Tag Archives: regulation

Another Reason

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…to reduce investments in the PRC: it’s getting harder to get the money back out, this time from foreign exchange controls designed to be limits on how much money in yuan can be exchanged for other currencies, like the US dollar, the British pound, and the Japanese yen.

China’s foreign-exchange regulator in recent months has deployed a new system to monitor individual purchases of foreign funds and has asked banks to reduce foreign-currency transactions. It has summoned bankers to its offices to give guidance and has grilled them when foreign-exchange activity spikes, according to executives at Chinese and foreign lenders.

Nice little bank you got there….

But it’s more than just threats; the government controls are having material impacts on business’ ability to do straight-up cross border business.

A European chemicals manufacturer recently faced delays in Shanghai in obtaining US dollars, threatening its deadline for an overseas licensing payment. The Bank of Tianjin is having trouble getting funds from mainland investors for a planned Hong Kong public stock offering. A water-treatment company struggled to withdraw $2,000 for an engineer to travel to the US.

And

[Hong Kong law firm Harvey Law Corp Managing Partner—Worldwide, Jean Francois] Harvey said a Chinese client is having problems wiring $15 million to a Hong Kong company that for two years has been helping it buy equipment for a South American factory. “There’s no indication that the money will go through,” he said, “and we heard from our client that it was due to restrictions on money transfer.”

It goes on from there.

Stability vs Prosperity and Sovereignty

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It appears that Mark Carney, Bank of England Governor, prefers stability at the expense of British prosperity and national sovereignty. He said last Tuesday that

uncertainty surrounding the outcome of the coming referendum on Britain’s future in Europe is already being felt in financial markets, and that a vote in favor of leaving could cause a short-term hit to the wider economy.

A possible departure represents “the biggest domestic risk to financial stability,” Mr. Carney said, with potential consequences for Britain’s balance of payments with the rest of the world, its housing market, foreign investment and its banks.

“It is a risk to domestic financial stability, and it has some potential to amplify pre-existing risks to financial stability[.]”

Of course things will be turbulent during the transition from EU member, subject to lots of EU regulation that runs contrary to British law or what the Brits would prefer to be British law (things like being required to spend British taxpayer money as benefits to non-citizens and to non-citizen family members not even resident in Great Britain—Prime Minister David Cameron’s tentative agreement with the EU is only a temporary measure).

Don’t want the uncertainty of the outcome of the referendum? Then Carney should get behind the exit and reduce the uncertainty.

What would the British get from leaving the EU? Quite a lot. London’s financial district would be free to operate on free market principles, not EU rules. Great Britain’s tax laws would be set according to what’s good for Brits and British business and for attracting foreign businesses and investment, not according to protecting precious continental jurisdictions from the evils of tax competition. Great Britain’s private enterprises would be free to operate in accordance with British law and not EU regulation.

What would the British lose from leaving the EU? Those impediments. Not much else.

Staying in the EU would provide a strong measure of economic stability; those rules are established and well understood. But that stability is only intermediate; the EU will dissolve in the foreseeable future. The current refugee flow crisis is not the threat, though, for all the press it’s getting. No, the threat is exactly what the British would be avoiding if they succeed in leaving: economic dissolution. That threat was made manifest by the Panic of 2008 and emphasized by the Greek default crisis. These exposed the utterly differing and irreconcilable economic philosophies of the constituent members.

The transition ensuing from that dissolution will be far more destructive than any sneezes from a Brexit in the next couple of years.

The PRC’s Economic Malaise

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Andrew Browne had some thoughts in a recent Wall Street Journal article. PRC’s Premier, Li Keqiang, wanted to do some serious revamping of the nation’s economic structure and deemphasize a massively overbuilt industrial capacity, shifting the economy more toward consumer production and consumer spending. His words—”This is not nail-clipping; it’s like taking a knife to one’s own flesh”—were reminiscent of his predecessor’s actions. Zhu Rongji eliminated 30 million jobs in an actual overhaul attempt in the ’90s.

Thirty million jobs. That sounds like a lot, but with a workforce of roughly 800 million and roughly 95% employment (because, of course), those 30 million represent just 4% of the workers overall. That’s a sharp cut, but as job cuts go during downturns, it’s not that sharp.

But even that much was too much for Li. Or rather for PRC President Xi Jinping.

[H]igh-level economic policy-making and its practical implementation, once the preserve of the State Council headed by the premier, have increasingly fallen into the hands of Communist Party committees led by President Xi Jinping.

And

…Xi’s political preoccupations: to strengthen the party…to root out challenges to the régime, and to avoid social instability that could in any way threaten the party’s hold on power. If that means delaying unpopular economic adjustments, so be it.

“The party’s hold on power:” read that as Xi’s hold on power, say I. And the people of the People’s Republic can go hang.

The Fox Investigating the Hen House Leak, Revisited

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I mentioned Fox Business News‘ reporting on the FAA’s carefully biased “outreach” plan for increasing “diversity” in its air traffic controller employee base nearly a year ago, and I concluded that brief mention with the seemingly cynical remark, “Stand by for another whitewash.”

Now, it seems the whitewash is well in hand. DoT conducted its investigation, and there’s no word on its outcome. The FAA conducted its investigation; it

concluded an internal investigation which cleared the NBCFAE and Snow of doing anything wrong. In a statement sent to members of Congress last month the FAA claimed its Office of Security and Hazardous Materials Safety (ASH) had conducted an investigation into the allegations of cheating and favoritism. The FAA claims it was a thorough investigation which reviewed relevant audio recordings and documents. The statement says, “ASH found no specific information or evidence supporting claims that Human Resources employees improperly provided an advantage to ATCS applicants affiliated with the NBCFAE….”

The NBCFAE, recall, is the National Black Coalition of Federal Aviation Employees, one of whose members, Moranda Reilly (among others),

received emails in December 2013 and a recorded message from NBCFAE officer and air traffic controller Shelton Snow.   Reilly says the emails included buzzwords that, “…would help identify us. Key words the system would pick up. It was a kind of a way for our resumes to be picked and chosen. We were told not to share this information with anybody outside NBCFAE.”

Now, in an attempted final response to a FOIA request for those and related emails pursuant to a related law suit, the FAA has filed a motion with the Federal court presiding claiming it is

unable to recover missing and “corrupted” emails….

The FAA reached its conclusion of no wrong-doing, no carefully constructed bias in its air traffic controller applicant selection, by the FAA knowing these critical data weren’t being used in its investigation.

The “missing and unrecoverable” status of that evidence seems awfully convenient.

The PRC’s Currency

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The PRC’s Premier Li Keqiang and its People’s Bank of China Governor Zhou Xiaochuan had some words about this at last weekend’s G-20 conference.

China emerged from the weekend Group of 20 meeting with a new measure of trust from major trading partners that it won’t significantly devalue the yuan.

Zhou was quite explicit.

There is no basis for persistent [yuan] depreciation from the perspective of economic fundamentals[.]

What this means, too, is that from within its centrally managed economy, the government is defining “economic fundamentals,” and so the government also has no intention of allowing the currency to float; it’ll continue to manage that value for government purposes in every respect.