If you were the world's second-largest economy, you'd want to run some things, too. That's enough to explain China's creation of the Asian Infrastructure Investment Bank, which has attracted several US allies in Europe to join.
By Vikram Rangala
Thursday, March 19, 2015
It's an alternative to the IMF and World Bank, dominated by the US and legacies of the Bretton Woods agreement which set the dollar as the post-WWII reserve currency.
It's another sign of China's growing influence and financial clout. For many investors and traders, it's also a sign that China should be part of anyone's portfolio, anywhere in the world. The list of ways in which China is a global financial player is long, growing, and varied:
• Largest holder of US Treasuries. (Everyone knows that Japan is #2 but can you guess the third largest holder, with $300 billion in US debt? It's Belgium!)
• Largest consumer of coal and also largest installer of solar power. (Also a leader in ironic energy policy.)
• Largest trading partner of Africa, with twice as much trade with African nations as the US, which used to be largest.
I could go on, but if you're reading this on your iPhone or iPad (perhaps while trading on yourNadex mobile app), 'nuff said about China as a manufacturing powerhouse.
THE WORLD'S BEST STOCK RALLY
This week saw the Shanghai Stock Exchange achieve what some are calling the world's best stock rally. China's stock market boom has it back to levels not seen since the financial crisis. With China's central bank committing itself to stimulus, the stock rally in China is likely to see more upside and more volatility.
You might say, "But isn't much of that growth on paper fueled by outrageous and dangerous debt? Well, that's a strong accusation and...okay, it pretty much is. The debt burden of Chinese companies as a whole is a whopping 125% of GDP. In part, companies are able to be that leveraged because Chinese banks (and others) have been willing to endlessly refinance and roll over their debt. But with the economy in China slowing down, those banks may well get nervous about getting paid back.
EMOTION, VOLATILITY, OPPORTUNITY, TRADEABILITY
We can't discuss the new economic assertiveness of China without discussing the parallel military and diplomatic surge. China may or may not want to dominate the Pacific; but it's certain that it wants to be respected as a nation that could. While China is a permanent member of the UN Security Council, it has long resented Japan, which has one-tenth the population, enjoying membership in the G8. As the 70th anniversary of the end of World War 2 approaches, China wants to see Prime Minister Shinzo Abe once again apologize for Japanese atrocities like the Nanjing Massacre. To the rest of the world, it may seem like ancient history, but in Japan and China old wounds and old guilts are fresh. Even things most US schoolchildren never learn about, like the Opium Wars, are still part of China's world view.
In the context of history, China's desire to rival the US both militarily and economically makes sense, though it challenges the post-WW2 global order. Thomas Friedman of the New York Times has said, "The single most underappreciated force in international relations is humiliation." That's a powerful emotion, but as every trader knows, markets are nothing if not a display of emotion. Also known as volatility.
Also known, incidentally, as the smart trader's friend. Whether the new China-led investment bank becomes a successful rival and partner to the IMF, whether the Shanghai and Shenzhen markets rally further or correct, one thing is sure: there will be profit to be made.
THE NADEX CHINA 50 BINARY OPTION
And that's where Nadex's China 50 binary option comes in. It's a low-cost way for anyone to take a position on the Chinese stock market. Watch out, here comes the sales-y bit:
The same volatility that poses a risk for investors in Chinese stocks is the bread and butter of traders who trade in both directions through the market's ups and downs. In other words, for traders like those who trade Nadex index binary options, the Chinese stock market is a perfect fit.
That's why Nadex just added its new China 50 binary option, based on the Singapore FTSE China A50 stock index. The FTSE China A50 is "the benchmark for investors to access the China domestic market through A Shares – securities of companies incorporated in mainland China and traded by Chinese and institutional investors, comprising the largest 50 companies by full market capitalisation on the Shanghai and Shenzhen stock exchanges."
By using the benchmark China A50 as its underlying indicative market, Nadex can offer binary option traders the most representative measure of the Chinese stock exchanges available. At the same time, the Nadex China 50 offers the same limited risk, short-term result, and protection from market spikes that all Nadex binaries offer. And with a $100 minimum to open an account, it democratizes access to the Chinese markets, which are among the hottest in the world right now. Almost anyone can trade their view of the Chinese markets now—not just large institutions.
So there's the salesy part, but seriously, while your friends are talking about how their Apple stock is doing (yawn), you can tell them about how you traded Shanghai and Shenzhen. Oh, and ask them if they know which country is the third largest holder of US Treasuries. (Belgium, seriously!)
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