President Obama’s Valentine’s Day may have been just a bit sweeter had it not been for his meeting with Xi Jinping, the current Vice President of China and likely presidential successor.
You see, Xi Jinping arrived to the White House carrying a good deal of baggage… baggage that the White House might not have been so happy to unload.
Because far from being yesteryear’s unstoppable, domineering engine of growth, China’s come into plenty of problems as of late – market stagnancy, strained European relations, its widely criticized policies regarding the Middle East…
Global concerns, to be certain. And so, too, concerns of the United States.
And questions about China’s future – in the global economy, its foreign relations and human rights – are all open to debate. But we know one thing almost certainly: Its future is going to be presided over by Xi Jinping.
Mr. Xi… Probably No Mystery
Named the heir apparent to current President Hu Jintao (scheduled to retire next year), Xi Jinping is unlikely to be the bringer of radical change that some might wish for.
Yes, prior to his vice presidency, Xi presided over the Fujian Province and then the Zhejiang Province. And yes, his tenure in these areas was marked by a more free-market approach and rapid economic growth by removing regulations.
But even so, he’s far from a libertarian.
He’s regularly given fiercely Marxian speeches at the Communist Party’s main school – not the greatest sign of a budding capitalist.
As for any personal convictions that might deviate from the party line, if he has them, he’s done a standup job keeping them hidden.
And when all’s said and done, it’s likely that he’s been selected as the next President because Chinese government factions find him the least objectionable out of the available candidates.
Given that, you might consider him the Chinese Mitt Romney…
So if Xi Jinping is going to be more status quo as far as China’s politics are concerned, then what’s really on the table?
Numbers Talk… Politicians Walk…
As already mentioned, not everything was tea and polite conversation for Xi Jinping at the White House.
A few of the contentious issues: China’s manipulation of the yuan… its ability to provide relief for the European crisis… its (lack of) enforcement of U.S. intellectual property rights… its widely criticized veto of a United Nation’s resolution to intervene in Syria…
The New Case Against Hillary!
According to the mainstream media, we should all have voted for “crooked” Hillary.
But if she was the president, you would never have this chance to turn a small stake of $100 into a small fortune.
Sure, Trump is not perfect.
But even if you didn’t vote for him…
Once you see this video, you might like him a little more.
But that’s neither here nor there. Because behind every uninformative, ceremonious political exchange stands the numbers – more significant and more telling. So you’ll forgive me if I don’t dwell too long on the immaterial.
As a short-term boon for China, January’s numbers showed a 0.5% decline for Chinese exports, down from growth of 13.4% in December. The trade surplus for 2011 shrank to 2.7% (down from a high of 10.1% in 2007).
By the U.S. Treasury’s own description, a trade surplus greater than 4% suggests an imbalance in currency levels. So by that definition, the yuan is now fairly valued.
This gave Xi Jinping ammo to defer immediate demands for a currency revaluation, but the issue won’t go away – so long as American manufacturing struggles and the jobs issue drives our national conversation.
The overall trade surplus is misleading, anyway. China’s surplus with the United States alone actually rose 32%. That means the undervalued yuan could be the only thing keeping China’s economic measures from being much worse.
And China’s stock market has been stagnant for a full three years now, as measured by the iShares FTSE China 25 Index (NYSE: FXI). The case for shorting China essentially rests on over-inflated property values and an economy based on construction for unneeded buildings financed by cheap money.
As far as the bull case? There’s no news possible that could erase the myriad concerns about China’s sustainability. That’s why going short on China’s market now has almost no downside and incredible upside.
There’s no doubt that China faces slowing growth and the prospect of an economic collapse. And there’s no doubt that the United States will only allow the overvalued yuan to depress U.S. exports for so long.
The question is: How long can Xi Jinping and China keep this balancing act up? And which side will fall first?
Ahead of the tape,