Chinese Economics Thread

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Lieutenant General
At least $1 trillion of global reserves will switch into Chinese assets if the International Monetary Fund endorses the yuan as a reserve currency this year, according to Standard Chartered Plc and AXA Investment Managers.

People’s Bank of China officials have called for the IMF to include the yuan in its reserve basket -- which consists of the dollar, euro, pound and yen -- in a review later this year. An inclusion could spur as much as 6.2 trillion yuan ($999 billion) of net purchases of China’s onshore bonds by end-2020, Standard Chartered estimates. AXA Investment Managers says about 10 percent of the $11.6 trillion of global reserves will flow into yuan assets. It didn’t give a timeframe.

“What is significant is the seal of approval by the IMF that the yuan has internationalized as a reserve currency,” Aidan Yao, senior emerging-market economist at AXA Investment, said in a briefing in Hong Kong on Thursday. “It could trigger a reallocation of global reserves portfolios.”


China is making the yuan more freely usable in order to be included in the IMF’s Special Drawing Rights basket, PBOC Governor Zhou Xiaochuan said in Washington on April 18. The currency failed to qualify in a 2010 review.

The yuan
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fifth place in global payments this March, according to the Society for Worldwide Interbank Financial Telecommunication. Standard Chartered said the Chinese currency has a 60 percent chance of getting reserve status this year.

‘Meets Criteria’
“The renminbi broadly meets SDR criteria,” Standard Chartered analysts including Becky Liu and Eddie Cheung wrote in a research report Friday. “Even if the decision to include the renminbi is deferred, we see a high degree of certainty for inclusion in 2020, or possibly earlier via an interim review.”

The dollar has a 41.9 percent weighting in the SDR basket, and the euro has 37.4 percent, according to the IMF
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. The pound commands 11.3 percent and the yen’s share is 9.4 percent. The yuan can get a potential weighting of about 13 percent, according to an estimate by Bank of America Merrill Lynch in March. HSBC Holdings Plc said in an April note that the yuan’s share could be 14 percent, reflecting China’s importance in global exports.

“SDR inclusion in 2015 would likely have a significant market impact, driving an immediate sharp increase in global diversification into renminbi assets,” Liu and Cheung wrote.
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Lieutenant General
Should China's plan to position the Yuan as a world reserve currency serve as a warning sign that something much more dangerous is approaching?

According to Jim Rickards, the CIA's Asymmetric Warfare Advisor, the answer is yes.

In a startling interview he reveals that all 16 U.S. Intelligence Agencies have begun to prepare for World War III.

Making matters worse, his colleagues believe it could begin within the next 6 months.

However, the ground zero location for this global conflict is what makes his interview a must-see for every American.

Take a few moments to watch it below and decide for yourself.
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Lieutenant General
China is investing up to $50 billion in Brazil infrastructure as it seeks to cut export costs.

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Reuters
Illegally built slums near a Sao Paulo reservoir.
The Industrial & Commercial Bank of China will start a fund of up to $50 billion to be managed by Brazil’s state-owned bank Caixa Economica Federal, for infrastructure projects, The Wall Street Journalreports. China’s goals include cheaper transport of Brazilian iron ore and other exports with a rail line from the Atlantic Ocean to the Pacific coast of Peru. The projects also reportedly include a joint venture to produce steel.

Chinese Prime Minister Li Keqiang visits Brazil, as well as Colombia, Peru and Chile, next week. The tour comes one week after Indian Prime Minister Narendra Modi‘s visit to China resulted in $10 billion in investment agreements on education, rail and other themes.

The iShares MSCI Brazil Capped ETF (
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) and the EGShares Brazil Infrastructure ETF(
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) are each down slightly this morning. The EWZ fund’s is up 0.6% year to date, but remains down 25% over 12 months with pressure on the market from the electon of PresidentDilma Rousseff last fall, and the widening corruption scandal at state-controlled energy company Petroleo Brasileiro (
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.) The infrastructure-focued EGShares fund has underperformed the broader market; it is down 5.5% year to date, and down nearly 38% over 12 months.

Last month, the China Development Bank opened a $3.5 billion line of credit for Petrobras, whose shares are down 0.6% this morning.
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Lieutenant General
I hope this will be a short term problem. What happen to all that water coming from recent years when the island are hit by typhoons and such?

Taiwan is facing its worst drought in 67 years, with the island reservoirs at dangerously low levels.

The government has responded by cutting the water supply two days a week in some areas, and forcing factories to reduce consumption.

The last time that happened was in 2002.

As well, officials are warning power could also be rationed, with reserve supplies at their lowest level for 10 years.

The BBC's Cindy Sui reports.
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D

delft

Brigadier
shen said:
Well, what the opponents want is to attaching a bill against currency manipulation by foreign countries. The supporters of TPP claim that doing so would derail the entire TPP negotiation. Well, which country is manipulating currency these days? google Yen Dollar exchange rate. yeah, I see how it would derail TPP :)
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The crudest form of currency manipulation is Quantitative Easing, mostly practiced by Fed, BoE, BoJ and ECB.
 
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