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China cuts import duties; Japan exports more to the US; Australia pressed by China; Panama Canal volumes low; NZ$1 = 73.1 US¢, TWI-5 = 77.2

China cuts import duties; Japan exports more to the US; Australia pressed by China; Panama Canal volumes low; NZ$1 = 73.1 US¢, TWI-5 = 77.2

Here's my summary of the key issues from overnight that affect New Zealand, remembering that both New York and London are on a long weekend holiday.

China announced overnight that they are to cut import duties for some high-profile consumer products starting in June by about a half as an "important measure to create stable growth and push forward structural reform". Their stated goal is to reduce import tariffs on some consumers goods to stoke domestic spending and support the slowing economy at a time when record numbers of cash-rich Chinese tourists are splurging overseas. They also want to restrain local fake goods supply to improve their IP protection reputation.

In Japan, trade data out overnight showed that, although they moved back into a trade deficit in April after logging its first surplus in almost three years in March, the shortfall shrank significantly year on year, thanks to stronger exports especially to the US and lower energy bills.

And staying in Japan, they have signaled they will be importing more butter this year because of past troubles with supply.

In Australia, they are getting some hard lessons in realpolitik. China is using its trade muscle to try and shift Australia's close relationship with the US by befriending Brazil. It's a game being played with high stakes; a US$50 bln round has just been played.

The nature of world trade is changing and that is affecting the volume of trade. The value may be increasing as goods get lighter, smaller and cheaper, but the amount that goes by sea is shrinking. And the traffic levels in the Panama Canal show the transition clearly. Air freight is now a much more cost effective option.

In New York, bond markets are closed so the UST 10yr benchmark yield is still at 2.21%.

The US oil markets are also closed and the US benchmark price is still just under US$60/barrel again, while Brent crude is at US$65/barrel.

The gold price is marginally lower at US$1,204/oz.

The New Zealand dollar starts today pretty much unchanged at 73.1 US¢, at 93.4 AU¢, and at 66.6 euro cents. The TWI-5 is at 77.2.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here »

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16 Comments

In Australia, they are getting some hard lessons in realpolitik. China is using its trade muscle to try and shift Australia's close relationship with the US by befriending Brazil. It's a game being played with high stakes; a US$50 bln round has just been played.

Mr Abbott is certainly captivated by 'front-shirt' politics whether it is at a national or personal level.

Japan will join a major U.S.-Australian military exercise for the first time in a sign of growing security links between the three countries as tensions fester over China's island building in the South China Sea. Read more

Let's hope the PM can resist engaging in actions of contingent economic self destruction on our behalf.

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Why go slow when you can go fast

China's $50 billion Brazilian mining investment repercussions being felt. Fortescue Metals whose only market is China goes into Chinese play already - no mucking around
http://www.theage.com.au/business/mining-and-resources/fortescue-in-sig…

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We certainly do live in interesting times. Our improving economic relationship with China will be fantastic for us in 10 to 20 years from now. It is a HUGE market to be involved with and an entirely different culture to be able to produce goods for. Exciting business opportunities ahead. China is taking on corruption and putting in policies to position itself as THE major competitor to the US.

[Partial delete. Reasons explained offline. Ed]

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China's top banking regulator warns of rising bad loans, credit risk - sources

http://uk.reuters.com/article/2015/05/25/uk-china-debt-regulator-idUKKB…

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102.3 billion pounds of bad loans? HAHAHAHA. Compare that to this:

Between 1 January and 11 October 2008, owners of stocks in U.S. corporations suffered about $8 trillion in losses, as their holdings declined in value from $20 trillion to $12 trillion. Losses in other countries averaged about 40%

All thanks to Uncle Sam's subprime disease.

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talk about double entry book keeping

http://brontecapital.blogspot.com.au/2015/05/hanergy-let-there-be-no-do…

Now that Hanergy has been suspended I can let these out.

I went to visit Hanergy's main factory in China about a six weeks ago. It was almost entirely silent. There was essentially no production of solar cells at all and the accounts that suggest significant production and sales are entirely fraudulent.

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Henry - What is truth?
I went to Detroit recently blah blah blah
I went to a factory in NZ last Sunday and there were no cars outside, the factory was deserted. blah blah blah
Can we believe what we read?
Remember weapons of mass destruction
Remember our media giving Peter Whittle of Pike River a standing ovation?

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watch for those Copenhagen Interpretation promoters - artful thou they maybe...

http://www.telegraph.co.uk/technology/google/google-doodle/10237347/Sch…

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Niels Bohr and Werner Heisenberg get pulled over by traffic police for a routine stop and search. "Do you know there's dead cat in the boot of your car?" asks the policeman. "Well there is now!", reply the physicists.

From the comments stream

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Unfortunately onwards China has a few problems to overcome shortly, keep our distance may be the better option.
“The Chinese government has maintained its legitimacy by promising economic progress,” says economist Eswar Prasad of Cornell University. If the promise seems broken, it’s hard to know how China’s masses would react. Or China’s leaders. Would they become more nationalistic and aggressive to deflect attention from economic disappointment?

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I agree with you that China does have a few problems to overcome. But no harm in positioning ourselves with them as economic partners instead of adversaries as the Aussies are foolishly doing.

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partners......
http://www.stuff.co.nz/business/farming/dairy/68593520/synlait-farms-fo…

where is the love?
with news coming from the salaryman, was it better off listed?
what the tui man say

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As we all know China is trying to get its yuan recognised as a world currency.

We also know how Western media is always ready to spit out American propaganda, (weapons of mass destruction as one example)

We also know that the media have been talking about a China collapse for the past two years. And wether it would be a hard or soft landing

In light of all this we must ask ourselves

Is all this, Western media, talk about China colapsing just propaganda to scare people away from the yuan and delay it becomming a world currency?

We should be asking this question

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Is there any chance that China will put pressure on NZ dairy for its relations with America?

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Re - the nature of world trade is changing
Yes we need to keep an eye on
Russia and the EEU (not EU)
China, fast rail and the Chinese "Silk Road"
TPP
TTIP
world trade is changing

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Chinese co2 emissions are down and very fast,

http://www.vox.com/2015/5/22/8645455/china-emissions-coal-drop

A collapse in industrial output? recession looming?

Worse than the "expected" +7%?

http://www.economist.com/blogs/economist-explains/2015/03/economist-exp…

negative would be, um interesting.

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