following a meeting with Prime Minister George Papandreou in
Athens today.
“China has
already bought and holds its Greek bonds,” Wen said in joint comments
with Papandreou today, which were carried live on state-run ET-1
television. “It commits, very positively, to buy new bonds to be issued
by Greece.”
Greece received a 110-billion euro ($151
billion) bailout from the EU and International Monetary Fund in May to
avoid default. The country, which has been locked out of international
credit markets, plans to issue new bonds in 2011.
In
the first visit to Greece by a Chinese premier in 24 years, Wen said he
wants to signal a vote of confidence in Greece and the European Union
in overcoming the international financial crisis.
“With our
common efforts the total mass of imports and exports between the two
countries in the next five years can double to $8 billion,” Wen said. He
called on Chinese businesses to invest in Greece.
Shrinking Economy
Papandreou
is seeking investment to help an economy that his government forecasts
will shrink 4 percent this year and 2.6 percent in 2011. He pledged
austerity measures worth about 14 percent of gross domestic product over
four years in exchange for the loans from the EU and IMF.
Wen
said a $5 billion shipping fund will be set up to tighten relations
between the countries’ two maritime industries and facilitate the sale
of Chinese vessels to Greeks.
The two leaders will today visit
Piraeus Port, Greece’s biggest, where Asia’s third-biggest container
terminal operator has a 35-year concession to run some operations. China
plans to deepen its Piraeus investment to move 3.7 million containers a
year by 2015.
Cosco Pacific Ltd.
won the concession to run container operations at Piraeus Port’s Pier
II and build and run Pier III in 2009. Greece’s government owns 75
percent of Piraeus Port Authority SA, the company that manages the harbor.
Wen
will speak in the Greek parliament on Oct. 3, Ambassador Luo Linquan
said in an interview with China’s state- run news agency Xinhua.
In
June, Greece and China signed 14 agreements in fields including
shipping, construction and telecommunications during a visit by Vice
Premier of China Zhang Dejiang.
In other news, Reuters reports that China, Greece urge macro-economic policy coordination:
The "The "To this aim, it is necessary for each country to strengthen China supported EU efforts to increase supervision on credit rating agencies and set up an independent European one. "The Chinese side supports the initiatives of EU member states' leaders China "Promoting the Doha trade talks is an essential step to open up the Wen and Papandreou attended the signing ceremony of 13 deals after their talks, Here Second, Greek bonds Third, China is Finally, this
world's nations need to coordinate their economic policies for global
recovery to find a sure footing, Chinese Premier Wen Jiabao and his
Greek counterpart George Papandreou said in a joint statement.
global economy shows signs of gradual recovery but many uncertainties
remain," the two leaders said in the statement, issued on Saturday by
Papandreou's office after the two men met in Athens.
coordination of their macroeconomic policies for the global economy to
recover fully," the statement said.
to strengthen supervision and publish information on credit agencies,
as well as the creation of an independent European credit rating
agency," the statement said.
and Greece also expressed their opposition to trade protectionism.
world economy and strengthen growth," it added.
which covered areas concerning cooperation in maritime transportation,
loan, telecommunication, export and cultural exchanges. The two countries also issued a joint statement on deepening their comprehensive strategic partnership.
is my take on these developments. First, China is smart to invest in
Greece now. They are seizing a golden opportunity to develop a strategic
partnership within the heart of Europe. Greece's ports will serve as a hub for
Chinese goods -- another gateway into Europe.
are ridiculously cheap. Ten-year bonds trading at 11% is simply outrageous. The carry alone justifies taking a position. I just returned
from Greece and while things are bad, they're nowhere near as bad as
mainstream media make them out to be here in North America. The Chinese
and Norwegians will make money on Greek bonds whereas North American
pensions shunning Greek debt fearing reputation risk will lose out big.
Again, 11% on ten-year bonds is ridiculous and it tells me that a lot of
so-called experts don't have a clue about how the Greek economy
operates or how to properly assess the risk of a Greek default or
restructuring.
sending a strong signal that it's willing to help out the Eurozone. I
wouldn't be surprised to see other southern European nations sign
strategic partnerships with China. Don't forget, the Chinese are already
investing billions in Africa, and they're a leader in solar energy.
That's another reason why I'm bullish on solar and why I believe China
is making the right moves to eventually be a key player in the renewable
energy sector. In the future, I see Chinese backed solar farms in
Africa, Greece and other southern European nations selling energy to the
rest of Europe.
is bullish for stock markets and risk assets. Jittery investors were flocking into the
bond market fearing the worst. It was a complete overreaction. China is
on the same page as the Fed, meaning reflate & inflate to avoid
global deflation and social unrest at home. Stay long stocks, but pick
your sectors well or you'll underperform your indexes.
»
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That quote isn't in the Bloomberg article. I suppose it got redacted or edited out. What he actually does say is:
The whole problem is that they're locked out of the credit markets. Wen's statement is a bit of a tautology: We'll buy bonds once they're creditworthy enough to issue bonds again in the open market.
My take is, unless they bought and sold in a two-week window early this summer, everyone who bought Greek bonds in the last decade has gotten roasted. The Chinese will, too.
Save Greece, there's still the problem of Ireland. Save Ireland, there's still Portugal and Spain.
This is not a temporary issue of liquidity and confidence. This is a structural issue of solvency and demographics. Bloviating policymakers have long since lost their credibility and ability to influence the course of events.
Amusing how easy it is to excite Leo with a little PR exercise. Yep, $5 billion of Chinese state financing to support a sale of Chinese ships to Greece is going to save the Eurozone.
Obviously the fact that Greek shippers aren't buying these ships with private financing shows just how strong the industry is and just how badly they need those ships. Why those $5 billion of ships should be doing so much business by next year, it will be worth at least 5% of Eurozone GDP growth, don't you think?
LOL, a Greek buddy of mine, ever the cynic and conspiracy theorist, told me the following after he read my post: "China is going to crack Greece like a Chinese fortune cookie and slurp her down like a Chinese noodle!".
Fortune: "Seek 11% yields elsewhere."
Spare Some Arrows?
A scene from the story of China's greatest battle: the good guys have run out of arrows. What to do? China's most famous general, Zhuge Liang, has an idea.
http://www.youtube.com/watch?v=RWYpK11LlrE
Lest we forget, fleets from Piraeus have controlled the Western Med before. Location, location, location. (Ok, its been a while - but it's still a great location. Check out a map.)
I'm sure a benign Chinese presence (with plenty of reserves) will be welcomed by many in the region. Other opportunities will no doubt present themselves once the Chinese get established in Greece.
Sure is interesting to compare different methods of winning friends and influencing people. The Chinese sell ships and buy bonds. The USA sends ships and drops bombs. Which country is following the advice of Washington better?
This arrangement could be beneficial for Greece and China (with a gob of US$ 'assets' about to worth less - if not worthless) can't really be faulted for taking a contrarian approach to investing.
Thanks for the info, Leo. Whether or not Greece's future is a bright as you think remains to be seen, though.
A year ago Leo said the liquidity tsunami would save Europe. Now this. How many saves does Europe need? Maybe it's just broken.
China lends money to people to buy their goods, now that the US is maxed out they are looking for new channels (suckers)......simple, elegant, but how many markets will be left if they do not boost their own?
Chart: AUD/USD
No.
http://99ercharts.blogspot.com/2010/10/audusd.html
Leo, You might be ahead of yourself a bit on this one. You read this as a bullish signal. We shall see.
China is not dumb. When they lend money they get it back. I don't think that China is just buying Sov. Bonds here. They are geting a bi-lateral deal that is good for China. This is not them buying Greek bonds because they are cheap. There is quid pro quo here that is actually quite dangerous.
China has similar deals for other scuzball borrowers. They are big in Venezuela and have provide bank lines to to Iran. The are involved in Ecuador. But all the money was lent with security and a trade deal.
You think China is just being a nice guy and supporting global growth. I think they are niche playing and don't give a damn about Greece.
You're right in pointing out that China made this deal because it's good for China, Bruce. They are sharp operators, no doubt.
This is just the first of many deals in Greece. When the Chairman suggests Chinese businesses should invest in Greece they do!
But which would you prefer if you were Greek: Chinese seduction or an IMF/World Bank gang-rape? Are the Greeks choosing the lesser of two evils?
Greece is buying time. China is buying face time.
Are the Greeks choosing the lesser of two evils? YES!!!!!!!!!!!!!!
I wish it weren't so, but I think you're right about that, Leo.
Isn't there current over capacity in shipping world-wide?
It’s no deal for Greece if they can only buy ships with the money from the country that purchased their bonds. Those ships will be sold at a profit and no guarantees against cost overruns, so Greece ends up with greater liability, and they have more ships to add to the ones already sitting idle.
China on the other hand is handed bonds that could prove worthless.
What kind of economy is it when for instance; your business is forced to buy product it doesn’t need from a customer so the customer has money to buy your product which it doesn’t need?
http://www.stungunstopepperspray.com/
Excellent news! Since China is now Europe's Uncle Sugar, this means the United States can pull back its $65b IMF commitment! This is precisely what I am asking my congresscritter to do, now that the crisis has plainly passed.
Leo, sorry, but it seems you are the clueless one when it comes to valuing default risks of Greek govt. bonds. There is NO way, Greece can avoid a restructuring of its debt over the coming 10 years. Greek bonds yield 8-11 % even for 2 or 3 years, - a period that is covered by the 750 bn Euro safety net. And mind you, without the ECB buying up these bonds, yields would likely be even higher. 11% may seem a nice carry - but if you get a haircut of 40-60% down the road, you will barely break even. There is likely some value in Greek govt bonds when you go out 15-30 years with those bonds trading at 50-65%.
Your name-calling and statements such as "cover quick, shorty" are properly reflecting the quality of your, well, "analysis".
fx,
Quick question: How many other countries have their 10-year bonds trading north of 10% and how do their economies compare to that of Greece?
Leo, to answer your question with a question: How many countries have fiscal and indebtedness problems that are similar in their magnitude to those of Greece AND how many of those have all their 10 year bonds denominated in a currency that they have no control of AND have to act under budgetary restrictions imposed by other countries (IMF, EU)?
Do you still believe, these paltry 10-11 % yields compensate for all these disadvantages that Greece "enjoys" - on top of an already almost hopeless situation?
Leo, you don't understand how the world operates today.
China understands that this investment in Greece will simply buy some market access in other parts of Europe. China is playing it's part in the game of extend and pretend. China is willing to write off these investments in Greece if that means they are in the good books of the real leaders of Europe.
Leo, to repeat, this investment is to be written off as a marketing expense. No one wants Greek bonds. No one.
Norwegians and other sovereign funds beg to differ, but you can keep buying US Treasuries yielding next to nothing. :)
Leo, The main point is that the global economy no longer favors the developed world for many reasons expounded over and over on ZH. Therefore it is in China's interest to keep the game alive. Meanwhile we are mostly in denial with blind faith that the system primarily concocted by our financial wizards will somehow prevail . The Greeks still believe they invented democracy and sports .
"Wen said a $5 billion shipping fund will be set up to tighten relations between the countries’ two maritime industries and facilitate the sale of Chinese vessels to Greeks."
==========================
A lot of the commentary I read at ZH makes me feel like the not-too-bright kid at the back of the class, but does that say what I think it says?
1. The Chinese buy a load of Greek junk bonds at 11 per cent.
2. They then get the principal back as payment for building ships for the Greeks. But they get the coupon payments on the bonds too.
3. Presumably they also make a profit on construction of those ships.
4. Until such time as the ships arrive and are put to work -- several years from now, depending on size and complexity and current design status -- they can contribute nothing to the Greek economy.
5. The Greeks must keep making those 11 per cent payments.
Maybe I'm missing something, but this seems like the kind of economic wizardry that dumped Greece in the shit in the first place.
The Chinese are intelligent people. They always keep a long term view. The financial termoil in the world gives them the opportunity to gain influence in the world.
Silversem
http://www.goudbelegger.com
Fuck china. Everyone is waiting to see what rabbit gets pulled out of the centrally-planned hat. They will do exactly what is required for China to get by, and FUCK everyone else in the process.
Just wait, they aren't done yet.
Updated GOLD monthly chart:
http://stockmarket618.wordpress.com
Dude, I've seen you week after week post this stuff here - and you know what? If I felt it was of any benefit, sure. Why not. But you post a chart and utter these specious phrases like "Maybe lower, blah blah blah MEGAPHONE formation" and you know what? The fucking charts aren't even that good. Look, we all have trading platforms and know what a goddamn trendline is. Just makes me irritated where I don't see any 'added value' from the commentary, got it?
You should immediately run a scan on your computer if you clicked on that.
Just sayin.
Give us a break, Leo! The last thing China needs is all their goods tied up for months on Greek wharves in rusting containers!
FYI, the Chinese already own huge, far more efficient (and conveniently located) ports in both northern and southern Europe.
I edited to say ''another'' gateway, but the Chinese were already in Greece, developing the ports. The strikes have been more muted lately, so I don't see this as a serious problem in the ports.
The Chinese control ports all around the world, and have been building up that control for more than 20 years.
Just an aside: I see the demonstrations and strikes as being incited by the oligarchs (they have always controlled the union movement) to pressure the various governments to NOT adopt austerity measures but, instead, to continue on the way of printing and inflation until total currency collapse. Bankers have a particularly strong aversion to deflation.
If the US Congress attempts any kind of austerity, my bet is that the big US unions will be mobilised to raise hell.
Leo. Google sheds a different story.
http://www.solar-aid.org/
http://www.greekbonds.info/
Greek bonds is #1 link on Google. Riddle us with your thoughts
another BS post from someone who knows nada
# First, China is smart to invest in Greece now.
sure they're smart.. hey stupid remember Chinese/all sovereigns bought brokers in autumn 2008// rememeber what happended half year later..
#Second, Greek bonds are ridiculously cheap. Ten-year bonds trading at 11% is simply outrageous.
sure,, as it was cheap RUSSIAN bonds in 1998, Iceland bonds 2 eyars ago.. etc etc
#The carry alone justifies taking a position.
if u care about return of principal in bond investment you're speculator..
#so-called experts don't have a clue about how the Greek economy operates
sure... you know better..
# hub for Chinese goods -- a gateway into Europe.
almost fall down.. Leo , my stupid friend, not all here are stupid americans who never been nowhere..
there're some peoople who studied geography.. lived abroad.. GATEWAY TO EURope ALWAYS WAS AND ALWAYS WLL BE PORTS in NOrht Europe.. aka Hamburg/Rotterdam and etc .. cause its very convinient to carry goods out of there.. there's stuff called mountains in Greece..
summing up: stupid so-called greek expert who knows zilch and seems long upto eyeballs..
alx
Alex,
I am going to enjoy watching guys like you eating your words. And get your facts straight, I never claimed Greece had the largest ports, but Piraeus is one of the top ten container ports in Europe and can serve as a stragic hub for Chinese goods. As for Greece restructuring, we'll see in the next 12 months. I strongly doubt it.
LOL, the next 12 months may or may not see a Greek debt restructuring, but you talk of 10 year bonds! 2-3 years from here Germany (and hence the ECB) will no longer support Greek debt. Spain will be downgraded to A if not lower, as will be Portugal. Ireland will be near "junk" and nobody will bother about saving Greece anymore as all eyes will be on Spain and perhaps Japan. The problem with govt debt is that creditors are always in a very junior position!. With a corporation, you can at least calculate liquidation values and what residual claims may be worth. With govts, you will always be dependent on politicians and their decisions. good luck with these 10 year greek bonds; I wouldn't even be sure in what currency they will get redeemed - if and when they will get redeemed at all....
who cares about these downgrades?
Why do these rating agencies still exist anyway???
Now Leo has a point here
China is going to go the Burma/Srilanka way in europe
China owns majority stakes in ports and other local infrastructure
I expect them to do the same;swap US[eless] Treasuries with infra assets in Europe;
And Leo can rejoice, for EU which is clearly overboard on global warming is good chinese solar companies to paper over losses for another few years
The west is turning into a bunch of shameless losers.
Put that in the past tense, and amend it to say "Western governments", and I will wholeheartedly agree with you.
No. Let's make it crystal clear. The old political elite are in their death convulsions.
Bad debts will be written off. If oil goes over $100, there isn't enough lead to cover the political asses.
There is a price for printing and these guys are still playing checkers at chess.
Not according to Leo Kissmyass --- they are invincible, and to be honored and obeyed without question. The reign of the status-quo power structure is forever!
One might think that a Greek would have a broader viewpoint, or a smidgen of historical perspective. But not our Leo, oh no ---- short-term profits are ALL that matter, morality and justice be damned!
From a German Vassal state to a Chinese Vassal state. Now there's an improvement.
A certain degenerate and pathetic subset of the population, at any given time and in any given place, is not only happy to be vassals, but becomes furiously indignant should anyone want any other status, much less fight against it.
From Doug Noland:
Greek 10-year bond yields sank 91 bps to 10.13%, and 10-year Portuguese yields dropped 26 bps to 6.11%. Ireland yields fell 16 bps to 6.31%.
Meanwhile:
October 1 – Bloomberg (Tim Catts): “Sales of corporate bonds in the U.S. decelerated this week as the busiest September on record ends… Corporate bond issuance fell for the second straight week… even as sales of $159 billion set a record for the month of September…”
October 1 – Bloomberg (Jason Webb): “Emerging-market borrowers are on course to sell more bonds than ever this year after yields hit record lows and developing economies rebounded faster from the credit crisis than advanced nations. Governments and companies in developing countries… borrowed $196 billion from July to September, the most for any quarter…”
However:
International reserve assets (excluding gold) - as tallied by Bloomberg’s Alex Tanzi – were up $1.378 TN y-o-y, or 19.1%, to $8.589 TN.
Leo has a point, the 'Government bonds are safe' crowd or 'nervous Nellies', seem to be sniffing a change in the wind.
I'd look if I cared, but I remember Leo thundering about how cheap Greek 10 year bonds were in the spring, when they were yielding (if I remember correctly) 7 or 8%. I point this out not as a refutation because, frankly, I have no idea if Leo will turn out right this time.
I have the humility that a nobody oughta have!
You named yourself for our POS Guv here in PA? He is a fugging idiot pol whose only accomplishment was to get gambling started in Pa for his masters in Philly. He is a worthless, merde-spewing dung heap who needs to disappear from our Commonwealth asap.
Yep. I won't go into why. What you said is all fine and dandy, except for "worthless." Actually, he's worth a great deal, both to himself and friends.
Seems like a fair trade. Worthless Greek bonds for Chinese ships made of Pig Iron. You cannot lathe nor mill most of the crap steel the Chinese produce.
The end game is China stirring the shit pot, because for the moment, it can.
I wonder what China's plan is to save China? Oh yes, they have Chinese solars.
Sometimes I get the feeling China never learns; it merely fools the audience every once in a while.
Under Mao, when that miscreant decided steel was the way to go, plowshares were melted down to produce ingots and sheets of really low quality material. Then, the thing they decided they needed to do with it was.....make plowshares. Of course, in the meantime, some 50 million Chinese starved. And the architect of that crime stills gets his mug on their money.
Today, China makes low quality steel, but now uses it to construct cities that nobody will live in.
No doubt somebody is getting the make-up put on right now, so that his mug will grace the next issuance of new money.
+ a million yuan chin...which is around what?...150k...LOL.
How so many people can be infatuated with a communist state as an investment opportunity is beyond me...fools and their money etc.