a little birdie told me chinas growth ..., page-4

siamese

To True. The growth genie is out of the bottle, the Economic reporting of China has been poor - most journalists just taking what has been fed to them. Anyone who has read the economist, and doing business there, will know the informal sector continues to grow unabated. That central govt tightening of money supply is only 50% effective as the informal lending economy is huge.

The problem basically is that with the massive trade imbalance [conducted in USD] is distorting the economy. Firms making big bucks from trade in USD, cannot hold thier profits in the USD and must sell to the central bank who gives them local cash. So the economy is awash with local currency whilst at the same time the central govt is trying to tighten money supply to slow growth. Which why their efforts may look like a lot to an outsider but on the ground all those trade dollars converted into local cash are finding their to semi transparent lending institutions who lend to exporters to grow, and the whole cycle repeats.

The MD of Newmont who has made some bold predictions and has been spot on ( in late 2003 he said gold would peak at 450 at end 2004, which brought much mirth to his detractors at the time). Yesterday he predicted copper to remain above 1.50 lb for next 3-5yrs as China growth remains unabated. (this gives me some hope for OXR)

I believe in an effort to try and soak up loose cash in the mainland the Chinese govt has allowed private ownership of gold and sells at 3% below spot mkt through official channels. I personally think the significance of this has not been realised by gold bugs. I have lived in the east and was around during the last gold boom. The Han / Chinese if you will are classic wealth hoarders in the form of gold. At some point the the fixed exchange is got to end, exporting businesses will suddenly fold and there will be capital flight to USD and/or gold. As gold is available and USD not, methinks the shiny metal has a rosy long term future.

back to my coffee

cheers