China’s Nuclear Option Knocks
Chinese shares struggled to stay positive as officials suspended new nuclear plant approvals in reaction to Japan’s calamity after Premier Wen announced sharp energy fossil-fuel and consumption reduction targets in the new 5-year plan. The carbon-emission cut goal at almost 20 percent would accompany lower GDP growth over the period at 7 percent. On a proverbial “nuclear” issue, the latest US Treasury data showed continued mainland central and state bank bond buying as authorities look to smooth relations amid repeated resistance to steep renimbi appreciation moves. Before the earthquake-tsunami-radiation leakage events north of Tokyo, the Chinese nuclear power company was in pursuit of a uranium deposit stake in Namibia controlled by Kalahari Minerals. It previously signed African exploration pacts in Zambia, Tanzania and Zimbabwe, and had just before contracted with a partner in Uzbekistan, where the government recently expelled human rights observers. This source was to provide 10 percent of electricity needs by 2020 as the accident struck, which may shift the burden again to coal and natural gas as well as solar alternatives. Subsidies still shield users from world prices, and with reported inflation at the sensitive 5 percent threshold, removal timetables may be postponed. However according to Ministry of Finance figures, the centralized public debt burden is already close to one-fifth of GDP, and including provincial and other state-run liabilities the total may exceed 75 percent, experts believe. The railways minister put accumulated obligations at over $250 billion following a corruption scandal which brought high-level arrests and resignations at the large corporate-bond issuer. As the 2011 loan quota was set at 7.5 trillion yuan based on 15 percent expanded money supply, regulators have vowed to curb local government credit often based on property development with many projects in the overall 1 trillion yuan outstanding lacking other cash flow streams.
India in turn has stood by its civilian nuclear program, especially with higher oil prices stoking inflation and the budget and current account deficits. The exchange is off double-digits through Q1 on $1 billion in foreign investor outflows, with a tepid response to the latest fiscal consolidation effort aiming to keep the gap under 5 percent of output. A food security bill will increase transfers as prices in the category continue to surge. The central bank is expected to resume a hiking cycle as the inward investment limit on corporate bonds was raised to $40 billion to facilitate $1 trillion in projected infrastructure schemes, which have often developed their own funding and building leaks.
