Tuesday, October 12, 2010

Default Swaps Show China is the Strongest in the world

Thank you Shelley Smith from Bloomberg!  I guess the crouching tiger isn't so hidden anymore!

I think we as Americans get lazy sometimes about our role of dominance in the world and how that is slowly changing.
“Right now the strongest balance sheet in the world is China’s,” Daniel Arbess, who runs the $2.1 billion Xerion fund for Perella Weinberg Partners in New York, said in an interview with Bloomberg Television on Oct. 7. “China can use that balance sheet strength and the political centralized control that it has over its economic policy to literally finance and drive the ongoing urbanization and industrialization of its economy.”
The 10 basis-point difference between contracts on China and the U.S. is the narrowest since at least January 2008, according to data from New York-based CMA, which provides data on the market that suggests both countries should have the second-highest debt rankings. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually in a contract protecting $10 million of debt.
Wait, wait, wait ... WHAT! China IS the strongest?  Isn't that supposed to be "going to be the strongest" ... I guess our bailouts was supposed to fix that! 

Say what you will about the Chinese Government ... they will continue to grow.

I found the last 2 paragraphs made me the most anxious ...
"The nation’s improving credit comes as Chinese policy makers promote greater use of the yuan abroad to reduce reliance on the dollar. The government since the start of 2009 has approved the currency’s use to settle cross-border transactions, opened its interbank bond market to overseas financial institutions and sold yuan-denominated debt in Hong Kong.
“Chinese policy makers want to be seen as a stabilizing factor,” said Jerome Booth, who helps oversee about $35 billion as head of research at Ashmore Investment Management Ltd. in London. “They want to become a reserve currency, and they will become a reserve currency.
 Of course anyone who is truly surprised by this needs to read the news a bit more!


  1. All this reading about china is making me hungry for some general tso's chicken.

  2. hahah i was going to say something intelligent until i read arbys post