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Volume I, Episode 24
July 19, 2007
Food Fight! China-USA sling hash / Peak Oil? / Markets Flat Line...
Sinomania.TV

July 10, 2007

Chinese markets confused? Big IPOs - Chery+Chrysler


June 27, 2007

COSCO - China Mobile - IPOs - Telecom Mergers & Acquisitions

June 21, 2007

New Record Highs in Hong Kong, Shanghai: Will Beijing Put On the Squeeze? - IPOs & more

June 15, 2007

Fundamental Misalignment: US-China currency war - stock markets up & IPOs

June 7, 2007

China Stock Pop - Hot News items - climate change, tainted food...

May 31, 2007

Chinese stock markets hiccup - IPOs - USA-China Trade Gap

May 25, 2007

Report on the 2nd USA/China Strategic Economic Dialogue: Win-Win or When-When? - Market numbers - New IPOs


May 18, 2007

New life for Hong Kong? IPO Update - USA/China summit


May 11, 2007

Will Shanghai end up like NASDAQ or Nikkei? - IPOs


April 30, 2007

Tulips to Dotcom - is Sino Mania the next big bubble?


April 20, 2007

The Heat is on! - IPO Report - Air Pollution in China


April 15, 2007

China markets, IPO update, Beijing Ready for Olympics?


March 30, 2007

China markets up, up, up! Sinomania! goes to China


March 23, 2007

Focus on National People's Congress... Hi-Tech, IPOs


March 17, 2007

China's new investment strategy, IPOs, the Wrap...


March 7, 2007

China syndrome or hong bao bounce? New IPOs... more!


February 27, 2007

China Stock Market Yo-Yo, new IPO issues, the wrap


February 17, 2007

Chinese New Year edition! Will China buy Chrysler & more!


February 9, 2007

The USA-China WTO trade dispute and New IPOs


February 1, 2007

IPOs: New Red Chip — Bubble Burst? — USA-China


January 26, 2007

BUBBLE TROUBLE? — IPOs on NASDAQ — Renminbi Yuan


January 20, 2007

IPOs in 3 hot sectors — BAOSteel — Macro Report


China MARKETS » China WEATHER »
HKEX Hang Seng Shanghai
SSE Shanghai Hong Kong
SZEX Shenzhen Beijing
MUSIC in China: Listen!
 

TRANSCRIPT: Food Fight! Peak Oil? And Chinese Stock Markets Flatline:
Sinomania! Volume I Webisode 24, July 19, 2007

Food Fight! China and the US sling hash but who cleans up in the end?
Chinese markets flat line - I'll take their pulse.
And a special look at world oil.

FOOD FIGHT!

Like a fussy patron in a busy restaurant, the USA continues to send Chinese food imports back and the White House and Congress trip over each other with competing measures to deal with America's new "filthy food" problem.

A panel of Bush cabinet members including Secretary of State Condoleezza Rice, Commerce Secretary Carlos Gutierrez, and trade maid Susan Schwab, will look hard at the food safety problem. And at the end of this month a delegation from the United States' Food and Drug Administration or FDA will meet with their Chinese counterparts in Beijing for talks and perhaps lay the groundwork for uniformity in safety standards, something that is lacking and needed.

But that's not enough for opportunistic politicians in Congress such as Senator Chuck Schumer of New York or Sherrod Brown of Ohio who want to create an import "czar" to oversee the Chinese food invasion.

Meanwhile, Beijing responded in its usual heavy-handed way: the party boss of the Chinese equivalent of the FDA was speedily tried and executed and the national government is putting in place new regulations, outlawing whole classes of chemicals, and promising to publish daily reports of food safety in time for next summer's Olympic Games.

American food imports from China are growing and are close to $3 billion US dollars in value but China is not the number one food import problem - India is followed by Mexico, according to the FDA's own data. Of the top 10 rejected source countries of tainted food, China ranks third on a list that includes Denmark and Italy.

One result of the food fight is that China has now joined Japan, Korea, and Taiwan, in rejecting American meat. But the real danger is to the growth of USA agricultural exports to China if trade retaliation continues. China is one of the largest buyers of American wheat, some years buying up to 20% of all exports, and American corn and dairy producers are counting on China for future growth.

WORLD OIL

"There are traces of oil everywhere, not always in commercial quantities … and no man is yet able to say what will be 'commercial quantities' and what 'inaccessible territory' when the automobile has finished off its mad consumption of gasoline. That day is perhaps closer than we think…"

That gloomy forecast comes from a report on the oil situation published in 1920 by the US Geological Survey. The same report announced the USA had only 20 years yield left from onshore oil deposits and marked the first time the country began using more oil than it produced. The following year, 1921, an oil conference was held in Washington, DC, to plan how the United States could compete against British Petroleum and Royal Dutch Shell for oil production rights in the areas with known reserves - the Middle East and Asia.

Flash forward to today and the oil reserves picture is little changed, the oil majors still competing for new fields, and the world wondering - as it did back then - if "resource nationalism" will end in wars for oil. One could argue that's already happening once again in Mesopotamia.

Two reports out this week are fueling the "peak oil" debate again.

First, the IEA (International Energy Agency) released a mid term report on global oil supply and demand to 2012. The report confirms the widely known fact that many of the world's most important oil reserves are in decline, particularly the oil deposits of the North Sea, affecting the energy positions of the UK and Norway, and mainland United States and Mexico. Additionally, the IEA projects no increase in production in Iraq, Iran, and Venezuela.

But with demand expected to continue increasing around the world and in particular in the USA and China, with OPEC meeting it only by reaching sustained maximum production, prices must stay high and get higher still by 2012.

The IEA sees Chinese oil product demand growing over five percent per year and reaching 10 million barrels per day by 2012 making China the number two user after perennial frontrunner, the USA.

Chinese demand will come from a combination of growth of energy intensive industries such as steel, increased numbers of autos, air travel, urban expansion, and up to ten big refinery plants planned by 2012. China 's oil production will also plateau but not decline at just under four million barrels per day. But overall the IEA report undermines its assessment by saying that the data on China is full of uncertainties.

The IEA report is pessimistic and sees no real change in the medium term. The report reluctantly accepts that there will be no replacing Middle East oil for the foreseeable future and that Europe will become more dependent on Russia for supplies in the years ahead. It also views Asia (China and India) and the USA as direct competitors for future energy needs.

Also this week, the USA's National Petroleum Council released after a two-year wait its report to the USA Energy Secretary on global oil to 2030. The upshot, the council believes global production can increase by around 25% but only if new supplies can be exploited, particularly in the Middle East.

More importantly, the report recognizes the need for energy efficiency in the USA and calls for a doubling of fuel economy in American cars and trucks by 2030.

The report acknowledges that use of coal for electricity generation is here to stay and will increase for both the USA and China with no comment on the implications for global warming.

The Council's assessment is more optimistic and also focuses on the need to strengthen global and US energy security. It recommends avoiding unnecessary confrontation with China, emphasizing that the USA shares vital common interest with China as an energy importer.

MARKET UPDATE

Stock markets in China have barely moved since our last episode. In fact, the Shanghai Composite Index appears to be flat-lining having not crossed 4,000 all month. Worst hit are Shanghai B shares, down almost 1/3 since the May peak and also flat-lining around 274 points. There was a surprise jump in B share prices at the end of last week, speculation is that it was bargain hunting. After all the long term trend remains good for Chinese shares.

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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