Step Aside Panama Canal: China To Build Nicaragua Canal, "World's Largest Infrastructure Project Ever"Submitted by Tyler Durden on 08/06/2014 23:00 -0400
A month ago, a Nicaraguan committee approved Chinese billionaire Wang Jing's project to create The Nicaraguan Canal. With a planned capacity to accommodate ships with loaded displacement of 400,000 tons (notably bigger than The Panama Canal), the proposed 278-kilometer-long canal that will run across the Nicaragua isthmus would probably change the landscape of the world's maritime trade. "The project is the largest infrastructure project ever in the history of man in terms of engineering difficulty, investment scale, workload and its global impact," Wang told reporters.
With Shanghai having limited retail exposure to high-yield bonds, and the Chinese corporate bond market has overtaken the United States as the world's biggest and is set to soak up a third of global company debt needs over the next five years, it is no wonder that, as Bloomberg reports, analysts fear "a prelude to a storm." Privately issued notes totaling 6.2 billion yuan ($1 billion) come due next quarter, the most since authorities first allowed such offerings from small- to medium-sized borrowers in 2012. This week a 4th issuer has faced a "payment crisis" and while officials are trying to expand financing for small companies (which account for 70% of China's economy, with debt-to-equity ratios exceeding 200%, this is nothing but more ponzi. As Goldman warns, it appears China's Minsky Moment is drawing near (as the hangover from Q1's credit impulse kicks in).
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For seventy years, one of the critical foundations of American power has been the dollar’s standing as the world’s most important currency. For the last forty years, a pillar of dollar primacy has been the greenback’s dominant role in international energy markets. Today, China is leveraging its rise as an economic power - and as the most important incremental market for hydrocarbon exporters in the Persian Gulf and the former Soviet Union - to circumscribe dollar dominance in global energy, with potentially profound ramifications for America’s strategic position.
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Nouriel Roubini, Kyle Bass, Hugo Salinas Price, Charles Nenner, James Dines, Jim Rogers, David Stockman, Marc Faber, Jim Rickards, Paul Craig Roberts, Martin Armstrong, Larry Edelson, Gerald Celente and Others Warn of Wider War
Quietly, and without the drama associated with The Fed and ECB, China unveiled what looks like QE recently (as we discussed in detail here). Whether this is a stealth creation of a 'fannie-mae' structure to support housing or merely another channel for the PBOC to shovel out hole-filling liquidity is unclear. However, one thing is very clear, demand for CNY is surging (even as the PBOC weakens its fixing) and the Shanghai Composite is surging as hot money chases free money once again...
To China housing is like the stock market to the US: both mission-critical bubbles designed to give a sense of comfort and boost the "wealth effect"
“Property companies are facing huge debt burdens,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “If the regulator hadn’t eased, there probably would have been more defaults.” Or, translated: if the companies weren't allowed to "fix" their huge debt burdens with even more debt, it would have been a complete catastrophe.
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Tomorrow is the 100th anniversary of the start of World War I. Perhaps just as importantly, this weekend is also the 120th anniversary of the first Sino-Japanese war: a war between China's Qing dynasty and Meiji Japan. A war which China lost, and which has been a chip on China's shoulder ever since. As Hong Kong's SCMP reports "China's loss of the first Sino-Japanese war has been attributed to a disorganised navy. Although the northern fleet equalled, some say exceeded, the Meiji navy in terms of firepower, it was annihilated because it lacked coordination among its military units." In the context of constant recent flare ups over various contested East China Sea islands, one can see why the anniversary of the war coupled with a sudden spike in nationalistic ambitions of Japan's PM Abe, would be a sensitive issue to China. However, as we can see below, China no longer has an inferiority complex when it comes to its navy compared to that of Japan.
When it comes to the rise of Eurasia as the ascendent axis set to oppose US global hegemony, conventional wisdom focuses on the roles of China and Russia. However, the changing geopolitical landscape is certainly far more nuanced than merely the "west" versus the BRICS, and as the following infographic from SCMP shows, China has been quietly working to recreate one of the most legendary trade routes, "the Silk Road", linking Africa to the Middle East (Iraq and Iran) to India, to Indonesia and all culminating in Beijing, while at the same time the reverse leg of the route goes to Kazakhstan, Moscow and ultimately, Germany. The purpose: "to enhance political and economic ties with southeast Asia and beyond."
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30 years ago, the great outsourcing wave took millions of US low-skilled jobs and planted them right in the heart of China, which was about to undergo the fastest industrialization-commercialization-financialization experiment in history. $26 trillion in bank assets later, the world's biggest housing bubble, and a teetering financial system that every day depends on Beijing making the correct central-planning decision (of kicking the can one more day, of course) or else the biggest financial collapse in history will take place, all lubricated by years of inflation in everything and most certainly wages, and suddenly outsourding jobs in China is not all that attractive. In fact, it has gotten so bad that China itself is now forced to outsource its own labor to cheaper offshore markets. Such as this one.