"Dubai" is one of the seven emirates of the United Arab Emirates (UAE), and it is not only the second largest emirate of the UAE but also its second largest city. It is located in the middle of the Arabian Peninsula, on the southern coast of the Arabian Gulf, making it the center of the Gulf region and known as the pearl of the Gulf. Over the past 20 years, Dubai has used "petrodollars" to build a series of modern supporting infrastructure facilities, and large-scale construction has made Dubai synonymous with "luxury."
Recently, "Dubai World Group" announced that it would delay repayment of its $4 billion debt due in six months and would restructure its debt with government assistance. After the event erupted, global stock markets plummeted, and under the rush of risk-averse funds, the US dollar index rose sharply, rising from 74.18 points to 75.57 points. The "Dubai Crisis" once again triggered "doomsday" talk, causing many people to worry that this crisis would bring the global economy to another low point. For a time, people who had just suffered from the international financial crisis and hadn't yet fully recovered were terrified. In our country, the main form of manifestation occurred in the stock market, where investors rushed to sell their stocks, as if holding bundles of banknotes could help them avoid this "century disaster"...
In the east of the earth, an ancient yet vibrant country, and an older yet vibrant "blogger"—Old Sha, pointed out incisively that the so-called "Dubai Crisis" was nothing more than a joke played by "Dubai" on the whole world!
Not to mention that the scale of the "Abu Dhabi Sovereign Fund" alone in the UAE is as high as $329 billion to $875 billion, while the total foreign debt of the Dubai government and state-owned enterprises is only $80 billion, among which the total debt of the "Dubai World Group" is $60 billion, and the debt due next month is only $4 billion...
Not to mention that the "Dubai World Group" is a flagship company controlled by the Dubai Emirate government, a "state-owned enterprise"; the per capita income of the UAE in 1985 was ranked as the richest in the world, even entering the 21st century, a skinny camel is still bigger than a horse, with its per capita GDP reaching tens of thousands of dollars, still ranking among the wealthiest countries in the world...
Not to mention that the "Dubai World Group" is the fourth largest port operator in the world, and in the year 2008 when the international financial crisis occurred, the group's profit growth rate was still as high as 48%; the president of the Dubai World Group recently stated: "In 2008, the Dubai World Group performed well. Our focus on emerging markets and goods origins once again gave us excellent results and exceeded our expectations"...
Not to mention that the announcement of "delayed repayment" was merely from one "province" of the UAE, and cannot be compared to the economic crises that affected the entire United States and Europe in 2008; nor can it replay the default trends of sovereign nations like Russia in 1998 or Argentina in 2001...
Not to mention that our country's main international trade partners are the United States, Japan, South Korea, and the EU, and trade with the UAE accounts for only a small portion of our total import-export trade. The UAE is merely considered a "logistics station" for our external trade goods transfer...
Not to mention that the world economy has already begun to recover, and the momentum of China's economic recovery is even stronger. There is no way that the recovery trend of the world economy can be reversed by a single company in the UAE...
Chinese economists and media have already started to dispel the panic caused by the "Dubai Crisis" among investors:
For example, Chen Bingcai, a researcher at the National Academy of Governance's Decision-Making Consultation Department, said: "The Dubai debt crisis is not a new crisis, it may be the last manifestation of this international financial crisis." He analyzed that the Dubai crisis was due to a sharp drop in real estate prices, broken capital chains, and too many suspended engineering projects... Old Sha firmly believes that this will certainly remind China's highest decision-making level that the real estate industry needs "moderate development" and must not be suppressed! At the same time, it also tells all Chinese people that those who curse the collapse of the real estate industry are actually hoping for the early collapse of China's economy!
Independent-thinking "bloggers" have even seen the positive aspects of the "Dubai Crisis," because "Dubai" will make China's highest level consider carefully the constraining effect of weak external markets on domestic GDP growth, continuing to implement active fiscal policies and moderately loose monetary policies will undoubtedly be the only choice for the next few years!
Perhaps Europeans were the first to discover that the so-called "Dubai Crisis" was not a crisis at all, but rather a dramatic event. Therefore, after the Europeans panicked and "net flowed out" of stocks on Thursday, they quickly bought them back the next day; last Friday, most major European stock markets closed in the red—
The UK's FTSE index rose 56.2 points or 1.08%, closing at 5250 points;
Germany's DAX index rose 79.02 points, closing at 5693.19 points;
Stock markets in Russia, France, Italy, Netherlands, Norway, Sweden, etc., also mostly rose by more than 1%;
After the U.S. stock market opened low, seeing the rebound in European stock markets, the decline was reduced, and after setting a new high for the year in the previous one or two trading days, the Dow Jones Index ultimately fell 154.48 points or 1.48%, still closing above 10,000 points, at 10309.92 points.
It is said that the dollar index, which is inversely correlated with the stock market, rose sharply, but the dollar index soon realized that the "Dubai Crisis" was just a joke, thus retreating from a 1% rise to only a 0.1% increase! A long upper shadow line was the best response to this "international joke." Please see the daily K-line of the dollar index on last Friday—
In Old Sha's view, the so-called "Dubai Crisis" was nothing more than a unique business idea from the "Dubai World Group" that has already shifted from the "petrodollar" model to the "tourism, trade" model, a successful market strategy, an original self-promotion, and a cost-free advertising blitz! Repaying debts is a natural obligation, and the "Dubai World Group" did not declare bankruptcy or inability to repay debts, but merely announced "postponed repayment." Its "one stone" stirred up "three birds": first, it maintained the basic credit that the group would repay its debts; second, it indicated the temporary difficulties of being tight on cash; third, it served as a business promotion for itself!
Regarding the third point, any tourist attraction or leisure entertainment area is "afraid that people don't know." Imagine, in just the past few days, how many media outlets around the world have published pictures of Dubai's seven-star sailboat hotel, the modern desert garden of Abu Dhabi, and Terminal 3 of Dubai International Airport, which sees 70 million passengers annually and handles 4 million tons of freight?
The wave of "Dubai" swept overnight across all of China's TV stations, newspapers, and radio stations... And isn't it the same in any other country in the world? Old Sha boldly predicts that from now on, I dare not say about other countries, but the number of Chinese traveling to Dubai for tourism and shopping will sharply increase!
"Dubai" played a malicious joke on the whole world, and among those paying the "advertising fees," alas, there are many frightened Chinese people!
Some see the "Dubai Crisis" as the beginning of a "second dip," others see it as the "last manifestation" of the international financial crisis. Some believe that the "Dubai Crisis" is the inevitable result of excessive infrastructure expansion and suggest slowing down or even halting urbanization. Others think that the "Dubai Crisis" warns governments worldwide that if real estate collapses, the entire economic structure will collapse, and during the economic recovery process, real estate must not be suppressed. Some economic commentaries exaggerate the horror of the "Dubai Crisis," much like the "Wall Street Strikes" TV programs at the end of each year, accompanied by music akin to "the Japanese invasion," causing countless people to miss the best opportunity to buy houses in panic and cut their stocks at "rock bottom" prices; Old Sha consistently maintains a light-hearted bullish tone, believing that the "Dubai" embraced by the bearish camp will inevitably fail, and the desire of people around the world for a happy and beautiful life always forms an irresistible force of buying pressure!
Small Smart Moves Cause Big Troubles
A Middle Eastern financial industry observer who wished to remain anonymous revealed in an interview with China Securities News on November 29 that the Dubai debt crisis exposed last Thursday was actually due to the Dubai government's hope to obtain funds from the Central Bank of the UAE at a lower cost. From this perspective, this crisis was actually a "big trouble" caused by a "small smart move" by the Dubai government.
According to the observer, on November 26, the Dubai Emirate government requested its flagship holding company, Dubai World, to postpone debt repayment until May of the following year, while simultaneously announcing plans to issue bonds to raise funds for its own water and electricity businesses—a practice extremely rare in today’s global financial markets. The Dubai government's plan was to make the UAE federal government realize the "poor financial condition of the Dubai local government," thereby trying to minimize the interest costs required to obtain these funds from the Central Bank of the UAE.
Previously, the Central Bank of the UAE had invested $10 billion in February and $5 billion in November to purchase Dubai local government bonds, and was considered an important future buyer of Dubai government bonds.
The observer pointed out that the above measures indicate that the Dubai government did not fully understand the close interconnectivity of today’s global financial markets, nor did it realize that the act of postponing debt repayment itself could harm the international market's perception of the status and reputation of the Dubai government.
Moreover, according to the observer's estimate, including the assets of sovereign wealth funds, the total assets of the UAE federal government are currently about $800 billion, while the country's external debt is less than $130 billion. Overall, there is no situation where timely debt repayment cannot be made.