Lifted from an e-mail by Stormy
Financial Times notes that China’s champions-elect are going abroad, in oil, in mining and in car manufacturing, supported in almost all cases by state-owned banks. But the banks themselves are largely staying put. Why?
Global chinese capital See charts for China
Couple of points:
1. Currency manipulation is discussed here and here:
Neither you nor anyone else knows what the true currency exchange (dollar v yuan) should be. The only way we will know is if the yuan is allowed to float. (Ours does…the Canadian one does, etc etc…in fact, most industrialized nations allow their currencies to float… If they did not, then there would be a big stink.)
2.Walmart–both retailer and manufacturer. What we need to see is where that split between retailer and manufacturer occurs. Often, it has forced major U.S. firms to outsource production in order to keep their goods on Wal-mart shelves,,,e,g, Master Lock, to name only one. On the other hand, Faded Glory is a brand name in effect created by Wal-mart and made in China on the cheap. It is not a Chinese brand name. But again, no one knows what the proportion of foreign brands, Wal-mart brands, Chinese brands is on Wal-mart shelves.
3. China is beginning to protect and nurture certain categories of indigenous firms. It is worth watching what areas it is and will be investing in. Certainly IT.
What needs careful analysis is exactly the relationship between major firms and Chinese suppliers. In some cases, the foreign firm itself has set up shop….in terms of others, the firm– like Mattel–use Chinese firms as suppliers. In others, there may indeed be a Chinese firm.
Apparently, Walmart is responsible for 10% of China’s exports…but how is that 10% spread between foreign firms in China and indigenous Chinese firms? And what how much has it forced American firms to outsource production to cheap locales–Mexico, China, etc?
I can easily point you to declarations by Chinese officials that 60% of China’s exports are driven by foreign firms in China–in the case of IT, closer to 80%.
I pointed you and others to National Tooling and Machining Association because there is a possible shift occurring. Unfortunately, I do not think anyone bothered to read the pdf file at that site.
That association is only one of the many collections of foreign firms using China and other third world countries as export platforms. The reasons for this possible shift are many and varied.
I see that some in NakedCapitalism are sad that China is getting only 2% profit margin (on Walmart?) Well, not sure how that number is arrived at.
Anyway, the intent apparently is to allow China to continue to manipulate its currency. Weird.
As far as the cards China and the U.S. have to play in their trade spat? Certainly China can use its role as major creditor with some effect. (If I remember correctly, the U.S. government fully protected China’s investment in AIG. Does that say anything?) Now, how effective that role will be…who knows. The U.S. can try to deflate its currency…up to a point. These are tricky waters.