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Volume I, Episode 40
November 20, 2007
Currency Crisis! Dollars Drained by China, OPEC Continue Down - Inflation Hot

November 14, 2007

Time to Short China's Yo-Yo Market? - Mining In or Out? IPOs - more

November 2, 2007

Oil Shock! Price Problems At the Chinese Pump - Stocks: Where's the Correction?

October 24, 2007

SPECIAL REPORT: 17th Party Congress - Shanghai Bubbles? - Market Numbers

October 15, 2007

China Bull Run Gets New Highs - PetroChina - IPOs - Money - more

October 9, 2007

Chinese Stocks Up & Up - IPOs - Iron & Steel - Pacific Pipeline - more

October 4, 2007

Hong Kong Booms - Commodities, Inflation, Oil at $100 a barrel? - more

September 25, 2007

UAW Tells GM No Jobs For China - Markets Hit 5,500 - China's Auto Industry - IPOs

September 19, 2007

New IPOs Rock Shanghai! But is Resistance Building? A Big Push for Private Equity…

September 10, 2007

Report on APEC 2007 - Energy Security - Markets Update - IPOs in Hong Kong

August 30, 2007

Chinese Stocks Stay Up - Big Bond Sale - IPOs - Upcoming Party Congress

August 22, 2007

China Stock Markets Get Higher But For How Much Longer? - Surprise Rate Hike - IPO Update

August 14, 2007

China Toy Recall - Markets & IPOs - Western Banks Catch Asian Flu?

August 6, 2007

Shanghai Composite Busts Past 4,600 - Beijing Bets on Banks - Chinese IPOs in Japan

July 31, 2007

China Stocks Up Again & Again! - Pussyfooting Around Currency? - Democracy in Japan?!

July 25, 2007

Will Barclay's Turn Chinese? 2Q/H1 Macro Report + IPOs!

July 19, 2007

Food Fight! China-USA sling hash / Peak Oil? / Markets Flat Line...

July 10, 2007

Chinese markets confused? Big IPOs - Chery+Chrysler

June 27, 2007

COSCO - China Mobile - IPOs - Telecom Mergers & Acquisitions

June 21, 2007

New Record Highs in Hong Kong, Shanghai: Will Beijing Put On the Squeeze? - IPOs & more

June 15, 2007

Fundamental Misalignment: US-China currency war - stock markets up & IPOs

June 7, 2007

China Stock Pop - Hot News items - climate change, tainted food...

May 31, 2007

Chinese stock markets hiccup - IPOs - USA-China Trade Gap

May 25, 2007

Report on the 2nd USA/China Strategic Economic Dialogue: Win-Win or When-When? - Market numbers - New IPOs

May 18, 2007

New life for Hong Kong? IPO Update - USA/China summit

May 11, 2007

Will Shanghai end up like NASDAQ or Nikkei? - IPOs

April 30, 2007

Tulips to Dotcom - is Sino Mania the next big bubble?

April 20, 2007

The Heat is on! - IPO Report - Air Pollution in China

April 15, 2007

China markets, IPO update, Beijing Ready for Olympics?

March 30, 2007

China markets up, up, up! Sinomania! goes to China

March 23, 2007

Focus on National People's Congress... Hi-Tech, IPOs

March 17, 2007

China's new investment strategy, IPOs, the Wrap...

March 7, 2007

China syndrome or hong bao bounce? New IPOs... more!

February 27, 2007

China Stock Market Yo-Yo, new IPO issues, the wrap

February 17, 2007

Chinese New Year edition! Will China buy Chrysler & more!

February 9, 2007

The USA-China WTO trade dispute and New IPOs

February 1, 2007

IPOs: New Red Chip — Bubble Burst? — USA-China

January 26, 2007

BUBBLE TROUBLE? — IPOs on NASDAQ — Renminbi Yuan

January 20, 2007

IPOs in 3 hot sectors — BAOSteel — Macro Report

HKEX Hang Seng Shanghai
SSE Shanghai Hong Kong
SZEX Shenzhen Beijing
MUSIC in China: Listen!

TRANSCRIPT: Global rebalancing act of 21st Century drains dollars and frays nerves but what is the new currency regime to be? Growth of money in China fuels inflation and fears of hard landing; Chinese markets hiccup...
Sinomania! Volume I Webisode 40, November 20, 2007

Currency Crisis! Will China Dump the Dollar?
Money Everywhere but Markets Hiccup…


At the start of the last century China stuck with silver while Japan and the United States among others based their finances on a gold standard. The U.S. was then the upstart new superpower and it took decades to sort out global currencies as the British pound sterling faded and Germany and China after it suffered from spectacular inflation.

At face value the situation in today's currency markets looks a lot like the mid to late 1980s when U.S. policy deliberately decimated the dollar in response to its trade and government deficits. Add to that the blame Japan strategy and the forced appreciation of the Yen and you can see how many think the solution is for China to rapidly change the value of its currency.

And so we hear louder calls for Yuan appreciation from the United States - Treasury Secretary Paulson speaking from Africa, and Europe with French Finance Minister Christine Lagarde echoing calls from Jean-Claude Trichet, head of the European Central Bank, for China to inflate its paper money.

But while central bankers and politicians of the G-7, G-10, and G-20, ramp up the rhetoric to show markets they are concerned, reality is exchange rates appear to have a logic of their own not necessarily driven by trade balances or imbalances.

Globalization has reached such new heights and interconnectedness that it is not currently clear whether the world is "decoupling" from dependence on the USA or "rebalancing" by encouraging if not creating a "slowdown" in the American economy in order for "emerging markets" that is poorer countries of the world to catch up even faster.

One thing is clear China and oil exporters are benefiting the most from the first decade of the 21st Century draining dollars and increasingly Euros and Yen. China's trade surplus with the USA has grown almost sixty percent since the start of the year. The EU is an even bigger export market for China. Meanwhile the foreign exchange reserves, primarily denominated in US dollars, of oil exporters from OPEC to Russia have swelled for the past five years.

Both are now seriously concerned about the fate of the US dollar and actively seeking diversification away from US dollar currency pegs. Speaking in Singapore at a business conference, Chinese Prime Minister Wen Jiabao said "we are worried" adding his voice to others in China's top leadership for divestment out of Greenbacks.

Chinese ministers will be meeting this month and next with their European and American counterparts in what will certainly be a contentious if unproductive conversation on their intertwined units of money.

This past weekend, for only the third time in its near 50 year history the Organization of Petroleum Exporting Countries or OPEC gathered heads of state in Saudi Arabia to discuss direction as the dollar decline alarms its financiers.

The ministerial meeting was held behind closed door and I've not found any disclosure yet of what was said. Oil production was not a topic that will be discussed in another meeting scheduled later.

One note of possible interest regarding China, OPEC Secretary-General Abdalla Salem El-Badri was in China only two weeks ago and met with officials of China's national government and said that the group can meet China's energy needs. The most recent figures on China's oil imports show that Saudi Arabia is now the number one supplier accounting for over 18% of Chinese crude imports at over 3 million barrels per day, twice the amount Saudi Arabia exports to the USA.


The growth of money supply in China appears out of control according to otherwise more sober analysts in Hong Kong fueling inflation and leading to general fears that Beijing will be forced to put on the brakes to reign in China's growth sometime in the second half of 2008 at just the moment when the United States economy is supposed to bottom out.

The M2 money supply expanded at over 18% and inflation at six and a half percent last month, an 11-year high. Food inflation is the biggest problem running at almost 18% with prices for meat up near 40%. This is a very serious concern as high food prices are a traditional source of unhappiness among Chinese with their governments.

There are widespread reports of deliberate but selective curbs in bank lending particularly in real estate although the China Banking Regulatory Commission officially denies any credit freeze is underway.

Real estate investment is said to be in surplus or excess capacity. One indicator, prices of land are breaking new records. A Singapore developer recently paid 20,000 Yuan per square meter (or about $1,000 a square foot) for land in the New Jiangwan Town area of Yangpu district in Shanghai, a new center of gentrification. That puts Shanghai land values almost on a par with London or New York City.


The Shanghai Composite Index continues to slide ending down every day since our last show to close November 19 at 5,269.82. All markets have under performed over the last few days with few small exceptions. The CSI 300 Index ended down again today to close at 4,994.416. Even with declines, however, it has tripled in the past year. Shanghai B shares are up a fraction to 330.353 after three days of declines and the story is the same for ShenZhen Bs closing November 19 at 708.931.

The individual investor program that was the hope of Hong Kong remains delayed and a Credit Suisse analyst now says it won't be implemented until the second quarter of 2008. The China Securities and Banking Regulatory Commissions disagree over the scope of the program. The Hang Seng reacted negatively to this news but most analysts still expect the market to absorb potentially billions from individual Chinese investors and the anticipation to inflate Hong Kong's economy.

For viewers in the USA and Canada this week, Happy Thanksgiving!

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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