The Oxford Portfolio Update - March 27, 2009 (Broadcast #858)

In This Update

** China's Growth Engine is Revving Again

By Robert Williams, Oxford Club Editorial Director

The inevitable reform of our financial system is officially afoot. Yesterday, the Obama administration unveiled its plan to overhaul the system and impose greater regulation on major players, like hedge funds and Wall Street banks.

The overarching premise of the plan, which will require the approval of Congress, is to rein in the financial institutions deemed "too big to fail."

More specifically, if the plan gets Congress' blessing, banks that are so big that their failure would jeopardize the entire system will be subject to a much greater degree of federal oversight.

"Over the past 18 months, we have faced the most severe global financial crisis in generations," Treasury Secretary Timothy Geithner said in testimony to the House Financial Services Committee. "To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game."

Clearly, the health of the U.S. banking system trumps all.

It serves as the engine for the entire global economy.

Thus, healthy banks and functioning credit markets will once again allow the world's growing economies, including ours, to resume their northward heading.

Perhaps no greater beneficiary exists than China, given the Unites States is its chief trading partner.

Without a doubt, China's economy has lost some of its luster. But the Asian giant is already showing signs of recovery. Falling interest rates and its own $585 billion stimulus package is resuscitating buyers' confidence.

Automobile sales have raced 25% higher of late. And new data suggests that steel and energy consumption may be on the rise again (after a few negative quarters).

Some even think the country can achieve its target of 8% economic growth this year, despite the chilling effects of the global slowdown, which has seen Asian exports collapse.