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GUARDIAN Wed, 17 Feb 2010 12:26:50 GMT
The move means that Japan, which boosted its purchases, is once again the largest overseas holder of the securities
China relinquished its position as the largest overseas holder of US Treasury bonds by selling $34.2bn (£21.7bn) worth of the securities in December, according to new Treasury figures.
The move means that Japan, which boosted its purchases, is once again in the top spot and contributed to a record drop in foreign holdings of short-term bills. In all, net overseas holdings of bills fell by $53bn; the previous record was $44.5bn in April last year.
But overall, the US saw a net inflow of $60.9bn as investors bought longer-term securities.
Analysts are divided on the significance of the Chinese shift. Some see it as a typical switch back to riskier assets as confidence in the economy grows, while others believe it reflects serious concerns about the US deficit – projected to reach a record $1.56tn this year.
The sales also come amid friction over issues including the value of the yuan, which the US argues is far too low.
But some observers argue that the figures do not accurately reflect Chinese holdings. Not only could China be buying other dollar assets, but it could be buying Treasuries through funds, they pointed out.
Alan Meltzer, an economics professor at Carnegie Mellon University, told the Associated Press that China's shift should be a wake-up call for Washington.
"The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it," he said.
Last year, Chinese premier Wen Jiabao told reporters: "We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried."
China's December sales still left it with $755.4bn of Treasuries. Its huge holdings reflect the trade deficit between China and the US. US assets are thought to make up over two-thirds of its estimated $2tn foreign reserves.
Others said that figures are often volatile month-to-month and that Europe's debt crisis has put pressure on the euro and boosted demand for dollar assets.
"China may not be too happy with us right now, but you have to ask, what else are they going to do with their money?" said David Wyss, chief economist at Standard & Poor's in New York.
Japan added $11.5bn to its holdings, taking the total to $768.8bn – overtaking China for the first time since August 2008. Britain, Luxembourg and Hong Kong also made sizable purchases – with the UK buying $24.9bn of US government debt.
Michael Pettis, professor of finance at Peking University, warned that the Treasury figures gave only a "very impressionistic" record of Chinese holdings and that it was unclear what Beijing was buying with the money recouped.
One possibility was that it was selling to invest in funds which then bought Treasuries.
"You can sell what's in your name and have Merrill Lynch buy some for you. The net effect is that ownership hasn't changed," he added.
"The US is running a current account deficit; China has an account surplus. Directly or indirectly the two are going to meet up."
If that was the case, it could be simply an attempt to diversify or an attempt to send a warning to Washington to get a grip on its finances.
Ho-fung Hung, author of China and the Transformation of Global Capitalism, said it was hard to tell whether China had a long-term strategy for selling US debt.
"I think decision makers know very well that any large-scale selling of US Treasuries won't do any good to the Chinese economy, which still needs a sustained recovery of the US economy to pull up its export sector. Such selling will also devalue China's existing holdings of Treasuries," he said.
"Dumping Treasuries will also entail the problem of what to buy in return – definitely not euro or yen assets at the moment."
US economy
China
Bonds
Japan
Tania Branigan
guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content...
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GUARDIAN Mon, 15 Feb 2010 00:05:26 GMT
When Google threatened to quit China, most of the focus was on human rights and the country's extensive system of internet censorship, the Great Firewall. China rebuffed such criticism. Countries that censor political speech on the internet are quick to point out that western nations also have laws governing content online, some of it political. Germany bans neo-Nazi symbols on German internet sites. The state of South Australia recently attempted to ban anonymous political speech online in the lead-up to elections. China said it was its sovereign right to set limits on internet activities. However, less attention was paid to Google's claims that hackers had also stolen corporate secrets in addition to targeting human rights activists.
This highlighted a little discussed problem. While China calls on other countries to respect its laws, it must do more to curtail internet attacks focused on foreign companies that do business there. The Chinese government denied involvement in the attempts to gain access to the Gmail accounts of human rights activists or attempts to steal Google's corporate secrets. It is almost impossible to link attacks online to a single player, much less link the shadowy hackers to a government. Attempts to find a technical link to China in the latest round of attacks failed to uncover a smoking gun. However, security researchers have found that companies doing business in China find their networks hacked and documents relating to business there stolen. A report by US defence company Northrop Grumman last year found that attacks against the US and "many countries around the world" were "extremely focused", not only on scientific and defence secrets but also on "China-related policy information". The report determined that such attacks were "beyond the capabilities or profile of virtually all organised cyber-criminal enterprises" and were "difficult at best without some type of state sponsorship". The US is not alone in its concerns. MI5 warned businesses that Chinese government officials had given British businessmen digital cameras and memory sticks loaded with Trojan horses, viruses that would give the Chinese access to their computers.
Companies doing business in China have long faced brazen attempts to steal corporate secrets. The lure of the riches that China promises has bought silence in the corporate world. That silence made Google's announcement stand out. If China claims its extensive censorship of the internet in its borders is its sovereign right, it cannot lecture the rest of the world on respecting its laws while evidence mounts that foreign companies face sophisticated attempts to steal their secrets.
China
Google
Internet
United States
US national security
Germany
Europe
Australia
Freedom of speech
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GUARDIAN Tue, 09 Feb 2010 08:21:20 GMT
Tan Zuoren jailed over Tiananmen Square article but supporters say detention owing to research into death of pupils in quake
A Chinese activist who investigated the deaths of children in schools that collapsed in the Sichuan earthquake was today jailed for five years for subversion, his lawyer said.
The court in Chengdu sentenced Tan Zuoren over comments he made in online articles about the violent crackdown on Tiananmen Square protests in 1989. But he and his supporters believe he was detained owing to his research into the deaths of thousands of pupils. Charges related to his investigation were ignored in the verdict.
"The court was very smart. They took out any mention of the earthquake from the verdict because they are afraid of referring to it," said his lawyer, Pu Zhiqiang.
The quake in the south-western province in May 2008 left almost 90,000 people dead or missing. But parents demanded to know why many schools collapsed even when buildings around them stood firm. As public outrage about poor quality construction grew, authorities stamped out any discussion of the matter, harassing parents who protested.
Tan, 55, received the maximum sentence for subverting state power, highlighting what human rights groups describe as an increasingly punitive environment for dissidents. He plans to appeal.
The lawyer of another man who campaigned over the deaths of Sichuan children said today that a court had upheld his three year sentence on appeal. Huang Qi, a well known activist, was convicted in November of revealing state secrets after trying to gather information on shoddy school construction.
Tan's wife, Wang Qinghua, was not allowed to attend the 10 minute sentencing session. "Even one day of imprisonment is too much. He only exercised his freedom of expression and addressed corruption from his own conscience," she told Amnesty International.
"Tan's case is the most important one to take place recently, because it is a sign of a huge step backwards in China's judicial ethics and independence after decades of reform and opening," said Ai Weiwei, a leading artist who has also attempted to tally the number of pupils who died in the disaster.
"Tan Zuoren received such a serious punishment only for believing or writing in his [online] diaries that there were problems with the earthquake. It is ridiculous. Though China claims to the world that it is a major country, the case just shows how fragile and lacking in confidence it is."
Hong Kong radio station RTHK said police tried to block nine journalists from the territory from interviewing Tan's lawyer outside the court.
Chen Yunfei, another Sichuan activist, tweeted that he had wanted to attend the sentencing but that police arrived at his house last night to stop him doing so.
"[Tan's] arrest, unfair trial and now the guilty verdict are further disturbing examples of how the Chinese authorities use vague and over broad laws to silence and punish dissenting voices," said Roseann Rife, Asia-Pacific deputy director at Amnesty.
"The Chinese authorities cannot continue to claim that they are dealing with human rights defenders according to the law when they violate so many of their own legal procedures in cases like this."
Tan stood trial in August last year, but his lawyers were unable to call witnesses to testify or to show video footage they had prepared. Police also detained and threatened supporters including Ai.
China earthquake
Human rights
Freedom of speech
China
Tiananmen Square protests 1989
Tania Branigan
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GUARDIAN Mon, 01 Feb 2010 00:05:37 GMT
Talking points at the World Economic Forum 2010 included repairing the financial system and gauging the pace of weaning leading economies off stimulants
Davos used to be the place where the masters of the universe came for a bit of R&R with their trophy wives. They would chew the fat, cut a few deals, nod wisely as a tame politician paid homage to the orthodoxies of de-regulation, privatisation and globalisation, perhaps do a bit of skiing.
The World Economic Forum has not been like that for some time. Two years ago, there was concern that the seizing up of financial markets in the summer of 2007 was the start of something really nasty.
By Davos 2009 it was clear that the fears were justified and that the banking crisis during the Autumn of 2008 had brought the global economy to the brink of depression. The bankers wandered around the ugly concrete conference centre in a state of bemusement.
This year the mood was different. Gerard Lyons, chief economist at Standard Chartered said that if 2009 was marked by pessimism, 2010 was the year of realism.
There were 10 big themes this year. The first was a sense of relief that the outlook for the world economy is brighter than a year ago. In recorded history, no precedent exists for the amount of stimulus provided by central banks and finance ministries over the past year or so. And it has worked, because there has been no repeat of the 1930s.
But only up to a point. The second big talking point this year was of how fragile the recovery still is. Few were carried away by the fact that the US economy expanded by almost 1.5% in the final three months of 2009, nor that China is once again on course for near double digit expansion this year. There is justified concern that growth is heavily – indeed, almost exclusively – reliant on the stimulus provided by ultra cheap money and budget deficits.
As a result, [third theme] there is a broad consensus that the stimulus should not be withdrawn too soon. Dominique Strauss-Kahn, managing director of the International Monetary Fund, said there were risks from waiting too long before getting to grips with high levels of public borrowing but these were outweighed by the risks of double-dip recession from acting too hastily. If that happened, Strauss-Kahn warned, policy makers would be powerless. "Our tool kit is empty", he said.
One of the few dissenters from this was David Cameron, who has managed to get himself into a mess by favouring cutting Britain's deficit no matter what the state of the economy might be. He is now in the strange position of saying that an incoming Conservative government would not need "extensive" cuts in the budget deficit in order to maintain his macho line on fiscal policy.
Strauss-Kahn and Larry Summers, Barack Obama's chief economic adviser, prefer Alistair Darling's approach. They think it is important that a government has a plan to reduce the deficit over the medium term but that there needs to be flexibility in the short-term.
The fourth theme was how to re-regulate the financial sector. Darling, who met bankers for a clear-the-air session last week, believes that after several months of shooting themselves in both feet, the financiers finally "get it". That certainly seemed to be the case, with bankers frankly accepting there was a need for tighter supervision and constraints on some of their riskier activities.
The banks have recognised that the politicians – backed by public opinion – are the ones calling the shots. Obama was not physically in Davos but his plan to curb the power of Wall Street influenced the mood. Nicolas Sarkozy had the same message: self-regulation is no longer an option.
Some of the reservations raised by the banks were valid. Peter Sands of Standard Chartered and Josef Ackermann of Deutsche Bank made the point that a too-heavy handed approach to regulation might affect the ability of banks to provide the credit needed to fund a sustained recovery. But it was clear that the...
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GUARDIAN Sun, 31 Jan 2010 23:00:00 GMT
China's tough response on US arms sales to Taiwan reflects the shift in the global balance of power
The Chinese response to the decision of the United States to sell a $6.3bn arms package to Taiwan represents a small but significant raising of the ante. The Chinese have partially halted the military exchange programme between the two countries, only recently resumed following a suspension after the last such military package in 2008. This time the Chinese have also threatened to impose sanctions against the US firms involved in the deal. This is causing serious disquiet among firms like Boeing and Lockheed Martin.
Taiwan, of course, is of special significance to the Chinese; since 1949 the return of the island to China has been seen as an overriding priority. Beijing regards Taiwan as an internal Chinese issue, and the US arms sales are therefore regarded as interference in China's internal affairs and a violation of its sovereignty. When the pro-independence DPP held office in Taiwan, China's relations with the island were fraught; but with the victory of the more moderate KMT, they have improved immeasurably and some kind of reconciliation between China and Taiwan is now conceivable. This has made the Chinese more confident in their handling of the Taiwan issue.
But the underlying reason for the tougher Chinese response is the shift in the balance of power between China and the US, evident since the global financial crisis. Beijing is in a stronger position, and this is finding expression in its attitude towards issues from climate change to a growing economic assertiveness. It is unlikely the Chinese will overplay their hand – they are too cautious and too diplomatically shrewd – but we should expect them to be more prepared to flex their muscles.
Their reaction to the US arms package provides a subtle insight into this. The issue is decades-old – the US has been supplying arms to Taiwan ever since it declared independence from China. The Chinese have angrily protested at each and every sale, albeit always aware there was little they could do to affect them. But a rapid and palpable shift is taking place. The US is feeling vulnerable, conscious for the first time that its power is on the wane, and painfully aware that China is now both its creditor and a nation on the rise. The Chinese threat of sanctions against the companies involved in the deal is making aerospace executives nervous: it is estimated that China will order 3,770 aircraft between now and 2028, the government centrally manages purchases, and Boeing in particular fears that it could seriously lose out to Airbus.
China's economic power is making itself felt everywhere and in a myriad of ways – and this will grow exponentially in the future. Even if the Obama administration decides to push through this deal – with or without minor changes – Beijing's response will make any future administration more cautious about arms deals with Taiwan.
Meanwhile, this kind of spat with the US is likely to multiply as China's power grows and its interests around the world mushroom. When China was economically weak, its voice mattered on only a limited range of issues. We have now entered a very different era: Beijing's views on the global financial crisis, global financial architecture, climate change, Africa, Iran and the Greek debt crisis – to name but a few – are of critical importance. As a result, conflicts and tensions with the US will become increasingly common and potentially more serious. This does not mean that relations between the two countries will inevitably deteriorate, but they are certainly going to be subject to new kinds of pressure.
Taiwan
United States
China
Martin Jacques
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