Comments on: The China Not-Investing Corporation http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/ Sat, 21 Nov 2009 16:40:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Brad Setser: Follow the Money » Blog Archive » Secrets from the Treasury’s Survey: It looks like China bought a lot of equities just before the stock market tumbled http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-126371 Brad Setser: Follow the Money » Blog Archive » Secrets from the Treasury’s Survey: It looks like China bought a lot of equities just before the stock market tumbled Sun, 01 Mar 2009 14:58:30 +0000 http://blogs.cfr.org/setser/?p=4376#comment-126371 [...] $70 billion. And the CIC is now bragging that its external portfolio was mostly in cash – as it didn’t invest most of the $90 billion or so of foreign exchange that it bought off SAFE (I am setting aside the [...] [...] $70 billion. And the CIC is now bragging that its external portfolio was mostly in cash – as it didn’t invest most of the $90 billion or so of foreign exchange that it bought off SAFE (I am setting aside the [...]

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121708 Twofish Wed, 07 Jan 2009 08:38:12 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121708 bsetser: Bank of America last month cancelled a plan to sell more than $3bn worth of its shares in CCB after being told by senior government and banking officials that Beijing was unhappy with the timing of the sale, according to people familiar with the matter. FYI, the sale just went through. Bank of America made about a $1 billion on the sale. bsetser: Bank of America last month cancelled a plan to sell more than $3bn worth of its shares in CCB after being told by senior government and banking officials that Beijing was unhappy with the timing of the sale, according to people familiar with the matter.

FYI, the sale just went through. Bank of America made about a $1 billion on the sale.

]]> By: Observer http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121694 Observer Wed, 07 Jan 2009 01:47:54 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121694 Twofish: I suspect that we are about to find some very expansive and creative definitions of “national security.” That's true. However, I think we are about to find that the business of America is business, and cash is king. Even politicians would be hard pressed to find reasons for keeping autoworkers out of a job when someone is willing to rescue them. Twofish: I suspect that we are about to find some very expansive and creative definitions of “national security.”

That’s true. However, I think we are about to find that the business of America is business, and cash is king. Even politicians would be hard pressed to find reasons for keeping autoworkers out of a job when someone is willing to rescue them.

]]> By: adiemuso http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121691 adiemuso Wed, 07 Jan 2009 01:32:12 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121691 Geert, good to find someone here who puts his $ down. i agree with you on having independent trading/investment actions/ideas from economic articles/reviews/comments/ideals. in my opinion, though seemingly, the real world operates differently from its theoretical counterpart, however the academic/theoretical model forms a basis for a trader/investor to consider his/her strategies for the long/medium/short term. i have never agreed with anyone who prides his/herself with their profits through short term/ intraday bets entirely devoid of any economics/politics/real worl analysis. I think anyone can do that, and a winning streak or profits are just pure luck. a seasoned gambler at Las Vegas can be equally good too. No disrespect to anyone. back to the contents of this blog, i do think that there are avenues for the USD assets being held by the Chinese to be used without being self suicidal. Brad has pointed out a few, logically i think thats very likely too. Money flows are one of the important factors for Traders/Investors. Especially one of this magnitude. Geert,
good to find someone here who puts his $ down.

i agree with you on having independent trading/investment actions/ideas from economic articles/reviews/comments/ideals.

in my opinion, though seemingly, the real world operates differently from its theoretical counterpart, however the academic/theoretical model forms a basis for a trader/investor to consider his/her strategies for the long/medium/short term.

i have never agreed with anyone who prides his/herself with their profits through short term/ intraday bets entirely devoid of any economics/politics/real worl analysis. I think anyone can do that, and a winning streak or profits are just pure luck. a seasoned gambler at Las Vegas can be equally good too. No disrespect to anyone.

back to the contents of this blog, i do think that there are avenues for the USD assets being held by the Chinese to be used without being self suicidal. Brad has pointed out a few, logically i think thats very likely too.

Money flows are one of the important factors for Traders/Investors. Especially one of this magnitude.

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121689 Twofish Tue, 06 Jan 2009 23:53:39 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121689 Observer: It would later be revealed that the same mainland holding company had injected cash into all three companies. That part can't happen. There are reporting requirements involved with Exon-Florio so there is no way that a Chinese company could quietly this sort of investment. This isn't to say that these investments won't happen, it's just they they can't happen quietly. It also means that there isn't any particular reason for China to hide its investments, and lots of reasons for it not to. US disclosure laws interact in curious ways with Chinese business practices. In a lot of cases, we know a lot about the internals of Chinese companies because of US and Hong Kong disclosure laws. One other thing is that under Exon-Florio, the President can disapprove of any foreign purchase which he things is not in the national security interests of the United States. I suspect that we are about to find some very expansive and creative definitions of "national security." Observer: It would later be revealed that the same mainland holding company had injected cash into all three companies.

That part can’t happen. There are reporting requirements involved with Exon-Florio so there is no way that a Chinese company could quietly this sort of investment.

This isn’t to say that these investments won’t happen, it’s just they they can’t happen quietly. It also means that there isn’t any particular reason for China to hide its investments, and lots of reasons for it not to.

US disclosure laws interact in curious ways with Chinese business practices. In a lot of cases, we know a lot about the internals of Chinese companies because of US and Hong Kong disclosure laws.

One other thing is that under Exon-Florio, the President can disapprove of any foreign purchase which he things is not in the national security interests of the United States. I suspect that we are about to find some very expansive and creative definitions of “national security.”

]]> By: Observer http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121681 Observer Tue, 06 Jan 2009 20:40:40 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121681 Predictions, hmmmm...here's one: With additional capital injections from Warren Buffett and from Chinese mainland sources, BYD acquires Chrysler's assets and starts to build electric cars targeting Western united states. Simultaneous, a solar panel builder and a battery installer are acquired by an obscured mainland company and start a massive campaign to promote solar-powered electricity in the Western states. It would later be revealed that the same mainland holding company had injected cash into all three companies. Predictions, hmmmm…here’s one:

With additional capital injections from Warren Buffett and from Chinese mainland sources, BYD acquires Chrysler’s assets and starts to build electric cars targeting Western united states.

Simultaneous, a solar panel builder and a battery installer are acquired by an obscured mainland company and start a massive campaign to promote solar-powered electricity in the Western states.

It would later be revealed that the same mainland holding company had injected cash into all three companies.

]]> By: Links 1/6/08 | Bear Market Investments http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121658 Links 1/6/08 | Bear Market Investments Tue, 06 Jan 2009 16:57:41 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121658 [...] The China Not-Investing Corporation Brad Setser [...] [...] The China Not-Investing Corporation Brad Setser [...]

]]> By: bsetser http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121644 bsetser Tue, 06 Jan 2009 15:12:45 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121644 Djc -- i take your point that the ownership structure of US banks and Chinese banks has converged and that the "competitiveness" of US banks may not be quite as high as was often argued. But I would hazard to guess that both US and CHinese banks have made their share of bad bets. The bad bets we know about, but in China I suspect: a) SAFE has some exposure to US corp bonds that have generated losses, and the Chinese state banks have been selling off their foreign portfolio b/c of questions about its performance. b) the domestic Chinese banks may have a new round of bad loans from the current slump. Nothing much goes bad when the economy is growing as fast as China's was. This isn't a defense of the US banks/ the US system or an argument that China should emulate the US. Only an observation that there a few doubts about the health of China's banks too. Djc — i take your point that the ownership structure of US banks and Chinese banks has converged and that the “competitiveness” of US banks may not be quite as high as was often argued. But I would hazard to guess that both US and CHinese banks have made their share of bad bets. The bad bets we know about, but in China I suspect:

a) SAFE has some exposure to US corp bonds that have generated losses, and the Chinese state banks have been selling off their foreign portfolio b/c of questions about its performance.

b) the domestic Chinese banks may have a new round of bad loans from the current slump. Nothing much goes bad when the economy is growing as fast as China’s was.

This isn’t a defense of the US banks/ the US system or an argument that China should emulate the US. Only an observation that there a few doubts about the health of China’s banks too.

]]> By: DJC http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121643 DJC Tue, 06 Jan 2009 14:39:54 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121643 Twofish: The obstacles that Beijing has placed on Western banks in China is nothing like the obstacles that the US has placed on Chinese banks in the United States. DJC: Absolutely correct. The Federal Reserve has only permitted two Chinese state owned banks to operate in the United States. The Bank of China operates a small retail banking operation in both New York and San Francisco ethnic enclaves. More recently last year, China Construction Bank was granted a only a commercial license to operate an import-export business financing operation in the United States. It is almost laughable that the Western banking analysts on CNBC always criticize the state-owned Chinese banks as uncompetitive compared to Wall Street banks. At least the Chinese state-owned banks didn't get caught with their pants down unlike their American banking counterparts laden with trillions of dollars in subprime garbage. Now the US Treasury is a significant equity partner in Citicorp owning a large portion of shares: just like socialist Chinese government owning shares of Bank of China. Twofish: The obstacles that Beijing has placed on Western banks in China is nothing like the obstacles that the US has placed on Chinese banks in the United States.

DJC: Absolutely correct. The Federal Reserve has only permitted two Chinese state owned banks to operate in the United States. The Bank of China operates a small retail banking operation in both New York and San Francisco ethnic enclaves. More recently last year, China Construction Bank was granted a only a commercial license to operate an import-export business financing operation in the United States.

It is almost laughable that the Western banking analysts on CNBC always criticize the state-owned Chinese banks as uncompetitive compared to Wall Street banks. At least the Chinese state-owned banks didn’t get caught with their pants down unlike their American banking counterparts laden with trillions of dollars in subprime garbage. Now the US Treasury is a significant equity partner in Citicorp owning a large portion of shares: just like socialist Chinese government owning shares of Bank of China.

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/05/the-china-not-investing-corporation/#comment-121642 Twofish Tue, 06 Jan 2009 14:31:27 +0000 http://blogs.cfr.org/setser/?p=4376#comment-121642 Anticipation: Wouldn’t rule out CIC taking a minority control in JPM (which in my opinion will need to raise capital sooner than most expect). I would rule it out. The US government will not let CIC or any Chinese firm take any management position in a US bank. It would never pass CFIUS review which means that the maximum that any Chinese company can hope to have is 9.99% and no management stake. Without management influence or even a seat on the board, there is no point in investment. Anticipation: Wouldn’t rule out CIC taking a minority control in JPM (which in my opinion will need to raise capital sooner than most expect).

I would rule it out.

The US government will not let CIC or any Chinese firm take any management position in a US bank. It would never pass CFIUS review which means that the maximum that any Chinese company can hope to have is 9.99% and no management stake.

Without management influence or even a seat on the board, there is no point in investment.

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