Tuesday, July 10, 2012

515 Australia, Europe trade with China in Yuan, bypassing $. Loss of Seigneurage will end US Empire

Australia, Europe trade with China in Yuan, bypassing $. Loss of
Seigneurage will end US Empire

(1) Australia, Europe trade with China in Yuan, bypassing $. Loss of
Seigneurage will end US Empire - Peter Myers, May 2, 2012
(2) Australia's Reserve Bank backs China's push to trade in Yuan with
$30bn swap deal
(3) Currency swap deal means that China will pay for Australian coal &
iron ore in Yuan
(4) ANZ Bank: Yuan may be China's main Trade Currency in 2 Years
(5) Europe now using Yuan (renminbi, RMB) for trade with China
(6) Internationalizing the Yuan will make it more vulnerable
(7) Chinese companies build infrastructure in Europe; Germany exports
more to China than US - John Ross
(8) Stephen Roach blames Americans for a Fixation on the Yuan (Renminbi)
(9) Wen Jaibao urges break-up of China's state-controlled banking 'monopoly'
(10) China Rewards Over Two Thousand People for Reporting Porn to
Authorities
(11) Australian Foreign Minister Bob Carr rebuked by China over Tibetan
probe
(12) Huawei banned from tendering for Australian Broadband Network, on
security grounds
(13) Opposition slams NBN exclusion of Huawei
(14) Fujitsu's King K confirmed as world's top supercomputer, thrashes
Top 500 rivals

(1) Australia, Europe trade with China in Yuan, bypassing $. Loss of
Seigneurage will end US Empire - Peter Myers, May 2, 2012


The Dollar's role as the world's reserve currency allows the US to run a
large Current Account Deficit. In effect, it prints Dollars and presents
them around the world, to buy assets, build military bases and
equipment, and generally run the Empire.

In the process, the Empire gets the benefit of Seigneurage - it can
spend/consume far more than it produces. As long as the US Navy rules
the waves, no one can collect the US debt.

Producer countries like China, Japan and Germany, which have long had
Current Account Surpluses with the US, now hold $ bonds and other $
assets which are unrepayable. Any attempt to pay them would crash the $
and render the assets worthless.

The only way these countries can escape from the $'s gravitational field
is to conduct trade in other currencies.

China is now doing that. Given the size of its trade, this is a historic
shift in the world economy which will force the US to withdraw from its
empire, just as economic collapse forced the Soviet Union to do so.

The cause of this historic shift is Free Trade, coupled with
Laissez-Faire economic policies, both of which are promoted by nearly
all economists. The remedy is a return to Protection - but that is
already too late, since the US has exported its technology and offshored
its production.

Although one might applaud the end of US empire, the prospect of Chinese
empire is daunting.

It's likely that as China's succession to US hegemony approaches, some
sort of conflict will break out between them, as Americans realize that
the "One World" policy they imposed on the world has led to their
demise, and try to stave off collapse by blaming China for outsmarting them.

In item 8, Stephen Roach condemns Americans for a fixation on the Yuan
(Renminbi, RMB) - blaming China for keeping it too low. He points out
that the RMB has risen 31.4% against the $ since mid-2005, and that
China’s current-account surplus has fallen to 2.3%.

However, as China advances in value-adding, it will increasingly export
high-tech equipment on the lines of Japan Inc. So the Current Account
Problem will remain; China will try to hide it by buying assets abroard,
this time in Yuan rather than Dollars.

As the Trotskyist WSWS site argues (item 6), Internationalizing the Yuan
will make it more vulnerable to currency manipulators - like George
Soros, for example. But the size of the Chinese currency pool will make
this risky for the manipulators too. Wen Jaibao's call for more foreign
capital to be allowed entry (item 9) shows the high-stakes game China is
embarking on to achieve world-power.

The ouster of princeling Bo Xilai may be connected with this change of
direction at the top. See "Fall of a Princeling", Editorial in The
Guardian, Thursday 12 April 2012:
http://www.guardian.co.uk/commentisfree/2012/apr/12/china-fall-of-princeling

(2) Australia's Reserve Bank backs China's push to trade in Yuan with
$30bn swap deal


http://www.theaustralian.com.au/business/financial-services/reserve-backs-beijings-yuan-push-with-30bn-swap-deal/story-fn91wd6x-1226307676426

Reserve backs Beijing's yuan push with $30bn swap deal

DAVID UREN, ECONOMICS EDITOR The Australian March 23, 2012 12:00AM

THE Reserve Bank has backed China's push to win global acceptance for
its currency, signing a $30 billion deal with the People's Bank of China
to support business with Australia conducted in yuan.

Governor Glenn Stevens signed a "swap" deal with PBOC governor Zhao
Xiaochuan under which the two central banks can exchange local
currencies for up to $30bn, or 200 billion yuan. ...

(3) Currency swap deal means that China will pay for Australian coal &
iron ore in Yuan


http://afr.com/p/national/historic_pact_seals_china_ties_3EnHQZQ0Awvcj176ecKMjM

Historic $A pact seals China ties

Australian Financial Review

PUBLISHED: 23 MAR 2012 00:01:07 | UPDATED: 23 MAR 2012 13:14:09

{photo}
RBA governor Glenn Stevens and People's Bank of China governor Zhou
Xiaochuan sign the currency deal in Beijing on Thursday.
{end}

MICHAEL DWYER AND JASON MURPHY

Australia will become more enmeshed in the Asian financial zone after
the Reserve Bank signed a $30 billion currency swap arrangement with the
Chinese central bank yesterday.

The historic agreement highlights the important role Australia is
playing in what the Gillard government calls "the Asian century", as the
world's fastest growing major economy integrates into global trade and
financial markets.

The agreement, signed in Beijing by Reserve Bank of Australia governor
Glenn Stevens and People's Bank of China governor Zhou Xiaochuan,
follows Beijing's decision last November to allow convertibility between
Australian dollars and Chinese yuan in the interbank market in China.

The currency swap deal with Australia is the largest that China has
signed other than with Hong Kong and South Korea. It is also one of the
first with a Western economy.

China's currency is still not fully convertible as Beijing likes to keep
the yuan undervalued to help its manufacturing sector. But the deal with
Australia is seen in official circles as a crucial sign that China is
committed to opening up its foreign capital account and making its
currency more convertible.

"I welcome the currency swap agreement," Treasurer Wayne Swan said.
"This is an important symbolic step towards the internationalisation of
the renminbi and another milestone in the continued deepening of the
economic relationship between Australia and China."

Mr Swan said Australia had a strong interest in China's path towards
full convertibility of its currency and that he looked forward working
with China towards this goal.

While most of Australia's trade with China is still denominated in US
dollars, some local companies are starting to write contracts in renminbi.

Fortescue Metals Group announced late last year it had inked an
agreement for $50 million worth of Chinese mining equipment in the
Chinese currency.

"Many Australian companies have been thinking about using the yuan as a
settlement currency, said Andy Ji, a currency strategist with the
Commonwealth Bank of Australia. "This will make things easier."

The chief executive of HSBC Bank Australia, Paulo Maia, said the deal
would "help to support continuing growth in renminbi liquidity".

HSBC believed that by 2015, some $US2 trillion of Chinese trade would be
settled in renminbi, making it one of the top three trading currencies.

China has been moving to do more of its trade in its own currency rather
than the US dollar or other reserve currencies such as the euro and the
yen as it becomes an important part of the global economy.

"The main purposes of the swap agreement are to support trade and
investment between Australia and China, particularly in local currency
terms, and to strengthen bilateral financial co-operation," the RBA said
in a statement yesterday.

"The agreement reflects the increasing opportunities available to?settle
trade between the two countries in Chinese renminbi and to
make?renminbi-denominated investments." ...

As its economy grew to become the world's second biggest, Chinese ties
with Australia hit record levels in 2010-11.

Trade flows rose to $105 billion, making it Australia's most important
partner, while two-way investment deals hit $40 billion.

It's not just financial flows and raw materials that link the nations,
but also tourism. In January, 77,000 Chinese visitors came to Australia,
the biggest single source country, overtaking New Zealand for only the
third time.

Although the financial links between Australia and China are becoming
stronger, there has been some domestic opposition to Chinese investment
here.

Independent MP Rob Oakeshott was yesterday backing calls for the Foreign
Investment Review Board to scrutinise foreign purchases of Australian
agricultural assets more closely. The Nationals have also been urging
tighter FIRB restrictions, although some Liberal MPs are worried this
could deter investment.

China initially signed currency-swap agreements with countries such as
Argentina, Belarus, Uzbekistan, Tajikistan, Mongolia, the United Arab
Emirates and Iceland. However, these have been perceived as being driven
mostly by foreign policy issues and, if anything, as something that made
a comparable deal less attractive for the RBA.

The People's Bank of China has yet to strike a similar arrangement with
the US Federal Reserve, the Bank of Japan, the European Central Bank or
the Bank of England.

HSBC chief economist Paul Bloxham said yesterday's deal would allow the
RBA to provide liquidity in renminbi, which would increase investment
and trade in renminbi because of a diminished risk of a liquidity shortage.

"It's a back-stop for financial institutions and corporates that might
want to use, trade or do investment in renminbi," he said, explaining
that the swap arrangement is not expected to be in day-to-day use.

"If there were a shortage of liquidity in the renminbi., this is a
facility that allows our central bank to be able to tap liquidity and
provide it to the system," he said.

Mr Bloxham said the agreement recognised the increased importance of the
Chinese economy.

"We are a natural part of all of this as our largest trading partner is
China," he said.

The agreement comes after submissions by major Australian companies,
including ANZ Banking Group and Rio Tinto, calling for a dramatic
increase in the flow of trade and investment between Australia and Asia
in their submissions to the Asia white paper team led by former Treasury
secretary Ken Henry.

The new China-Australia currency agreement will run for an initial
period of three years and can be activated if needed by either country.

(4) ANZ Bank: Yuan may be China's main Trade Currency in 2 Years
http://www.4-traders.com/AUSTRALIA-AND-NEW-ZEALAND-6492549/news/Australia-and-New-Zealand-Banking-Group-Yuan-May-Be-China-s-Main-Trade-Currency-In-2-Years-ANZ-s-14234483/

March 25, 2012 07:11 pm US/Eastern

AUSTRALIA AND NEW ZEALAND BANK (ANZ)

Australia and New Zealand Banking Group : Yuan May Be China's Main Trade
Currency In 2 Years --ANZ's RMB Chief

03/23/2012 | 01:29am

Australia's currency swap deal with China's central bank could help the
yuan become China's primary trade currency in the next two years, the
head of RMB sales and product at ANZ Bank said on Friday.

Steve Kelly said the A$30 billion agreement signed between the Reserve
Bank of Australia and the People's Bank of China--the largest with any
Western nation--was an "important step" in reinforcing trade ties
between the two countries.

"Importing and exporting in local currency gives our customers a
competitive advantage," he told Dow Jones Newswires in an interview. "If
you're an investor in China and you read in the paper that the People's
Bank has signed a currency deal with Australia, it's going to make you
feel a little bit warmer."

Total two-way trade between Australia and China was valued at around
A$106 billion in the 2010-2011 fiscal year, and the two countries are
negotiating a free-trade pact. China is Australia's biggest trading
partner and its demand for resources exports such as coal and iron ore
have been pivotal in bolstering Australia's economic fortunes.

This week's pact follows a move in November by Chinese authorities to
allow convertibility between Australian dollars and the yuan in the
interbank market.

Kelly said ANZ's yuan-denominated business has "started to really
accelerate in the past 6 months," with particular interest from retail
chains, and importers and exporters of infrastructure and agricultural
products.

Beijing is liberalizing its currency regime by allowing greater
cross-border settlements in designated cities as part of a push to make
the yuan a global currency. Hong Kong is already a designated yuan
trading center, and other cities such as London are vying for a role too.

China's total yuan-denomindated cross-border trade settlements reached
RMB2.1 trillion ($330 billion) in 2011, nearly 9% of its tradeflows,
according to ANZ data.

"We're very confident that the RMB will become the currency of trade for
Chinese trade in the next two to five years," said Kelly. "There's
potential for it to move very quickly."

By Caroline Henshaw, Dow Jones Newswires; 61-2-8272-4680;
caroline.henshaw@dowjones.com

(5) Europe now using Yuan (renminbi, RMB) for trade with China

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20120428000048&cid=1203

Europe now second-biggest market for RMB settlement

Chen Man-nung and Staff Reporter

2012-04-28 14:36 (GMT+8)

Europe has now emerged as the second-biggest area using the renminbi for
cross-border transaction settlements. Bankers and commodity traders
believe the yuan can be used to settle trade transactions involving gold
and bulk commodities in 10 to 20 years as long as the Chinese government
continues liberalizing currency policies.

Bankers attending the 2012 FT Global Commodities Summit sponsored by the
Financial Times in Lausanne earlier this week expressed the view that
the current domination by the US dollar in commodity and trade
transactions will undergo major changes in years ahead, and that changes
could come faster than expected.

China, as the world's largest consumer of bulk commodities such as
industrial metals and oil products plus an economic growth rate three
times higher than most countries, has been pushing the use of its
currency for transaction settlements, analysts said.

The efforts will further carry forward the goal of internationalizing
the yuan. More companies in Hong Kong and the wider Asia-Pacific region
now choose to settle business transactions with the Chinese yuan. The
latest report from the Society Worldwide Interbank Financial
Telecommunication, an international banking organization, shows that
renminbi-clearing transactions in Europe have already surpassed the
Asia-Pacific area and are now trailing behind only Hong Kong, the
primary pilot offshore yuan settlement district designated by Beijing.

Excluding the Hong Kong market, payments made in the yuan by European
enterprises accounted for 47% of the global market to exceed the market
share of 41% held by the Asia-Pacific region during the month of March,
according to the bank's statistics. The total global transaction amounts
settled in March increased by 8.6% compared to February, but those
settled in the Chinese currency registered a much higher growth rate of
13.2%.

The renminbi will be used widely as a key currency to settle
international commodity transactions in 10 to 20 years, and the
timetable may even arrival earlier if the Chinese government pushes it,
according to Jean-Francois Lambert, managing director and global chief
of commodity and structured trade finance at HSBC.

Bullish on the market prospects of the Chinese currency, HSBC has
recently floated the first ever renminbi-denominated bonds exceeding 1
billion yuan (US$158 million) in London, targeted mainly at European
investors.

The People's Bank of China, the country's central bank, announced
earlier this month the widening of the daily RMB/USD exchange rate
trading band to ±1% from the central parity.

Bankers and commodity traders agreed that this is a clear sign that
China intends to further ease the fluctuations of the renminbi foreign
exchange rate on the international market.

(6) Internationalizing the Yuan will make it more vulnerable

China widens trading range of the yuan

http://www.wsws.org/articles/2012/apr2012/yuan-a24.shtml

By John Chan

24 April 2012

The People’s Bank of China last week widened the yuan’s daily trading
band from 0.5 percent to 1 percent. In the short term, the Chinese
central bank will continue to intervene in currency markets to ensure
that no major fluctuations damage China’s struggling export industries.
Nevertheless, the measure is a step toward a more market-based exchange
rate that will also internationalise the country’s currency.

US Treasury Secretary Tim Geithner welcomed the move as “very
significant and very promising.” The Obama administration has long
pressured China to institute a more flexible yuan and further open up
its financial sector. International Monetary Fund (IMF) head Christine
Lagarde declared: “It’s not a baby step, it’s a very good step in the
right direction.”

The Western powers recognise that the yuan reform is part of a broader
agenda by the dominant factions within the Chinese Communist Party (CCP)
regime to permit global banks and corporations to restructure the
country’s remaining large state enterprises, especially protected areas
such as banking.

Premier Wen Jiabao had openly criticised the major state banks on April
4. “Let me be frank,” Wen declared, “Our banks earn profit too easily.
Why? Because a small number of large banks have a monopoly.” He
insisted: “To break the monopoly, we must allow private capital to flow
into the finance sector.”

The Chinese central bank has tightly controlled the exchange rate
between yuan and the US dollar since 1994 in order to maintain China’s
export competitiveness. In 2007, Beijing increased the yuan’s daily
trading band from 0.3 percent to 0.5 percent under pressure from
Washington to revalue the currency. But the CCP regime halted any
further widening of the trading band after the 2008-09 global financial
crisis sent Chinese export industries into a tailspin, initially
throwing 23 million internal migrant workers out of work. Last week’s
widening of the trading band came after clear signs that exports cannot
continue to power China’s rapid economic expansion, as they have done
for the past two decades. China’s trade surplus halved in 2011 to just
$155 billion, and the current account surplus fell below 4 percent of
gross domestic product—down from a peak of 10 percent in 2007.

Before 1994, China’s currency was relatively independent from the
Western economies. The currency reform of that year marked a fundamental
shift—pegging the yuan to the US dollar, while massively devaluing it to
boost exports. The yuan-dollar peg was essential to the transformation
of regions such as the Yangtze and Pearl River Deltas into the world’s
largest cheap labour manufacturing centres. China’s foreign currency
reserves skyrocketed from $160 billion in 2000 to more than $3 trillion
in 2011—due to massive inflows of export earnings and foreign capital.
Most of the dollar reserves in turn were sent back to America via the
purchase of US bonds—supposedly the safest investment at the time. Apart
from $1.2 trillion in US federal bills, China holds some $400 billion
worth of bonds in the US government-backed housing giants Freddie Mac
and Fannie Mae. US housing price rises in turn allowed American working
class households, which increasingly depended on debt because of
declining real wages, to undertake the consumption spending that fuelled
production in China. Almost the entire Chinese boom rested on expanding
exports. Domestic consumption accounted for just 35.6 percent of China’s
GDP in 2011—compared to America’s 70 percent—due to the
super-exploitation of Chinese workers.

China’s depressed consumption levels led to the rapid accumulation of
capital for investment, which now accounts for half its GDP—compared to
the world average of 20 percent. This was viable only because US
consumer spending was five times larger than China’s, even as China’s
manufacturing output and fixed capital investment grew larger than those
of the US.

As the 2008-09 crash demonstrated, any decline in external demand
rapidly leads to a crisis of overproduction, factory closures and rising
unemployment in China.

The Chinese financial system has been based on export-led production.
The destruction of most state-owned enterprises in the 1990s, which used
to provide housing and medical coverage for employees, forced workers to
save what they could from their low wages in bank deposits. The banks
set low interest rates for deposits, which were in turn crucial for the
operations of the central bank. It was able to counter inflation and
keep the currency stable by buying up the dollars flowing into the
country from exports, and issuing bonds in yuan at low interest rates.

In effect, Chinese savings subsidised the entire trade cycle. Some
economists described this process as the “export of savings” to the US.

China’s low interest rates also provided cheap credit to fuel a
state-led investment boom in industries from telecoms and automobiles to
metal manufacturing and infrastructure. Western corporations in these
sectors formed joint-ventures and partnerships with Chinese state firms,
reaping huge profits.

With the collapse of the US housing and financial bubbles in 2007-08,
however, the happy “marriage” of US-China dollar recycling came to an
end, and with it the “state-led” capitalist model in China.

Beijing’s stimulus packages, which unleashed trillions of dollars of
cheap credit after 2008, only exacerbated the resulting crisis by
triggering a speculative property boom and threatening to generate
colossal bad debts for the state banks and local governments. Already
afflicted by low profit margins before the crisis, Chinese manufacturing
profitability dived even further. Investors sought returns from property
speculation, rather than production. In response, the Chinese regime is
seeking to further integrate China’s financial and monetary system with
the world’s major finance centres such as New York and London in order
to attract an influx of international capital and prop up the faltering
economy.

Far from resolving the current economic difficulties, China’s closer
financial integration will make it ever more vulnerable to the global
capitalist crisis and sudden shifts in the world markets. Beijing’s
economic policy-making will become ever more subject to the dictates
from the major global banks and financial institutions for a deeper
assault on the living standards of China’s already exploited workers.

(7) Chinese companies build infrastructure in Europe; Germany exports
more to China than US - John Ross


http://ablog.typepad.com/keytrendsinglobalisation/2012/03/changing-perceptions-of-china-in-europe.html

Changing perceptions of China in Europe

Rohn Ross

09 March 2012

Chinese Vice-President Xi Jinping's visit to Ireland last month
highlighted the way in which the impact of the international financial
crisis is bringing about a change in the perception of China in Europe.

It is useful to go back four years, in the run-up to the Beijing
Olympics, to see the difference. At that time, according to a poll in
the Irish Times, a campaign for an Olympic boycott, promoted by figures
from most Irish political parties, had the support of 43 per cent of
Ireland's population – compared to 57 per cent favouring participation.
In comparison, during Xi Jinping's visit, every major party and
newspaper spoke in favour of closer links with China.

Taking another example, in early 2008, French President Sarkozy
threatened to boycott the opening ceremony of the Beijing Olympics, the
11th meeting of the EU-China summit was postponed because of Sarkozy's
attacks on China, and the mayor of Paris was saying he would hang a
banner outside his office denouncing China. In contrast, when President
Hu Jintao visited France in November 2010, President Sarkozy did him the
unusual honour of meeting him personally at the airport.

Trade between key European countries and China has advanced in the
intervening period - Germany now exports more to China than the US.
China's investments in Europe have moved beyond bond purchases to
Chinese companies signing significant deals – particularly in
infrastructure. China's Three Gorges Corp bought a 21 per cent stake in
EDP-Energias de Portugal SA for $3.5 billion, and China Investment Corp,
China's sovereign wealth fund, bought a 9 per cent stake in the holding
company of the UK's Thames Water. In finance, in January the UK signed
an agreement with the Chinese government for London to act as an
offshore centre for RMB transactions.

What in most European countries has essentially become an all-party
welcome for closer economic ties with China contrasts with the political
atmosphere in the US. Vice-President Xi was treated respectfully by
President Obama's administration during his US visit - although no major
agreements were arrived at. But leading Republican presidential
candidate Mitt Romney declared he would designate China as a currency
manipulator on his first day if elected president.

In contrast to Europe, the US has adopted a position blocking Chinese
inward investment. The most famous case was China's National Offshore
Oil Corp being prevented from purchasing Californian oil company Unocal.
But China's Huawei, the world's second-largest telecommunications
equipment manufacturer, has effectively been blocked from bidding for US
contracts.

There are are of course those in Europe opposing better relations with
China. Britain's Daily Telegraph, for example, carried a headline
regarding Vice-President Xi's visit to the US that ‘China's upcoming
leader Xi Jinping has been wined, dined... and warned.' But in contrast,
the UK's Guardian newspaper carried an editorial headlined, ‘Chinese
economy: headaches to die for,' arguing: ‘Any appraisal of China's
prospects must begin by admitting that the Middle Kingdom is the most
astonishing development success story in the world today.' Even a
tabloid newspaper, such as the UK's Daily Mirror, carried a major story
emphasizing the positive role of UK trade relations with China.

It is clear that the political atmosphere for China's trade and
investment in Europe is currently more favourable, and enjoys far wider
support, than in US politics.

This situation is significant not only for China but for Europe and the
US themselves. Trade growth between both the US and China and between
the EU and China is larger than between the US and EU.

Comparing the latest available data, for the 4th quarter of 2011, with
the 4th quarter of 2007, before the financial crisis, U.S. exports to
the EU increased by an annualized $21 billion and EU exports to the US
by an annualized $8 billion. US exports to China, however, increased by
an annualized $47 billion, while EU exports to China grew by an
annualized $83 billion. Growth of US exports to China, therefore was
more than twice those to the EU, and EU exports to China grew by more
than 10-fold those to the US. This data also shows the EU gained more
from increased exports to China than the US.

A parallel investment pattern exists. Europe is now the largest
destination for Chinese companies' foreign investment. It also accounted
for 34 per cent of China's outward investment in mergers and
acquisitions in 2011. In contrast, China's investment in the US fell
from $4.2 billion in 2010 to $3.2 billion last year.

Naturally there are downs as well as ups in Europe's economic relations
with China – a current down is the row over the EU's airline tax. But
overall the current types of deals being done are well founded because
they are mutually beneficial. The Economist magazine noted: ‘In
welcoming China, Europe is swimming with the tide of history; America is
struggling against it.'

The reason that at present the EU is gaining more from trade and
investment with China than the US is certainly not due to China's
political bias – China's government must consider its relations with the
US as the world's most important bilateral one. But, in addition to the
different scale of openings being offered them, China's companies have
to evaluate ‘political risk' just as much as Western ones do. ‘Political
risk' is clearly now lower in Europe.

Good relations between Europe and China are evidently capable of
generating what China characterises as 'win-win' outcomes. China is a
huge market for technologically advanced and high-value exports from the
EU, as Germany's export success shows, which improves China's industry,
while the EU also gains from China's continued support for the euro.

The change in the perception of China in Europe is not merely a success
for China's diplomacy but has economic foundations.* * *

An earlier version of this article appeared in China Daily.

(8) Stephen Roach blames Americans for a Fixation on the Yuan (Renminbi)

America's Renminbi Fixation

Stephen S. Roach

Apr. 26, 2012

Stephen S. Roach was Chairman of Morgan Stanley Asia and the firm's
Chief Economist, and currently is a senior fellow at Yale University’s
Jackson Institute of Global Affairs and a senior lecturer at … Full profile

http://www.project-syndicate.org/commentary/america-s-renminbi-fixation

NEW YORK – For seven years, the United States has allowed its fixation
on the renminbi’s exchange rate to deflect attention from far more
important issues in its economic relationship with China. The upcoming
Strategic and Economic Dialogue between the US and China is an excellent
opportunity to examine – and rethink – America’s priorities.

Since 2005, the US Congress has repeatedly flirted with legislation
aimed at defending hard-pressed American workers from the presumed
threat of a cheap Chinese currency. Bipartisan support for such a
measure surfaced when Senators Charles Schumer (a liberal Democrat from
New York) and Lindsey Graham (a conservative Republican from South
Carolina) introduced the first Chinese currency bill.

The argument for legislative action is tantalizingly simple: the US
merchandise trade deficit has averaged a record 4.4% of GDP since 2005,
with China accounting for fully 35% of the shortfall, supposedly owing
to its currency manipulation. The Chinese, insists a broad coalition of
politicians, business leaders, and academic economists, must revalue or
face sanctions.

This reasoning resonates with the US public. Opinion polls conducted in
2011 found that fully 61% of Americans believes that China represents a
serious economic threat. As such, the currency debate looms as a major
issue in the upcoming US presidential campaign. “Enough is enough,”
President Barack Obama replied, when queried on the renminbi in the
aftermath of his last meeting with Chinese President Hu Jintao. Obama’s
presumptive Republican challenger, Mitt Romney, has promised to declare
China guilty of currency manipulation the day he takes office.

But, however appealing this logic may be, it is wrong. First, America’s
trade deficit is multilateral: the US ran deficits with 88 nations in
2010. A multilateral imbalance – especially one that it is traceable to
a saving shortfall – cannot be fixed by putting pressure on a bilateral
exchange rate. Indeed, America’s major threat is from within. Blaming
China merely impedes the heavy lifting that must be done at home –
namely, boosting saving by cutting budget deficits and encouraging
households to save income rather than rely on asset bubbles.

Second, the renminbi has now appreciated 31.4% against the dollar since
mid-2005, well in excess of the 27.5% increase called for by the
original Schumer-Graham bill. Mindful of the lessons of Japan –
especially its disastrous concession on sharp yen appreciation in the
Plaza Accord of 1985 – the Chinese have opted, instead, for a gradual
revaluation. Recent moves toward renminbi internationalization, a more
open capital account, and wider currency trading bands leave little
doubt that the endgame is a market-based, fully convertible renminbi.

Third, there has been significant improvement in China’s external
imbalance. The International Monetary Fund estimates that China’s
current-account surplus will narrow to just 2.3% of GDP in 2012, after
peaking at 10.1% in 2007. American officials have long bemoaned China’s
saving glut as a major source of global instability. But they should
look in the mirror: America’s current-account deficit this year, at an
estimated $510 billion, is likely to be 2.8 times higher than China’s
surplus.

Finally, China has evolved from the world’s factory to its assembly
line. Research shows that no more than 20% to 30% of Chinese exports to
the US reflect value added inside China. Roughly 60% of Chinese exports
represent shipments of “foreign invested enterprises” – in effect,
Chinese subsidiaries of global multinationals. Think Apple. Globalized
production platforms distort bilateral trade data between the US and
China, and have little to do with the exchange rate.

Rather than vilifying China as the principal economic threat to America,
the relationship should be recast as an opportunity. The largest
component of US aggregate demand – the consumer – is on ice. With
households focused on repairing severely damaged balance sheets,
inflation-adjusted private consumption has expanded at an anemic 0.5%
average annual rate over the past four years. Consumer deleveraging is
likely to persist for years to come, leaving the US increasingly
desperate for new sources of growth.

Exports top the list of possibilities. China is now America’s third
largest and most rapidly growing export market. There can be no
mistaking its potential to fill some of the void left by US consumers.

The key to realizing that opportunity lies in access to Chinese markets
– all the more significant in light of China’s upcoming pro-consumption
rebalancing. Historically, China has had an open development model, with
imports running at 28% of GDP since 2002 – nearly three times Japan’s
10% import ratio during its high-growth era (1960-1989). As a result,
for a given increment of domestic demand, China is far more predisposed
toward foreign sourcing.

As the Chinese consumer emerges, demand for a wide variety of US-made
goods – ranging from new-generation information technology and biotech
to automotive components and aircraft – could surge. The same is true of
services. At just 43% of GDP, China’s services sector is relatively
tiny. There is enormous scope for America’s global services companies to
expand in China, especially in transactions-intensive distribution
sectors – wholesale and retail trade, domestic transportation, and
supply-chain logistics – as well as in the processing segments of
finance, health care, and data warehousing.

The US needs to refocus the US-China trade agenda toward expanded market
access in these and other areas – pushing back against Chinese policies
and government procurement practices that favor domestic production and
indigenous innovation. Some progress has been made, but more is needed –
for example, getting China to join the World Trade Organization’s
Government Procurement Agreement. At the same time, the US should
reconsider antiquated Cold War restrictions on Chinese purchases of
technology-intensive items.

For a growth-starved US, the opportunities of market access far outweigh
the currency threat. The long-dormant Chinese consumer is about to be
unleashed. This plays to one of America’s greatest strengths – its zeal
to compete in new markets. Shame on the US if it squanders this
extraordinary chance by digging in its heels at the upcoming Strategic
and Economic dialogue.

(9) Wen Jaibao urges break-up of China's state-controlled banking 'monopoly'

http://www.theaustralian.com.au/business/wall-street-journal/wen-jaibao-urges-break-up-of-chinas-state-controlled-banking-monopoly/story-fnay3ubk-1226318517953

BY: DINNY MCMAHON, LINGLING WEI AND ANDREW GALBRAITH

From: The Wall Street Journal

April 04, 2012 12:26PM

CHINESE Premier Wen Jiabao told a national audience that China's
state-controlled banks are a "monopoly" that must be broken up, in a
blunt appeal for a shake-up of the creaky financial system of the
world's No 2 economy.

In a broadcast on state-run China National Radio, Mr Wen told an
audience of business leaders that China's tightly controlled banking
system needs to change.

"Let me be frank. Our banks earn profit too easily. Why? Because a small
number of large banks have a monopoly," said Mr Wen, according to the
transcript of the program on the broadcaster's website.

"To break the monopoly, we must allow private capital to flow into the
finance sector."

Mr Wen's comments tap into a rich vein of popular anger against China's
biggest banks that has been building in recent months online and in the
media.

The backlash was initially prompted by frustration at what has been
perceived as banks' payments of low interest rates on deposits and
indiscriminate levying of fees.

It has worsened in recent weeks as lenders posted record profits, even
as the economy slows and some companies struggle to access credit.

Mr Wen's push is part of a broader set of issues over China's growth,
and came on the same day that Beijing unveiled programs intended to
support the development of the country's capital markets and to spread
international use of the yuan.

Among them, China's security regulator said it would more than triple
the amount that foreigners would be allowed to invest in China's heavily
restricted financial markets to $US80 billion.

Mr Wen formally came into office in 2003 with a reputation as a reformer
but has acknowledged publicly his regrets that he didn't go far enough.

The premier is expected to step down in a once-a-decade leadership
change that begins late this year.

The country's economic expansion is set to slow in coming years after
racing ahead at a torrid pace over the past decade, raising questions
over whether China can switch from a model based on exports and
investment to one that relies more on a rising consumer culture.

That has led to a nationwide conversation over China's tight grip on its
financial system, which favours big state-owned firms but has been
criticised by economists and even some reformers in China for impeding
more balanced growth.

Many in China now believe a crisis will come without economic reform.

Mr Wen's remarks, in the export-oriented province of Fujian, are further
indication that long-delayed economic reform is now at least a topic for
public debate.

His comments challenge a widespread assumption that reform will have to
wait for years until the new leadership under Xi Jinping, China's
designated next party chief, is installed and has established a power
base and cemented allegiances.

To realise the economic transformation, "private companies should be
encouraged to get into the financial-services industry," said Fang
Xinghai, director-general of Shanghai Municipal Financial Services
Office and a former World Bank economist, in an interview at China's
Boao Forum for Asia this week.

For decades, China's economic growth has relied to a large extent on the
captive savings of ordinary Chinese moved at cheap rates to state-owned
enterprises.

The system penalises savers and rewards borrowers, perpetuating an
economic imbalance marked by high rates of investment and suppressed
consumption.

That model is increasingly seen as unsustainable. To lift the economy,
many economists believe China must now transfer more money to consumers
and aid its service sector, which is based on private enterprise.

Some economists argue that low interest rates are partly a consequence
of China's efforts to keep its currency undervalued.

The central bank fears that higher rates would attract speculative
capital, fuelling inflation.

It would raise the cost to the People's Bank of China of "sterilising"
the liquidity created through its massive intervention in the currency
markets.

The process involves the PBOC buying US dollars and selling yuan, which
must then be mopped up through local currency bond issues.

The interest on those bonds is a heavy burden on the nation's finances.

Meanwhile, critics say that the Big Four state banks have grown bloated
and complacent by living off the guaranteed spread between deposit and
lending rates, currently at around three percentage points.

Critics say the banks' practices have impeded innovation in products and
services, and encouraged lending to state-owned enterprises that has an
implicit government guarantee.

The effect is that many private companies, the main generators of jobs,
are starved of capital, the critics say.

Eswar Prasad, a Cornell University economist and former senior
International Monetary Fund official, said Mr Wen's remarks reflect "a
growing frustration among reform-minded officials that the large banks
are deploying their political clout to preserve their privileges and
block broader reforms to the financial system."

Other overhauls finding increasing backing by Chinese officials include
proposals to improve Chinese companies' ability to conduct initial
public offerings in local stock markets and to allow more openness to
foreign investors.

The major question is whether increasing rhetoric and new initiatives
toward economic revisions will lead to broader reform.

Previous efforts have faltered amid Beijing's drive to keep a tight rein
on the economy and opposition from interest groups.

"The Chinese government has said similar things for many, many years and
I have yet to see drastic, concrete action," said Victor Shih, an
associate professor at Northwestern University.

Gary Hufbauer, a former senior US Treasury official now at the Peterson
Institute for International Economics, said if Beijing follows through
with Mr Wen's pronouncements, "It would be a dramatic step towards a
true market economy."

But, he added, "Whether this will materialise, one has to take these
statements with a grain of salt."

In his comments, Mr Wen referred to a pilot program announced last week
intended to legitimise portions of China's informal lending system.

Economists say China's state-controlled banks favour lending to
state-owned industrial and construction firms. That has fuelled the
investment that has been a mainstay of China's economy, but some say it
is now outmoded because it means credit doesn't get to the small firms
and consumers who will help drive the economy toward greater consumption.

The program is focused on the city of Wenzhou - an eastern centre of
commerce with a reputation for fostering entrepreneurship - and the
reform push includes legitimatising and tracking the city's wide network
of informal non-bank lenders.

"Those parts of the Wenzhou trial that prove a success should
immediately be expanded to the rest of the country," he said, according
to the broadcaster.

China's largest banks - Industrial & Commercial Bank of China, Bank of
China, Agricultural Bank of China and China Construction Bank -reported
combined profits of 632.21 billion yuan ($97.4bn) for 2011, despite a
slowing economy.

In their public comments, they have defended their lending to smaller
companies and entrepreneurs and said they were embarking on further
outreach.

The four banks, plus Bank of Communications, China Development Bank and
the Postal Savings Bank, account for more than 55 per cent of all
outstanding loans in China's banking system.

Additional reporting: Andrew Browne, Ian Talley and Carolyn Cui

(10) China Rewards Over Two Thousand People for Reporting Porn to
Authorities


http://socialbarrel.com/china-rewards-over-two-thousand-people-for-reporting-porn-to-authorities/33232/

March 7, 2012 by Naveen Kar 0

The Government of China has rewarded over two thousand people for
reporting pornographic content available on internet and mobile to
Chinese authorities in 2011, reports IANS. These people received over
nine million yuans (around $1.5 million) from the government as rewards.

According to Xinhua News, about 2129 people offered important tip-offs
to authorities about pornography. All of them received awards ranging
from 1,000 to 10,000 yuans.

Starting December 2009, four organizations in China started soliciting
information about pornographic content. These organizations included
China Internet Illegal Information Reporting Centre; 12321 Internet
Obscene and Trash Information Reporting Centre; Internet Illegal Conduct
and Crime Reporting Centre; and Reporting Centre of the National Office
Against Pornographic and Illegal Publications.

The organizations sought help of the general public to crack down
against the pornographic content available on internet and mobile
phones, and targeted different online forums, social media sites,
smartphones, and porn websites that were offering pornographic content
to users.

Chinese government rewarding people who report about porn sites on the
internet About 1.26 million tip-offs were received by these
organizations during the period from December 2009 till December 2011.

(11) Australian Foreign Minister Bob Carr rebuked by China over Tibetan
probe


http://www.theaustralian.com.au/national-affairs/foreign-affairs/bob-carrs-tibet-bid-earns-ire-of-china/story-fn59nm2j-1226307695440

Bob Carr's Tibet bid earns ire of China

BY: MICHAEL SAINSBURY, CHINA CORRESPONDENT

The Australian

March 23, 2012 12:00AM

BOB Carr has been rebuked by the Chinese government for wading into the
Tibet debate, with state-owned media and the Foreign Affairs Ministry
accusing him of interfering in the country's domestic affairs and
pandering to the US.

The Chinese backlash came after Senator Carr revealed Australia's
ambassador to China, Frances Adamson, would request a visit to highly
sensitive Tibetan areas of Sichuan province.

"Let me emphasise I spoke as recently as Saturday night to Frances
Adamson, our ambassador in Beijing, to have her request a visit to Tibet
on behalf of the Australian government," Senator Carr told ABC TV's 7.30
on Wednesday.

In response, the Communist Party-run tabloid The Global Times
effectively told Australia to butt out of China's internal affairs.

The paper cited a Chinese foreign affairs expert saying Australia
appeared to be shifting its foreign policy focus towards human rights -
a topic the Chinese detest being lectured on by Western countries -
following the departure of Kevin Rudd from the Foreign Ministry.

"What happens in Tibet is China's domestic affairs. It has nothing to
do with Australia, nor does Australia have the right to interfere,"
Minzu University professor Wu Chuke told The Global Times.

"He (Senator Carr) thinks that the act is for Australian domestic politics.

"After Kevin Rudd has stepped down the new Foreign Minister has turned
'right', his aim is to make China's human rights an issue and strengthen
the relationship with the US."

In response to a query from The Australian, China's Foreign Ministry
rammed the point home: "China is willing to strengthen friendly
co-operation and communications with other countries. What we want to
emphasis is that Tibetan affairs are Chinese domestic affairs. China
resolutely opposes any other country or any other people to interfere in
China's internal affairs under any excuse."

Tibetan areas have seen mounting levels of violence as a series of
self-immolations, mainly by Buddhist monks and nuns, has sparked wider
protests, prompting Chinese security forces to step in.

Senator Carr's comments have echoes of a mistake made by Mr Rudd when on
his first trip to China he raised Tibet in a speech at Beijing
University in 2008. Mr Rudd's relationship with Beijing never recovered.

Senator Carr also snubbed Australia' major trading partner by announcing
that his first trip to the region would be to Vietnam, Cambodia and
Singapore.

Senator Carr's inaugural Asian itinerary has raised eyebrows in
diplomatic circles in Beijing, with one source describing the decision
as "bizarre".

But the new Foreign Minister is following a tradition of gaffes in Asia
diplomacy by Labor.

Mr Rudd visited China and not Japan on his first trip to Asia as prime
minister, a mistake Julia Gillard reversed by visiting Japan and not
China on her first visit.

The latest gaffe by Senator Carr comes after he upset Papua New Guinea's
leaders for suggesting Australia would consider sanctions if the country
did not hold elections on schedule.

(12) Huawei banned from tendering for Australian Broadband Network, on
security grounds


http://www.abc.net.au/lateline/content/2012/s3464250.htm

Huawei blocked from NBN on security ground

Australian Broadcasting Corporation

Broadcast: 26/03/2012

Reporter: The Federal Government has blocked Chinese technology company
Huawei from tendering for NBN contracts on national security grounds.

Transcript EMMA ALBERICI, PRESENTER: The Federal Government is standing
by a decision to block a Chinese company working on the National
Broadband Network.

Huawei Technologies has been banned from tendering for NBN contracts on
advice from ASIO. {Australia's intelligence agency - Peter M.}

The company is run by a former member of the People's Liberation Army
and has been doing business in Australia for the past eight years.

The Prime Minister says the Government is acting in the best interests
of the National Broadband Network.

JULIA GILLARD, PRIME MINISTER: You would expect as a government that
we'd make all of the prudent decisions to make sure that that
infrastructure project does what we want it to do and we've taken one of
those decisions.

JEREMY MITCHELL, HUAWEI SPOKESMAN: We are privately owned, we run the
company ourselves, there is no evidence at all and we have never been
told by the Chinese Government to do a certain thing.

EMMA ALBERICI: Huawei says it's already involved in eight of the nine
broadband networks under construction around the world.

(13) Opposition slams NBN exclusion of Huawei

http://www.theaustralian.com.au/business/breaking-news/opposition-slams-nbn-exclusion-of-huawei/story-e6frg90f-1226310671789

BY: BY PAUL OSBORNE From: AAP March 26, 2012 8:00PM

THE Coalition says the Federal Government's decision to ban Chinese
telecoms giant Huawei from taking part in tenders for work on the
national broadband network (NBN) is "clumsy, offensive and unprofessional".

Huawei Technologies, which is close to becoming the world's largest
telecommunications equipment provider, was advised late last year that
it could not tender for NBN contracts because of security concerns about
cyber attacks emanating from China.

Prime Minister Julia Gillard said in Seoul, where she is attending
nuclear security talks, the NBN is a crucial national infrastructure
project.

"You would expect, as a government, we would make all of the prudent
decisions to make sure that infrastructure project does what we want it
to do, and we've taken one of those decisions," she said, when asked
about the Huawei decision.

A spokesman for Attorney-General Nicola Roxon told AAP today the $36
billion NBN project was the "backbone of Australia's information
infrastructure" and as such the Government had a responsibility "to do
our utmost to protect its integrity and that of the information carried
on it".

"This is consistent with the Government's practice for ensuring the
security and resilience of Australia's critical infrastructure more
broadly," the spokesman said.

Opposition Finance spokesman Andrew Robb, who last year toured Huawei's
facilities in mainland China and Hong Kong on a trip sponsored by the
company, said decisions such as this would reinforce the increasingly
"dim view" overseas investors had of Australia.

"Over the last four years the Rudd-Gillard governments have damaged our
relations with China, India, Japan and Indonesia at a time when the
middle class across that region is exploding," Mr Robb told AAP.

"This looks to be the latest clumsy, offensive and unprofessional
instalment of a truly dysfunctional government."

He said the fact that former foreign minister Alexander Downer and
former Victorian premier John Brumby were on Huawei's Australian board,
and that the company had a leading role in Britain's telecommunications
sector, warranted the Government considering it with "clear eyes".

"We must bear in mind that this is a company which is heavily involved
in eight of nine NBN roll-outs around the world," Mr Robb said.

The parliamentary pecuniary interest register shows Opposition Deputy
Leader Julie Bishop and frontbench colleague Bronwyn Bishop also visited
Huawei's facilities as guests of the company.

Ms Bishop declined to comment on the tender process, which she described
as "a matter for the Government", and said she had not been lobbied in
regard to the NBN or any other matter.

"My trip included a tour of Huawei headquarters in Shenzhen, where I was
shown some of the technology under development by its research and
development division that comprises about half of Huawei's 120,000
staff," she told AAP.

A Huawei Australia spokesman told AAP today it had issued an open
invitation to all MPs, and the media, to tour its facilities.

"We haven't targeted one party over another," the spokesman said.

However, former NSW Labor premier Kristina Keneally rejected a statement
by a Huawei spokesman earlier today that she travelled on a company
sponsored trip to the firm's China facilities.

"This is incorrect," she said in a statement today.

"I have never undertaken any travel paid for by Huawei."

When told of Ms Keneally's statement, the spokesman apologised for
giving misleading information.

Huawei spokesman Jeremy Mitchell said Australia was still getting used
to privately owned Chinese companies, but Huawei would not give up on
tendering for NBN projects, which are being managed by the Australian
government-owned NBN Co Ltd.

"We're not used to companies coming from China that are leading in
technology and also global - 70 per cent of our work is outside of
China," Mr Mitchell said.

"This is new territory.

"We see this as a setback. We're obviously disappointed. But through
looking at what we've done overseas, looking at what we've done in the
United Kingdom, we can put in place measures that help the Australian
Government consider us as a partner in the NBN."

Huawei was established in the late 1980s by Ren Zhengfei, a former major
in the People's Liberation Army, and is headquartered in the special
economic zone of Shenzhen, near Hong Kong.

Its Australian office opened in 2004 in Sydney and is the operations hub
for its business across Australia, New Zealand and the South Pacific.

NBN Co declined to comment.

(14) Fujitsu's King K confirmed as world's top supercomputer, thrashes
Top 500 rivals


http://www.theregister.co.uk/2012/03/16/fujitsu_k_computer/

Fujitsu's thrashes Top 500 rivals

Supercomputer's amazing 10-plus petaflops with 706,000 cores

By Chris Mellor

Posted in HPC, 16th March 2012 17:32 GMT

Fujitsu's K computer has confirmed its place as emperor of the Top 500
supercomputer list with an incredible 10.51 petaflops.

The K computer – RIKEN, a Japanese government science and technology
research institute, after the Japanese word for 1016, "Kei" – was
conceived in 2006. Detailed design took place from 2007 to 2009, when
manufacturing started, with the system being delivered in stages.
Performance tuning started this year, with an 8.126 Pflop rating in
June. Full service is scheduled to start in November.

The petaflop number has just increased by 29 per cent, which solidly
cements the K computer's place at the top of the SuperComputer Top500
list. The second system is a 2.566 Pflop Tianhe-1A supercomputer at the
Chinese National Supercomputing Centre in Tianjin, made by NUDT. Third
is a Cray Jaguar at the US Oak Ridge National Laboratory, rated at 1.759
PfLops.

The numbers involved are bizarrely large. The K computer has 11PB of
local file system storage and over 30PB of global file system storage,
mostly Fujitsu Eternus arrays. There are 864 racks, housing 88,128
SPARC64 VIIIfx processors: each one a node in the system. Each processor
has 8 cores, running at 128Gflops and 2GHz, connected by a Tofu 6D mesh
torus interconnect that can support more than 100,000 nodes. That means
a grand total of 705,024 cores. This baby is a monster.

It is installed at the RIKEN AICS (Advanced Institute for Computational
Science) multi-storey site in Kobe, Japan and the project has been
sponsored by Japan's Ministry of Education, Culture, Sports, Science and
Technology. It seems obvious that, at this scale, no one company can
privately develop such a huge processing engine and government
intervention and funding help will be essential to go past the 10.51
Pflop mark.

It seems equally obvious that no private organisation could afford to
buy an 88,128 node K computer. These colossally expensive machines are
going to be national or international resources for hire. ...

Now that the system is nearing operational readiness it needs users.

Yamada said the Japanese government is promoting joint research efforts
between Japanese universities and institutions to develop applications
of high-performance computing in new fields beyond the traditional ones.

It is necessary to extend the research efforts to solve issues in
different countries with a global collaborative scheme. Fujitsu is
pushing this idea energetically.

Having spent what's likely to be over a billion dollars of its own and
the Japanese government's money it is understandably keen that the
almost three-quarters of a million cores don't sit there running Grand
Theft Auto because there aren't enough customers. ®

Fujitsu's King K confirmed as world's top supercomputer, thrashes Top
500 rivals

http://www.theregister.co.uk/2012/03/16/fujitsu_k_computer/

Fujitsu's thrashes Top 500 rivals

Supercomputer's amazing 10-plus petaflops with 706,000 cores

By Chris Mellor

Posted in HPC, 16th March 2012 17:32 GMT

Fujitsu's K computer has confirmed its place as emperor of the Top 500
supercomputer list with an incredible 10.51 petaflops.

The K computer – RIKEN, a Japanese government science and technology
research institute, after the Japanese word for 1016, "Kei" – was
conceived in 2006. Detailed design took place from 2007 to 2009, when
manufacturing started, with the system being delivered in stages.
Performance tuning started this year, with an 8.126 Pflop rating in
June. Full service is scheduled to start in November.

The petaflop number has just increased by 29 per cent, which solidly
cements the K computer's place at the top of the SuperComputer Top500
list. The second system is a 2.566 Pflop Tianhe-1A supercomputer at the
Chinese National Supercomputing Centre in Tianjin, made by NUDT. Third
is a Cray Jaguar at the US Oak Ridge National Laboratory, rated at 1.759
PfLops.

The numbers involved are bizarrely large. The K computer has 11PB of
local file system storage and over 30PB of global file system storage,
mostly Fujitsu Eternus arrays. There are 864 racks, housing 88,128
SPARC64 VIIIfx processors: each one a node in the system. Each processor
has 8 cores, running at 128Gflops and 2GHz, connected by a Tofu 6D mesh
torus interconnect that can support more than 100,000 nodes. That means
a grand total of 705,024 cores. This baby is a monster.

It is installed at the RIKEN AICS (Advanced Institute for Computational
Science) multi-storey site in Kobe, Japan and the project has been
sponsored by Japan's Ministry of Education, Culture, Sports, Science and
Technology. It seems obvious that, at this scale, no one company can
privately develop such a huge processing engine and government
intervention and funding help will be essential to go past the 10.51
Pflop mark.

It seems equally obvious that no private organisation could afford to
buy an 88,128 node K computer. These colossally expensive machines are
going to be national or international resources for hire. ...

Now that the system is nearing operational readiness it needs users.

Yamada said the Japanese government is promoting joint research efforts
between Japanese universities and institutions to develop applications
of high-performance computing in new fields beyond the traditional ones.

It is necessary to extend the research efforts to solve issues in
different countries with a global collaborative scheme. Fujitsu is
pushing this idea energetically.

Having spent what's likely to be over a billion dollars of its own and
the Japanese government's money it is understandably keen that the
almost three-quarters of a million cores don't sit there running Grand
Theft Auto because there aren't enough customers. ®

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