China

This paragraph, taken out SoGen’s Dylan Grice research report, sums up the dichotomy of how investors look at China and the rest of the world.

Some notable tidbits from Rosie's am piece: "We just came across a Bloomberg News article quoting an official from the state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) as saying “we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” China’s reserves, after a 76% buildup since 2003, currently stand at 1,054 tons, so we are talking here about the prospect of some pretty heaving buying in coming years." You have one guess what 9,000 incremental tons of gold demand will do to price: here is a hint "If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park."

Today Bloomberg picks up where we left off yesterday, and in its "chart of the day" analyzes the underpinnings of Albert Edwards' assumption that not only will the Renminbi not increase in value, as so many battered manufacturers in the US hope and pray (and complain to Congress every day), but will in fact be further devalued once China realizes the only way to avoid America's fate down the financial rabbit hole is to unpeg, but in the opposite direction from where Geithner would like. The causal factor: a collapsing trade balance which drags China's forex reserves, resulting in a major shift in international capital flows.

When Obama sets foot in China for the first time, he will confront a dramatically altered balance of power between China and the United States. This seismic shift is driven by China's astonishing economic growth over the past two decades and has accelerated during the global financial crisis. Its 9% to 10% annualized GDP growth rate in the past two and a half decades is unprecedented in world history.

"The Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery. It is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets. The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices." Liu Mingkang, China Chief Banking Regulator

Many of those who have spent late hours playing SimCity 3000 and never understood why the damn thing would never get any people to move into it, will derive a deranged pleasure from the following clip. In China, where 8% GDP is guaranteed and has to be "goal seeked" by any and every increasingly more deranged economic project, the authorities have taken the game of SimCity and applied it to real life. Alas, they started out on "difficult" level.

Ordos is a hyper modern city, full of brand new glass walled residential and commercial buildings, yet devoid of inhabitants. In its attempt to present a "growing" economy, and to "invest" its $585 billion stimulus into anything and everything, courtesy of comparable idiocy on the other side of the Pacific, China's communist party is now ruling over ghost towns. One wonders just how many such "efficient" projects sustain China's magical 8% growth.

India buys 200 metric tons of IMF gold.

Who's next?

China: Be cautious

Japan: Uh-oh ...

When I was a kid my parents took me to Disney World- and we did that ride that went through the world on a boat- "It's a small world…?" The global automobile business too, is getting smaller and smaller. And a whole-lot-more “international,” if you know what I mean.

"A decline in the value of the dollar is necessary in order compensate for the fact that the US economy will remain rather weak, will be a drag on the global economy. China will emerge as the motor replacing the US consumer and, of course, it’s a smaller motor because the Chinese economy is much smaller. So the world economy will have less of a motor, so it will move forward slower than it has in the last 25 years. But China will be the engine driving it forward and the US will be actually a drag that’s being pulled along through a gradual decline in the value of the dollar." - George Soros

The most convoluted monthly report issued by the US Treasury, that of Treasury International Capital (TIC) flows was released on Friday, and it disclosed some troubling data points. While foreigners overall continued purchasing domestic assets, their appetite continues to decline. In particular foreigners increased their purchases of Treasuries marginally, while they continued selling off corporate bonds and agencies, while buying corporate stocks. Yet, most troublingly, the Big 3 (China, Japan and the UK) purchased the least net total of Bonds and Billsyear to date: as the Fed now dominates the market for Treasuries, traditional buyers are becoming increasingly nervous.

Next week, trading will begin on China’s new "little" stock market, catering to small companies. Think of it like the Dim Sum of stock exchanges. A little bit of this, a little bit of that. A "Buyers Beware" market "for Informed Investors..." Their words, not mine.

Amid a bankruptcy, massive restructuring, brand failures and division sales, General Motors aims to grow faster than China’s entire auto market in 2010, according to its China chief Kevin Wale. Having outperformed China’s overall market thus far, during the first three quarters of 2009- 2010 is bound to be a banner year? Right? Right.

China's export situation isn't as dire as you might assume ...

Some ominous moves out of the Hang Send and the Shanghai Composite overnight which may have everything to do with the latest piece from Caijing, which notes that according to banking sources September lending by China's four largest banks was the lowest so far this year at a paltry 110 billion yuan (from 166 billion in August), while the Bank of China disbursed a miserly 3 billion down from 72.2 billion in August.