Borther's blog: 03/2009

Loan from the United States at the beginning of the crisis, to the United States, Fannie Mae and Freddie Mac, "two rooms" crisis, and then Lehman Brothers filed for bankruptcy, Merrill Lynch was acquired, the largest U.S. insurance company AIG brink of bankruptcy was injected 85 billion U.S. dollars rescue, global stock markets continued to fall, the Wall Street indicates that the coldest winter yet to come, former Federal Reserve Chairman Alan Greenspan believes that the United States are trapped in a "once-in" the economic crisis. In the global financial and economic integration of today, the United States must be careful analysis of the economic crisis on the impact of China's economy, adopt measures to deal with in order to avoid greater losses. In my opinion, the effect of the following:

Recent case the United States Capital Markets Review:

Lehman Brothers bond crush garbage;

AIG falls on the CDS, the company funds the "gap" in urgent need of relief;

The current look, because of the credit crisis in the fifth wave of the impact of American financial markets need to plug the "hole" more and more.

Main viewpoints: Overall, the American economic crisis on the domestic economy can be divided into two categories. First, a direct impact; second indirect effects.

● a direct impact on:

Mainly on the capital market shocks; on the impact of China's foreign exchange reserves has shrunk, thereby affecting the domestic part of the performance of financial institutions. If China holds some of America's debt and the U.S. company faces closure, it being understood that this part of the borrower faces the risk of not be able to recover, after all, have some bonds are unsecured bonds, therefore, relevant departments of the corresponding provision related losses.

Holders of foreign bonds in China over the years the ratio of the total lack of international investment position of the assets of 10%. If the loan is also considered one of, the interest at the rate of 13.5% (2007), 17.9% (2006), 15.4% (2005), 16.2% (2004). The international position of the assets primarily to foreign exchange-based. Positions accounted for separately as a proportion of the total assets of 66.8% (2007), 64.9% (2006), 67% (2005), 65.6% (2004). International investment of assets and liabilities are separately the rate of 35.6% (2007), 38.6% (2006), 39.6% (2005), 40.7% (2004). Taking all these data with our foreign exchange reserve management has maintained a cautious and prudent investment approach has always been rational and effective implementation of risk management. Therefore, we believe that the United States credit crisis broke out, even if the United States has the country's collapse of major investment bank on the impact of China's foreign exchange reserves are relatively limited. However, if taking into account the dollar factor, China's foreign exchange reserves by the dollar devaluation of factors such as relatively large, after all, the vast majority of China's foreign exchange are the form of foreign exchange exist.

At the same time, the domestic part of the United States held by banks such corporate debt. Therefore, at present, we need to know the domestic foreign exchange reserves of the bonds, as well as the percentage of debt held by the SAFE and other categories as well as some domestic banks held by the United States and Europe the amount of bonds and bonds of the property.
Another point worthy of our attention is this: If the foreign investment bank's collapse of liquidation, after all, will be its global portfolio of assets positions settled, if our country's financial assets are part of its investment portfolio, then this part of the financial assets sold is bound to further exacerbate the domestic capital market tensions, the recent crash of the Hong Kong stock market should have a great relationship here. Fortunately, the extent of opening up China's capital market is not high, this trust will not have much effect, many for the psychological impact of it.

At present, the actual size of 65 QFII for 10.67 billion U.S. dollars, if the future of Lehman formal bankruptcy, then for the treatment of their holdings will have an impact on some stocks.

If taking into account the QFII stock重仓by many for high-quality stocks, if the company did not change the fundamentals and has been substantial selling of QFII, the trust of investors is a good opportunity to intervene last week, the trend of Chinese iron on the narrative part of funds the spirit of "taking people abandoned me," admitted the investment strategy of Chinese iron H shares and A shares.

● indirect effects:

The main entities of our country's economy; the United States at the United States evolved into a debt crisis, economic crisis, but also known as "once" the economic crisis of such a country the United States economy is very enormous. At the same time, the euro-zone economies will have been seriously affected. In China, although not the full liberalization of financial markets, but China's economic dependence on the external current of up to 60%, while domestic exports is the biggest euro zone and the United States and other economically developed countries. If the country exports the economy have fallen sharply, and its dramatic fall in international demand is bound to affect China's exports, while domestic exports of monthly data is a clear demonstration of the trend. However, China's economy is characterized by a large export-led domestic investment, thereby promoting domestic GDP growth, if there are problems in the export, then the domestic investment in fixed assets will be affected, the domestic economy there is no doubt there will be a larger drop. The surface, China's GDP, there is much room for, because of China's domestic demand has not yet been fully activated, the future through the expansion of domestic consumption to stimulate economic development potential is still very great. But now watch the trend of economic development also required a longer period of time.

One reason: the decision of China's industrial structure in China is still in the status of the world's factory, in Western developed countries to "employment" of such a state. The current look of our "wage" of this income - that is, the future export obvious impact on this income. At the same time, data show that China's current economic growth of western developed countries more flexible economy, the Western developed countries, economic growth will be slightly more substantial driving China's economic growth; the other hand, when western economies are bound to come down slightly on the current domestic economy has larger negative impact. The United States and the euro zone are the main source of China's trade surplus, once the Western developed economies recession, exports to China can imagine would cause a greater blow.

Second reason: to stimulate domestic demand in driving China's GDP growth are not ripe. Currently, China's per capita disposable income is still relatively low, did not arrive at random to enjoy life conditions, particularly in time of high inflation and economic sensitive period, blind to stimulate domestic demand is unwise;

Three reasons: the domestic industrial upgrading and industrial restructuring will take time;

Four reasons: the domestic industry is likely to face some embarrassing situation overproduction. Even if the early loosening of domestic monetary policy is only to alleviate some of the enterprises of "urgent" situation, but the future drastically over a short period to the market to inject liquidity into the real economy or monetary policy may not be published.
Based on the above, we judge that China's economy will be in the United States economic crisis caused by the global economic slowdown in growth or even negative growth and there will be more substantial decline, if taking into account the national status of the current downturn in the real estate industry, I believe our country's economic downturn is likely to continue longer period of time.

Since 2008, the state controlled the first half of the domestic inflation situation in the development of many policies, it would seem that the real estate industry has not given the focus of "concern." The reasons should be multi-faceted: First, the government "look" has long been the real estate prices finally fell back, still belong to the benign and controllable callback framework; Second, from the introduction of several for the first half of the housing market policy, we can see that the Government of the real estate industry's "ambiguous" attitude, on the one hand do not want to see house prices fall, on the one hand and "not quite the nerve," come forward to curb housing prices down policy, can only give the people from the burden , such as raising tax threshold;停征individual industrial and commercial households bazaars management fees and management costs. We can see that the Government started to give the Chinese people burden, which is trying to change people geotropism improve disposable income - on this important aspect. Of course, this is to stabilize the property market in China play a crucial role, will play to activate the real estate industry of China's rigid demand, China's real estate market is conducive to stability. China's financial markets so as to stabilize the real economy as well as stability.

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