What would the United States be if there were not some major threat for the population to fear aimlessly? 9/11 must be too distant, Iraq must have numbed to many, and Pakistan and Iran must be too complicated. Heck, even subjects like carbon emissions, starvation and slaughter in Africa, elimination of the rain forests, and natural disasters in Bangladesh and Indonesia all are a little thin for the US media. Yawn.
Good thing there's China. Those guys are trying to kill our kids, if you believe the media. Every week, there is another story about another Chinese-manufactured toy that has to be re-called. And their dastardly currency policy - when will the US persuade them to let the thing reflect what the US thinks it's worth? But most recently I was entertained by a couple headlines. Yahoo!'s front page ran a cover story over the weekend about satellites and how they avoid orbital collisions. Amusingly, the "sub-question" below the headline was "Will China shoot down satellites?" I guess I am so out of touch that I have missed the recent China policy of shooting down satellites** - good thing the ever-sharp editorial crew at Yahoo! was there casually to scare me out of my pants.
Also, the New York Times Sunday paper ran a story about rock concerts in China. Apparently, concerts are getting more profitable there, so stars are traveling there to perform. The photograph of the latest star to show up in China was amusing - a shot with the star at the center, on the stage in the distance, framed by massive close-ups of two police security guards. Thanks to the New York Times, I now know that concerts in China are tightly-secure affairs, and the presence of the police can overwhelm the concert itself. Never mind the state of security at public gatherings in the US - the Chinese are just so strange!
Reflecting on the stream of enemies that the US Government and media has had us all afraid of over the span of the 20th and 21st centuries, it is amusing to watch the commencement, in earnest, of the next chapter. Welcome to the China House of Horrors.
** It turns out that the Chinese have inexplicably tested a satellite missile. How much can we make of that over the next months? I can't wait to find out.
Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Sunday, November 25, 2007
Friday, August 31, 2007
Bush's China/Iraq framework, according to the AP
In what one can only hope was a rather hastily assembled (18 minutes ago!) AP headline story on Yahoo! yesterday, there was a discussion of the Bush administration’s current position on China and Iraq. It seems Bush would be concerned about the Chinese military, if China ever “turned hostile”, as he was explaining to the Australian Government. Bush said that his administration spends “a lot of time on China”. Would it be fair to wonder what the Bush administration is actually considering doing about China? What specific actions do you think the folks in the White House have in mind?
Remaining in a hopeful mood, one hopes that we glean nothing on this question from the AP reporter who did the story. Without transition, Bush is stated to have urged all countries considering pulling out their troops “to base their decision on restoring the country’s security”. Oh, that is a reference to Iraq. No need to worry that the Bush administration is promoting military options to address his concern about China turning hostile. Whew.
I imagine President Bush actually addressed China and Iraq in close succession at his press conference in Sydney. And perhaps Bush did so in a way that was somewhat confusing. But come on, the Associated Press ought to be able to find reporters and editors who can sift through the word salad and report something lucid about what the United States President has had to say at a meeting with another head of state. Right? The fact that this AP story is still on the web, largely uncorrected, is bad news indeed for the US media consumer. But do you think anybody cares, or will even notice?
Remaining in a hopeful mood, one hopes that we glean nothing on this question from the AP reporter who did the story. Without transition, Bush is stated to have urged all countries considering pulling out their troops “to base their decision on restoring the country’s security”. Oh, that is a reference to Iraq. No need to worry that the Bush administration is promoting military options to address his concern about China turning hostile. Whew.
I imagine President Bush actually addressed China and Iraq in close succession at his press conference in Sydney. And perhaps Bush did so in a way that was somewhat confusing. But come on, the Associated Press ought to be able to find reporters and editors who can sift through the word salad and report something lucid about what the United States President has had to say at a meeting with another head of state. Right? The fact that this AP story is still on the web, largely uncorrected, is bad news indeed for the US media consumer. But do you think anybody cares, or will even notice?
Saturday, July 14, 2007
How Liquid Is That?
This post is just to note another piece of evidence in support of my earlier post on the likelihood that the global liquidity glut may last a while longer yet. Usual caveat: nobody can predict cataclysmic change, and I have to confess that the huge and growing notional amount of the credit derivatives market has been troubling me a good deal of late. Check out this post on the Seeking Alpha page for a chilling report on that subject.
But I could not suppress a smile when I read this story on Bloomberg yesterday. It seems that the same week as the ratings companies are finally realizing the US sub-prime mortgage market disruption means related mortgage-backed paper should be down-graded, US HUD Secretary Jackson is in Beijing urging the Chinese Government to invest more heavily in US mortgage-backed securities.
I am sure I am wrong, but it sounds like somebody is asking the Chinese to provide liquidity to help revive a deflating market in the US. The story didn't say what the Chinese reaction was, although I imagine if Secretary Jackson had been laughed out of the room, Bloomberg would have mentioned it.
But I could not suppress a smile when I read this story on Bloomberg yesterday. It seems that the same week as the ratings companies are finally realizing the US sub-prime mortgage market disruption means related mortgage-backed paper should be down-graded, US HUD Secretary Jackson is in Beijing urging the Chinese Government to invest more heavily in US mortgage-backed securities.
I am sure I am wrong, but it sounds like somebody is asking the Chinese to provide liquidity to help revive a deflating market in the US. The story didn't say what the Chinese reaction was, although I imagine if Secretary Jackson had been laughed out of the room, Bloomberg would have mentioned it.
Thursday, May 24, 2007
Let's get this bubble started
China is investing $3 billion in Blackstone's IPO. What do we make of that? Well, the US media is intrigued by what the deal signals about the power of Blackstone's game plan. And, of course, tremendous amounts of ink have been dedicated to whether the development means China plans to take over the US, just as the US feared about Japan in the 1980s. I wonder, though, whether the US media ought to get out of its usual, parochial rut, and consider whether the development signals something much more important (and less paranoid).
Something about global liquidity. Global financial players have been commenting on global liquidity excesses and potential asset bubbles for the past several years. I have yet to hear any rational, defensible explanation for all this liquidity. Where is it coming from, and why? Is it connected to a glut of savings from the about-to-retire baby boomers? Is it connected to huge hard currency reserves in oil producing nations and elsewhere? Is it connected to China's protection against a precipitous rise in its currency's value? This novice couldn't begin to explain the liquidity excess, but nobody has been arguing that it isn't there and growing.
Among the recited ramifications of all the liquidity have been (a) increases in housing prices, (b) inflated share markets, (c) booming corporate debt issuances, (d) red-hot private equity / M&A markets, and (e) extremely low corporate default rates. In the markets that the Western financial media follows, the past years have been a wide-spread asset boom that would have been hard to imagine beforehand. Investors have been chasing yield in an increasingly crowded and competitive marketplace. (Never mind that huge swaths of the earth's population continue to live in abject - and often worsening - poverty. And never mind that the liquidity glut will almost certainly not be used to address their plight in any meaningful way. That subject will have to be another post's.)
A debate my friends and colleagues often engage in these days is what might burst this liquidity bubble, and, of course, when. People who well understand finance and global markets argue forcefully from experience that what goes up must come down. These people recite the irrationally high P/E ratios on which shares trade and the incredible EBITDA multiples that companies can finance these days. The argument is that these levels are not sustainable, and a melt down is nigh. Since mid-2003, in my experience, this meltdown has constantly been stated to be six-nine months away.
Perhaps. The arguments certainly are sensible, and they are rooted in historical trends that surely teach us much. But is the China/Blackstone deal perhaps meaningful in this discussion as well? I think it is, and it is huge. For months, the Chinese have been quietly (and occasionally openly) considering how to deploy their $1.2 trillion in hard currency reserves in assets that are higher-yielding than the US T-bills which they buy in bulk.
Imagine the effect on today's asset bubbles of the addition of that much money to the yield-chasing investor pool. While nothing is certain, and unpredictable events can cause markets to tumble precipitously, it seems to me likely that China's investment diversification will only expand and extend current trends. Mark my words, the Blackstone deal is only the tip of the iceberg. Don't be surprised to see China and Singapore team up as investors, to see India and oil producing countries' more openly and frequently investing hard currency reserves into private markets, to see Chavez' Bank of the South take off and become a player, and to see other non-US pools of funds collaborating in the same spaces. And don't be surprised if the six-nine month window extends to several more years. Plan and hedge accordingly.
Something about global liquidity. Global financial players have been commenting on global liquidity excesses and potential asset bubbles for the past several years. I have yet to hear any rational, defensible explanation for all this liquidity. Where is it coming from, and why? Is it connected to a glut of savings from the about-to-retire baby boomers? Is it connected to huge hard currency reserves in oil producing nations and elsewhere? Is it connected to China's protection against a precipitous rise in its currency's value? This novice couldn't begin to explain the liquidity excess, but nobody has been arguing that it isn't there and growing.
Among the recited ramifications of all the liquidity have been (a) increases in housing prices, (b) inflated share markets, (c) booming corporate debt issuances, (d) red-hot private equity / M&A markets, and (e) extremely low corporate default rates. In the markets that the Western financial media follows, the past years have been a wide-spread asset boom that would have been hard to imagine beforehand. Investors have been chasing yield in an increasingly crowded and competitive marketplace. (Never mind that huge swaths of the earth's population continue to live in abject - and often worsening - poverty. And never mind that the liquidity glut will almost certainly not be used to address their plight in any meaningful way. That subject will have to be another post's.)
A debate my friends and colleagues often engage in these days is what might burst this liquidity bubble, and, of course, when. People who well understand finance and global markets argue forcefully from experience that what goes up must come down. These people recite the irrationally high P/E ratios on which shares trade and the incredible EBITDA multiples that companies can finance these days. The argument is that these levels are not sustainable, and a melt down is nigh. Since mid-2003, in my experience, this meltdown has constantly been stated to be six-nine months away.
Perhaps. The arguments certainly are sensible, and they are rooted in historical trends that surely teach us much. But is the China/Blackstone deal perhaps meaningful in this discussion as well? I think it is, and it is huge. For months, the Chinese have been quietly (and occasionally openly) considering how to deploy their $1.2 trillion in hard currency reserves in assets that are higher-yielding than the US T-bills which they buy in bulk.
Imagine the effect on today's asset bubbles of the addition of that much money to the yield-chasing investor pool. While nothing is certain, and unpredictable events can cause markets to tumble precipitously, it seems to me likely that China's investment diversification will only expand and extend current trends. Mark my words, the Blackstone deal is only the tip of the iceberg. Don't be surprised to see China and Singapore team up as investors, to see India and oil producing countries' more openly and frequently investing hard currency reserves into private markets, to see Chavez' Bank of the South take off and become a player, and to see other non-US pools of funds collaborating in the same spaces. And don't be surprised if the six-nine month window extends to several more years. Plan and hedge accordingly.
Tuesday, April 24, 2007
"Corrupt" - "Altered from the Model" or "Morally Depraved"?
Caution: if you believe that Western means of government are the best, you will likely find this post patronizing.
China is often said to be corrupt. It is widely agreed that unpublished and therefore unpredictable fees - bribes - must often be paid to government officials if businesses wish to obtain results (e.g., licences, concessions, approvals, etc.). There are laws against this kind of behavior, within China, in the USA, and elsewhere. And violation of these laws in practice is certainly an alteration from the model.
But is it morally depraved? And could the answer to the latter question depend on the culture from which one comes? If one is willing to consider that sovereignty is a commercial enterprise, then how could one consider that a government official - say, one in charge of a particular agency whose approval is needed - should not be able to charge whatever price for the requested approval that the prevalent conditions will bear? In fact, that is just how things have long been viewed and worked in many parts of the world.
But, Western minds generally consider that sovereignty is not a commercial enterprise (query what it is then), and they elevate governments to a different plane. A plane where it is somehow morally depraved to demand a market-clearing price for a requested approval or other service. The best argument that occurs to me for this position is that the government has a kind of monopoly - it sets the requirements and also administers them, and it should not be able to command such concentrated power without published constraint. It is for this reason that no self-respecting Western society would countenance anything close to such a concentration of power in commercial markets, aside perhaps from the odd minor exception like the energy industry or the defense industry.
When the WTO joined the PRC, it took on a cultural integration project, and mutual understanding of longstanding business and bureaucratic attitudes and practices is critical - in both directions - if the team-up is going to work. The PRC states that it wants to tackle "corruption" in the Western sense, though I doubt the Chinese have attributed a "morally depraved" aspect to their definition. As we should well understand by now, that tackling process will evolve very slowly, growing out of the previous system. To expect sudden change to the Western model is silly. And to label thousands of years of customs as "morally depraved" is not constructive.
China is often said to be corrupt. It is widely agreed that unpublished and therefore unpredictable fees - bribes - must often be paid to government officials if businesses wish to obtain results (e.g., licences, concessions, approvals, etc.). There are laws against this kind of behavior, within China, in the USA, and elsewhere. And violation of these laws in practice is certainly an alteration from the model.
But is it morally depraved? And could the answer to the latter question depend on the culture from which one comes? If one is willing to consider that sovereignty is a commercial enterprise, then how could one consider that a government official - say, one in charge of a particular agency whose approval is needed - should not be able to charge whatever price for the requested approval that the prevalent conditions will bear? In fact, that is just how things have long been viewed and worked in many parts of the world.
But, Western minds generally consider that sovereignty is not a commercial enterprise (query what it is then), and they elevate governments to a different plane. A plane where it is somehow morally depraved to demand a market-clearing price for a requested approval or other service. The best argument that occurs to me for this position is that the government has a kind of monopoly - it sets the requirements and also administers them, and it should not be able to command such concentrated power without published constraint. It is for this reason that no self-respecting Western society would countenance anything close to such a concentration of power in commercial markets, aside perhaps from the odd minor exception like the energy industry or the defense industry.
When the WTO joined the PRC, it took on a cultural integration project, and mutual understanding of longstanding business and bureaucratic attitudes and practices is critical - in both directions - if the team-up is going to work. The PRC states that it wants to tackle "corruption" in the Western sense, though I doubt the Chinese have attributed a "morally depraved" aspect to their definition. As we should well understand by now, that tackling process will evolve very slowly, growing out of the previous system. To expect sudden change to the Western model is silly. And to label thousands of years of customs as "morally depraved" is not constructive.
Tuesday, April 10, 2007
Connect the China Dots
The Economist ran a special report on China last week. A couple articles buried separately toward the back of the issue were as helpful as the report itself. These articles alone would tell a very useful story were somebody to connect them. The first article asks whether multinational corporations are really investing as much in China as one would expect given all the hype about China's increasing commercial importance. The article states that multinationals' revenues and especially business growth potential in China far outstrip their infrastructure and human resources in China.
The second article points out how corporate borrowers globally these days command ever more leverage in negotiating debt terms with their lenders. The article describes the evolution of the world's commercial lender base from multinational banks to multinational funds of various stripes, and it points out that fewer lenders seem to be bothered with loan terms that regulate borrowers' business activities in any way at all.
Spot the connection? Neither did The Economist. A very real and important story here, though, is how much money is flowing into China (and elsewhere) on the kinds of terms that have proven so dangerous in the past - institutionally and anonymously, without regard for investor-investee (eg, lender-borrower) relationships or commercial leverage points. Post-Asian currency crisis, it should be clear that the first kind of investor to be forgotten in a time of stress is the anonymous investor who has nothing further to offer a struggling business - and no ability to hurt it. On the other hand, that business' critical and ongoing commercial/trading relationships are treated better longer. But these relationships require resources "on the ground".
Multinationals are over-weighting the known-to-be dangerous kinds of investment in China and under-weighting the more secure. And they likely haven't done enough homework even to notice. But Chinese business owners must be delighted.
The second article points out how corporate borrowers globally these days command ever more leverage in negotiating debt terms with their lenders. The article describes the evolution of the world's commercial lender base from multinational banks to multinational funds of various stripes, and it points out that fewer lenders seem to be bothered with loan terms that regulate borrowers' business activities in any way at all.
Spot the connection? Neither did The Economist. A very real and important story here, though, is how much money is flowing into China (and elsewhere) on the kinds of terms that have proven so dangerous in the past - institutionally and anonymously, without regard for investor-investee (eg, lender-borrower) relationships or commercial leverage points. Post-Asian currency crisis, it should be clear that the first kind of investor to be forgotten in a time of stress is the anonymous investor who has nothing further to offer a struggling business - and no ability to hurt it. On the other hand, that business' critical and ongoing commercial/trading relationships are treated better longer. But these relationships require resources "on the ground".
Multinationals are over-weighting the known-to-be dangerous kinds of investment in China and under-weighting the more secure. And they likely haven't done enough homework even to notice. But Chinese business owners must be delighted.
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