Brad Setser, who should be a daily read for everyone who enjoys economics, has posted an excellent summary of an RGM Monitor item on China’s coming economic crisis, and how it will differ from other emerging-market crises. AsiaPundit has no disagreements.:
One thing is clear: the trigger for financial crisis in China will differ from the trigger for the last Asian crisis. China simply is not vulnerable to sudden pullback of international bank credit. China’s reserves exceed China’s short-term debts by factor of six to seven and its total external debt by a factor of almost three.
The core question, of course, is whether China’s external strength will protect it from a domestic banking crisis. My answer is no.
Crisis though is an imprecise term. Bank crises can happen if bank depositors - or a bank’s short-term external creditors - pull their funds out of the bank. Or they can happen if a large share of the banks’ loans go bad, leading to large losses for the banks equity investors and even its depositors (if the government does not step in). The two types of crises are of course related - depositors are more likely to run if they worry that the banks are bad. But the link is not perfect. So long as a bank is backed by a credible government guarantee, for example, depositors may be happy to keep their funds in a rotten bank. China’s banks, for example, still carry tons of bad loans from their lending to state owned enterprises in the 1990s. But those bad loans have not stood in the way of a vast increase in the bank’s deposit base - or a lending surge.
Lending booms often are followed by a surge in bad loans. That happened in the Asian tigers after their boom. Chinese banks do not have quite the same vulnerabilities: they are not as exposed to a large currency move, for example. Most of the deposits and loans of the banks are denominated in RMB, not in dollars. That limits the banks’ “balance sheet risks” from a hidden currency mismatch. And it is hard to see how the RMB would depreciate significantly in any case.
The triggers for a surge in bad loans are more likely to come from the real economy. And the longer China continues on its current path of export and investment led growth, the bigger the risks. And if a slowdown in investment or exports is not offset by a surge in consumption, China’s growth could slow sharply.
That in turn would lead to a surge in bad loans, and a surge in bad loans might make the banks more reluctant to lend - and make depositors more reluctant to keep piling their savings into the banking system. Both developments in turn would lead to slump in new lending - aggravating the cyclical slowdown. Boom would turn to bust.
AsiaPundit has always intended on reviving the China Economic Roundup feature. Time constraints have prevented that from happening yet, and AP regretfully admits to withholding great economic posts for roundups that had not been forthcoming. That will cease.
Technorati Tags: asia, china, east asia, economy, northeast asia
Sometimes a personal setback can be so massive that it leads to thoughts of suicide. That’s always a bad way out. Something that Jilin City deputy mayor Wang Wei should have kept in mind is the story of Nick Lesson.
Lesson has quite recovered from bankrupting one of the UK’s most-reknowned banks, a four-year long lock-up in Singapore, a divorce and cancer. He’s now doing quite decently for himself. He’s managing an Irish football club, getting speaking gigs on risk management and has published a book on dealing with stress.:
With the story of the rogue Chinese copper trader still unfolding, readers may be interested in this interview with former trader Nick Leeson whose incorrect bets on the Nikkei toppled Britain’s famous Barings bank, and landed him in a Singapore prison for over 4 years. While in prison, he was divorced by his wife and developed cancer (they kept him chained to his bed, while he got treatment). Now, he’s living in Ireland and working as the general manager of a football club, doing the occasional speaking gigs on (of course) risk management:
What was it like being at the centre of such a phenomenal manhunt while you were on the run in the Far East?
It was terrifying. The first I knew that the bank had gone under was at the Shangri-La Hotel in Borneo.
I saw the Asian Wall Street Journal and the headline “British bank collapses”. My first thought was: “Someone’s in trouble”. I genuinely didn’t think it was me because I thought Barings could recover
I began speed reading the story and my memory goes blank after that moment because I think I went into shock.
The key plan was to get home. I was very, very scared about being caught and going to prison in Asia. I had to go from Brunei to Bangkok to Abu Dhabi and then Frankfurt. By that time my picture was on every front page and every TV screen in every airport. I had my baseball cap pulled down and a scarf around my face. Only my eyes were showing, so I must have looked very suspicious. I was physically scared, my heart was pounding and I was sweating.
It was an unimaginable nightmare.
Technorati Tags: asia, cancer, china, east asia, economy, northeast asia, puppy, southeast asia
Agam’s Gecko has a thoroughly good wrap-up of mainstream press coverage of the situation in Dongzhou village, and a birthday message for a toothless document.
Happy birthday, Universal Declaration of Human Rights! Today is a big day for you — your 57th birthday! Although it seems you were misnamed at birth, as there was nothing particularly universal about you either then or now. Human rights are universal, the Declaration was, and is not so. Mrs. Roosevelt and the many other of your laudable parents may have better given you the grand, all-encompassing term as a middle name instead. The Declaration of Universal Human Rights would sound more suitable for you.
As if to mark the special day (along with Mr. el Baradei getting his Peace Prize), the Chinese Communist Party has held a special event this week. For the first time since the Beijing Massacre of 1989, Chinese police have shot and killed a number of village protesters in southern Guangdong province. Dongzhou village, a small town near the city of Shanwei had seen public protests in recent weeks over confiscation of property by the government for the purposes of industrial development, offering the villagers only meager compensation. One fellow quipped that “it wasn’t even enough to buy toilet paper.”
UPDATE: ESWN has a very thorough roundup of articles.
More at Timur-I-Leng (multiple entries), Anton Traversa, Peking Duck,
Technorati Tags: asia, china, east asia, northeast asia
AsiaPundit loves maps and this one is brilliant. Here is the world with countries sized adjusted for population. Asia dominates the world, and India and China dominate Asia.
Technorati Tags: asia, east asia, india, northeast asia, maps, south asia, southeast asia
Roland of ESWN, who’s name AsiaPundit has never mentioned, has come out in the open with an interview in Hong Kong’s Next magazine. Letters from China provides a selection of money quotes.:
Quotations from Mr Soong’s interview which may reflect his philosophy of blogging (after reading my “translation” (so to speak), you will sorely miss ESWN):
“I do not make comment. I put everything on the internet. Who is right and who is wrong, you decide.” (我不下評論，全放上網讓你看，對對錯錯，由你判斷。)
“Countries in the world are divided into the South and the North. The South is developing countries. The North is developed countries. I came from the West to the East. So [the blog] is titled East South West North.” (世界上的國家，分南、北。南是發展中國家，北是已發展國家。我由西方來到東方，所以叫東南西北。)
“If I think English media coverage is sufficient, I don’t translate it. Lots of people talked about Bush’s visit to China. You could guess the way the New York Times reported the visit. And it is even more pointless to translate the People’s Daily. (如果我認為英文已經足夠，就不理它。像布殊訪問中國，大把人講。《紐約時報》的報導形式，你猜到。《人民日報》，更加無謂翻譯。)
“Perhaps one would not know [a 78-year-old Hong Kong citizen placed advertisement in newspapers questioning when would there be universal suffrage] by reading the New York Times.” (看《紐約時報》大概不會知道有這種事。)
“I particularly want media people to read [my blog] so that they dare not distort the fact. For instance, when Chinese fleet visited Hong Kong, New York Times put it like that the mainland scared Hong Kong democracy. And that article was even published on the annual report of American congress. How can you say that? I showed you. Was your fleet visit an attempt to scare China?” (我特別在乎傳媒人看，等他們別亂來 …… 像中國海軍艦隊來香港，《紐約時報》說成是大陸恐嚇香港民主，那文章還在美國國會年報刊登。…… 你咁都講得出？我讓你看，你們艦隊來，算不算恐嚇中國？)
Roland also notes the LfC translation, and reveals more details on his nonpartisan leanings from a speech at an Internet conference in Hong Kong.:
I do this by becoming the single most hated blog in Hong Kong. When I write about something like the number of marchers on 12/4, the democrats are howling that I am a Communist Party shill. When I write about something like the new rules on avian flu reporting in China, the other boot falls. So I am hated by all sides.
But why is my political position so ambivalent? Because I have none. As an American citizen, my greatest sorrow is to watch how political partisanship has destroyed all sense of objectivity among the citizens. Take an event such as Hurricane Katrina and run a public opinion poll on satisfaction with the administration’s performance? Approval rates are 10% from Democrats, 15% from Independents and 90% from Republicans. People don’t look at the objective situation anymore — everything is about partisanship calculations. I do not talk politics in the United States anymore, because nobody is listening.
But when I write about something on my blog, I do not look at the party behind it. If something is wrong, then it is wrong. It is wrong to exaggerate the number of marchers just as it is wrong to order people to hide information about an epidemic outbreak. If there is a pro-Beijing rally in which their organizers claim 750,000, you can bet that I will review the evidence and condemn them for lying. If the Hong Kong government has the same orders about reporting avian flu, I would publish that information too. After living through Free China, Richard Nixon, the Cultural Revolution, Monica Lewinsky, the War in Iraq and all that, I am now insisting on a world of truth.
Technorati Tags: asia, blogs, china, east asia, hong kong, northeast asia, taiwan
Justin of Shenzhen Zen partakes in a unique ’slimming’ treatment at an upscale Hong Kong spa, which allows its clients to ‘enjoy’ a small bonfire for the sake of vanity.
One the reasons I stay in journalism besides the fact that I’m lousy at math and possess no other marketable skills is that I still the opportunity to do things like getting set on fire in an upscale Hong Kong spa.
I felt a little like a human yule log. Or given that I’d just eaten 20 minutes before and my torso was basted in mysterious Chinese herbal oils, swathed in plastic cling wrap and towels with a fire flickering on my back, perhaps a living boil-a-meal was more appropriate.
It was all part of an “Aqua-Fire therapy'’ that Life of Life Healing Spa in Causeway Bay promotes as a rejuvination and weight loss treatment.
The spa claims that the fire’s heat hastens the oils’ ability to zap fat cells and detoxify the body….
Mandy Sea, a doctor and nutritionist at Chinese University’s Center for Nutritional Studies begged to disagreee said any perceived weight loss could be attributed to temporary water weight being sweated out and that if someone is obese and/or suffering from high blood pressure they may be playing with fire.
“The heat is not efficient enough to burn away your fat,'’ said Sea. “And if someone is suffering from hypertension and overweight the heat could raise your blood pressure to dangerous levels.
“The herb oils will not make any chemical changes to your body. There is no chemical data on how much penetration there might be or how it could affect your skin and health.
Technorati Tags: asia, china, east asia, hello kitty, northeast asia
A violent crackdown on peasant protesters in Dongzhou may have been much worse that reported. Initial foreign press reports said that at least two protesters were shot and killed. Now, Howard French writes in the New York Times that the incident may be the largest use of lethal force against civilians in China since 4 June 1989.
SHANGHAI, Dec. 9 - Residents of a fishing village near Hong Kong said that as many as 20 people had been killed by paramilitary police in an unusually violent clash that marked an escalation in the widespread social protests that have roiled the Chinese countryside. Villagers said that as many as 50 other residents remain unaccounted for since the shooting. It is the largest known use of force by security forces against ordinary citizens since the killings around Tiananmen Square in 1989. That death toll remains unknown, but is estimated to be in the hundreds.
The violence began after dark in the town of Dongzhou on Tuesday evening. Terrified residents said their hamlet has remained occupied by thousands of security forces, who have blocked off all access roads and are reportedly arresting residents who attempt to leave the area in the wake of the heavily armed assault.
“From about 7 p.m. the police started firing tear gas into the crowd, but this failed to scare people,” said a resident who gave his name only as Li and claimed to have been at the scene, where a relative of his was killed. “Later, we heard more than 10 explosions, and thought they were just detonators, so nobody was scared. At about 8 p.m. they started using guns, shooting bullets into the ground, but not really targeting anybody.
“Finally, at about 10 p.m. they started killing people.”
A Scotsman item, datelined today from Beijing, is also estimating there have been from 2-20 deaths, citing residents and Amnesty International and again raising comparisons with June 1989.:
Estimates from residents and rights groups put the number of dead between two and 20.
China’s Communist Party brooks no dissent but protests are becoming increasingly common, caused by disputes over land rights, corruption and a growing gap between rich and poor.
Many of the protests turn violent, but Amnesty said police opening fire marked a different turn.
“Police used guns on protesters the last time in 1989,” said Chine Chan, the east Asia campaigner for Amnesty International, referring to China’s military crackdown on pro-democracy demonstrators.
Technorati Tags: asia, china, east asia, northeast asia
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Mao: The Unknown Story - by Jung Chang and Jon Halliday:
A controversial and damning biography of the Helmsman.
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