Transformation and Strategies for the long run

  

China Transformation and Strategies

Vale SA, being a global iron ore & nickel producer, wants to have a bigger responsibility in China's initiatives to cut down carbon emissions by providing higher quality supply of iron ore, according to its CEO Murilo. Murilo Ferreira discussed the company's strategies with a local daily and also shared some of the recent projects as well as cost reduction effort in a volatile market and unstable political environment. He wants politicians to increase effort in increasing prosperity instead of going into arguments. Ferreira is all for the Chinese government's new plan for bringing change to steel mills in the country. Plants that have issues with credit could be consolidated and modernized using modern technologies. Modernization will take some time. According to Ferreira, credit easing had caused iron ore prices to rebound sharply. There is huge credit improvement in China. Loose financing measure gave people access on new housing launches. New properties are being launched and increasing in number. Steel mill efficiency is increasing and much better compared to 2015. China demand for using iron ore has picked up. However, the quality is lacking compared to Brazilian iron ore as there is 67% iron content compared to Chinese iron ore at 25% iron content. It is better for the environment as well.

Consolidation must be done to reduce the overcapacity situation in China. Depletion of iron ore will naturally reduce the overcapacity. Currently about 40 million iron ore tons are being depleted every year. Existing mines must be replaced. Vale has been investing heavily on new mining projects. We had some cost reduction in project budget from $19.5billion to $14billion due to exchange rate fluctuation. Vale intends to stay committed to China and maintaining its position as the largest supplier. Vale hopes to increase the supply from 180 millionto 250 million (tons).The purpose for executing a memorandum together with FMG (Fortescue Metals) is to mix the iron ore materials at China port infrastructure. There is no firm contract now. Vale is in need of good iron ore and is exploring all avenues.
Vale's credit rating was downgraded due to issues in reducing debt. Vale is actually aggressive in cost control. Iron ore cost has been reduced to US$32 from US$90. S&P and Fitch had reaffirmed our investment grade rating but Moody's is deliberating on the bleak long term prospect of iron ore cost of US$35. Vale divested a huge non-core operations amounting to US$12 billion. Another transaction will be announced soon to sooth creditors' concerns. Vale will work hard to prove Moody's views and assumptions. Vale believes that iron ore price will be between US$65 and US$80 in the long run. Brazil's politician should focus and unite on creating wealth to the nation instead of squabbling over petty issues. Economic growth should be the main priority in the current slowdown climate.
Vale has always been the biggest nickel producer globally. There is potential demand for nickel with rise of electric cars, aerospace as well as high-tech industries. Our best nickel product comes from Canada. The future for nickel is bright. Vale is in the top 10 copper supplier list. Vale is preparing to launch production for metallurgical coal located in Mozambique. Railways and port facility are all ready for operation. Vale is the third largest producer for grains and fertilizer. Vale aims to be number one in the near future.
Mining industry has always been a cyclical industry. Central bank monetary policies are very different for China, Japan, EU and US. Vale will navigate the cycles by considering the long term prospect for its projects which take about 8 to 10 years. There is big concern on politics globally and these need to be solved real soon. Brexit issue has been the main political headline and world leaders need to resolve them.

 

Understanding the Balance Sheet

  

Understanding the Balance Sheet

With a lot of things that has been going on in China in the previous months, it may be perceived that there are also numerous topics that can be used to complete an essay writing task. On the other hand, people are typically caught up just staring at something that will eventually lose your sight along the way. There are certain instances that occurred in July this year, August and June of 2013 as well. There are also numerous times when some amusing and unwanted instances occurred. The vigorous an unbalanced economic system of China is actually invading something that may be called the phase shift. It may also be not as grand as the rebalancing method that will be best in re-structuring debts in an upturned manner.

People who view China in this manner may have been able to determine a not so typical panic, shocks and even credit crunches that may have gone through, but somewhat that may have the important practice in a series of very related amusing. These amusing instances were all linked to debts and that may happen regularly for so many years, each of the amusing instance will progress or even delay the rebalancing method, so that it may affect the method of the future shocks to happen. There are some few wide paths along with the Chinese economy that may bring re-balance. If you can get some sense out of the China's official restrains and balance sheet structures, only then you will determine the meaning behind the figures and how they were linked with one another.
To be able to get the figures right, it is important to comprehend the undercurrents of the debt as well as the balance sheet and its structures in a generalize manner. Around 4 years back, a client has sent a research report from the Standard Chartered Bank wherein the Analyst from China gave warning that while the Chinese debt levels were still insignificant, there was still a probability, though it is quite low or thin, but if it is not important, the credit growth will rise dramatically and the debt will be a big problem for the policymakers. At the moment, things are still manageable, however, it is also probable that Beijing may neglect the proper way to handle their debt issues.
It may be considered as a devastating agreement at that time when the growth of China was still strong, easy to maintain, they may generate GDP growth rates for decades that weren't lower than around 10% that has been seen in the past 3 decades. As the client sent the report with the remarks that the sell side has been known that the economic status of China was at risk then. There was an analyst who had been a part of the devastating bull consensus once said that at last, the start to comprehend the economic condition of China along with the issues it has been facing. Though, this concern is still unconfirmed. It may be that those who have comprehended the growth of the Chinese model may have also understood that it is also over dependent on the fuel growth investment, combined with the structure of the credit markets, massive moral risk, awful low interest rates to name some that made the debts soar at its highest and may be hard to repair.
To say that it may only occur in the government being handled by Xi Jinping, the mismanagement process says that the analyst wasn't able to understood the self-reinforcing links between the soaring debt and the lessening growth. It has also been underestimated how hard it may be for the new government to rise from the debt and deal with the declining growth. It was just under computed how hard it may seem for the new government to break out in this kind of method. It is bound to occur, no matter what the administration do and how much to exert effort to get this job done. He cannot hinder being blamed for not being able to become competent in handling the government management accordingly.
There was just a big dissimilarity between the acknowledgement given by China with all of the debts and comprehending how the debts were formed and how they were made to embed in the financial system, however, the Standard Chartered representative assumed that the former affects the latter. However, there was a certain misunderstanding about how they were able to handle the data interpretation and this reaches to the primary of the analysts that handles the data of China. Lardy do believe that China is in a good condition, economical wise and that sums up the positive growth predictions. According to this similar data, there was a writing from Lardy that has been published for some time now. The growth to slow sharply is just a must expect. The present condition of the China's growth is long term; it may be around 6-7%. China may grow at around 8% for one year and for 5-10 years still.

 

Congress in China

  

Congress in China

The People's Republic of China practices the system of people's congress. China's Constitution stipulates that all power in the People's Republic of China belongs to the people, and the organs through which the people exercise state power are the National People's Congress and the local people's congresses at different levels. Local people's congresses at different levels are elected in a democratic way, and are responsible to the people and subject to supervision by the people. Deputies to the people's congresses at county and township levels are elected directly by their constituents. All citizens of the People's Republic of China who have reached the age of 18 have the right to vote and stand for election, regardless of ethnic status, race, sex, occupation, family background, religious belief, education, property status or length of residence. Such citizens make up 99.97 percent of the population who are 18 years of age or over. Over the past dozen years, more than 90 percent of the electorates participated in the four direct elections of deputies to the people's congresses at county and township levels. Deputies to the people's congresses of the provinces, autonomous regions, municipalities directly under the Central Government, autonomous prefectures and cities divided into districts are elected by the people's congresses at the next lower level. Deputies to the NPC are elected by the provinces, autonomous regions and municipalities directly under the Central Government, and by the armed forces. Candidates for deputies to the people's congress at various levels are nominated on the basis of electoral districts or electoral units. The political parties and various people's organizations may either jointly or separately recommend candidates for deputies. Any voter or deputy may, with at least 10 people supporting his proposal, also recommend a candidate. The number of candidates for deputies shall be greater than the number of deputies to be elected. The elections shall be by secret ballot.
 

The NPC is the highest organ of state power. It exercises the state power of amending the Constitution and supervising the enforcement of the Constitution; enacts basic laws of the state; elects and decides on the choices of the leading personnel of the highest state organs of China, including the President and Vice President, the choice of the Premier of the State Council and other component members of the State Council; elects the Chairman of the Central Military Commission and decide on the choice of other component members of the Central Military Commission; elects the President of the Supreme People's Court and the Procurator-General of the Supreme People's Procuratorate; examines and approves the plan for national economic and social development and the report on its implementation; examines and approves the state budget and the report on its implementation; and make decisions on other important issues in national life. The NPC is elected for a term of five years. It meets in session during the first quarter each year and is convened by the NPC Standing Committee.

 

Insurance Sector Luck in a Warm Temperature

  

China antiques

On a warm summer afternoon, it is so inviting to be in a swimming pool. The roaring insurance sector is persuading the crowds of the consumers, firms and investors in terms of refreshing the security as well as cash. Just behind the booming insurance industry is a summerlike business environment that has been made simpler than ever for companies to provide and the consumers will buy all of the insurance types. A regulatory simplification of the business launched by the China Insurance Regulatory Commission or CIRC just in 2012 and then polish some since it has helped the insurance firms expand and then profit from the investments in the stocks, different financial products as well as bonds.

It has persuaded a ground breaking spirit, since lots of new insurance firms have started in the current years and since February, over a hundred were looking for business licenses. The simplification as well as the continuous rise has been the trademark of Xiang Junbo's tenancy with the CIRC chairman. In 2011, he took the job in 2011 and since then it has been behind the commerce improvements in places like as insurer fund investments, farm policies and policy premium rates. On the 22nd of February, there was an interview with Caixin, Xiang has known that the reform, climate is becoming progressively complex being given the economic downturn. That has been spreading through China in 2014.
However, he is just so confident that the regulatory facilitation which is still the right thing to do, especially since it has gained the support from the officers at a higher level in Beijing. It was just after some time that they took the post and work as a CIRC chairman, some of the ministry leaders in the central government told them that on a prime task for the insurance business has been to loosen up the insurance fund investments. This is in accordance with the statement released by Xiang. He also said that the industry faces different hurdles and probabilities too.
In terms of the dangers involve, Xiang has accepted that there are some risks involved as the economy goes down and the sector expands when it comes to the companies, assets, investments and even clients. There must be a caution in terms of the watchword for a lot of small newbies in the business in which having found an earning aspect, there are also some non-conventional and even short term insurance plants as well. The analysis has just said that the plans can actually give ample coverage for just around 3 months, however, it can generate most of the offering consumers with high payouts, that may also lead in generating liquidity dangers for the business underweights.
Just in the past, the life insurance firms, rarely had issues with liquidity since the debts were long term. This is in accordance with Zhou Xing, who is a partner at the China insurance division of the PricewaterhouseCoopers. However, at the moment, he added, the short term liabilities are actually placing the companies at a greater risk. In terms of the business opportunities, the risks have been soaked in the insurance business environment. In accordance to the source who wants to stay anonymous, in the latter part of February, the CIRC has been processing the applications from over a hundred thirty firms that would like to start with selling the insurance. Just lately, the officials of the CIRC in a conference with the insurance firm claimed that most of the shareholders were actually using the insurers to boost the funds for some other firms.

 

The G-20 Countries

  

G20 Summit Japan

The G20 Summit on Financial Markets and the World Economy is held every year to discuss the critical issues affecting the global economy. 2019 G20 Osaka summit will be held on 28–29 June 2019 in Osaka and be the first-ever G20 summit to be hosted in Japan. During its presidency of the G20 Summit, the Japanese government is determined to carry out strong leadership in advancing discussions toward resolving the myriad issues now facing the international community. At the same time, the G20 Summit is a perfect opportunity for people from all over the world to see and experience not only a newly revitalized and transforming Japan—which is thanks to booming corporate profits and a wave of inbound investment as a result of bold regulatory reforms and other stimulus measures—but also the wide-ranging appeal of the various regions that will host these consequential discussions. The nine cities hosting the G20 Summit and its related ministerial meetings all have their own fascinating cuisine, history, and culture. Photo from japan.go.jp

Looking back to other meetings, there has been a consensus reached by the finance ministers of G-20, against the devaluation of competitive currencies. Haruhiko Kuroda, governor of the Bank of Japan shares the sentiment that not only the G-20 countries but also other countries will reap the benefits of the consensus. He made his announcement at a meeting held in Shanghai. The meeting was centered on the negative rates of interest and the steps to be taken by the Bank of Japan regardless of its lack of space for maneuvering. To reach the target of a two percent inflation the bank will further lessen it rates after assessing the impact the policy might have on the situation.

How was the meeting on the G-20 assessed?
The global economy was looked at as a whole that includes the volatility of the included finances, the capital flow reversal and the decline of the commodity prices. Growth strategies are consistently implemented by the G-20 countries along with conducting reformation of the structural integrity to sustain a balance growth. The tools of policy including fiscal, monetary, individually, structural and collectivity are all used by the G-20 countries to achieve the communique in its entirety.
Is there fear of this devaluation among major Asian currencies?
To increase competition for exports or any other aspects, G-20 countries will not be a part of using competitive devaluation to achieve their increases and this is a direction that many other countries also believe is the right way to go. The government of China won't allow the yuan to depreciate as their policy on exchange rates are very clear. The six major Asian countries of the G-20, Japan, China, South Korea, India, Australia and Indonesia are agree to the decision of not engaging in the competitive depreciation of their currencies.
What is the viability of the New Plaza Accord?
Volatility on the exchange rates along with disorderly movements can adversely impact the financial stability of the economy and this has been clearly outlined by the communique. G-20 countries will not target the currency exchange rates to ensure competitive devaluation. The first Plaza Accord was designed to depreciate the value of the ten US dollar in nineteen eighty five. The situation as it stands is completely different from the prior one and the communique lays out a good statement in regards to this.
Will fiscal policies boost the growth of Japan's economy?
The Bank of Japan has implemented negative interest rates in the attempt to reach their targeted goal of two percent inflation. Structural reform has also been implemented with bills being fostered to strengthen these structural changes and this includes a reform of the labor market. The nation as showed that they are adhering to the policies of the G-20 agreement and is incorporating all tools to obtain balanced goals.
What has been the impact of the negative interest policy?
The idea behind negative interest policy was to ensure the reduction of the yield curve starting point. The entire curve will decline by affecting the curve's short end. In response to the curve's decline, the interest rates on housing and cooperate loans have been significantly reduced by commercial banks. There is a difference in the impact of the rates of negative interest and the exchange rates movements on the markets. The yen and the stock market fluctuated even after the introduction of negative interest rates. The Japanese economy is steadily increasing but unlike the US and the European economy, it is a lot more stable and does not fluctuate as much. This is the reason the yen is been seen as a safe heaven. The movement of the exchange rate is radical and very hard to predict and pose a problem for one to discern a fall in the Yen's value or not.
What is the effects of negative interest rates on banking?
The negative interest rates have minimal impacts on the banking sector. This is a well-constructed scheme that only subjects a marginal increase of reserves to a negative interest rate of 0.1 percent. The remainder reserve will continuously receive the opposite in positive interest rates.
Will the ‘helicopter money' policy be accepted by Japan?
The previous actions of the Japanese Bank ensures no need for the nation to adapt the rules of the policy. They have been purchasing long term bonds in order to lower the curve of the yield and the idea of the helicopter money will not be able to support this direction. With that in mind you have to be aware that the fiscal and current laws prohibits the Japanese bank from financing the deficit directly.
Will the U.S Federal Reserve raise interest rates?
The policies of the Federal Reserve are very transparent and will continue to be dependent on data. The increase or decrease in interest rates will totally influenced by the data produced by the reserves. The rates will be increased only if the data allows it and the reserve see where the economy is recovered and strong enough to support such and increase or decline.

 

Small Businesses in China

  

Small Businesses in China

If you are looking to start a small business in China, there are a few that my pique your interest. First off you could choose to provide Education. There are many opportunities for educators although the Universities in China control the U.S. education in the country. Vocational, management and language schools are some of the opportunities foreign educators have in the country. You might need to partner up with a Chinese national as you will require licensing by the Ministry of Education to educate Chinese national.

The second business that you may consider is that of a wine maker. Wine makers of Washington and Oregon are already making head way in the Chinese wine industry. There are openings for foreign wineries in this industry. You need to keep aware of the local palates and the local price points of the industry. You could just opt to import processed food instead. There is still a very large market with many openings in this industry that a small business could thrive on. The need for convenience in the food they eat and the desire to fulfill a 21st century type lifestyle has driven many Chinese to their cities. This along with their need for more professional jobs has created his need in the industry for businesses of this nature to not only survive but also thrive exceptionally well.
As one of the world's leading construction industries, China is a major player in the solar industry as well that still have meet a very rigid standard in its environment. There are plans in place to construct long lasting eco-friendly structures and this has created a need for renewable energy manufacturers and products from green buildings. There is a very lucrative market in China for foreign high-tech medical devices providers. The ageing population of the nation coupled with the reform in health care has created and ensure this niche in the industry. Western provider may face challenges as it related to registration of product, the pricing and also the intellectual property registration. The U.S. Commercial Service is the perfect source for information on contacts and other vital information.
Already the largest and still growing, China has one of the largest travel markets in Asia. The nation's government has expanded their holiday season in an attempt to create more travel opportunities. The UNWTO states that over a million Chinese visitors to visit destinations all over the world by the year 2020. This nation has a fast growing economy and may need some management help. Consulting firms were not a part of the nation's former economy but have now established multinationals in the market in the form of investment, legal and human resource.
The civil aviation of China as significantly grown over the years and has been predicted to purchase over four thousand new planes by the 2020 year. The nation is purchasing quality parts and industry reaching standard assemblies from suppliers not locally based. Chocolate is a big and expanding business in China. The consumers have desires on not just the unique products but on the gourmet product range as well. The sale of chocolate has now hit China's second-tier cities creating more opening for a successful business but you have to keep in mind that your competitors are entities such as Hershey and Cadbury.
It is believed and predicted that in the coming decade, China will have the number one economy in the world. The U.S and Europe's economy seem to have the feel of a flat fiscal future for the coming years. This is an economy that many businesses see has a source of stability and prosperity for the coming future. The ways and tradition of the country are different and you will have to be prepared to operate in a bureaucratic environment. This is a place that has done the same thing for centuries and there is no space for a cowboy attitude. You will surly fail if you try to operate by your own rules as they will not change their centuries old traditional methods. It will take time to get a proper foot hold in an industry such as this with so many new and challenging traditions. As a business owner it is important that you are a part of China's economy in the coming years. They will have the most stable and thriving one in the coming decades and this will be the place to rest your businesses hopes on.

 

Positive outlook for China markets

  

Positive outlook for China markets
Well with recent news about Huawei sales top USD $105.2 billion despite US-led pressure as revenue from the smartphone division increased by 45 percent, it proves Huawei is a massive consumer brand which many people love. Huawei is an independent, privately-held company that provides information and communication technology (ICT). They were founded in 1987, in the southern Chinese city of Shenzhen, with about 21,000 RMB in start-up capital. Since then, they've grown to become the world's largest supplier of telecommunications equipment and the second-largest manufacturer of smartphones. Huawei employs 180,000 people in more than 170 countries. They are a market leader in China and many countries across Europe, Asia, and Africa. More than 3 billion of the world's population uses Huawei's products and services to make calls, send text messages, or surf the internet.
Looking back over last few years financial markets point towards a simplified overview of the complexity of China markets. It is being accused of causing a coming recession and slump in stock markets. China has links to the global economy but it is not direct. China is trying to balance between its new growth plans and developing sound financial infrastructure. It is on the right track in order to have a more sustainable growth rather than continuing pumping out goods because there must be underlying demand to sustain economic growth.
China is getting sound progress by shifting its economy to more service based instead of traditional manufacturing. It is an important progress compared to GDP growth alone where people are mostly obsessed with. Most people have been reading too much on the GDP growth rate and trying to figure out the accuracy of the figures. The end of commodity super cycle caused pain to resource economies from Brazil to Canada. The countries were slow to react. It is obvious in fall in oil price even as China uses coal for 70% of its energy consumption. China used 40% of total oil consumption growth in 2014. The plunge in crude oil prices was due to China shifting to services having lower carbon usage. Same goes for metals and industrial materials. There are roadblocks to China's progress in financial reform and economy rebalancing. This is marked by the 2015 stock market crash which spilled over to 2016 and affecting global markets. Regulators had been slow to react to the market bubble in 1H 2015. They tried to stabilize markets by implementing equity purchases and circuit breakers. Many were confused. China had been trying hard to develop its bond markets but have not seen much success. Equity markets regulations were also not definite. A deeper problem is not the crash but an inadequate capital markets which has been heavily reliant on banking institutions. It is a huge letdown in terms of financial reforms.
China is facing a huge risk of capital flight. Beijing's policy of devaluing the renminbi against US dollar may spark currency wars similar of the Asian Financial Crisis that caused south East Asia countries to fall into a deep recession. However this scenario is unlikely as renminbi had been appreciating strongly over the past 10 years and is now trading around its fair value. Its current account surpluses had decrease, which eases the pressure of forcefully adjusting the currency. Renminbi has depreciated 6% against the US dollar in July 2015, but still at a high of 25% appreciation since 2005. China's currency is effectively up 50% against all major trading partners' currencies. China has reasons to slow down the appreciation of renminbi. Its impact will not be severe as the depreciation need to be of larger magnitude in order to spur exports. It is in direct conflict with Beijing's main objective of shifting export driven to consumption driven demand. IMF may decide to withhold inclusion of renminbi in the unique drawing rights scheme.
China has many challenges, ranging from excess leverage and property market imbalance as well as overcapacity for its industrial sector and deteriorating environment. Beijing leader are closely monitoring these issues in their policy debates. Beijing must take good care to balance the economic growth and financial reformation. Economic rebalancing cannot be achieved if capital markets restructuring are in disarray.
Markets need to cool down. There is no real risk of hard landing for China. Recovery in oversold markets could give investors a temporary sigh of relief. One bad news affecting markets is central banks have begun to remove the man-made support of monetary stimulus. That would be worse than China's reported dire situation.

 

Analysis and Reasoning of Economic Imbalances

  

Analysis and Reasoning of Economic Imbalances

According to the Father of Economics, “Adam Smith”, China is one of the world's most advanced, rich, fertile, industrious and prosperous countries in the world and it is one of the world's largest economy by nominal GDP. (Gross domestic product) Gross domestic product is a measure of value for all finished goods and services, which is measured quarterly or annually. This value is estimated to determine the economic performance of the country for a period of time. The nominal GDP does not show any differences in the living strategies of the people, but the fluctuations in the exchange rates may result in the countries ranking from time to time. A Comparison of the national wealth to that of other nations is made on purchasing power parity (PPP - estimates the exchange rate between two currencies) Through PPP the economy can solve its problems which arise from the exchange rates, even though it is not free from some drawbacks.

Based on the trade and economic reforms , China maintained poor and inefficient status in the global economy. But in the year, 1979 after implementing foreign trade and investment policies, china is the second largest among the fastest growing economies, maintaining a real average growth of gross domestic product of nearly 10% every year up to 2014. The economic crisis affected badly by the China's economy in 2008 and these trends which resulted in the decline in import, export and in foreign trade also. By this China's government responded and implemented some monetary policies to increase bank lending process. However, the statistics show that there is a decline in the China's economy in recent years. The GDP, which was 10.4% in the year 2010 fell to 7.8% in the year 2012 and a further decline i.e 7.3% in the year 2014.
Stock Exchange:
Despite of having two largest stock markets, China's financial system is restricted to market forces. The two china's stock markets are controlled by the domestic Chinese firms, which resulted a significant volatility in the global market. These stock markets were dominated by the speculators and to the greatest extent the shareholders have less influence to move according to the latest trends in the stock market within a short period. From January to June, 2015 these two stock markets bubbled and the investors were buying stocks on borrowing money. In the June 2015, the bubble blasted and there is a fall in the China's two stock markets by 32% to 40% respectively , resulting a major loss to the economy. With this the government entered into the scene and settled by relaxations in insurance policies and by offering public initials, restricting and selling all share and by buying all SEO (state owned organizations) stocks. According to a report, the government spent nearly $250 billions to standardize the stock markets and the government has certain measure to control the market.
Rise in Reserves in China
The latest release of an International Monetary Fund report says that the value of the dollar has declined in both developing and advanced economies. At last the multilateral reserve currencies are increasingly. The currencies other than dollars are gaining, the euro and yen. There is a drastic change in the 2015 Q2 and 2015 Q1. The value of the dollar depreciated in the Q2 increasing the value of nondollar holdings. Broadly speaking, a small depreciation in the exchange rate during Q2 increased the value share of the euro and yen.
Future strategies to restructure the Economy
The current economic trends of China say that again the Economy is strengthening. The 12th Five year plan of China contains about the economy restructure and the economy is targeting to emerge the industries which are going to play an important role in the future restructure of the economy. In the year 2014, China along with some other countries started a “New Development Bank” to assist the developing economies. Some financial analysts reported negatively on about China's economic slowdown, but it is the time for the global economy to face the new Chinese economic developments in the coming years.

 

Silk Road of China

  

Silk Road of China

As the title of the road might suggest, Silk Road of China is not a single road of some market where you can expect to find noteworthy shops lined up in continuity on the roadside selling unique goods to travellers and tourists. It is, in fact, a very old trade route dating back to around 1 B.C. The route connected China to other lands to the Mediterranean region facilitating trade between them, especially of silk when it came to China as China was the only source of silk in the earlier times.

Though with the coming of engines empowered airplanes and cruise ships, the importance of this route has faded today. But the natural beauty of the entire route, the mesmerising views of vast landscapes and the soothing journey that the route offers that is unaffected to date, has made the route a destination for tourism with UNESCO declaring its Tian Shan Corridor as a world heritage site.
It can be presumed that China as a travel destination to visit the Tian Shan Corridor and walk on the road that once connected Asia; it's worth a shot! And while you have decided to make a visit to this road, check some of our selected spots along the corridor that are surely worthy of dropping by.
Army of Terra Cotta Warriors: If you have ever taken an interest in world history or even studied it in high school then you'd have heard about the Terra Cotta Army. A literal army of warriors having archers, chariots, soldiers and every other human unit that constituted an actual Chinese army except that this army was inanimate and made of clay. The army was made to serve as warriors protecting the first Chinese emperor; Qin Shi Huang in the afterlife and so was buried along with him. Thousands of Terra Cotta warriors have been unearthed and are on display in Shaanxi province that is outside of Xi'an city. Terra Cotta army is indeed a vital piece of Chinese culture that attracts tourists from around the world.
Labrang Monastery: If Buddhism fascinates you; then you have to visit this place. It is one of the most important monasteries of Buddhism and was once home for 4000 monks through which the teachings of Buddha reverberated to the outside. The monastery is still occupied and used by monks who continue to practice Buddhism in the monastery's halls and corridors. It is located in Xiahe town within Gansu province.
Singing Sand Mountains and Crescent Lake: The landscape of desert, sand dunes stretching kilometres in length and a crescent moon shaped lake in the middle of the desert; doesn't that sound like fantasy locations taken out from a story book? A crescent moon shaped lake in the middle of a desert with towering sand dunes whose sand when blown by the wind makes an almost instrumental sound; yes this place is real! It is also situated in Gansu province not much away from Labrang monastery.
Tianchi Lake: Right on the border of China and Korea is situated a lake so beautiful that it literally translates to 'Heaven Lake' in English. Tianchi Lake is a crater lake surrounded by mountains and peaks on all sides. The surface of the lake amidst the white gleam of the high rising peaks gives the scenery of that of a mirrored blue disk. Also, other than its scenic excellence that's almost divine, Tianchi Lake is also quite famous for its monster sightings (good news for thrill seekers).
The list doesn't end here. There are many more places along the Silk Road that shouldn't be left to be visited. So take a vacation, hit the Silk Road and familiarize yourself with a beautiful culture and a multitude of soul-penetrating experiences.

 

Inferring Information in the Stock Market

  

Shanghai Stock Exchange

Anyone who follows the financial markets must already be familiar with the story. Chinese stock markets had previously experienced a boom and the Shanghai Composite was standing at 5,178, when the market reached its peak on June 12. Overall in 2018, Chinese stock market had a loss in 2018 reducing bubble worries. Looking back before this drop the Shanghai index seemed to be continuously rising by more than 135% per year. From a fundamental point of view, the boom was almost incomprehensible. The markets were soaring even when the growth expectation from Chinese economy were vague, corporate profitability was squeezed, while the banks, which dominate the index, experienced a sharp rise in Nonperforming Loans (NPLs). Also during the same time period it was quite clear that the declining GDP growth of China was excessively reliant on the increasingly rapid credit growth. It was also evident that to have a control on credit growth, the GDP growth still had to drop.

The markets reached their peak in mid-June but the panic among the investors began somewhere in the first week of July. Actually July 7 is being referred by many as “Black Tuesday” of the Chinese market. By that time the Chinese market almost lost one third of its value. Beijing started to implement a series of measure since late June, in order to stop the decline. Ultimately it did not have its desired effects. By the first weekend of July, a complete sense of desperation was being experienced as the regulators did their best by taking exceptional measures in attempt to control the imminent fall.
The panic in the stock market seemed to end on July 9, when Shanghai markets closed up 5.8% on a single day. It was followed by considerable gains on the following Friday and Monday. Although the decline of 3.0 % on Tuesday had the hearts of the investors throbbing again and the nervousness also did not subside over the period of next three days as the markets rose with quite some drama. For now it can be safely said that the panic has finally ended, but with none of the fundamental questions resolved, volatility is still expected. It can also be observed that the markets still remain overvalued. However, there is little doubt in it that at least one more quite nasty bearish trend will take place.
The panic and policy responses have ignited a ferocious debate on the economic reforms of China and Beijing's capabilities regarding the cost of bearing the economic adjustment. Volatility is among this cost. Rebalancing of the economy and withdrawing of the state control over various aspect of the economy, especially the financial system will surely reduce the ability of Beijing to smoothly manage the economy over the short term, although it may be necessary for preventing a dangerous surge in the volatility over long term.
Although volatility is not the only thing to be considered but volatility can never be taken out of the equation. In one variable the volatility can be suppressed just by increasing the volatility in some other variable or by temporary suppression in exchange for more disruptive adjustment at some specific point in future.
When monetary volatility is being considered, for example, whether it is money supply and interest rate volatility or exchange rate volatility, the central banks can make the choice of controlling the later in exchange for greater volatility in the former and vice versa.
In other words, it can be said that the regulators never choose how much volatility will be permitted. Although they can choose any form of volatility which is least preferred by them and then try controlling it. It is always a political choice rather than an economic one. In short it is about deciding that which economic group will have to bear the cost of the volatility.
One way or another, it can be safely said that there is a huge amount of volatility in the Chinese economy. It is not only because of the fact that it is lower in the list of developing countries, which are always more volatile economically as compared to the advanced countries but also because of the fact that it is depending highly on investment for generating growth. It is argued by Hyman Minsky that the economies that are actually driven by the investment are highly volatile and quite susceptible to the changes in the sentiment. He is quite right.

 

  
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