China Rebuilds San Francisco-Oakland Bay Bridge, Pledges More Support for European Debt, Fuels Latin-America Debt Rally by Financing Ecuador Budget

China has its fingers in nearly every aspect of global financing as the following articles show.

San Francisco-Oakland Bay Bridge Now Made in China

The New York Times reports Bridge Comes to San Francisco With a Made-in-China Label

At left: The San Francisco-Oakland Bay Bridge. The replacement eastern span is on the right, with the city of San Francisco beyond. Photo by Jim Wilson/The New York Times

SHANGHAI — Talk about outsourcing.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

The project is part of China’s continual move up the global economic value chain — from cheap toys to Apple iPads to commercial jetliners — as it aims to become the world’s civil engineer.

The assembly work in California, and the pouring of the concrete road surface, will be done by Americans. But construction of the bridge decks and the materials that went into them are a Made in China affair. California officials say the state saved hundreds of millions of dollars by turning to China.

“They’ve produced a pretty impressive bridge for us,” Tony Anziano, a program manager at the California Department of Transportation, said a few weeks ago.

On the reputation of showcase projects like Beijing’s Olympic-size airport terminal and the mammoth hydroelectric Three Gorges Dam, Chinese companies have been hired to build copper mines in the Congo, high-speed rail lines in Brazil and huge apartment complexes in Saudi Arabia.

In New York City alone, Chinese companies have won contracts to help renovate the subway system, refurbish the Alexander Hamilton Bridge over the Harlem River and build a new Metro-North train platform near Yankee Stadium. As with the Bay Bridge, American union labor would carry out most of the work done on United States soil.

The new Bay Bridge, expected to open to traffic in 2013, will replace a structure that has never been quite the same since the 1989 Bay Area earthquake. At $7.2 billion, it will be one of the most expensive structures ever built. But California officials estimate that they will save at least $400 million by having so much of the work done in China.

There is much more in the 2-page story including protests by US steelworker unions and charges of poor-quality Chinese steel.

As a testament to the the current sad state of US manufacturing, the project director claims “Most U.S. companies don’t have these types of warehouses, equipment or the cash flow. The Chinese load the ships, and it’s their ships that deliver to our piers.”

China Pledges Continued Support for European Debt

The Wall Street Journal reports China Pledges Continued Support for European Debt

Chinese Premier Wen Jiabao on Saturday said China will continue to buy euro-denominated bonds to support Europe, in China's latest public endorsement of the efforts to contain a potential debt crisis in the common currency area.

"China has been a heavy investor in the euro sovereign-debt market," Mr. Wen said at a news briefing. "We have bought a lot of euro bonds over the past years and we will continue to support Europe and the euro."

"China is ready to seize the opportunity together with its European partners, tackling challenges and driving development to support the quickest possible recovery of the global economy and stable growth," he said.

Analysts believe about two-thirds of China's reserves is invested in dollar assets, mostly Treasury debt. Chinese officials have said frequently in recent years that they want to diversify their holdings, but there are few other asset classes that can absorb investments on such a huge scale.

In Hungary, Prime Minister Viktor Orban said China will double its trading volume with the country to US$20 billion by 2015. China will also establish a European logistics and transport hub in Hungary, in line with Hungary's earlier hopes to become a European hub for China as a logistics and commercial distribution center.

"Talks today showed that China indeed would like to transport through that hub," Mr. Orban said.

Debt Rally in Latin America Fueled by China

Bloomberg reports China Lifts Latin America’s Best Debt Funding Ecuador Budget

Ecuador’s bonds are rewarding investors with the best performance in Latin America as Chinese loans and higher oil prices boost confidence in the economy two years after the country defaulted on $3.2 billion in debt.

Ecuadorean dollar debt has returned 13 percent this year, compared with 5.2 percent for Latin American sovereigns on average, according to JPMorgan Chase & Co. Yields on bonds due 2015 fell 238 basis points, or 2.38 percentage points, this year to 9.59 percent. Similar maturity Brazilian bonds yield 1.9 percent, down 97 basis points from the end of December.

Loans from China that Ecuador says will reach at least $3 billion in 2011 and the government’s forecast for oil revenue to exceed the budgeted amount by $601 million are reassuring investors that South America’s seventh-biggest economy will keep servicing its debt, said Richard Francis, an analyst at Standard & Poor’s in New York. Government investment and consumption are driving the economy’s 12th straight year of expansion, he said.

“China is providing substantial financing that’s letting the government invest a lot more,” Francis said in a telephone interview. “This year and next year there’s no problem.”

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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