China’s Case For Britain.

Baltic Dry Index. 748  -01

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

The urbanisation rate in China has just passed 50pc. The increase of every percentage point means about 13m people will be better off. For Britain, this means a lot more Chinese shoppers in Oxford Street and Bond Street.

Today we follow up last week’s European Battle of Brussels, starting with China courting the UK. With the UK consistently headed for the door marked “exit from Europe,” China’s former Ambassador to the UK sets out China’s stall for Great Britain. Forget accommodating an ever more muddled dying bureaucracy of 500 million, go east young man, go east!

UK and China collaboration is a win-win situation for both countries

It is a decade since I left Britain, having been Chinese ambassador here for more than five years, but I closely follow relations between our two countries.

By Ma Zhengang 9:15PM GMT 10 Feb 2013

Compared with 10 years ago, China-UK economic co-operation has not only grown in size but also expanded to more areas. This has generated broader benefits in both countries.

Take two-way investment as an example. When I was in Britain, Chinese investment in the UK was modest. The number of Chinese enterprises in Britain never passed 100. But, in 2010, British Chambers of Commerce statistics showed that 400-500 Chinese enterprises had recently established a presence in Britain. Such collaboration has made both sides winners.

In 2011, the MG Motors plant in Longbridge, with investment from China’s Shanghai Automotive Industry Corporation, resumed operation and unveiled two new cars. It had been 16 years since a new MG model rolled off the Longbridge lines. It revived a famous British brand and created more than 400 British jobs.

Another compelling example is China’s Huawei. In 2004, Huawei moved its European headquarters to Britain.

Over the years it has grown into a globally competitive brand. Not long ago Huawei announced its plan to invest another £1.3bn in the UK. This will create at least 700 jobs in the coming five years. So, as more and more Chinese companies have settled in Britain, they have not only made breakthroughs in their own business but also contributed to the growth of the British economy.

Britain led other European countries for many years in terms of investing in China. These investments yielded generous returns.

For example, late last year both Jaguar and Rover reached agreements on a joint venture with China’s Chery Automobile. Together they will invest more than £1bn to make British cars in China.

Britain’s favourite coffee shop, Costa, plans to triple the number of its shops in China to 500 by 2016. Costa believes that, with enhanced spending ability, the annual intake of coffee will grow rapidly. Costa estimates annual consumption will rise in China from the current 3 cups per head to something close to the world average of 240 cups.

Marked progress has been made in China-UK economic co-operation. Yet, given the sizes and strengths of our two economies, great potential remains untapped. This holds out great opportunities for us to step up our cooperation.

I recently read a British newspaper article entitled “Wake up. Our trade with China is pathetic”, which reported that a pathetic 0.4pc of Britain’s national output heads to China. The figures of Germany and Korea are respectively 2pc and 12pc.

It might be easier to figure out what these figures mean if we make another comparison. China has 1.3bn people, while the population of Ireland is little more than 4m. Yet Britain’s exports to China are only half of its exports to Ireland.

A Swiss friend of mine once joked: so long as every Chinese consumes one bar of Swiss chocolate every year, then the chocolate export target of Switzerland will be easily reached. I believe in some areas this case also applies to Britain.

More

http://www.telegraph.co.uk/finance/comment/9861366/UK-and-China-collaboration-is-a-win-win-situation-for-both-countries.html

Up next, the right analysis but the wrong solution for the UK’s problems. While Her Majesty’s non-entity Government fiddles with a European contrived homosexual “marriage” non-issue, putting itself beyond the pale for most conservative voters, the over taxed, nanny state, bureaucratic EU-tied UK, is still drifting towards a European disaster. My solution if you really want to get the UK working again, cut corporation tax, fuel duty and VAT.  End the visa morass for Chinese citizens wanting to visit the UK.  Drop windmills and start “fracking” some of the UK’s shale gas. Make Britain the cheapest place in Europe to conduct business, shop and visit. Get out of Europe fast, before old socialist, too big to bail France, crashes the whole Bilderberger EUSSR.

“The only function of economic forecasting is to make astrology look respectable.”

J. K. Galbraith.

We need a strategy we can believe in, not Mr Micawber’s blind optimism

A change in policy is in the air. About time too. Not only was the last quarterly GDP growth figure negative but the next one may also be pretty weak.

By Roger Bootle 6:11PM GMT 10 Feb 2013

Meanwhile, the reduction of public borrowing, which has been this Government’s overriding aim, has stalled. Unless something turns up soon, there is a real risk of economic catastrophe. Let’s all hope that something does indeed turn up. But Mr Micawber is not a good example to follow. So what can be done?

The current policy framework is part of the problem. It was designed to maintain the confidence of the financial markets so that the government’s deficit can be funded cheaply. This imperative underlies both the inflation targeting regime and the emphasis on reducing the government’s borrowing requirement.

----The trouble is that the strategy is a direct response to the financial crises of the 1970s, whereas the current predicament shares more in common with the 1930s.

The most pressing issue now is not how to maintain the confidence of the financial markets but rather how to boost the confidence of firms and households in economic recovery – and thereby to make it more likely.

Companies would be more likely to invest, banks to lend, and households to spend, if they could believe in economic recovery.

Nor is the real economy imperative in blatant conflict with current financial objectives. The financial markets now realise that their greatest threat derives from the absence of economic recovery.

There are several things that could be done. The inflation targeting regime could be tweaked to create scope for inflation to return to target over a longer period, thereby giving the flexibility to undertake more expansionary policy and to give meaningful assurance that interest rates will not rise for a long time.

As Mark Carney suggested, this could be supplemented by a clear statement that rates would not be raised until GDP or employment reached a pre-specified level.

Another (but controversial) measure would be to announce an exchange rate cap, as the Swiss have. The response of exporters to a lower exchange rate is bound to be muted if they have no assurance that the currency is going to stay down. Again, confidence is crucial.

More

http://www.telegraph.co.uk/finance/comment/rogerbootle/9861076/We-need-a-strategy-we-can-believe-in-not-Mr-Micawbers-blind-optimism.html

Meanwhile back on the continent made for tanks,  France wants to turn all of continental Europe into France. This wasn’t in the Davos Spring. At the “Great Leader’s” summit last week in Brussels, Germany’s Merkel returned Francois Hollande’s snub. It doesn’t sound much like a united Europe to me. Until after Mrs Merkel’s autumn re-election, President Hollande influence is limited to dying Iberia and Italy.

“If all else fails, immortality can always be assured by spectacular error.”

J. K. Galbraith.

Europe à l’Hollandaise

François Hollande’s flawed vision for Europe

Feb 9th 2013

LEADERS keep talking about the future of Europe, yet none seems able to offer a clear vision. Angela Merkel speaks vaguely of the need for greater “Europeanisation of national powers”. David Cameron, by contrast, wants a renationalisation of European powers—though without being too specific. This week it was François Hollande’s turn to speak about destiny. His concept, as set out in a speech to the European Parliament on February 5th, is to extend French dirigiste and socialist ideas to Europe, even where they cannot be applied to France itself.

Take the rising value of the euro. France cannot resort to devaluation to close its already large trade deficit. So Mr Hollande wants euro-zone governments to act together to bring down the exchange rate. Or take competitiveness. Mr Hollande has adopted some cautious labour-market reforms, but now he proposes a euro-zone minimum wage. Or take taxation. Having put up French taxes, he wants euro-zone countries to “harmonise” tax policies. Or take macroeconomic policy. If deficit countries must undergo austerity, then the EU as a whole should continue spending to support growth, and surplus countries should boost domestic demand to bring up the rest.

---- Yet for Mr Hollande, as for many of his predecessors, competition is often “disloyal” and market forces dangerous—things to be tamed rather than encouraged. From both the left and the right, French politicians accuse European countries that allow lower wages and tax rates than France of practising “social dumping”.

Nebulous as Mr Hollande’s message may have been, it is striking that he spoke about the future at all. Since his election last year, the Europhile Mr Hollande has acted as if the less said about big European ideas the better. The European summit in December killed plans for a long-term “road map” to redesign the euro zone.

---- The future of the euro zone, Mr Hollande suggests, will not be the Germanic notion of euro-zone members bearing individual responsibility for their economic policies, within rigid rules imposed by the centre. Instead integration must include common projects on, say, infrastructure and renewable energy, paid for by “new financial instruments”. And integration must be accompanied by greater “solidarity”, including guaranteed jobs and training for young people and, yes, Eurobonds.

More

http://www.economist.com/news/europe/21571455-fran%C3%A7ois-hollandes-flawed-vision-europe-europe-%C3%A0-lhollandaise?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07

Analysis: France runs into German wall on EU growth drive

PARIS | Sun Feb 10, 2013 6:57am EST

(Reuters) - French efforts to divert Europe from economic austerity have foundered twice in a week due to German resistance, underlining a growing policy divide that is hobbling the core partnership.

Berlin rejected President Francois Hollande's call on Tuesday to set a mid-term target for the euro, a move he hoped would bring the single currency down to a level that would make it easier for French industry to sell its goods abroad.

Three days later, German Chancellor Angela Merkel joined forces with Britain's David Cameron at a Brussels summit to push through the first ever cut in the 27-nation's budget, taking an axe to spending on infrastructure projects backed by Paris.

"Is it the budget I would have liked if it was just up to me? No. But the problem with Europe is that there are others involved," a resigned Hollande told reporters after all-night talks secured a deal on EU funding from 2014-2020.

---- EU budget: Hollande left out of pocket", ran the headline of the left-leaning Liberation newspaper on the roughly three-percent cut in EU spending, mainly at the expense of transport, energy and telecoms projects which Paris has argued would foster growth and make Europe's economy more competitive.
"Cameron and Merkel impose austerity on Hollande" was how the conservative Le Figaro summed up the meeting.

---- But in the budget wrangling that ensued, it was Hollande who looked isolated as his efforts to forge a coalition of southern and eastern European states demanding more generous spending were quashed by Germany, Britain and other northern countries.

EU officials were mystified when Hollande, citing other engagements, chose not to attend a pre-summit huddle with Cameron, Merkel and EU President Herman Van Rompuy on Thursday afternoon where key details of the deal were hammered out.

From then on, what Cameron called the band of "like-minded budget disciplinarians" including Germany, the Netherlands, Sweden and Finland had the upper hand and for France, it was a matter of salvaging what it could from the summit.

---- A study by Deutsche Bank last month calculated that France's exporters start being priced out of world markets when the euro rises above 1.22-1.24 dollars - a level it has already long left behind to trade at $1.33 now.

Germany's higher value-added export products, however, only start to be disadvantaged when the exchange rate is above $1.54. Until that point, there is little damage to the German economy and indeed some benefit in a strong euro because it keeps the prices of imported goods and hence inflation in check.

More

http://www.reuters.com/article/2013/02/10/us-eu-france-idUSBRE91903J20130210

And so we await the week’s coming G-20 finance ministers meeting in Moscow. Can they really get round to implementing the Davos Spring?

“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

J. K. Galbraith.

At the Comex silver depositories Friday final figures were: Registered 36.26 Moz, Eligible 122.10 Moz, Total 158.36 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over. 

Today, the weekend’s summary of last week’s events in China’s Diaoyu Island dispute. With most of China still away celebrating the Lunar New Year, this week’s developments will probably be muted. But don’t rule Japan out of using the holiday to stage an incident.

Commentary: Japan's petty tricks counterproductive to ties with China

BEIJING, Feb. 9 (Xinhua) -- Japanese Prime Minister Shinzo Abe made another attempt on Friday to mislead the international community by demanding China apologize for the recent radar incident.

If there is an apology to be made for the latest unease in China-Japan relations, it should be from the Japanese side.

The accusation that Chinese warships targeted fire-control radars at Japanese vessels in the East China Sea on Jan. 30 is a sheer fabrication. The Chinese Ministry of National Defense has confirmed that no fire-control radar was used.

To safeguard the overall situation of China-Japan relations, China had taken Japan's allegation seriously and immediately conducted an earnest investigation, but the truth disappointed Tokyo.

As a matter of fact, Japan should be held responsible for any possible missteps as its Self-Defense Forces vessels had closely traced and monitored Chinese warships which were conducting regular training in high sea.

By spreading false accusation and posing as a poor victim, Japan had intended to tarnish China's image so as to gain sympathy and support, but a lie does not help.

While hyping up the "China threat" with irresponsible remarks, the Abe government is boosting Japan's military strength. For the first time in years, Japan raised its military budget this year despite its economic woes. This is seen as a worrisome signal by its Asian neighbors troubled by bitter memories of Japan's militarism during the Second World War.

Japan's petty tricks are counterproductive to the improvement of its ties with China, which have been souring over Tokyo's provocative move to "nationalize" the Diaoyu Islands last year. The disputed islands have been China's inherent territory since ancient times.

Uichiro Niwa, who served as Japanese ambassador to China from mid-2010 till late last year, acknowledged recently that his government misread the situation and made a mistake in choosing to "buy" the Diaoyu Islands, which ignited contention.

A Chinese saying goes that "it is better for the doer to undo what he has done." It is time for Japan to make sincere efforts to rectify its wrongdoing and mend relations with China, rather than playing petty tricks and stirring up tension.

More

http://news.xinhuanet.com/english/indepth/2013-02/09/c_132161466.htm

“The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.”

J. K. Galbraith.

The monthly Coppock Indicators finished January:

DJIA: +106 Up. NASDAQ: +126 Up. SP500: +140 Up.  All three indexes are giving the same signal, up.