I’m not sure what you’re talking about here. China’s labor force is very competitive even on a PPP-adjusted basis.

I don’t buy the notion that RMB is undervalued, but then exchange rate imbalances are not sustainable anyway. Whether the rebalancing occurs by nominal revaluation or inflationary tendencies is immaterial.

Sure, it generates some inefficiencies — but it basically is a transfer from urban china to rural china (social policy) conducted through trade policy (a tariff that raises the itnernal price of rice). and i think it generates fewer global distortions than an exchange rate set at a level that keeps rural China competitive.

I am not very doctrinaire on this — I expect China to eventually join Switzerland, Norway, Sweden, Korea and Japan (along with Europe) in protecting its smallish farmers and effectively trying to create an internal terms of trade that slows the out-migration from the countryside.

your numbers on the yukos related inflows are helpful as well — they clearly cannot account for all the recent acceleration in capital flows into russia.

I would not read too much into the decline in Spanish foreign exchange reserves - the Daily Telegraph (aka “Torygraph”) is a relatively conservative, eurosceptic newspaper. In fact, a better question might be why some of the other EMU countries have not reduced their national reserves.

Since foreign exchange intervention is one the principal reasons for holding reserves, and in EMU this becomes the responsibility of the ECB, EMU members ought to have reduced their reduced their national reserves since its inception. Running down reserves would make even more sense for Spain if its reserves were to some extent borrowed, such as through fx swaps. Moreover, given that Spain’s participation in EMU seems set to be increasingly painful, acquiring foreign exchange reserves now might send an even worse signal - that Spain was making contingency preparations to leave! Anyway, the proceeds of the reserves sold are presumably being used to reduce government borrowing, and if much of EMU remains buoyant as Spain slumps so that monetary policy does not respond, it will be useful to the Spanish government to have room for fiscal easing.

As for selling gold in particular, that is not unreasonable, given that gold pays practically no interest and its price has gone up so much in recent years. Other EMU members - eg the Netherlands - sold a lot of gold at much lower prices than prevail now.

It is simple. In the words of Defense Secretary Donald Rumsfeld, the Chinese are considered “a strategic threat to the United States”, whereas Japan is a strategic ally since they host numerous US military bases with operational expenses paid by the Japanese taxpayer. Wall Street Hedge Funds also heavily profit from the Japan yen carry trade. The narrow special economic interests are exclusively pandered to by the Washington elite. For better or worse, the Chinese attempt to manage their own collective futures without the advise of self-serving U.S. economist pundits. This is the primary reason the Chinese are repeatedly bashed in the United States without any justification.

If saudi arabia is really in decline, as those peak oil theorists tell us, then the only easy oil left is Iraq and Iran. Btw, Britain turned to be net importer of oil this year…

Hussein granted drilling right to Russian and Chineese companies. The new puppet goverment gas already transfered those rights to big oil. The only question left is that US and Britain might not be able to colonize Iraq.

If big oil gets Iraq it’s once again will be a decisive player for shure…

The global trading system wouldn’t work if everyone kept their least competitive, but job-intensive, sectors in business through exchange rate intervention.

The Japanese have used exchange rate intervention, along with every other form of protection known to man, to keep their agricultural sector in business for maybe 50 years now.

I am bewildered by how the trade theme du jour is China China China, when Japan with 15% of the Chinese population has roughly equivalent Foreign Exchange Reserves and Current Account Surplus, and is keeping the Yen from appreciating at all against the US Dollar rather than just the ‘not fast enough’ appreciation of the RMB.

ozajh

The finance ministry in Russia expects around 40B of inflows this year. Sberbank and VTB IPOs attracted something around 7-8 billion from abroad.

The inflows have an interesting pattern - equity managers underweight Russia and debt managers are mooving in, betting on rouble appreciation. This created an interesting situation were rates on quality corporate bonds are 6-8% in roubles with even official inflation above 10% last year, and this hold for several years already.

As for oil revenues - the state ownership in oil/gas is gradually increasing from around 20% before Yukos case to > 50% now, it will trend more in Norwegian direction, after the state will take control of Surgetneftegaz, Rusneft, and half of TNK PB (almost none doubts this here it’s just a question of time). By the way, some companies are increasing production, Lukoil posted good production numbers this week, but the incrases were likely ouside of Russia.

The metals are ofcourse largely out of state control and much lower taxed, but that’s also going to change, i believe. State owned rosneft and gazprom are heavily in debt and any meaningful increases in oil taxation is off the table. Mean while Russia has problem with pension fund and the task to rebuild infrastructure. Gas is another story but increases in taxes will be substituted with increases in local prices.

Nevertheless the country is flooded with cash right now, with M2 posting 50+% annual gains in USD. Property prices went throw the roof last year, as well as the stockmarket, but the valuations here are not high, so i expect another chineese-style rally to start soon, for now the market is being depressed with political news.

That’s it for the local color:)