Demanding the US administration label China a currency manipulator is an old chestnut, and not one that improves with age.
One, the label is self-evident: by definition any non free-floating currency is “manipulated”. The more pertinent issue is whether the currency is under-valued; the answer to that – calculations of multilateral institutions and certain US think-tanks notwithstanding – is less clear-cut.
Two, Washington does not set Chinese monetary policy. If it did, it might pause to consider the wisdom of compelling its biggest creditor to inflate its currency. Since a 5 per cent appreciation would lop, say, $70bn off the value of its largely US dollar-denominated $2,400bn foreign exchange reserves, that might temper Beijing’s appetite for US Treasuries. And three, renminbi appreciation would make barely a whit of difference to US jobs or business.
The Pru’s party line on financing for its $35bn Asian adventure is all you would expect from a salt of the earth UK corporate. The insurer will launch a wholly underwritten rights issue, complete with full pre-emption rights and decidedly sans any bells and whistles, for a deal that is indubitably going to complete. End of.
Another putative auto alliance falls onto the scrap heap. Following on the heels of GM’s U-turn on the planned sale of its European unit Opel and the scotched disposal of Hummer to the Chinese, Peugeot of France and Japan’s Mitsubishi Motors (MMC) have called time on their planned tie-up.
Spare the tears. Auto alliances have a mixed track record; there have even been rumblings in the initially highly successful Franco-Japanese pairing of Renault and Nissan. It was never clear where the strategic advantages lay for Peugeot and Mitsubishi – other than the fact that the Japanese carmaker could use the cash. Yet the more likely share swap would not have brought even that benefit.
Global rebalancing: Part II. First China lent Americans the money to buy its toys, gadgets and other assorted junk. Now it is set to stump up to repay beleaguered US taxpayers in return for the non-junk parts of a troubled insurer.
Asian sovereign wealth funds have been lined up to help bankroll the Prudential’s acquisition of AIA, the Asian arm of AIG. The asset is being touted as the group’s crown jewels (note: last time this phrase was bandied around, about Cable & Wireless’ sale of Hong Kong Telecom, the so-call jewels turned out to be paste and the deal one of the biggest exercises in value destruction). Assuming wily financiers succeed in their undertaking, which is on a par with selling duff snow to the Inuit, this would be the biggest vindication yet for paying bankers’ bonuses.
Barclays, expected to lead the ranks as Europe’s most profitable bank with an estimated £10bn of net income when it reports results next week, is a shining example of how to stay upright when all about you are flailing. Here are the golden rules:
1. Participate in auctions for banks if you must, but avoid succeeding – especially when said transaction takes place on the cusp of the mother of all financial crises
2. Ditto for distressed US banks
3. Just say no to state aid
4. When disposing of toxic assets remember the old tricks are the best: sivs fell into disrepute, but with a new name and sounder financing they are a useful tool for magicking assets off the balance sheet
5. Keep on banking
China has officially ousted Germany as factory of the world. Cue angst in Berlin, cheering in the streets of Tiananmen Square?
Not a bit of it. All the data really tells us is that the world isn’t flat and manufacturing is fluid: so long as ships ply the seas, goods can be made wherever labour and factory space is cheapest. And there is no getting round it: China is cheap and, wage inflation notwithstanding, managing to make its exports cheaper still.
Louise Lucas blogs for the Financial Times on the impact of Toyota’s woes on its rivals, such as GM, Ford and VW.