US And China Must Prevent Further Trade Disputes, Hu To Bush

- US And China Must Prevent Further Trade Disputes, Hu To Bush

  • [B]Call For Correction In China?s  Markets Made By Goldman[/B]

- China Vows Not To Slash Dollar Holdings

  • [B]Asian Markets Mixed, Hong Kong Stocks  Slide[/B]

US and China Must Prevent Further Trade Disputes
Speaking to US President George W. Bush yesterday over the phone, China?s President Hu Jintao stated that both countries must prevent current trade disputes from escalating too far. Noting that “frank and sincere dialogue” is required, Hu stated that both parties must “properly settle problems arising from bilateral economic and trade cooperation”, whereby promoting “steady development of economic and trade ties.” Incidentally, the comments come before the Strategic Economic Dialogue that is scheduled to take place in Washington later this month. Vice Premier Wu Yi is expected to be in attendance, with US Treasury Secretary Paulson speculated to make another push for further flexibility in the currency regime. The statements also come an afternoon after major industrial sector leaders met in Washington, voicing concern to Congress of China?s competitive advantage through currency manipulation. With all that said, the recent effort to extend the olive branch by the Chinese may be in order to ease recent pressure that has seemingly spiraled out of hand.

Goldman Sees Gains In China?s Stock Markets As Overextended
In line with comments made by central bank Governor Zhou Xiaochuan, Goldman Sachs Group Inc., the US based investment bank, has stated that a ‘correction? may be due in Chinese stock markets. With the CSI 300 Index advancing by a whopping 82 percent over the past year, analysts are looking at stock valuations that have completely exceeded earnings potential. Incidentally, the stock market mania has been reflected in the massive amount of new securities account openings over the Golden Week holiday. According to records by the China Securities Depository and Clearing Corp, Chinese investors opened a record 385,121 new accounts last week. Volume has also exceeded past figures, mounting to $48.96 billion. Subsequently, the possibility leaves markets open for another Feburary 27th adjustment that would bring stocks back to correct valuations. For now, however, it seems the only direction for Chinese equities is up.

China Vows To Hold Onto Dollars
Wih global concern emerging over the possibility of a US dollar dump by the Chinese central bank, policy officials today announced that with the creation of a new agency that would invest reserves more effectively, US currency assets will remain a key part of the overseas investment factor. The comments couldn?t come at a better time. Partly intended for the upcoming meeting in Washington, but mostly as the country has now amassed a US dollar reserve of $416 billion, almost 50 percent of overall currency reserves. Comments were subsequently released as it was revealed that China?s current account surplus had advanced by 55 percent to $250 billion last year with exports surginghigher, according to the State Administraion of Foreign Exchange. In a way, the comments help to ensure a bargaining chip against the US as complaints from industrial sector leaders continue to emerge.

Asian Stocks Mixed In The Overnight
Stocks in Hong Kong declined during the night, led by slides in China Mobile Ltd. and HSBC Holdings Plc as investors saw the recent advances as overextended. With both bellwethers lower, the Hang Seng Index dropped 98.51 points to close at 20,746.27. Singapore stocks fared slightly better on the day as speculation increased of near term growth in loans. As a result, lenders were the big take on the day with both DBS Group and United Overseas shares leading the way. The Straits Times Index added 16.54 points to close higher at 3,469.26.