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Uncle Wally
08-10-2014, 17:52
Sorry, America. China just overtook the US to become the world's largest economy, according to the International Monetary Fund.

Chris Giles at the Financial Times flagged up the change. He also alerted us back in April this year that it was all about to happen.

Basically, the method used by the IMF adjusts for purchasing power parity, explained here.

The simple logic is that prices aren't the same in each country: A shirt will cost you less in Shanghai than San Francisco, so it's not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist's Big Mac Index is a great example of these disparities.

So the IMF measures both GDP in market exchange terms, and in terms of purchasing power. On the purchasing power basis, China is overtaking the US right about now and becoming the world's biggest economy.

We've just gone past that cross-over on the chart below, according to the IMF. By the end of 2014, China will make up 16.48% of the world's purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion):


http://finance.yahoo.com/news/china-just-overtook-us-worlds-090801574.html

AstarD
08-10-2014, 17:56
It's about time, really.

It has a larger land mass than America. It's got four times the human capital that America has. And I'm sure it's got a better education system.

AstarD
08-10-2014, 18:17
China will probably be unstoppable after it takes over Russia. Better start learning Chinese.

Benedikt
08-10-2014, 18:57
China will probably be unstoppable after it takes over Russia. Better start learning Chinese.



and neither will they -invade- America. so we can keep english as well.

AstarD
08-10-2014, 19:01
They won't need to "invade". Loads of single Chinese men looking for wives. Newfound prosperity. Wide open spaces in the East of Russia (and increasingly in the West as everyone moves into the city).

Fantastika
10-10-2014, 02:44
China can re-value the renminbi from 8:dollar to 4:dollar and make itself twice as rich.

annasophia
10-10-2014, 03:14
I've never understood America's obsession with being the Biggest #1 everything. Meh, so what?

It's not hard to understand that a country with over a billion people might develop a boisterous economy.

We're still first in a lot of things. Like having the world's largest prison population and the world's biggest prescription drug use and the world's most expensive health care. We can still be #1.

Armoured
10-10-2014, 10:22
I've never understood America's obsession with being the Biggest #1 everything. Meh, so what?

It's not hard to understand that a country with over a billion people might develop a boisterous economy.

Do you find that the USA in general is obsessing with or particularly worried about this change? I mean, it's newsworthy in that the USA has been the largest economy for a long time now, so covering it in the press is understandable.

I'm not in the states and don't closely follow US press, but I don't see any big reaction or freaking out. As you put it, China's a big country and so this is more a sign of less poverty there than anyone 'overtaking' anyone. I do see articles about 'what does this change' of course.

On a geeky note, I get annoyed by the breathless reporting of GDP Purchasing Power as it's an important measure but not the only one. Chinese GDP in monetary terms is still less than 60% of US GDP. I'm not saying one is right and the other wrong, just that which measure it makes sense to use depends on what you're talking about.

And discussions about China also seem to bring out latent (or not so latent) anti-Americanism. I keep reading long screeds about how China has massive US$ reserves (and hence USA is doomed blah blah blah), usually combined with some measure of goldbuggery anti-debt anti-bank domesdayism about the US.

China, however, has a ratio of debt-to-GDP of 250% (not government debt, all debt) - a very, very high figure. So in some key respects is more dependent on debt-driven growth than the 'usual suspects' (of goldbuggery).

AstarD
14-10-2014, 13:33
Russia and China Boost Student Exchange Programs
By Anna DolgovOct. 13 2014 18:48 Last edited 18:48

Vladimir Filonov / MT
Chinese tourists walking near VDNKh last week. Most foreign tourists to Russia this year have been from China.

Russia and China plan to increase the number of students studying under mutual exchange programs to 100,000 in five years, Russian media has reported, shortly after Moscow canceled a popular exchange program with the U.S.

The announcement came ahead of a meeting between Russian Prime Minister Dmitry Medvedev and his Chinese counterpart Li Keqiang in Moscow on Monday, when several dozen cooperation agreements on trade, investment, energy and cultural affairs were expected to be signed.

Currently, about 25,000 Chinese students are attending Russian colleges and universities, while 15,000 Russian students are studying in China. Moscow and Beijing plan to raise the total number to 100,000 by 2020, Interfax reported Monday, citing an unidentified source from the Russian Cabinet.

As part of the 2014-15 Russia-China Youth Friendly Exchange program — a bilateral year set up to strengthen cultural ties — more than 300 events in both countries were scheduled throughout the year, with more than 7,000 students having taken part so far, according to the spokesperson.

The spokesperson also announced that China had taken first place in the number of visits to Russia this year, with more than 500,000 Chinese citizens coming to Russia in the first six months of this year alone.

"Last year, China came in second by the number of tourists visiting Russia [with 370,000 visits]. But in the first six months of 2014 alone, China has already taken the leading position — more than 500,000 Chinese citizens have visited Russia so far, and 135,000 of them were on tourist trips," the source was cited as saying by the TASS news agency.

The apparent surge in Russia's popularity comes as Moscow pivots toward China amid deteriorating relations with the West.

Even as China and Russia vowed to increase and strengthen student exchange programs on Monday, some Russian students were likely still reeling from Moscow's recent decision to suspend an exchange program with the U.S. that had been running successfully for two decades. Russian officials have said that the FLEX, or "Future Leaders Exchange," program was getting scrapped because a Russian student stayed in the U.S. instead of returning home.

Russia's turn eastward is also thought to be aimed at softening the economic blow from Western sanctions imposed over the annexation of Crimea and Russia's alleged meddling in Ukraine, as well as the ban on Western food imports that Moscow has imposed in response.

With Western investments leaving Russia earlier this year, China appears to have quickly stepped in. But agreements signed so far indicate that Beijing is primarily interested in Russia's natural resources, with the remaining trade apparently going to Russian military technologies.

A deal signed in May, which Russian President Vladimir Putin praised as "epochal," is expected to deliver billions of cubic meters of natural gas to China's growing economy, at a price that some officials have suggested could be less than what Russia is getting under earlier discount contracts for its gas deliveries to Europe.

While the price of the deal has not been disclosed, sources at the companies involved said Russia's state-controlled gas giant Gazprom refused to go below $350 per thousand cubic meters, compared with a discount rate of $350-$380 under long-term contracts with European utilities, Reuters reported.

On Monday, the two leaders were expected to discuss investment in that project, called the "Power of Siberia" pipeline. The pipeline, which has yet to be built, will link east Siberian gas production with China.

Observers have expressed concerns about the project's financing and further progress, however, noting that while Chinese investors' hands are not tied by Western sanctions, they may be less motivated to cooperate.

Russia has been seeking to diversify projects and go beyond raw material exports that dominate the trade, "but China is not interested," the head of the Asian Studies School at the Higher School of Economics in Moscow, Alexei Maslov, was quoted as saying by Bloomberg on Sunday.

China has expressed an interest in Russia's weapons systems, however.

Arms trade had been held back for decades by Russia's concerns about China's ability to reverse-engineer its weapons, but Putin agreed this spring to sell S-400 missile systems to Beijing, which had been seeking them for several years, Lenta.ru has reported.

http://www.themoscowtimes.com/news/article/russian-and-china-boost-student-exchange-programs/509353.html

Nobbynumbnuts
14-10-2014, 14:01
I'm always amused by all the glee from non Chinese that accompanies China's achievements, especially when they seem to challenge the US.
Have these people considered what China will be like to deal with when it is the largest economy in the world and a superpower?

Be careful what you wish for......;)

Yaks
14-10-2014, 14:26
China can re-value the renminbi from 8:dollar to 4:dollar and make itself twice as rich.

If it did that it would destroy its export market(as well as increase inflation in the US.) It would make America competitive at exports and bring manufacturing jobs from China back to the US.

It clearly isn't in China's interest to do such a thing.

Fantastika
14-10-2014, 16:21
China, however, has a ratio of debt-to-GDP of 250% (not government debt, all debt) - a very, very high figure.


Armoured's patented disinformation:

Armoured omitted the next sentence: "By comparison, the US had a 260% total-debt-to-GDP ratio in 2013 and Japan has 415%, according to the FT."

Armoured
14-10-2014, 16:34
Armoured's patented disinformation:

Armoured omitted the next sentence: "By comparison, the US had a 260% total-debt-to-GDP ratio in 2013 and Japan has 415%, according to the FT."

A valid point, no disinformation intended, and unlike you, can recognise an omission.

I should have noted amongst developing / emerging markets. There are a few exceptions in this group (South Africa, Thailand, Malaysia), but China's are quite high for developing markets. It has also grown very quickly.

http://www.ft.com/intl/cms/s/0/895604ac-10d8-11e4-812b-00144feabdc0.html#axzz3G7bbnGHT

Feel free to debate whether this is a relevant distinction (emerging/developed markets) in China's case, but it is objectively a pretty high figure _compared to countries at comparable levels of development_.

But it was indeed an omission on my part.

[See how I did that? I admitted my error. I didn't claim you were nitpicking or just claim your sources were biased. I explained what I meant and where I went wrong. And I think I did it without insulting anyone. It's possible.]


“China’s current level of debt is already very high by emerging markets standards and the few economies with higher debt ratios are all high-income ones,” said Chen Long, China economist at Gavekal Dragonomics, a research advisory. “In other words China has become indebted before it has become rich.”

Armoured
14-10-2014, 17:25
China's growth seems to be dropping off a cliff. There is a serious data issue connected with capital flight.

http://blogs.ft.com/beyond-brics/2014/10/13/china-heads-for-q3-gdp-slump-despite-export-surge/

Armoured
14-10-2014, 17:39
@Wally: you may want to take a look at this.

I don't usually read Shedlock as he is into a bit too much goldbuggery for my tastes, but he's smart. Basically, China has its own issues.

http://globaleconomicanalysis.blogspot.ru/2014/10/end-of-us-dollar-hegemony-not.html

I'll crosspost to the other thread: but basically, it doesn't matter a fig what currency oil is priced in.

And don't expect China to be your saviour: very serious people think its financial system is completely insolvent. You'll see Shedlock quotes Michael Pettis a lot - he is very, very much worth reading.

Nobbynumbnuts
14-10-2014, 17:48
China's growth seems to be dropping off a cliff. There is a serious data issue connected with capital flight.

http://blogs.ft.com/beyond-brics/2014/10/13/china-heads-for-q3-gdp-slump-despite-export-surge/

That's right and China has debt worries of it's own that many market analysts claim is the single biggest threat to world economic stability.

Fantastika
14-10-2014, 17:56
I should have noted amongst developing / emerging markets.

Feel free to debate whether this is a relevant distinction (emerging/developed markets)



The world's largest economy is an "emerging market"? :rofl:

Fantastika
14-10-2014, 18:03
That's right and China has debt worries of it's own that many market analysts claim is the single biggest threat to world economic stability.

"Threat"? I think they already have been practicing economic *war* for the past 3 decades. They are the only major country which sets the value of their currency, (all other currencies "float") giving Red China more power to manipulate trade and its own and other economies.

China, Inc. steals technology, wholesale, from other countries, whole factories at a time. This looting is sometimes contested in the courts, which China, Inc. laughs at.

Yaks
14-10-2014, 18:10
The world's largest economy is an "emerging market"? :rofl:

yes have you seen how the "average" Chinese person lives? Though 600 million Chinese have gone out of poverty in the last 30 years, 27% of the population still are on $2 a day or less.

but to be fair to China, its rate of growth was never sustainable-and yes they have gone over the top building cities with no people and pork barrelling projects of roads to nowhere etc all for the sake of construction for construction sake. but really a lot is simple maths. each year it grows means a larger base it has to grow from the next year. it's easy to grow from nothing, much harder as the economy gets larger. Even if China dropped to 5 or even 3% in raw terms in subsequent years that is still impressive because of the size we are now dealing with.

Yaks
14-10-2014, 18:19
"Threat"? I think they already have been practicing economic *war* for the past 3 decades. They are the only major country which sets the value of their currency, (all other currencies "float") giving Red China more power to manipulate trade and its own and other economies.

China, Inc. steals technology, wholesale, from other countries, whole factories at a time. This looting is sometimes contested in the courts, which China, Inc. laughs at.

Actually the Chinese decided not to play the US game. The US printed money
devaluing their currency in some ways to make them more competitive and also to have the costs of their debt less. The Chinese simply pegged their currency to the US one(within a floating range) so the yuan followed the US dollar down. Meaning trade between the two were on much the same terms.

US senators going on about currency manipulation by the Chinese should look at their own currency too.

while this didn't change much between the two countries, it flooded the rest of the world with cheap chinese exports that no one could compete with.

Anyway that trend is reversing now. The yuan has appreciated considerably as the Chinese government recognises that a stronger yuan would help local consumption and the economy can handle it, and of course the US dollar is rising with a start to rate rising mid 2015 already factored into the bond market and currency markets. This is the start of the US dollar clawing back.

Fantastika
14-10-2014, 18:48
The yuan has appreciated considerably as the Chinese government recognises that a stronger yuan would help local consumption and the economy can handle it, and of course the US dollar is rising with a start to rate rising mid 2015 already factored into the bond market and currency markets. This is the start of the US dollar clawing back.

The yuan has appreciated - yes, because Beijing decided to let it appreciate. They set the rate every day.

I have always wondered how they get so much money. If they set the price of the Yuan on Monday morning, and they know what the (different) price will be on Tuesday, they can just go out to the Forex market on Monday afternoon, load up on futures options, and clean up Tuesday morning. They could do this every day.

Nobbynumbnuts
14-10-2014, 19:57
"Threat"? I think they already have been practicing economic *war* for the past 3 decades. They are the only major country which sets the value of their currency, (all other currencies "float") giving Red China more power to manipulate trade and its own and other economies.

China, Inc. steals technology, wholesale, from other countries, whole factories at a time. This looting is sometimes contested in the courts, which China, Inc. laughs at.

My point was that, if China implodes due to over leveraging (many of the municipalites have borrowed excessive amounts) the fallout will result in another finical crisis.

China has also been under increasing pressure (from the US among others) to allow the Yuan to increase to a more realistic level.

Uncle Wally
14-10-2014, 21:24
@Wally: you may want to take a look at this.

I don't usually read Shedlock as he is into a bit too much goldbuggery for my tastes, but he's smart. Basically, China has its own issues.

http://globaleconomicanalysis.blogspot.ru/2014/10/end-of-us-dollar-hegemony-not.html

I'll crosspost to the other thread: but basically, it doesn't matter a fig what currency oil is priced in.

And don't expect China to be your saviour: very serious people think its financial system is completely insolvent. You'll see Shedlock quotes Michael Pettis a lot - he is very, very much worth reading.

Maybe the US will just pay back some of the $1.25 trillion



The U.S. debt to China is $1.25 trillion as of July 2014. That's down a bit from the $1.3 trillion in Treasury notes it owned in 2013.

China owns about 21% of the total of $5.9 trillion held by foreign countries. The rest of the more than $17 trillion debt is owned by either the American people, or by the U.S. government itself


http://useconomy.about.com/od/worldeconomy/p/What-Is-the-US-Debt-to-China.htm

Armoured
14-10-2014, 21:35
Maybe the US will just pay back some of the $1.25 trillion

It does so all the time. China holds treasuries, when they're due, China gets paid, and then China buys more. No big deal.

And some day, if it wants, China can use those dollars to buy something else - whatever it wants. Actually it does this to some degree now, but seems scared it can't find a better borrower than the US government.

And if it wants to sell the dollars and buy, say, Euros, it just has a different set of problems. It can't manage its currency the way it does now if it switches.

Uncle Wally
14-10-2014, 21:39
It does so all the time. China holds treasuries, when they're due, China gets paid, and then China buys more. No big deal.

And some day, if it wants, China can use those dollars to buy something else - whatever it wants. Actually it does this to some degree now, but seems scared it can't find a better borrower than the US government.

And if it wants to sell the dollars and buy, say, Euros, it just has a different set of problems. It can't manage its currency the way it does now if it switches.


China stop buying US treasuries some time last year. You can see they went from 1.3 to 1.25 trillion.

Armoured
14-10-2014, 21:43
China stop buying US treasuries some time last year. You can see they went from 1.3 to 1.25 trillion.

Ok. And so what? It doesn't seem to support any point you're trying to make.

Uncle Wally
14-10-2014, 21:51
Ok. And so what? It doesn't seem to support any point you're trying to make.


They're getting out of America bonds and into,

China's insurance group buys the Waldorf

http://www.china.org.cn/business/2014-10/08/content_33697705.htm

Nobbynumbnuts
14-10-2014, 22:30
They're getting out of America bonds and into,

China's insurance group buys the Waldorf

http://www.china.org.cn/business/2014-10/08/content_33697705.htm

Chinese companies and individuals have been investing in foreign real estate for a long time. Makes sense to diversify assets and to also take money out of China.

Did the US bond market tank today as a result of that article? :p

Uncle Wally
14-10-2014, 22:44
Did the US bond market tank today as a result of that article? :p



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Judge
15-10-2014, 00:15
I'm always amused by all the glee from non Chinese that accompanies China's achievements, especially when they seem to challenge the US.
Have these people considered what China will be like to deal with when it is the largest economy in the world and a superpower?

Be careful what you wish for......;)


For the Chinese to keep the number 1 spot they will need to grow grow grow and for that to happen their thirst for black gold and gas will be in high demand,and their neighbour Russia has got lots of what the Chinese need.

You have Russia feeding from 2 sides, to the main populated areas.

http://news.bbcimg.co.uk/media/images/47886000/gif/_47886103_oil_gas_china_466.gif

Nobbynumbnuts
15-10-2014, 01:22
For the Chinese to keep the number 1 spot they will need to grow grow grow and for that to happen their thirst for black gold and gas will be in high demand,and their neighbour Russia has got lots of what the Chinese need.

You have Russia feeding from 2 sides, to the main populated areas.

http://news.bbcimg.co.uk/media/images/47886000/gif/_47886103_oil_gas_china_466.gif

China are not in any No.1 spot, except having the largest population in the world. (soon probably, to be over taken by India)
They don't have the largest economy in the world either. They have a long, long way to go to overtake the USA in this respect.

It can be learnt from the experience of the 20th century that you don't want to be beholden to one country/region for all your energy needs. To do so is to be held to ransom. You can bet the farm the Chinese will not replicate this mistake...;)

Judge
15-10-2014, 01:37
China are not in any No.1 spot, except having the largest population in the world. (soon probably, to be over taken by India)
They don't have the largest economy in the world either. They have a long, long way to go to overtake the USA in this respect.

It can be learnt from the experience of the 20th century that you don't want to be beholden to one country/region for all your energy needs. To do so is to be held to ransom.

Talks about who is number 1, I'll leave that to the number crunchers...


You can bet the farm the Chinese will not replicate this mistake...;)
For sure they know this, but looking at the map, Russia's pipeline coming down from the north is no brainer,this helps supply much needed oil/gas to populated areas,which can't be reached, they could be reached but at a hefty price..
You mention India, Russia is also in talks about supplying India too..

Nobbynumbnuts
15-10-2014, 02:04
Talks about who is number 1, I'll leave that to the number crunchers...


For sure they know this, but looking at the map, Russia's pipeline coming down from the north is no brainer,this helps supply much needed oil/gas to populated areas,which can't be reached, they could be reached but at a hefty price..
You mention India, Russia is also in talks about supplying India too..

No need to employ the services of the number crunchers. All done for you! http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
Scroll down for the list.

No doubt oil and gas a are Godsend for Russia but the country needs to diversify away from it's dependance upon them. Russia needs growth in any other areas as recent prices and political turmoil have shown.

Uncle Wally
16-10-2014, 16:36
Talks about who is number 1, I'll leave that to the number crunchers...


For sure they know this, but looking at the map, Russia's pipeline coming down from the north is no brainer,this helps supply much needed oil/gas to populated areas,which can't be reached, they could be reached but at a hefty price..
You mention India, Russia is also in talks about supplying India too..

And they are going to find the money for that.


Banned From U.S. Banks, Russian Oil Giant Turns To Even Bigger Banks In China


http://www.forbes.com/sites/kenrapoza/2014/10/15/banned-from-u-s-banks-russian-oil-giant-turns-to-even-bigger-banks-in-china/?partner=yahootix

Armoured
16-10-2014, 16:52
And they are going to find the money for that.

Banned From U.S. Banks, Russian Oil Giant Turns To Even Bigger Banks In China

http://www.forbes.com/sites/kenrapoza/2014/10/15/banned-from-u-s-banks-russian-oil-giant-turns-to-even-bigger-banks-in-china/?partner=yahootix

Man, Forbes really seems to have no editors who know what they're talking about:


Chinese interest rates aren’t as low as what Western banks can offer. But they are still more attractive than Russian banks. China’s benchmark interest rate is 6%, while Russia’s rate is 8%.

This made me laugh. Of course, these are borrowing rates in different currencies. Sure, Gazprom could borrow in Yuan, and take the risk - that's not free. It's like saying onions are cheaper than cabbage - different things.

The bigger issue is whether the Chinese banks will lend in dollars (or rubles) - and at what rates. I expect it'll prove more difficult and costly (not just in %) than many seem to think.

Uncle Wally
17-10-2014, 00:39
Man, Forbes really seems to have no editors who know what they're talking about:



This made me laugh. Of course, these are borrowing rates in different currencies. Sure, Gazprom could borrow in Yuan, and take the risk - that's not free. It's like saying onions are cheaper than cabbage - different things.

The bigger issue is whether the Chinese banks will lend in dollars (or rubles) - and at what rates. I expect it'll prove more difficult and costly (not just in %) than many seem to think.

Dollars? What are dollars? Can I go to the shop and buy my vodka with dollars? No, so why do I need them?

You should pay attention to what has been going on because Russia and China no longer need dollars to trade with each other and soon no one will.

Uncle Wally
17-10-2014, 00:43
Man, Forbes really seems to have no editors who know what they're talking about:



This made me laugh. Of course, these are borrowing rates in different currencies. Sure, Gazprom could borrow in Yuan, and take the risk - that's not free. It's like saying onions are cheaper than cabbage - different things.

The bigger issue is whether the Chinese banks will lend in dollars (or rubles) - and at what rates. I expect it'll prove more difficult and costly (not just in %) than many seem to think.


Oh and yes Forbes doesn't know what their talking about, only you do and who are you? Please remind us why we should listen to you because I forgot.

Armoured
17-10-2014, 08:42
Dollars? What are dollars? Can I go to the shop and buy my vodka with dollars? No, so why do I need them?

The question is not what currency you need, but what Gazprom needs. Even if it borrows from China, it will still have a huge amount of business with the West (and not certain, but I thought its contracts with much of Europe are in dollars).

Simple logic: if an entity (like Gazprom) has future income in dollars (like from exports to EU, Ukraine, etc), it makes more sense to borrow in that currency.

Plus Gazprom has a huge amount of dollar borrowings right now.


...and soon no one will.

I guess we'll have to wait and see. If you want, we can make a bet in dollars on it, as long as you give a precise time ))

Armoured
17-10-2014, 08:53
Oh and yes Forbes doesn't know what their talking about, only you do and who are you? Please remind us why we should listen to you because I forgot.

Because unlike the Mainstream Media, I'm not controlled by the CIA:
http://jdtharp.files.wordpress.com/2014/10/300px-tin_foil_hat_2.jpg

At any rate, evaluate the argument: the guy says borrowing from China is cheaper because the central bank rate is lower - but it's a different currency. You can't compare the two (well, you can, but you'd need to look at swap rates - it's a lot more complicated than just saying 'see? the interest rate is lower).

I admit I was probably a bit unfair to Forbes - it's only one sentence with a pretty amateurish mistake. They're generally a bit better than this.

Judge
17-10-2014, 10:12
No need to employ the services of the number crunchers. All done for you! http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
Scroll down for the list.



China's demand for oil and gas is going to triple in the coming years,the main problem for Russia is will they be able to keep up with the Chinese dragon...



No doubt oil and gas a are Godsend for Russia but the country needs to diversify away from it's dependance upon them

Russia needs growth in any other areas as recent prices and political turmoil have shown.
Agree, and they had a few years to sort this out, even Putin mentioned it, nothing got done,too much easy money to be made in oil/gas...now is a good time to invest in other areas,the question is, will they?

Judge
17-10-2014, 10:18
One leading Russian company is looking east to China...

http://www.telecompaper.com/news/megafon-china-development-bank-sign-usd-500-mln-loan-deal--1042754

and

http://english.corp.megafon.ru/news/20140609-1200.html

Armoured
17-10-2014, 11:35
One leading Russian company is looking east to China...

http://www.telecompaper.com/news/megafon-china-development-bank-sign-usd-500-mln-loan-deal--1042754

I think some of the big telecoms operators have done this before. It can be a good deal, but it's tied to Huawei equipment.

So the question is whether this is the best equipment at the best price (including funding), or whether this is a 'second best' driven by other issues.

Put differently: are they buying a Great Wall SUV because the dealer is offering financing and they can't get an untied loan to buy a Volvo (their first choice based on price/quality)?

I think it's probably not so clear-cut and maybe the Huawei is the best choice for them - but it may not be a sign of a _voluntary_ 'turn to the East.'

Anyway, I'm sure Megafon buys a lot more equipment than this, so it may not mean much of anything apart from normal purchasing/financing.

Suuryaa
17-10-2014, 11:59
Because unlike the Mainstream Media, I'm not controlled by the CIA:
http://jdtharp.files.wordpress.com/2014/10/300px-tin_foil_hat_2.jpg

At any rate, evaluate the argument: the guy says borrowing from China is cheaper because the central bank rate is lower - but it's a different currency. You can't compare the two (well, you can, but you'd need to look at swap rates - it's a lot more complicated than just saying 'see? the interest rate is lower).

I admit I was probably a bit unfair to Forbes - it's only one sentence with a pretty amateurish mistake. They're generally a bit better than this.

You can buy one here http://stupidcasual.ru/suveniry/shapochki-iz-folgi/

Judge
17-10-2014, 12:11
I think some of the big telecoms operators have done this before. It can be a good deal, but it's tied to Huawei equipment.

So the question is whether this is the best equipment at the best price (including funding), or whether this is a 'second best' driven by other issues.

Put differently: are they buying a Great Wall SUV because the dealer is offering financing and they can't get an untied loan to buy a Volvo (their first choice based on price/quality)?

I think it's probably not so clear-cut and maybe the Huawei is the best choice for them - but it may not be a sign of a _voluntary_ 'turn to the East.'

Anyway, I'm sure Megafon buys a lot more equipment than this, so it may not mean much of anything apart from normal purchasing/financing.

Yes, most probably Megafon could have got a better deal elsewhere,let's say from Europe, but the thing is they have to look east,which is a loss in buisness for European or American banks and telecom equipment companies..
Right now, the EU could do with business coming from Russia, but....
More Russian firms are taking their business elsewhere..It's win-win situation for China, not so bad for Russia, but a big fat zero for the west..

The loan says $500m, I was told that the loan was in yuan,if so, more cutting out the west.
About quality,Huawei isn't too bad,they are aiming to take on Apple and Samsung..
It was in the news Huawei being banned from the US,even better for them to deal with Russia..
http://www.bbc.com/news/business-29620442

Armoured
17-10-2014, 12:21
Yes, most probably Megafon could have got a better deal elsewhere,let's say from Europe, but the thing is they have to look east,which is a loss in buisness for European or American banks and telecom equipment companies...

Overall agree - both sides are losing something.

Hard to say who loses more - just depends. In general, I wouldn't want to be in the position of buying the 'wrong' equipment - long-term cost might be much higher than savings on aggressive financing package.

But that's too general to tell us much, I'm sure Huawei has some good stuff, and Megafon mature enough to figure out where it works okay for them (even if not how they would prefer to do).

BUt I don't see a winner here apart from Huawei.

Judge
17-10-2014, 12:38
Overall agree - both sides are losing something.

Hard to say who loses more - just depends. In general, I wouldn't want to be in the position of buying the 'wrong' equipment - long-term cost might be much higher than savings on aggressive financing package.

But that's too general to tell us much, I'm sure Huawei has some good stuff, and Megafon mature enough to figure out where it works okay for them (even if not how they would prefer to do).

BUt I don't see a winner here apart from Huawei.

Huawei is a big player on the market now,I just read this.

Most Americans have never heard of Huawei. Huawei is no small fry; it is a large Chinese company. Its principal business is networking and telecommunications equipment. It has overtaken Ericsson to become the largest telecommunications equipment manufacturer in the world. It is also aggressively competing with Cisco in networking equipment. It employees 140,000 people and operates in 140 countries.

I don't see much of a problem for Megafon to buy from the number 1(ready to take on Cisco ) telecom equip company in the world, they probably got a good deal cos Huawei being shut out of the US market,in a way, both companies need each other.
Will be interesting to see Huawei take on Cisco, Apple and Samsung..

I'm looking at buying a new phone,and will check out Huawei phones..



Put differently: are they buying a Great Wall SUV because the dealer is offering financing and they can't get an untied loan to buy a Volvo (their first choice based on price/quality)?
You said the above earlier,
it reminds me of how we used to take the piss out of cars made in Asia(Japan/S.Korea) back in the 70s- 80's,thinking nothing beats American and European cars, but there's no laughing anymore,the same for Chinese products,I see a good amount of Great Wall SUV on the roads here, and aren't they opening a plant here soon..

Armoured
17-10-2014, 12:50
it reminds me of how we used to take the piss out of cars made in Asia(Japan/S.Korea) back in the 70s- 80's,thinking nothing beats American and European cars, but there's no laughing anymore,the same for Chinese products,I see a good amount of Great Wall SUV on the roads here, and aren't they opening a plant here soon..

I don't disagree on that overall (i.e. one shouldn't dismiss Chinese products out of hand). Lenovo is decent, mustn't forget most phones/many Apple products / Japanese namebrands made in China.

But in real life I have been hearing for many, many years complaints for all kinds of equipment sourced in China (Chinese brands) on quality, longevity, etc. Easy to find on runet boards as well. Usual thing is along the lines of 'Chinese [industrial pump or truck or machinery or whatever] was so cheap we had to try. [Long tail of woe / complaints of quality / service life far too short] In the end, we saved no money and in future [will buy German][use them only for disposable applications][other variations]'

Again, I don't mean that to slag all Chinese products, or say they don't make sense. But if Russian companies are buying them -because they have no other alternatives-, in my view it will turn out badly in long term.

Nobbynumbnuts
17-10-2014, 12:58
China's demand for oil and gas is going to triple in the coming years,the main problem for Russia is will they be able to keep up with the Chinese dragon...


Agree, and they had a few years to sort this out, even Putin mentioned it, nothing got done,too much easy money to be made in oil/gas...now is a good time to invest in other areas,the question is, will they?

Russia is dealing with the Chinese. They are well aware of the size and potential of their markets.
I was reading a while back that a very large gas (or was it oil?) contract between Russia and China had remained unsigned for years. The price and conditions insisted upon by the Chinese were deemed unacceptable by the Kremlin.
China won't just hand over a measure of financial security to a rival without extracting additional securities of their own.

As for diversifying the economy, they've missed the boat to a large part. The money's not there now, forget foreign investment for many reasons and not least, Russian politics.

Nobbynumbnuts
17-10-2014, 13:08
.........it reminds me of how we used to take the piss out of cars made in Asia(Japan/S.Korea) back in the 70s- 80's,thinking nothing beats American and European cars, but there's no laughing anymore,the same for Chinese products,I see a good amount of Great Wall SUV on the roads here, and aren't they opening a plant here soon..

We used to say the same thing about Hong Kong when i was a kid. They produced a whole raft of cheap and nasty items. Look at the place now.

China has to do the same and move up the value chain if it is to move to the next phase of it's development. I hear they are now creating their own brands. Plenty have gone down this route before (Japan, Korea etc) so i wouldn't write them off.

Armoured
17-10-2014, 13:33
@Judge: article very much along the lines of our discussion.

http://www.rbcdaily.ru/industry/562949992671578

"Buy Chinese!"

In brief, oil and gas industry dependence on Western imports up to 80%. Russian industry can't possibly gear up before 2018-20 to replace. Alternatives elsewhere exist, but far from perfect.

Overall: one way or another there is a cost - lower quality, lower effectiveness, higher cost (in some cases, esp local replacements), Russian companies will need 'preferences' to compete (i.e. more money from budget one way or the other).

They give an interesting figure from Gazpromneft, that substitutes worse on overall effectiveness by 5-7%. So the classic economic case: if e.g. some equipment is 5-7% less effective, how much cheaper does it have to be to make it worthwhile? My simplistic calc/guess would be (for important applications) 7% less effective would have to be half the cost. (Huge assumptions) Honest question, I have no idea, but doubt that 50% cheaper is common or sustainable in the long term. (Note: I'm absolutely certain there are lots of other cases where that sacrifice in efficiency is not significant and purchasers might prefer the cheaper even if only 15% less - but those will tend to be ones that were buyi9ng the cheaper stuff anyway).

Judge
17-10-2014, 13:45
We used to say the same thing about Hong Kong when i was a kid. They produced a whole raft of cheap and nasty items. Look at the place now.



The same for Lada and Skoda cars,butt of many jokes, but not aymore,,:sunny: well, maybe not both cars, before you say anything:10189:

Kruto:neiner:
http://www.supercarslada.com/wp-content/uploads/2014/02/new-lada-cars.jpg

Nobbynumbnuts
17-10-2014, 13:53
The same for Lada and Skoda cars,butt of many jokes, but not aymore,,:sunny: well, maybe not both cars, before you say anything:10189:

Kruto:neiner:
http://www.supercarslada.com/wp-content/uploads/2014/02/new-lada-cars.jpg

I'm old school so i still wouldn't be seen dead in a Lada or Skoda for that matter.
I have no idea what kind of improvements they have made over the years, apart from in the looks department, would be interested to hear.

Armoured
17-10-2014, 13:58
I'm old school so i still wouldn't be seen dead in a Lada or Skoda for that matter.
I have no idea what kind of improvements they have made over the years, apart from in the looks department, would be interested to hear.

Mostly simple:

-Skoda replaced everything except the nameplate with VW.

-Lada: in the process of replacing everything except the nameplate with Renault/Nissan.

In both cases, I believe the plants produce other-badged cars on same platforms as well (i.e. Avtovaz makes some cars sold as Renault or Nissan).

Nobbynumbnuts
17-10-2014, 14:44
Mostly simple:

-Skoda replaced everything except the nameplate with VW.

-Lada: in the process of replacing everything except the nameplate with Renault/Nissan.

In both cases, I believe the plants produce other-badged cars on same platforms as well (i.e. Avtovaz makes some cars sold as Renault or Nissan).

A Lada/Skoda are still duffel coats. Better change the name as well, as far as i'm concerned...;)