Faced with surging numbers of unemployed college graduates China has asked its municipalities to ease the Hukou restrictions for non-local college graduates. The Hukou system is a left-over restriction from the Cultural Revolution that allowed the Chinese government to control for migration and settlement of its population. The new measure, which excludes Beijing, Shanghai, Tianjin and Chongqing, will allow college graduates more freedom in choosing work locations.
China, the world’s second largest oil importer after the U.S., signed a deal with Russia for 15 million tons of oil per year for the next 20 years. Russia, the world’s second largest oil exporter after Saudi Arabia, is under significant pressure due to an economic slowdown and its first recession in a decade. The deal grants Russia’s oil giants Rosneft and Transneft much needed cash through Chinese loans of $25 billion.
Chinese automaker Chery may consider acquisitions in Europe as part of its global growth strategy. Acquisition of strategic assets in Europe would enable Chery Auto to enter the European market and get access to sophisticated technology, brands and distribution channels. The automobile industry is currently undergoing significant changes and well-known brands such as Volvo or Hummer struggling under the drop in demand are increasingly becoming targets of strategic acquisitions.
China might shift its focus from low-risk yet low-yield assets, such as U.S. government bonds, to higher return investment opportunities. Another consideration for China is to use its FX reserves to help stimulate struggling domestic industry sectors. With almost $2 trillion in foreign exchange reserves China is by far the largest holder of FX reserves in the world. A shift in the country’s FX reserves strategy would have significant effects on the U.S. economy which is heavily dependent on Chinese money loans.
