Below news should not be surprising to anyone. Right on the money with my recent forecasts!

Below news should not be surprising to anyone. Right on the money with my recent forecasts. — Larry

 

Malaysia, China consider ending use of dollar for trade

 

MALAYSIA (THE WALL STREET JOURNAL) – MALAYSIA’S prime minister said China and his country are considering conducting their trade in Chinese yuan and Malaysian ringgit, joining a rising number of nations thinking of phasing out the dollar.

 

“We can consider whether we can use local currencies to facilitate trade financing between our two countries,” Malaysian Prime Minister Najib Abdul Razak told reporters at a briefing after meeting with China’s premier, Wen Jiabao.

“What worries us is that the (US) deficit is being financed by printing more money,” Mr Najib said. “That is what is happening. The Treasury in the United States is printing more notes.”

China has been promoting the idea of replacing the dollar as the global currency, suggesting that a basket of currencies less linked to the fate of one economy would make more sense. It also has been talking about using the yuan for trade settlements, starting gradually in the region and then expanding farther abroad.

US Treasury Secretary Timothy Geithner earlier this week urged China to move toward a more-flexible exchange rate for the yuan. If the yuan were to strengthen, that would increase China’s domestic buying power and reduce the country’s dependence on exports.

Chinese trading partner Brazil is also looking at reducing its exposure to the dollar by conducting its trade with China in yuan.

Despite countries’ growing interest in adopting the yuan — fostered by China’s growing economic clout and worries about the US government’s deficit spending — many experts agree it would take a long time to liberalise China’s currency enough to be used as a global benchmark. Right now it’s difficult to buy and sell yuan outside China.

Malaysia’s Mr Najib, speaking on the second day of a four-day visit to Beijing, timed to coincide with the 35th anniversary of diplomatic ties established by Mr Najib’s father, said the two countries signed a series of framework agreements meant to facilitate trade and investment.

Mr Najib, who is also finance minister, has been struggling to revive Malaysia’s export-dependent economy. In April, he unveiled measures to liberalise the country’s finance sector, allowing greater foreign investment and rolling back some of the decades-old preferential policies granted to elevate the country’s majority Muslim Malay population, which helped them compete with the ethnic Chinese.

Last week, the government sharply revised down its annual gross-domestic-product forecasts to a contraction of between 4 per cent and 5 per cent, versus an earlier estimate of a 1 per cent decline. Analysts now predict the nation’s fiscal deficit could rise to 8 per cent of GDP, the highest level in a decade.

But Mr Najib ruled out more stimulus spending. “We’ve introduced one of the biggest in the world — as a percentage of GDP it’s 9 per cent. But there’s a limit to which we can introduce fiscal stimulus,” he said.

 

World Bank boss sees China spurring global recovery

 

MONTREAL (AFP) — China’s stellar growth could help pull the world out of its current economic slump, the head of the World Bank said on Monday, while hailing the yuan’s progress toward becoming a global reserve currency.

With Chinese growth in the first quarter of 2009 exceeding most expectations, World Bank president Robert Zoellick said China could act as a catalyst for a global economic resurgence.

 

“Any forecast in this environment is hazardous, but I think China is likely to surprise on the upside,” the former US trade envoy said, speaking at a conference in Canada.

 

“By and large (China’s growth) has not only been a stabilizing force, but a force that will pull the system (out of the downturn).”

 

China’s meteoric rise as a global economic player has boosted world trade in manufactured goods and provided western companies with an enormous new market for their products and services.

 

Zoellick, who once headed US efforts to reach a new set of global trade rules at the World Trade Organization, urged countries not to hamper this now “symbiotic relationship.”

 

“In this environment, if you had protectionism burst out on one side or the other, or have some doubt put in about financial markets, those are the type of factors that could take a fragile situation and make it worse.”

Zollick also praised China’s central bank for its efforts to develop the yuan as a global currency.

 

“Ultimately, that’s a good thing. And ultimately it’s good if you’ve got, I think, some multipolarity of reserve currencies to create, to make sure that people manage them well,” he said.

 

Some currency-hawks, particularly in the United States, have seen the rise of the yuan as a threat to the dollar’s global standing, one which could undermine US financial stability.

 

 

China Car Sales Jump Most Since 2006 on Government Stimulus

 

June 9 (Bloomberg) — China’s passenger-vehicle sales rose 47 percent in May, the biggest jump since February 2006, as tax cuts and government subsidies helped extend the country’s lead over the U.S. as the world’s biggest auto market this year.

 

Chinese drivers bought 829,100 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall vehicle sales rose 34 percent to 1.12 million.

 

China has cut retail taxes on vehicles and handed out subsidies in rural areas after auto sales slowed on the global economy and job concerns. The moves helped General Motors Corp., the largest overseas automaker in China, to boost sales in the country 34 percent in the first five months of the year even as plunging U.S. demand forced it into bankruptcy.

 

“Sales of small cars have been driving growth,” said Ricon Xia, an analyst with Daiwa Institute of Research (H.K.) Ltd. in Shanghai. “Whether automakers can reverse profit declines this year will depend on demand for big cars and heavy-duty trucks that carry bigger profit margins.”

 

Combined profit at the country’s top 19 automakers fell 28 percent in the first four months, while revenue declined 11 percent, according to the association. During the period, five automakers boosted profit, 10 reported declines and the rest had losses, it added.

 

SAIC Motor Corp., China’s biggest domestic automaker and GM’s main partner in the country, may boost full-year vehicle sales to 2 million, Chairman Hu Maoyuan said in Shanghai today. That’s an increase of about 9 percent from last year, based on figures in its annual report. The company, which also makes cars with Volkswagen AG, boosted sales 26 percent to more than 1 million in the first five months.

 

Industry wide China vehicle sales rose 14 percent to 4.96 million units in the first five months. By contrast, sales in the U.S. fell 37 percent to 3.95 million.

China’s commercial-vehicle sales fell 1.6 percent in the first five months to 1.3 million, the association said. Government policies that were introduced to help truckmakers aren’t sufficient and more measures are needed, it added.

 

 

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