Gang Fan provides another insightful piece on China's urbanization.

He analyzed why China's urbanization rate lags behind other countries with similar development level – he attributed this to China's Hukou system – most readers will find nothing new on this account.  More interestingly, he shared his view on why China does not have urban slums as typically found in other developing countries with large mass migration.  This has something to do with China's land tenure system.

For a graph on China's urbanization gap, you may find my previous post useful.

PIMCO's Kashkari and Rodosky show the market is flashing warning signals on US Treasuries (source: WSJ),

We can suggest market indicators that leaders should watch for warning signs:

• Increasing U.S. government debt-to-GDP ratio. From 1960 to 2007, that ratio averaged 36%. At the end of 2010, it was 62%. The Congressional Budget Office forecasts that it will climb to 100% by 2020 unless current tax and spending policies change. Research by economists Carmen Reinhart and Ken Rogoff indicates that sovereign debt begins to stifle economies' productive capacity when it passes 90% of GDP. Japan has had a ratio of greater than 150% for several years, and it has contributed to anemic growth.

• Increasing inflation expectations. The U.S. has enjoyed low inflation for two decades due to the Federal Reserve's commitment to stable prices. But if that resolve were perceived to weaken, confidence in Treasurys would decline, pushing both nominal and real yields higher. Since Fed Chairman Ben Bernanke's Jackson Hole speech in August 2010, the forward five-year annual inflation rate has increased 94 basis points to 2.90%, which is now above policy makers' unofficial target of 2%.

Reduced Treasury demand from abroad. Foreign ownership of Treasurys has increased to 55% in 2008, from 34% in 2000, providing the U.S. with cheap funding. As the U.S. continues to issue record levels of Treasurys, it will grow increasingly difficult for foreign buyers, both private and sovereign, to maintain their share. For example, foreign ownership of Treasurys has fallen to about 50% today. As foreign buyers increasingly look elsewhere, U.S. funding costs could increase, creating a drag on economic growth.

• Rapid dollar depreciation. A large and rapid drop in the value of the dollar would indicate concerns among investors in Treasurys and across the U.S. economy. Although currencies are volatile, the dollar index (DXY) has fallen by 5% or more in one month only 16 times since the index began 44 years ago. It has done so four times in the past two years. This suggests increased concern about the stability of the dollar.

• Dramatic steepening of the yield curve. A steepening yield curve—signifying that long-term rates are climbing more quickly than short-term ones—is usually a positive indicator that reflects increased optimism for future economic growth. However, if the yield curve were to steepen while economic growth expectations remained modest, such as during a period of prolonged private deleveraging, it could indicate that investors were demanding higher rates to compensate them for increased risk over time. Today's yield curve has 10-year rates about 315 basis points above overnight rates. A spread of greater than 400 basis points would be rare and potentially concerning.

According to DB research, gold prices on a PPI and CPI adjusted basis would need to surpass USD1,455/oz (very close now), and USD1,850/oz respectively to represent an all time high.

From a new nationwide poll by Pew Research Center (source: WSJ):

A new nationwide poll by the Pew Research Center finds Americans considering Asia more important by a 47% to 37% margin. In 1993, the balance of public opinion was the opposite: 50% considered Europe most important, 31% Asia. Questioned today about their interest in news from various countries, 34% of Americans say they are very interested in news from China, while far fewer say the same about France (6%), Germany (11%), Italy (11%) and even Great Britain (17%).

Public interest in China is not just academic. A large majority correctly identifies China as the country that holds the most American debt. Growing numbers of Americans also see China—incorrectly—as the world's leading economic power. Pew's latest survey finds 47% of respondents citing China as the world's top economic power, and only 31% correctly citing the U.S. In early 2008, the balance of opinion was the opposite: 41% named the U.S., while 30% named China.

While there is alarm, there isn't quite panic over China's growing economic power. A Pew Global Attitudes survey last year found that although 47% of Americans consider China's growing economic power a bad thing, larger numbers of Western Europeans see it that way. In France 67% share the view, and in Germany 58% do. 

Americans have two seemingly conflicting views on China policy. Fifty-three percent think the U.S. should get tougher with China on trade issues, but nearly as many (58%) say that U.S. policy should try to build stronger relations between the two countries. Many fewer want to scold China about its human rights (40%) or environmental policies (39%).

The bottom line is that Americans don't want to demonize China, but they have reservations about the effects of U.S.-Chinese trade. Few see China as an adversary, but most see it as a problem that needs addressing. Worries notwithstanding, most Americans for now continue to hold a favorable view of the rising Asian giant.

From today's Journal – another step toward free floating of Yuan:

China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country's plan to foster global trading in its currency.

The state-controlled Bank of China Ltd. is allowing customers to trade the yuan, also known as the renminbi, in the U.S., expanding the nascent offshore market for the currency which began last year in Hong Kong.

The decision is the latest move by China to allow the yuan, whose value is still tightly controlled by the government, to become an international currency that can be used for trade and investment.