“One of the key problems today
is that politics is such a disgrace. Good people don’t go into government.”
Donald J. Trump.
If the 19th
century was the Age of the British Empire, and the 20th century was
the Age of the American Empire, we seem to have just entered the 21st
century Age of China.
China Sets New Records for Gobbling Up the World’s Commodities
By Pratish Narayanan
12
January 2018, 04:31 GMT Updated on 12 January 2018, 07:29 GMT
- China’s 2017 imports of oil to iron ore and soybeans increase
- Demand likely to keep up steam as economic growth persists
In a year of flux marked by industrial capacity cuts, environmental curbs and financial deleveraging, demand for raw materials has continued to grow in the world’s biggest consumer, helping drive a second annual gain in global commodity returns.
The Bloomberg Commodity Index was up 0.3 percent at 7:19 a.m. London time, climbing for a fourth day. The gauge of returns from raw materials rose 0.8 percent last year after advancing 11.4 percent in 2016.
As President Xi Jinping consolidates power behind an economy that may have posted its first full-year acceleration since 2010, there are few signs of the Chinese commodity juggernaut slowing as it rolls into 2018.
“China’s economic expansion has been beating expectations since the second half of last year, boosting demand for all kinds of commodities,” Guo Chaohui, an analyst with Beijing-based China International Capital Corp., said by phone. “We are expecting continued strength in economic growth in 2018 which will keep up the nation’s import appetite.”
Oil Coronation
The crown of the world’s biggest oil importer now sits firmly atop China after the nation’s shipments surpassed the U.S. on an annual basis for the first time ever. What’s more, it’s also one of the largest buyers of American crude.
Inbound shipments from across the globe -- Russia to Saudi Arabia and Venezuela -- jumped about 10 percent to average 8.43 million barrels a day in 2017, data from China’s General Administration of Customs showed on Friday.
The unprecedented purchases may be bettered in 2018, if import quotas granted by the government to China’s independent refiners are a signal. The first batch of allocations was 75 percent higher than for 2017.
Mr. Blue Sky
The world’s second-biggest economy is also realizing that the key to winning its war on smog may lie overseas. Record amounts of less-polluting grades of iron ore -- typically not available within China -- are being pulled in to feed the nation’s mammoth steel industry, with imports rising 5 percent to 1.07 billion metric tons in 2017.
----
Purchases of less-polluting ore is only one tactic in China’s war against
pollution. Another is curbing coal use and encouraging the use of cleaner
natural gas instead. Imports of the fuel via both sea and pipeline surged
almost 27 percent to 68.57 million tons in 2017.
Food for Farms
And while China is trying to clean up its air, it’s also seeking more food for its hogs at its expanding large-scale farms. The explosion in economic growth over the past couple of decades has made its population richer, with better living standards spurring meat consumption.
As
big farms have increased, so has demand for soybeans that’ll be crushed to make
feed for the pigs. China’s inbound shipments of the oilseed jumped almost 14
percent to a record 95.54 million tons in 2017. The nation’s soy imports are
forecast to grow to an unprecedented 97 million tons in the 12 months ending
September 2018, according to the U.S. Department of Agriculture. The country
will account for 65 percent of global trade, the data show.
More
The Chinese are now buying as much stuff as Americans, a game-changer for the world economy
The mighty force of consumerism has taken hold in China. In 2018, retail sales in China are expected to equal or surpass sales in the United States for the first time, another definitive marker in China's rise to economic superpower status. The growth of China's domestic retail market is luring everyone from automakers to make up companies that want to cash in on the country's growing middle class, but it also serves as another complication in President Trump's quest to transform U.S.-China trade.Retail sales in China are on track to hit just over $5.8 trillion this year, according to Mizuho, a Japanese bank. It's a stunning rise from a decade ago, when retail sales in China were a quarter of those in the United States. China's rapidly growing middle class has been eager to buy brand-name clothes, cars and cellphones, among other products. Shanghai is now referred to in fashion circles as “Paris of the East.” Their spending habits have been supported by fatter paychecks, with China's income per capita jumping from about $2,000 a year a decade ago to over $8,000 a year now.
“China's
best bargaining chip is its massive and fast-growing domestic market,” says
Jianguang Shen, chief China economist for Mizuho, who pointed out the retail
trend in a recent presentation in Washington, D.C. “This will change the
balance (of power) tremendously, as it is first time when the U.S. is dealing
with a market of equal size in a potential trade war.”
On
the campaign trail, Trump railed against China as the “economic enemy” of the
American people. He harped on the fact that the United States buys far
more than it sells to China. The United States ran a $310 billion trade deficit
with China in 2016. But Trump has softened his tone on China lately, especially
after he visited China in
November,
and the countries have jointly faced escalating nuclear tensions with
North Korea.
Stephen K. Bannon, Trump's former chief strategist, was one of the harshest critics of China in the White House. “To me, the economic war with China is everything," Bannon said over the summer. His excommunication from the Trump fold might also reduce the urgency in the White House to go after China.
Still, the two nations continue to dance around each other in a quest for global and economic dominance. Both sides continue to look for leverage over the other. On Wednesday morning, a Bloomberg story suggesting the Chinese government might halt its purchases of U.S. Treasurys was enough to temporarily spook U.S. markets, sending stocks sliding in early trading. China is the largest foreign holder of U.S. Treasurys. There are also more playful jabs between the countries. A mall in northern China put up a giant dog balloon that bears a striking resemblance to Trump.
If Trump really wants to go after China on trade, “we will need leverage and we will need allies,” says Olin Wethington, who served as a special envoy to China in 2005 and as an economic adviser to President George H.W. Bush. Wethington's name has surfaced for a possible role in Trump's State Department.
More
In other news this
weekend crypto-mania anyone?
“My IQ is one of the highest —
and you all know it! Please don’t feel so stupid or insecure; it’s not your
fault.”
Donald J. Trump.
One of the Biggest Crypto Exchanges Goes Dark and Users Are Getting Nervous
By Camila RussoKraken went offline at 9 p.m. Pacific Time on Wednesday for maintenance that was initially scheduled to last two hours, plus an additional two to three hours for withdrawals, according to an announcement on the San Francisco-based company’s website.
"We are still working to resolve the issues that we have identified and our team is working around the clock to ensure a smooth upgrade," according to a status update on Kraken’s website posted seven hours ago. "This means it may still take several hours before we can relaunch the site."
In previous updates, Kraken mentioned it’s working on "unexpected and delicate issues" and assured clients their funds were secure, adding that "Yes, this is our new record for downtime since we launched in 2013. No, we’re not proud of it."
The short history of cryptocurrencies has been rife with hackers and stolen bitcoin, so issues with exchanges are quick to unnerve investors. In the most famous case, Mt. Gox filed for bankruptcy in 2014 after losing hundreds of thousands of its clients bitcoins. Less dramatically, popular websites such as Coinbase have frequently crashed or slowed down in the past few months as they’ve been unable to handle the increased traffic coming from the growing number of investors trying to cash in on the crypto boom.
Kraken is one of the exchanges that the CME Group Inc. is using to price the bitcoin futures it introduced last month.
Lack of communication from fledgling companies, delays in withdrawals and transfers, high fees, and the creeping fear of a malicious attack are some of the issues largely retail investors face, and discourage many more from jumping in.
With not even a phone number or e-mail listed on Kraken’s status page, the exchange’s clients vented on Twitter.
More
Indonesia Warns Against Owning, Selling, Trading Cryptocurrency
By Yudith Ho“Owning virtual currencies is very risky and inherently speculative,” the central bank said in a statement Saturday. The digital tokens “are prone to forming asset bubbles and tend to be used as method for money laundering and terrorism funding, so it has the potential to affect financial-system stability and harm the public.”
The move highlights the challenge faced by regulators as they seek to manage potential risks from the global cryptocurrency mania while lacking the authority to prohibit its use. South Korea’s central bank banned employees from trading cryptocurrencies on the job last week, while China has outlined proposals to discourage bitcoin mining, the process by which the virtual currency enters circulation.
Bank Indonesia’s statement follows its earlier ban on financial technology companies using cryptocurrencies for transactions in January, which doesn’t prohibit trading of the digital tokens itself. While the authority reiterates an existing ban on payment-system providers under its watch from processing transactions using digital currencies, PT Bitcoin Indonesia, a virtual-currency exchange that boasts more than 940,000 members, doesn’t fall under its supervision.
Finally, they may not
get President Trump for collusion with President Putin’s Russia, but the giant
stink around his, and others, real estate deals suggests that there’s no smoke
without fire.
“I will build a great wall –
and nobody builds walls better than me, believe me – and I’ll build them very
inexpensively. I will build a great, great wall on our southern border, and I
will make Mexico pay for that wall. Mark my words.”
Donald J. Trump.
How a Trump SoHo Partner Ended Up With Toxic Mining Riches From Kazakhstan
The long road from the old Soviet republic to the offshore financial centers of the Caribbean to London—and all the way to a partner in Midtown Manhattan's Trump SoHo.
By Marc Champion
11 January 2018, 10:00 GMT
Green smoke
paints the landscape on the outskirts of Aktobe, the hub of a Central Asian
mining empire that produces a third of the world’s chromium — the essential
ingredient in stainless steel.
Locals say
that the air gets so bad in summer it’s hard to breathe. Industrial waste
contaminates the groundwater.
All of this
starts at the Aktyubinsk Chromium Chemicals Plant (AZXS), a Nikita
Khrushchev-era complex. It shares an industrial zone with a vast smelting
plant; together, they have yielded lavish private wealth since the collapse of
the Soviet Union.
In one
sense, it’s a familiar snapshot of post-Soviet capitalism: state assets bought
for a song, workers saying they were cheated out of shares and connected
businessmen getting wildly rich.
This story,
however, carves a path from near Kazakhstan’s northern border with Russia to
the offshore financial centers of the Caribbean, to London and all the way to
Trump property in Midtown Manhattan.
How and why
funds from former Soviet states flowed into Trump-branded real estate has been
the focus of speculation since the start of the 2016 presidential campaign. One
theory, propounded by opponents of President Donald Trump is that his
admiration for Russia’s Vladimir Putin comes down to money, a suggestion Trump
has forcefully denied.
Still, Special Counsel Robert Mueller is digging into Trump’s business dealings, and the scramble for Kazakhstan’s chromium riches may fill in a piece of that puzzle. Company records, court filings and interviews in Kazakhstan and London suggest millions of dollars from the Aktobe plant wound their way to the U.S. and a development company with which Trump partnered to build a controversial Trump SoHo hotel-condominium complex in Manhattan.
There’s no suggestion that the Kazakh money ties Trump to Putin. But the funds tell an important story of the future president’s insouciance toward due diligence and business partner choices at a time when unmonitored cash was flooding out of Russia and other former Soviet states.
It was on the 24th floor of Trump Tower that Kazakh businessman Tevfik Arif, a key figure in Aktobe chromium, established Bayrock Group LLC. The plant passed millions of dollars to Bayrock, which organized financing for the Trump SoHo high-rise that Trump once hailed as a “work of art.” Earlier last month, Trump Soho’s new owner bought the Trump Organization out of its management contract for the project.
It’s
unclear precisely how much money from the refinery might have coursed through
Bayrock and to Trump SoHo and other Trump-branded projects that Bayrock planned
or undertook, in Miami and Phoenix. A 2016 complaint for breach of contract
against Arif said that in two years alone, at least $10 million arrived at
Bayrock from the Kazakh plant. Jody Kriss, the Bayrock finance director who
brought the suit, said in the complaint that he became convinced the company
was a front for Russian and Kazakh money laundering. The case, approved in
December 2016 to proceed to trial under a racketeering statute, is
ongoing.
----Audited 2016 accounts for AZXS show four shell companies as the plant’s main shareholders. According to the Panama Papers leak of offshore holdings, three of these were established in the British Virgin Islands and in turn were owned by shell companies, including one that shares a name with Tevfik Arif’s son, Polat Ali.
A 2011 leaked letter from Hamels Consultants, the London-based firm that organized the Arifs’ offshore holdings, said the annual profits from the chromium chemicals plant flowed into a further BVI entity, belonging to Refik Arif. In 2008, the most recent year cited in the letter, that profit was $44 million. (A spokeswoman for Hamels said the company could not comment on the affairs of its clients.)
Part of the chromium plant’s profits were then directed to Bayrock by issuing loans from a U.K. company registered in London as dormant. In one June 2005 instance, Tevfik Arif authorized Bayrock to borrow $2 million from the company at 6 percent a year. It isn’t clear whether the loan was repaid. The Bayrock spokeswoman declined to comment.
According to a 2007 Bayrock presentation, Arif was just one channel through which Kazakhstan’s chromium industry funded Bayrock. The other was the Troika’s multibillion-dollar metals empire and its chairman, Alexander Mashkevich.
----Audited 2016 accounts for AZXS show four shell companies as the plant’s main shareholders. According to the Panama Papers leak of offshore holdings, three of these were established in the British Virgin Islands and in turn were owned by shell companies, including one that shares a name with Tevfik Arif’s son, Polat Ali.
A 2011 leaked letter from Hamels Consultants, the London-based firm that organized the Arifs’ offshore holdings, said the annual profits from the chromium chemicals plant flowed into a further BVI entity, belonging to Refik Arif. In 2008, the most recent year cited in the letter, that profit was $44 million. (A spokeswoman for Hamels said the company could not comment on the affairs of its clients.)
Part of the chromium plant’s profits were then directed to Bayrock by issuing loans from a U.K. company registered in London as dormant. In one June 2005 instance, Tevfik Arif authorized Bayrock to borrow $2 million from the company at 6 percent a year. It isn’t clear whether the loan was repaid. The Bayrock spokeswoman declined to comment.
According to a 2007 Bayrock presentation, Arif was just one channel through which Kazakhstan’s chromium industry funded Bayrock. The other was the Troika’s multibillion-dollar metals empire and its chairman, Alexander Mashkevich.
More
The big question on
the mind in London, this drab, cold, damp winter weekend, is who will get
indicted first? The Trumps, the
Clintons, or the Kushners? I’ll have to check with the bookies.
One of
the queries Quakers are asked to consider, is: "Do you maintain strict
integrity in your business transactions and in your relations with individuals
and organizations? Are you personally scrupulous and responsible in the use of
money entrusted to you, and are you careful not to defraud the public
revenue?"
Probably
why there a no Quakers on Wall Street or in the City of London.
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