Exploring and keeping readers up to date with the growing economic and political ties between China and South America. Including all the good stuff: Commodities, Energy, International Finance, South-South Cooperation, Microfinance and more
According to this Bloomberg article, Abu Yahya al-Libi, the alleged successor to Osama Bin Laden has declared a holy war against the Chinese state for its repression of its Uighur.
Abu Yahya al-Libi has been quoted saying:
"The state of atheism is heading to its fall.”
"China will suffer the same fate as the “Russian bear.”
How China is going to deal with this new threat remains to be seen. Also, how Abu Yahya al-Libi plans to wage this holy war is far from clear. Foreign policy buffs describe some obvious concerns such as the growth of the Xinjiang-based East Turkistan Islamic Movement, which is based in the Taliban-rules areas of Pakistan.
This declaration of sorts comes on the heels of The July riots in the capital of Xinjiang which were the deadliest in China in decades. Bloomberg writes, "Al-Libi’s speech, entitled 'East Turkistan, the Forgotten Wound,' echoed complaints of the Uighurs that decades of government-sponsored migration to the province is making them a minority in their homeland."
Personally, this blogger feels a threat such as a Pakistan based, anti-Chinese (Han) movement is not a major problem in the short-term, but it will no less force China to become more involved over the future of Afghanistan and Pakistan.
All eyes will be watching next week when members of Shanghai Cooperation Organization meet in Shanghai to discuss regional issues. This group includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Xinjiang, or East Turkistan, as many in the Muslim world refer to it lies at the heart of this grouping of Central Asian countries.
Click here to access Bloomberg's article on this topic
Shougang Hierro Peru, the country's only iron ore producer, said on Monday a week-old strike at its mine had halted production and slowed mineral shipments.
The company's comments were its first since some 1,200 workers walked off the job more than a week ago in a bid to pressure Shougang (SHP.LM: Quote) to raise wages.
"Workers are on strike, therefore (the mine) is not producing," Raul Vera, Shougang's chief executive, told Reuters.
Click here to access the complete update on the situation, courtesy of Reuters
A nice show of retro-decadence if you ask this blogger. Pretty impressive nonetheless and indicative of China's emergence as a global power. Although, as many articles here in the West have pointed out, this type of parade was not meant to scare Western observers. Rather it was meant to dazzle and impress the 1.4 billion Chinese, and that it did...
Oct 1 - China puts up a spectacularly choreographed show of military might to mark the 60th anniversary of the birth of the People's Republic of China.
Apologies to readers who check this site on a frequent basis for the lack of recent updates. I've been traveling and preparing for some big changes. Updates to resume this afternoon. For now, feast your eyes on China's preparation for its 60 year celebrations of the founding of the People's Republic of China.
Sep 28 (Reuters) - Chinese authorities expect 200 million people to be on the move over this year's October National holiday and China's 60th anniversary.
China and Brazil have created a work group to study the possibility of implementation of a bilateral trade program in their respective currencies, in replacement of the North American dollar, said a source in the Central Bank of Brazil.
"The negotiations are still in an initial phase, with a work group having been created with representatives of Brazil and China, who also met during the G-20 summit, in London," explained a source.
The next step should be the visit of a Central Bank of Brazil delegation to China, "despite there being no forecast as to when it may come true," said the source.
The work group should analyze the "results to be reached through an agreement that China recently established with Argentina" - the first country in South America to benefit from trade exchanges in the same currency with the Asian giant and with whom Brazil has also been developing the same program since September 2008.
The Central Banks of China and Brazil are also going to develop a "study of the potential bilateral trade volume to analyze the possibility of an agreement."
SAN JOSE — China and Costa Rica concluded the fourth round of negotiations in Beijing aimed at reaching a free trade agreement, according to the foreign trade ministry.
Costa Rica -- which gave up six decades of ties with Taiwan in favor of China two years ago -- is the third Latin American country to negotiate a free trade deal with China, after Chile and Peru.
In the round of talks that ended Thursday agreements were reached for more than 90 percent of each country's exports, the trade ministry said.
Costa Rican exports include coffee, bananas, fruit juices, cigars, pork, beef and chicken, said Costa Rican chief negotiator Fernando Ocampo...
1) Wen Signals Unprecedented Spending Will Drive Chinese Rebound - Bloomberg
China's Premier Wen Jiabao signaled he will maintain unprecedented government spending to drive a recovery from the slowest expansion in almost a decade.
"China's economic rebound is unstable, unbalanced and not yet solid," Wen said yesterday in a speech at the World Economic Forum in Dalian, a city in northeastern China. "We cannot and will not change the direction of our policies when the conditions aren't appropriate."
2) Standard Bank Borrows $1 Billion From Chinese Banks
Standard Bank Group Ltd., Africa's largest lender, said the $1 billion loan facility it signed with four Chinese banks will be mainly used for clients developing projects on the continent.
"The money will be used mainly to support our Africa business, for clients wanting to do business in Africa and this would include Chinese clients," said Chief Executive Officer Jacko Maree, after signing the five-year facility in Macau. It will be used mainly to fund projects, he added.
3) Mongolia Fund to Manage $30 Billion Mining Jackpot
The Mongolian government will set up a sovereign wealth fund using mining royalties and tax revenue, and distribute part of the income to citizens to alleviate poverty, said Finance Minister Sangajav Bayartsogt.
The fund, to be run by professional managers from 2013, will disburse part of its annual income to every Mongolian in cash or non-cash securities to let them own stakes in the country's mining wealth, Bayartsogt said. Initial capital will be drawn from Ivanhoe Mines Ltd.'s $4 billion Oyu Tolgoi copper- gold mine project, estimated to generate $30 billion in tax revenue over 50 years, he said.
"We're drafting the idea to implement the proposal, and we're studying examples like the Alaskan Permanent Fund," Bayartsogt said in a Sept. 9 interview in the capital Ulaanbaatar, declining to specify the size of the proposed fund.
Happy b-lated Labor Day to all my fellow US-Americans out there in cyberspace. I hope you spent it with friends and family and made it to work this morning without a hangover.
CSA (China South America) is going to begin the US work week with some rather enlightening words of wisdom from one of the wise men of the ancient world -- Confucius.
Confucius on Self-Cultivation -- "The man of virtue only practices what hes practiced."
Confucius on Humanity and Morality -- "A man who has faith in humanity always puts a lot of hard work before he is duly rewarded. Such a man may be regarded as a bearer of the virtue of humanity."
Confucius on Education -- "When you know a thing, say that you know it; when you do not know a thing, admit that you do not know it. That is wisdom."
Confucius on State Governing -- "Incorrect wording of status will lead to an irrational stream of speech; irrational stream of speech will lead to failure in handling affairs; failure in handling affairs will lead to impossibility to promote the rites and music; impossibility to promote the rites and music will lead to improperness in enacting penalty; improperness in enacting the penalty will lead to panic among the people."
Confucius on Family -- "A son should keep in mind the age of his parents, for he should feel joyful for their healthiness and at the same time fearful for their aging."
Confucius on Philosophy -- "If one fails in making friends with those who are well established in the doctrine of the mean, one should associate with those are are ambitious and those who adhere to moral principles. Those who are ambitious tend to be enterprising and those are adhere to moral principles seldom do evil deeds."
Although Sino-African trade had weakened during the global financial crisis, Chinese and African enterprises could strengthen their collaboration and emerge from the downturn together, Chinese trade officials said at a trade fair Wednesday. Huang Xiwen, chief of Jilin Province's Commerce bureau, said at the 2009 China Africa Economic and Trade Cooperation Seminar that local enterprises had been vigorously developing business with African companies. He said 19 local companies had invested ..
"China and France seeking to develop bilateral ties"Vice Premier Wang Qishan said Wednesday China had always valued its relationship with France, and said he hoped the two countries could work together to promote bilateral ties. Wang met Jean-David Levitte, a diplomatic adviser to French President Nicolas Sarkozy Wednesday. Relations had developed smoothly on the whole since the two countries forged diplomatic ties 45 years ago, he said. Wang said he hoped the two countries could handle the relationship from a strategic and long-term ...
China and Laos reaffirmed their determination to further advance their traditional friendly relations as senior leaders of the ruling parties of the two countries met in Beijing Wednesday. He Guoqiang, member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China (CPC), met Sisavath Keobounphanh, chairman of the Central Committee of the Lao Front for National Reconstruction. Sisavath Keobounphanh, 81, has visited China many times over t ...
The Democratic Party of Japan (DPJ) Secretary General Katsuya Okada said Wednesday that the DPJ will continue to advance Japan-China relations after taking the reins of government. Okada made the remarks at a symposium to mark the 60th anniversary of the founding of the People's Republic of China following the DPJ's landslide victory over the ruling Liberal Democratic Party in the lower house election Sunday. "The DPJ has, as always, attached great importance to Japan-China relations and ...
Can anyone else catch that intense aroma of bootleg in the air? I don't mean to point fingers at China because hey... all the major mobile company's around the world have made Iphone / smart phones that are comparable to the Iphone.
These phones are China's homegrown challenge to the Iphone which has finally reached a "non-exclusive" agreement with China Unicom, which will be the initial carrier Apple works with in the mainland.
Employees of China Mobile show off different designs of OPhone handsets at the first-issuing ceremony in Beijing, China, August 31, 2009. (Xinhua/Yuan Zhou)
I say... Let the competition begin. I just wonder if something shady is going going on behind the scenes because China Mobile and China Unicom are more like reflections of one another in terms of their company structure and place in the Chinese economy. Yes, China Mobile is bigger and has far great market share, and yes both company's have separate management and are traded on different tickers on various stock exchanges.
Nonetheless, the government has a heavy hand in both and I wonder how Apple is dealing. A friend of mine who is quite observant and logical once told me
"Government wants two big company's to make illusion of real competition, but read story is two company's mean more important jobs for people with connections and image of fair market."
I personally own shares of China Unicom ADR here in the states. Meaning... despite what people tell me about the real situation with telecoms in China, officially, I buy into the hype.
China Unicom (CHU) - Year to date performance Aug 31, 2009
China has become a "privileged partner of Latin America," and the region needs to define a joint strategy to develop its ties with China, an official of the Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday.
The "post- (economic) crisis will find a bigger and more important China than the one it has been in the world economy," said Osvaldo Rosales, ECLAC's director for international trade and integration.
Citing the World Trade Organization's report on Tuesday that China had displaced Germany in the first half of 2009 as a leading exporter, Rosales observed that "this has been reflected in its (China's) growing relative presence in the world's trade, mainly in Latin America." "The numbers of destinations and exporters show that China has become a privileged partner of Latin America," Rosales told Xinhua in an interview.
This was because the Chinese government had "already defined the strategy for Latin America in its white book," Rosales explained, adding that the region needed to do the same.
Regarding bilateral trade relations, Rosales worried about Latin America's export structure, which focused on a few products and natural resources. He called for a diversification of the export basket.
"Latin America is in some ways linked with China, the world economy's engine of the 21st century, but it is doing that with an export structure from the 20th century," Rosales observed.
Two articles grabbed my attention from Chinamining.org this morning. They both relate to the fact China's ethnic regions also happen to be home to a great proportion of the countries commodity and energy wealth.
You can click on the titles of each respective article to access the stories in full from Chinamining.org.
--> Tibet has copper ore reserves of 30 mln t, half of China's total Southwest China's Tibet Autonomous Region has geological copper ore reserves of more than 30 million tons, accounting for over a half of the country's total, according to the region's geological prospecting bureau.
The bureau director said that Tibet is the largest region in China by its copper resources reserves. By 2008, 329 copper ore deposits had been found in the region, including 11 large deposits and six mid-size ones. Its Qulong copper ore mine, the largest one in Asia, is estimated to possess copper reserves of more than 10 million tons.
Tibet - Potala Palace [Photo I personally took during a trip I made to the region in December 2006, Bennett A. Reiss]
--> 1st Kunming Mining & Cooperation Forum (Sept 2-4, 2009) Entering the 21st century, the global mining industry is writing a new chapter. It is an era of resource economy. Mining market becomes more open and capitalized. Mineral exploring as well as financing becomes more diversified.
Yunnan is rich in natural resources, known as "the Kingdom of non-ferrous metals". More than 150 kinds of minerals have been proved there, accounting for 92.6% of Chinese total. Among the proved 92 minerals, 9 of them have the largest reserves in China and 21 of them are listed within top three. Mining as one of the five pillar industries in Yunnan plays an important role in the development of the local economy.
Earlier this summer another ethnic region grabbed world headlines. Does the region of Xinjiang ring any bells? Xinjiang is home to a large number of China's ethnic Muslims, is culturally quite similar to other republics in central Asia and is often referred to as East Turkestan. Xinjiang is also on track to become China's most important oil and gas producing region.
This article, "Xinjiang's oil and gas equivalent ranks first in China" is from little over a year ago (July 2008), asserts that Xinjiang has already passed Daqing (China's other oil producing region) as the number region in oil and gas output.
As one hand seizes development, the other taps into the potential to allow Xinjiang's oil output to soar. The latest statistics show that Xinjiang's annual oil and gas equivalent output has already exceeded that in Daqing and ranks the first in the country.
The third national resources evaluation shows that: Xinjiang's total oil and natural gas resource reserves exceeded 30 billion tons. Although it is rich in resources, Xinjiang still requires development and a reduction in consumption. Recently, Xinjiang has been producing 75,000 tons of crude oil daily, occupying 14.4 percent of the country's daily crude oil output. In 2007, Xinjiang's oil and gas equivalent reached 44.94 million tons, and ranked at the top. In all likelihood, the development of commodity sectors in these regions will be controlled by Beijing...not locals. What industries can these regions develop as to diversify their economic development from commodity sector led growth?
Yunnan and Tibet have great potential for becoming tourist meccas in China. Yunnan, the less politically sensitive of the two, has already emerged as one of China's most popular tourist destinations.
Furthermore, Yunnan's strategic location in SE Asia put it in a good place to be at the center of the future growth of trade and exchange between China and the countries of Vietnam, Myanmar and Laos.
[Map courtesy of leafgovso.co.uk]
Tibetan tourism is growing as well, but remains inhibited by the sporadic changing of restrictions and the need to acquire a special internal visa or permission to visit.
When analyzing this situation from a the perspective of the people in the Chinese government determining domestic policy, China can not and will not simply let three of its most resource rich regions control the development their natural resource industries.
Sad as it may be for some members of the minority groups in these regions, one thing is sure--Xinjiang, Tibet and Yunnan are all going to remain integral pieces of China for a long time and be subject to increased inflows of ethnic Han Chinese seeking economic opportunities.
Let me clearly state, the opinions expressed in this analysis not reflect how I the author, (Bennett A. Reiss) feel on a personal level. Allow me to try to put things into perspective with two analogies which I feel help explain the Chinese point of view.
Canada is full of resources from top to bottom. I am by no means an expert, but I highly doubt the Eskimo and Native American populations have much say about development of Canadian mining and energy companies in their ancestral territories.
Likewise, a more mainstream analogy might be the US in Iraq. To the "logic" driven Chinese bureaucrat, China is far more justified in their domestic policy towards these resource rich regions than the United States is in Iraq. On the surface the US is subjugating a foreign population in a country half way across the globe from its own territory. China in its own official opinion is not subjecting anyone, and to further add to the Chinese argument, these regions have been a part of China for centuries if not thousands of years.
Even if your feelings on the war in Iraq produce other rationalizations for the US invasion (outside of oil), try to justify this to a country with over 1.4 billion people to feed and improve the lives of.
I welcome debate in this area to any readers who would like to discuss this topic further.
China wants to boost cooperation with members of the Association of Southeast Asian Nations to develop trade and increase investment, said Chinese Commerce Minister Chen Deming.
Five Southeast Asian nations may set up a rice-trade association next year to cooperate in stabilizing rice prices, a Thai official said.
Thailand, Vietnam, Cambodia, Laos and Myanmar will also cooperate on other issues related to food security and production, said Chiya Yimvilai, a spokesman at a meeting of Asean economic ministers in Bangkok. The countries would also work together on developing rice products, he said.
Petroleos de Venezuela SA and a group of Russian oil companies plan to spend $30 billion on a joint venture in Venezuela’s Orinoco region.
The 40-year venture will seek to produce crude in the Junin 6 area and may expand to other Orinoco blocks, Russian Deputy Prime Minister Igor Sechin told reporters in St. Petersburg today after meeting with Venezuelan Vice President Ramon Carrizalez. Russian investors will include OAO Gazprom, OAO Rosneft, OAO Lukoil, TNK-BP and OAO Surgutneftegaz. The venture will be signed “in the coming months,” Sechin said.
Mexico president Felipe Calderón and Uruguay’s Tabare Vazquez signed on Friday in Montevideo a Strategic Association accord to strengthen political dialogue and bilateral trade relations in the framework of the 2004 free trade agreement.
[Peru - Brazil] -Brazilian President to visit Peru to strengthen strategic alliance - Andina The next arrival to Lima of Brazilian President Luiz Inacio Lula da Silva will contribute to create a new strategic alliance to face Asian markets when signing several trade agreements, the President of Peru-Brazil Integration Chamber Miguel Vega Alvear.
“The arrival of Brazilian President will strengthen the progress achieved up to now in this Peru-Brazil strategic alliance and it will create a new stage in which both countries can face Asia-Pacific markets,”
Aug 14, 2009 -- State-owned Yanzhou Coal Mining Co. buys Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), reports Bloomberg
Aug 13, 2009 -- Sinochem Corp., China’s biggest chemicals trader, makes an offer to buy to buy Emerald Energy Plc for 532 million pounds ($881 million). Giving Sinochem Corp., access to oil fields in Syria and Colombia, reports Bloomberg
“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper. There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day." Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview yesterday.
China's Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.
China's top negotiators in the bitter and protracted row over the price of iron ore seem destined never to agree - risking a loss of face that will raise questions about whether they are up to the job and who it is they are actually representing.
Their apparent refusal to compromise is damaging the competitiveness of smaller domestic steel mills, forcing them to buy from their larger counterparts, say analysts. The bigger firms have been content to pay whatever the spot price is for ore and pass on the premiums.
China National Petroleum Corp (CNPC), the country's largest oil and gas producer, will speed up overseas acquisitions in regions such as Africa and South America this year, in a bid to boost China's quest for energy security.
A large-scale restructuring of the coal industry in China's major coal-producing province of Shanxi, starting at the end of this month, will reduce accidents and improve efficiency by shutting down small coal mines, officials said.
"The restructuring this time is the largest after years of adjusting the coal industry's structure," Miao Huanli, planning section director of Shanxi provincial coal bureau, said yesterday.
Chinese oil conglomerates China National Petroleum and Cnooc have offered to pay an estimated $17 billion usd for all of Repsol YPF's state in its Argentine unit called YPF.
You can read the Wall Street Journal's paraphrased article (the original costs money) at thestreet.com, by visiting this article.
Will this deal actually be completed? China South America reported on this possible deal back on July 7, 2009. You will notice, the offer at this point was only $14.5 billion for a 75% stake. China has since upped the offer and is now looking to buy the entire thing.
Why China? Are you angry over Australia rejecting your Rio bid? Are you feeling flustered that countries from the industrialized world, but also in Africa and Latin America are starting to think twice about selling the rights to their raw materials?
I don't blame them, after all, Australia is quite similar to South American commodity producing countries. Two note worthy and simple similarities include
A large portion of GDP is generated from commodity exports
The relative strength or weakness of domestic currencies such as the Ausie Dollar, Argentine Peso, Peruvian Sol and Brazilian Real, are all inherently linked to the global market price of the commodities the countries export. [ie: if the spot price for copper drops 50%, observe what happens to Peru and Chile's Peso's.
According to the WSJ article, the main obstacles to this deal include
Spain is hesitant to see some of its best assets in Argentina be sold to China
Argentina's government has no financial stake in YPF, but nonetheless under Argentine law has the right to veto decisions such as transfer of ownership. In my personal opinion, this translates into who is willing to pay more “under the table” to the Argentine government.
China National Petroleum and Cnooc are state owned organizations. Despite their growing influence and presence in oil markets around the world, many governments still remain weary of doing business with companies officially tied to a foreign government.
Jonathan (Jono) Warren is a friend of mine who is currently living in Beijing, but is moving to Kashgar, Xinjiang. You know the place where all the riots occurred a little while ago. He is beginning a tea business, where he will be importing Pakistani tea into China, packaging it in China and then selling it to super markets in the West.
Sounds crazy right? Well, regardless of your thoughts of this brief description of his business, the man is quite well read and paints a incredible story with his words... which you can find at his blog Garbage and Noodles (http://garbageandnoodles.blogspot.com/)
Up in Changbaixian, Liu Baiguo was that grower. The owner of a local Chinese-medicine shop (中药房), recommended Mr. Liu as his farm was the closest to the city, but produced some of the best ginseng. Liu walked into the shop and asked for the ones who were looking for him. He seemed genuinely excited to be able to show his roots to two bright-eyed American entrepreneurs.
He led us out of the shop, out of the marketplace, and into his car - a police car that he got to keep after his work as a chinese border customs official. At his fields, he told us everything he knew about ginseng, how he inherited his fields, how there are 92 workers working for him, how he plants trees on the plots where the ginseng is picked because the roots use up all the nutrients...
I thought it was very appropriate and a nice coincidence that upon returning from my business trip to China & Singapore, I turn on my blackberry and am flashed with this NYT article: American Graduates Finding Jobs in China.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
BEIJING — Shanghai and Beijing are becoming new lands of opportunity for recent American college graduates who face unemployment nearing double digits at home.
“I’ve seen a surge of young people coming to work in China over the last few years,” said Jack Perkowski, founder of Asimco Technologies, one of the largest automotive parts companies in China.
“When I came over to China in 1994, that was the first wave of Americans coming to China,” he said. “These young people are part of this big second wave.
Let's be honest. China has not escaped the shocks of the global economic recession. There are empty office and commercial buildings around Beijing’s Central Business District. Rents are sky rocketing and apartments are remaining unsold and unoccupied. Factories are closing in Southern China. Political turmoil has touched regions where minorities are great in number. And… so on.
Nonetheless, after living and working in the country at the beginning of the crisis (Sept - Dec 08), and returning to do business this past month—the fact remains there is one thing you can find in China that is missing from my colleagues and friends here in the North-Eastern United States, down in Lima, Peru and Belo Horizonte, Brazil and across the pond in the UK and France.
“A positive outlook on the future.”
Walk the streets of Beijing and the city is full of people just as the NYT article above describes; motivated and adventurous young entrepreneurs and professionals from all walks of life that have come to China to build their respective futures.
Likewise, a considerable portion of China’s younger generations remain confident and positive about their futures. In a country of 1.4 billion people (probably more) you will hardly ever find a general consensus. What applies in Beijing, will not apply in western China in the city of Xinjiang. This does not change the fact, that the life styles and future aspirations of China’s youth are considerably different than those of their parents and grandparents.
The Chinese are not ignorant; they know things are probably worse than their government lets on. At the same time, critics in the west are too quick to point fingers and predict imminent economic collapse. Sometimes it is a bursting real estate bubble, an over-valued stock market due for a correction, plunging exports, or decreasing import demand. Critics will always find a way to well… criticize.
On the road today updating from my handheld again and feeling incredibly cool and sophisticated, all while reinforcing the popular belief that we are indeed way too dependent on technology these days.
Here are two short excerpts from different Bloomberg articles which shed some light on the true health and capacity of the Chinese economy. What should you take away if you decide to click through to Bloomberg and read the entire articles? Basically that China is a economic powerhouse and still has room to grow. Likewise, it is not a cure all to the woes of the global economy.
This is important to realize because the government in China will do all it can to produce good economic news, sometimes misleading the international investment community. But hey! Most countries do too. ChinaSouthAmerica, as it always does encourages readers to form own opinions and always try to read in between the lines.
China failed to complete a 28 billion yuan ($4.1 billion) government bond sale for the first time, as the central bank withdrew cash from the financial system to reduce inflation pressures.
The Ministry of Finance sold 27.5 billion yuan of one-year notes at a yield of 1.06 percent, compared with 0.89 percent at the last auction of similar-maturity debt in May, according to Chinabond, the nation's biggest debt-clearing house. Later, the People's Bank of China it said will resume the sale of one-year bills tomorrow after an eight-month suspension.
"The failure to sell all government bonds in an auction is quite rare," said Nie Shuguang, a fixed-income analyst at Industrial Bank Co. in Shanghai. "Investors are worried the central bank will fine-tune its monetary policy and drain capital from the financial market."
Chinese stocks may be headed for a "sizable correction" after a so-called momentum indicator for the Shanghai Composite Index advanced to the highest in at least five months.
The 14-day relative strength index, or RSI, for the Shanghai Composite climbed to 83 this week, above the 70 threshold that signals to technical analysts an asset or market is poised to fall. The indicator compares the magnitude of recent gains to losses. The last time the Shanghai gauge's RSI breached the 80 level, in February, the stock measure sank as much as 13 percent in following two weeks.
"The RSI shows that the market is in a pretty overbought situation," said Barole Shiu, a Hong Kong-based technical analyst at UOB-Kay Hian Ltd. "If history repeats itself, there's a very strong chance we'll see a sizable correction."
