Foxconn to build industrial base in Chongqing
Taiwan-based Hon Hai Precision Industry Ltd, also known as Foxconn, has kicked off construction of an industrial base in Xiyong Micro-electronic Industrial Park, Chongqing Municipaity, sources reported.

Hon Hai's new industrial base, covering a land area of 1,800 Mu, will be home to production facilities in ten fields such as computer manufacturing, software development, service outsourcing, and cartoon and animation.

The Chongqing Industrial Base is expected to involve a total investment of US$1 billion. Upon the completion of the project, it will be able to produce 20 million notebooks and related accessories annually.

In the future, 80% of Hon Hai's key components will be produced in the Chongqing base, said president Terry Gou, adding that the development of both software and hardware is expected to be done in Chongqing thanks to its rich talent pool.

The base will provide around 50,000 job opportunities, and the output value is estimated to exceed RMB 100 billion.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=27549

SHANGHAI (AP) - Ford Motor Co. said Friday it plans to spend $490 million on building a third assembly plant in China, ramping up production to meet surging demand in this fast-growing market as the U.S. automaker expands in Asia.

The factory, to be built in the central Chinese city of Chongqing, will make the next-generation Focus compact car, which Ford plans to sell globally.

The announcement from Chongqing came the day after the Dearborn, Michigan-based automaker unveiled a made-in-India compact car — part of a plan to boost sales in Asia, a region the U.S. automaker has hardly dented but is counting on to drive growth.

"Today's announcement reinforces our commitment to the further expansion of our China operations to meet the continued rise in demand from Chinese consumers for world-class Ford products and services," Ford chief executive Alan Mulally said in a statement.

In India earlier this week, Mulally said he expects a third of global car sales to come from Asia in 20 years, a third from the Americas and a third from Europe and Russia.

China is proving a lifesaver for all the big automakers, helping offset miseries elsewhere.

Total sales in January-August surpassed those in the U.S. for all but two months, rising to 8.33 million units, up nearly 30 percent from a year earlier, according to the China Association of Automobile Manufacturers.

Sales should soar to 12.6 million units this year, up 35 percent from 2008, boosted by subsidies that the industry is lobbying Beijing to extend, Xu Changming, a senior economist with the Cabinet's State Information Center, said at a seminar Friday in Beijing.

The government is due to decide by mid-December, Xu said, if it will continue the subsidies, which are aimed at promoting energy-efficient vehicles.

"If the policy is extended to next year, rapid growth of auto sales will be sustained," Xu said. "Otherwise, it will fluctuate, and it's hard to predict the degree."

The Chongqing plant, part of Ford's joint venture Changan Ford Mazda Automobile Co., is the third for Ford in China and its second in Chongqing, an industrial hub of 30 million people sprawled along the upper reaches of the Yangtze River.

Slated for full completion by 2012, Ford said the plant will be equipped to make other small cars on the company's global C-car platform in addition to the Focus.

Ford lags behind other automakers in Asia, capturing only 2 percent of auto sales there, compared with nearly 15 percent in North America and 10 percent in Europe.

Ford currently produces 450,000 vehicles in China annually. The new Chongqing facility will initially be able to manufacture 150,000 cars per year, with the capacity to produce 600,000 by 2012 when the plant is at full capacity, the company said.

Other foreign automakers are also expanding their investments in China, while China's domestic automakers are shopping overseas for big brand names and advanced technology.

Wolfsburg, Germany-based Volkswagen AG recently said it plans to spend euro 4 billion ($5.8 billion) in China between now and 2011 on new products and expansions at its plants in Nanjing and Chengdu.

On Thursday, General Motors Co. announced it was setting up a new technology research laboratory in Shanghai.

"China is one of the few markets worldwide which still keeps growing this year. It's obvious any automaker would like to set up plants here," said Zhang Xin, an analyst at Guotai Junan Securities, in Beijing.

Ford says it plans to introduce four new vehicles in the Chinese market in the next three years.
September 25, 2009 4:36 AM ET
The four-door "Figo", which is Italian slang for 'cool', will go on sale in India during the first quarter of next year, Ford executives told a press conference Wednesday. There are also plans to export the low-cost car to other Asian countries.

The next-generation Focus, scheduled to debut in January at the North American International Auto Show, represents a shift toward C-segment vehicles that Ford says it expects to account for nearly 28 percent of global sales by 2013.

Ford's current plant in Chongqing makes the Ford Focus, Ford Mondeo and Ford S-MAX. Its plant in Nanjing, in eastern China, makes the Ford Fiesta.

Changan Ford Mazda Engine Co. also has an engine manufacturing plant in Nanjing with an annual capacity of 350,000 units — one of the largest in China.

Ford's other partner in China, Jiangling Motors Corp., makes commercial vehicles, including the popular Ford Transit van.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20090925&id=10423151

Chinese should stick to their wan system even when the test is translaterd That would lessen the misunderstanding. Instead of writing 100,000 they should write 10 wan.

I, too, always get confused when I have to translate big numbers from Chinese to German or English and vice versa.

I agree. China should keep wan (10 thousands) number system. This is one of few things that is Chinese in math today. I don't see the advantage of western tri-digit (thousand) number system comparing to the Chinese quadra-digit (wan) system. For some people, it may have conversion problem, but I can convert a number from one system to the other without thinking.

China's retail sales hit $83.5 billion during holiday

2009-10-10


BEIJING: China's retail sales of consumer goods totaled 570 billion yuan ($ 83.50 billion) during the National Day holiday, with average daily sales up 18 percent compared with the same period of last year, the Ministry of Commerce said Friday.

Sales of household appliances soared during the eight-day holiday which started on October 1. Among them, high-definition flat screen TV sets, digital cameras, side-by-side refrigerators and 3G mobile phones are consumers' favorites. In the case of Kaiyuan Mall in Xi'an, capital of Northwest China's Shaanxi province, sales of household appliances gained by 34.7 percent year on year.

Jewelry and cars became hot sellers as well. The sales of jewelry of Caishikou Department Store in Beijing topped 100 million yuan, up 30 percent year on year. Car sales of major car-selling companies in Southwest China's Chongqing Municipality increased by 71.7 percent year on year.

The selling boom in the home appliance and car sectors was partly stimulated by a policy approved by the State Council in June this year, aiming to spur domestic consumption by subsidizing buyers of cars and household appliances, according to the ministry.

For example, consumers can first sell their old household appliances to recycling companies and obtain a certification card from the recyclers. Card holders then can purchase new appliances with a 10 percent cut in prices when showing retailers the card.

Meanwhile, sales promotion in major cities also played an important role in the holiday consumption boom.

http://www.chinadaily.com.cn/china/2009-10/10/content_8774251.htm

Putin's China visit to bring $5.5b in deals

2009-10-11

MOSCOW: Russian firms plan to sign over $5.5 billion worth of deals with their Chinese partners during the visit of Prime Minister Vladimir Putin to Beijing next week, Putin's deputy said during an interview with Reuters.

The 34 deals will range from a $500 million loan agreement between China's Development Bank and its Russian equivalent VEB to joint projects in transport, infrastructure, construction and mineral extraction, a draft list obtained by Reuters showed.

Russia's trade with China soared to $56 billion in 2008 from $9.3 billion in 2002. The share of oil in Russia's exports stands at 56 percent, metals at 5 percent while the share of machinery stands at 4.4 percent.

The list also showed Russia's diversified holding Sistema will sign a $200 million funding deal with the Bank of China and telecoms equipment maker ZTE Corp.

China National Materials (Sinoma) and investment holding company CNBM will sign four cement production facilities construction deals with Russian cement maker Eurocement.

Zhukov, who chairs Russia-China government commission and oversees preparations for the visit, said Russia pinned its hopes on future exports of commercial jets as well as equipment for nuclear power plants to boost machinery exports.

Latest data shows a 12.5 percent rise in machinery exports from Russia to China in January-July 2009, largely due to a 3.5-fold increase in aviation exports.

Putin, who stepped down as President in 2008 and became prime minister, last met his Chinese counterpart Wen Jiabao in Davos earlier this year where both addressed the business elite on the global economic crisis.

Last year Putin and Wen Jiabao oversaw the signing of a pipeline deal between Russia and China to create a new overland supply route for Siberian oil and negotiated an oil-for-loan deal through which China secured Russian oil supply for the next 20 years and Russian companies borrowed $25 billion from China at low rates.

Zhukov said the two sides will continue the energy dialogue, including talks about cooperation in the coal industry. He said Russia has also agreed to resume electricity exports to China.

Zhukov said the bilateral banking commission, headed by senior central bankers, will discuss raising the share of the rouble and the yuan in bilateral trade where the two currencies currently account for just over 1 percent of the trade turnover.

"Both us and the Chinese are interested in expanding this share. This is cheaper than settling trade in global currencies," Zhukov said. "If businessmen see it is convenient they will use this possibility more and more."

He said the two countries have not yet set targets for the share of trade to be done in national currencies.

http://www.chinadaily.com.cn/world/2009-10/11/content_8777112.htm

China's new model of 'model workers'

2009-09-28

Oilman Wang Jinxi, father of hybrid rice Yuan Longping, bus-ticket seller Li Suli, astronaut Yang Liwei, hurdler Liu Xiang. These seemingly unrelated names have one thing in common - they have all been designated a model worker.

Model worker is an honor bestowed on people who have made a significant contribution to the country through their hard work. It was one of China's most prestigious honors under the old planned economy.

However, with the country's rapid economic and social development, the criteria of what defines a model worker have undergone a sea of change.

The nationwide selection of model workers began in 1950, and was based on the endurance of hardship and the sacrifice of self-interests. The model worker was expected to inspire the masses and inculcate such virtues as hard work, modesty and patriotism.

According to Liang Jun, China's first woman tractor driver and also one of the first batch of national model workers, various competitions were held to choose model workers in the early years of New China. "One who works like an old bull" was a common description of model workers at that time.


"I remember that once I worked non-stop for three days in the fields. I was so tired that I could have even slept through an earthquake. My colleagues told me later that they found me sleeping soundly in a mud hut," recalls Liang, with smile.

Manual laborers, such as toilet cleaners, coal miners and construction workers, were typical model workers during that period. "Old bull" was how most people referred to them.

More than 460 people were selected as China's first batch of model workers in 1950, among whom 158, or 34 percent, were farmers and 113, or 24.3 percent, were workers. Only 7.1 percent were from the managerial class.

As time went by, the composition of model workers also changed. In the 1960s, for the first time, model workers began to be drawn from diverse fields, such as education, culture, sports and media.

The selection of model workers was suspended during the "cultural revolution" (1966-76), resuming only in the late 1970s. Deng Xiaoping, chief architect of China's reform and opening-up, put forward the ideas of "technology is productivity" and "intellectuals are part of the working class", triggering new respect for intellectuals and knowledge.

Many of those chosen as model workers at this time were scientists, engineers and educationists, such as scientist Jiang Zhuying who brought Chinese color television technology up to world standards.

As China entered the 1990s, more and more manual labor began to be replaced with machines. This was especially true after the promulgation of the Labor Law in 1994, which clearly prohibited unlimited overtime.

More importantly, entrepreneurs and managers with insight and courage began to play a more important role in China's switch from a planned to a market economy.

More than 340 entrepreneurs and managers were elected during the eighth National Model Worker Conference in 1989. In 1995, 2,873 people were elected as national model workers, among whom heads of enterprises numbered 409.

"It is not surprising that nowadays when you open the resumes of most of the entrepreneurs and managers of large-scale enterprises, they were all once elected as model workers," says You Zhenglin, associate professor of sociology at China University of Politics and Law.

"Few frontline workers get the honor now, because they have been left far behind by the intellectual group in creating wealth for the country," says You.

In a bid to balance the proportion of model workers from different fields, the State Council decided before the opening of the 1989 conference to guarantee that at least a third of the elected model workers would be frontline workers. It also revised and standardized the selection criteria for model workers.

In 2005, the model worker title was bestowed on basketball player Yao Ming and hurdler Liu Xiang, and Liu Yonghao, one of China's richest men then. The same year, the people's government of Dalian honored seven foreign managers working in the Dalian Development Zone with the title of model worker.

Today's model workers are not laborers in the traditional sense. Those who work in air-conditioned rooms, frequent five-star hotels and drive luxury cars are also deemed entitled to the honor.

Dissatisfaction over the changing profile of model workers has sparked quite a heated debate on the Internet.

According to Professor Zhou Xiaozheng of Renmin University of China, it is a little strange to honor athletes as model workers. "We cannot take athletes as common people, for their success and achievements owe not only to their efforts, but also a lot to the physical quality they are born with," he says. "It is not easy for common people to follow their model."

Some online posters have even sarcastically suggested new selection criteria such as being good at flattery, able to win the hearts of leaders and being skilled at self-promotion.

But many continue to support the new breed of model workers, saying they don't necessarily have to imply meager incomes and low living standards.

"The assessment procedures to select model workers need to be revised, because today's society needs knowledgeable and skilled workers," says professor Zhou Yunlong, of Northeast China Institute of Electric Power Engineering.

"A model worker is one who excels in his field of work, reflecting the values most cherished by a society at a particular period in time.

"Although Yao is not a laborer, he works very hard and worked his way to win honors for the country. He truly is a model worker."

http://www.chinadaily.com.cn/china/2009-09/28/content_8744702_2.htm

The debate about Chinese asset prices
A bubble in Beijing?

Not yet. But China will soon look dangerously frothy unless policymakers allow the yuan to rise

HAS the world got a new bubble economy? A rising chorus of foam-spotters believes so. Their argument is simple: to support demand, China’s government has created huge quantities of credit. That lending is leading to unsustainable asset-price inflation, while wasteful investment is producing oodles of excess capacity. As a result, China’s stimulus will inevitably be followed by a bust down the road (see article).

http://media.economist.com/images/20091010/CLD281.gif

Few things matter more for the global economy than whether this argument is right. With America and other economies in the English-speaking world weakened by their own asset busts, the pace of global growth over the next couple of years will depend heavily on China. A painful asset slump or banking collapse there would further slow the pace of global growth. No one doubts that credit has been growing dramatically in the Middle Kingdom. Lending grew by 34% in the year to August, around four times faster than nominal GDP. Nonetheless, today’s fears are exaggerated—for four main reasons.

First, neither China’s stock nor property markets looks dangerously overvalued. The average price/earnings multiple, at 24, is well below China’s long-run average. Property prices are rising smartly in Shanghai and other cities, but nationally house-price growth has only just turned positive. Next, even if China’s asset prices surge and then slump, the damage will be less grave than elsewhere, because China’s house and share prices have not led to too much debt-driven borrowing. Only around a quarter of middle-class homeowners have mortgages and the average loan-to-value is less than 50%.

Third, although there is much scope to improve the efficiency of capital allocation in China, the lending boost may not be as inefficient as some fear. Much has gone into infrastructure, which ought to improve the rate of productivity growth. Lastly, Chinese officials have long been more worried about excess credit growth and asset-price bubbles than many of their Western counterparts. Even now, regulators are tightening the rules—demanding bigger down-payments on second homes and higher provisioning from banks—even as Beijing’s politicians promise that monetary conditions will stay loose.

But even if immediate worries about a bubble are overdone, there are medium-term risks. Ample liquidity, low inflation and strong growth are the perfect ingredients for sustained asset-price inflation. And China lacks one essential anti-bubble instrument: the ability to raise interest rates.

Yuan to do what?

To support its exporters China has kept the yuan stable against the dollar over the past year, in effect tying China’s monetary conditions to America’s. So far that has mattered little. Domestic deflation means China’s real interest rates are the highest of any big economy. But this monetary coupling will become increasingly dangerous. America’s weak economy means its monetary conditions are likely to stay ultra-loose for far longer than makes sense for China. Left in place too long, the currency alignment could swell an asset bubble.

Just as the rebalancing of China’s economy calls for a stronger yuan, so the ability to avert bubbles requires a more flexible one. The transition will not be easy. The spectre of a stronger yuan will, temporarily at least, worsen China’s asset-price bubbliness, as foreign capital floods into the country in anticipation of a stronger currency. But this argues for acting quickly and carefully, rather than doing nothing. The longer China shadows the dollar, the bigger the distortions and the risks from any currency adjustment. Without an independent monetary policy China will eventually become a bubble economy. To avoid that fate, Beijing must let go of the yuan.

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478048&story_id=14587027

China's roaring economy
Bull in a china shop

China does not have dangerous bubbles in shares and housing—yet

EARLY this year, many China-watchers warned that the government’s stimulus was not enough to save the economy from a deep downturn. With indecent haste, they have now switched to worrying that overly lax policies have created a gigantic bubble in shares and house prices.

Figures due later this month are likely to show that China’s real GDP grew by around 9% in the year to the third quarter—a period over which output in most other economies probably fell. A recent flurry of bearish reports has warned that sooner or later the markets will crash, excessive borrowing and investment will cause banks’ bad loans to surge, and China’s growth will collapse.

If the government does not act soon to tighten liquidity, share and house prices will become seriously overvalued. But it is much too early to use the “B” word. Start with China’s stockmarket, described by Andy Xie, an independent economist, as a “giant Ponzi scheme”. Despite a recent slide, Shanghai’s A-share index is still up by over 60% since its trough last November. Yet this is only a fraction of the gain during China’s previous bubble in 2006-07, when the price/earnings ratio jumped to an eye-popping 70. Today the p/e ratio stands at 24. That is high compared with developed markets but well below China’s long-term average of 37 (see left-hand chart). China’s faster trend pace of growth also means that the outlook for corporate profits is rosier than elsewhere. They are already bouncing back: in the three months to August industrial profits were 7% higher than a year ago, after falling by 37% in the year to February.

http://media.economist.com/images/20091010/CFN267.gif

Bubble suspect number two is the housing market. Average Chinese home prices are nine times average annual household income. In the rich world a ratio of more than four would sound alarm bells; in other Asian countries prices are typically 5-7 times income. The volume of property sales has surged by 85% over the past year and prices of new apartments in Shanghai have risen by nearly 30%. Some conclude that prices have been pumped up by imprudent bank lending and that the market is at risk of crashing.

However, average nationwide house prices have risen by only 2% over the past year, after falling in 2008. The official price index may understate the true average gain but figures for central Shanghai will overstate it. Either way, house prices are rising nowhere near as fast as they did during the previous boom in 2004-07 (see right-hand chart). And in relation to income, average house prices in China have fallen slightly over the past decade (although they have risen in some big cities).

Arthur Kroeber, an economist at Dragonomics, a research firm in Beijing, argues that the high level of prices relative to income is partly explained by hidden subsidies. A high proportion of households live in apartments purchased at a fraction of their value from the government a decade ago (when the housing market was privatised) or have upgraded to apartments financed by the sale of such properties.

The leap in property sales follows a deep slump last year after the government deliberately cooled the market. The level of transactions in August was less than half its level in 2005 or 2006. More important, China’s housing market is much less dependent on credit than those in places like America, so its economy would be less vulnerable to any sharp fall in prices. Andy Rothman, an economist at CLSA, a broker, estimates that only one-quarter of middle-class homeowners have a mortgage and their average loan is only 46% of the property’s value, compared with 76% in America. Homeowners have to put down a minimum deposit of 20%. Speculators buying property as an investment have to put down 40%.

Rising home prices are not an accidental consequence of government easing but one of its goals. The government needs a lively housing market to support the economy when its fiscal stimulus fades. It creates a lot of jobs, spurs private-sector investment in construction and encourages new homebuyers to spend more on furniture and electrical goods. Until recently China’s recovery was driven largely by state spending but thanks to a rebound in construction, private-sector investment rose by 30% in the year to August, double its growth rate in December.

But even if China’s stockmarkets and housing markets do not look particularly overvalued now, there is a clear risk that they could become so. Mingchun Sun, an economist at Nomura, points to some big differences between the recent sell-off in shares and the previous one in November 2007. Inflation was then 6.9% and rising, so policymakers were forced to slam on the monetary brakes. Today consumer prices are falling. In 2007 liquidity was tight, with the M2 measure of money supply growing more slowly than nominal GDP. Today excess liquidity (money growth minus GDP growth) is growing at its fastest pace on record. Low inflation, lashings of liquidity and strong growth are the ideal environment for asset-price inflation. Mr Sun concludes that equity and housing bubbles are inevitable and may grow even bigger than those in 2007.

The third alleged threat to China’s recovery is overinvestment. It is widely argued that the recent investment boom has simply exacerbated China’s overcapacity, which will reduce the return on capital and eventually drag down its growth rate. Yet analysis by BCA Research, a Canadian research firm, finds surprisingly little evidence of wasteful overinvestment to date.

One yardstick of the efficiency of capital is the incremental capital-output ratio (ICOR)—the investment needed to generate an additional unit of output (ie, annual investment divided by the annual increase in GDP). The higher the ICOR, the less efficient the investment. China’s ICOR has been fairly stable over the past three decades. This year it will shoot up because investment surged and growth slowed, but the ICOR is meaningless in a recession. America’s ICOR, for example, will be infinite because GDP fell. In general, BCA finds that China’s ICOR is lower than that in many other places, suggesting that its capital spending is more, not less, efficient.

But what about this year’s state-directed investment boom? The good news is that little new investment has gone into industries which already had excess supply, such as steel. Three-fifths of new lending this year went into infrastructure projects. Some of this money will inevitably be wasted and banks’ non-performing loans will rise in future years as payments come due. But much of the new infrastructure, especially railways and roads, should help improve future productivity.

As for bank lending, which grew by a thumping 34% in the year to August, the government has repeatedly signalled that it will maintain its easy monetary policy because it is still concerned about the sustainability of the recovery. But it is also trying to curb speculative excesses and to tighten bank supervision. The banking regulator strengthened the rules on mortgages for investment properties this summer, and has told banks to raise their capital ratios to 10% and to hold provisions equal to 150% of projected loan losses by the end of the year.

China does not yet have dangerous bubbles in housing and shares that could threaten its recovery. Indeed, rising asset prices will help boost consumer spending over the next year, which will in turn help broaden China’s recovery. But to minimise the risk that China is starting to inflate its biggest bubble ever, the government does need to curb excessive liquidity. That means allowing the yuan to appreciate. With interest rates likely to remain close to zero in America for some time, China cannot significantly tighten its own rates unless it allows its currency to rise. If China’s growth has decoupled from America, then so must its monetary policy.

http://www.economist.com/businessfinance/displayStory.cfm?story_id=14587130&source=features_box2

BEIJING, Oct 12 (Reuters) - China's annual economic growth probably accelerated to 8.9 percent in the third quarter from 7.9 percent in the April-June quarter, according to a Reuters poll.

Following are the detailed forecasts of 22 banks and brokerages for Q3 GDP, as well as the consumer price index, producer price index, urban fixed-asset investment, industrial output and retail sales for September.

(Percent change from a year earlier):
Institution GDP CPI PPI *FAI IO RS
Action Economics ~ -0.6 -7.0 32.6 11.0 15.5
Bank of China 8.2 -0.6 -5.0 32.0 12.5 16.0
Bank of Communications 9.0 -0.9 -7.0 33.2 12.5 15.5
Bank of East Asia ~ -0.8 -7.3 33.1 14.3 15.6
Bohai Securities 8.2 -1.0 -7.5 33.0 13.5 15.6
China Construction Bank 8.6 -1.0 -6.5 32.2 13.0 14.9
CICC 8.7 -0.7 -6.6 ~ 12.8 15.5
CITIC Securities ~ -0.8 -7.5 33.0 13.1 15.6
Daiwa Research Institute 8.5 -0.8 -6.9 33.0 13.1 15.4
Deutsche Bank ~ -0.8 -6.9 33.0 13.1 15.4
Essence Securities 9.4 -0.8 -6.8 33.2 13.8 15.6
Fortune Trust 8.9 -0.9 -7.0 33.2 13.5 15.5
Goldman Sachs 9.5 -1.0 -7.5 33.3 13.6 15.7
Guotai & Junan Securities 8.5 -0.8 -7.4 33.1 13.2 15.5
Industrial Bank 9.0 -0.7 -6.8 33.5 13.0 15.5
Industrial Securities 9.5 -0.7 -7.0 33.0 13.5 15.6
Jiangnan Securities 8.9 -0.8 -6.0 32.0 13.5 15.8
Merrill Lynch 9.1 -0.8 -7.3 33.2 13.5 15.5
Morgan Stanley 9.5 -0.7 -7.5 32.5 13.5 15.5
Northeast Securities 8.8 -0.8 -6.2 32.6 14.0 15.6
Qilu Securities 9.1 -1.0 -6.3 33.4 12.6 15.5
Royal Bank of Scotland 8.3 -0.9 -7.5 32.5 13.4 15.5

_____________________________________________________________
Median 8.9 -0.8 -7.0 33.0 13.3 15.5
Minimum 8.2 -1.0 -7.5 32.0 11.0 14.9
Maximum 9.5 -0.6 -5.0 33.5 14.3 16.0

~ Not available

# FIXED-ASSET INVESTMENT IN URBAN AREAS, YEAR-TO-DATE

http://www.iii.co.uk/news/?type=afxnews&articleid=7568261&subject=economic&action=article

Real figures will be released on Oct 22nd.

I agree. China should keep wan (10 thousands) number system. This is one of few things that is Chinese in math today. I don't see the advantage of western tri-digit (thousand) number system comparing to the Chinese quadra-digit (wan) system. For some people, it may have conversion problem, but I can convert a number from one system to the other without thinking.

The only problem is that with people demanding larger numbers in economics/finance/Science fields, more characters should be invented to the wan numbering system, i.e.

Number----------English------------Chinese

1000---------------Thousand-------------Qian 千
10000------------------------------------Wan 万
1000000------------Million
100000000--------------------------------Yi 亿
1000000000---------Billion
1000000000000-----Trillion-----------------? (万亿)
1000000000000000--Quadrillion
10000000000000000------------------------? (万万亿)

^^ What about this
http://en.wikipedia.org/wiki/Chinese_numerals#Large_numbers

Thanks for the information.

It's good they already have it. the bad thing is some chracters' meanings are still ambiguous (i.e. definition of Zhao 兆) and unpopular.

Thanks for the information.

It's good they already have it. the bad thing is some chracters' meanings are still ambiguous (i.e. definition of Zhao 兆) and unpopular.

What is so ambigous about zhao?

They are unpopular because they are rarely needed, even in Europe these large numbers are more used in the academics than in the daily newspapers or average households.

What is so ambigous about zhao?


you can visit z0rg's link, it has two meanings in Chinese.

They are unpopular because they are rarely needed, even in Europe these large numbers are more used in the academics than in the daily newspapers or average households.
as I mentioned, they are frequently used only in economics/finance/science. i.e. trillion is already a popular term in GDP valuation, but there's no equivalent popular Chinese character describing it (we call it Wan Yi).

Western regions to get $43.3b investment


2009-10-17

China's relatively poor western regions are to receive 296 billion yuan ($43.3 billion) of investment through 551 projects signed Friday with investors from both China and abroad.

Those deals were sealed at the tenth Western China International Economy and Trade Fair in Chengdu, provincial capital of Southwest China's Sichuan province.

The region has 12 provinces, autonomous regions and municipalities, with a combined population of about 370 million.

Chinese investors contributed 539 of the 551 projects, involving 288.9 billion yuan of investment. The rest 12 projects would be invested by foreign contractors, involving in around $1 billion of investment.

Sectors involving local resources, equipment manufacturing, service and new and high technology were investors' favorite target areas.

According to agreements signed here, German industrial conglomerate Siemens would spend 30 million yuan in Chengdu to setup a "Global IT Operation Center", intending to provide better IT operation support for its customers.

Meanwhile, Taiwan's Foxconn Group, the world's top maker of outsourced electronics, would invest $1 billion to build an industrial base in Chengdu, setting up production lines for products like LED-TV, LCD module, LED backlight module and LCD package. The new base will also develop software and sell 3C digital products as wells.

http://www.chinadaily.com.cn/bizchina/2009-10/17/content_8805658.htm

China to be largest auto market in the world

(chinadaily.com.cn)
Updated: 2009-10-20

Experts expect that China will become the biggest auto market in the world this year, the West China City Daily reported yesterday. Based on current trends, consumers will buy between 12 and 13 million cars this year, analysts said.

China’s auto sales will reach 10 million units on Tuesday, estimated Rao Da, secretary-general of the Joint Advisory Committee of China Passenger Car Market. About 9.66 million vehicles have been sold in the first nine months of the year, according to data from the China Association of Automobile Manufacturers.

Another analyst, Jia Xinguang said this country’s auto sales will continue to grow rapidly in the fourth quarter, for three reasons: the imminent end of a policy that halved the sales tax on mini cars, the auto exposition in Guangzhou, the capital of Guangdong province and new cars like Audi Q5 entering the market.

In addition, China has produced 10 million units of cars so far this year, becoming a l0-million-unit car producer, according to auto.qq.com.

(http://www.chinadaily.com.cn/china/2009-10/20/content_8820728.htm)

Great news!!! The 2009 full year GDP growth is atleast 8%.
http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091020/001ec95b7aff0c47679001.jpg


China's GDP grows nearly 9 percent last quarter

updated 22 minutes ago

Story Highlights

•China's GDP increased 8.9 percent for the third quarter

•China's economy has been picking up pace the first three quarters of the year

•China spent $586 billion to bolster its economyupdated 22 minutes ago

BEIJING, China (CNN) -- China's GDP increased 8.9 percent for the third quarter, moving closer toward the goal of 8 percent growth for the year.

Growth for the first three quarters of the year is up 7.7 percent; economists says 8 percent growth is needed to keep current employment levels.

The growth was in line with analyst expectations, although there are rising fears that the government's massive stimulus package may be inflating stock and property prices. The Chinese government spent $586 billion to bolster its economy.

"We have obtained obvious achievements and further strengthened the steady upturn trend of the economy. The overall situation of national economy is good," said Li Xiaochao, of the National Bureau of Statistics.

"At present, it's a crucial stage for the national economy to realize stable growth," Li said. "Yet the basis of the economic recovery still needs to be consolidated, and the insufficient external demand is still severe with the arduous task of expanding domestic demand and adjusting the structures."

China's economy has been picking up pace the first three quarters of the year, growing at 6.1 percent the first quarter and 7.9 percent the second quarter.

Foreign trade has continued to drop, but its rate of decline is slowing. The total volue of imports and exports in September was down 10.1 percent compared to the same month last year, but up 14.2 percent from August.

(cnn.com)

Chinese GDP Rockets 8.9% Higher In Q3

All the caveats about Chinese statistics aside, Q3 was a monster, with GDP growing 8.9%.

For some context, do check out this FT op-ed from Qin Xiao, warning of global imbalances, asset bubbles in China, and clueless central bankers without any ideas for how to pull back the stimulus.

Here's the full GDP announcement from China's Bureau of Statistics.

-----

In the first three quarters of 2009, the various localities and departments have conscientiously implemented the arrays of plans by the central government and the State Council on dealing with the international financial crisis and maintaining stable and fast development of the economy. We have attained obvious achievements, and further strengthened the steady upturn trend of the economy. The overall situation of national economy was good.

According to preliminary estimation, the gross domestic product (GDP) of China in the first three quarters of this year was 21,781.7 billion yuan, a year-on-year increase of 7.7 percent, which was 0.6 percentage points higher than that in the first half of this year. In terms of growth by quarters, it was up 6.1 percent for the first quarter, 7.9 percent for the second, and 8.9 percent for the third quarter. In terms of growth by sectors, the value added of the primary industry was 2,250.0 billion yuan, up by 4.0 percent; that of the secondary industry was 10,647.7 billion yuan, up by 7.5 percent; and that of the tertiary industry was 8,884.0 billion yuan, up by 8.8 percent.

1. The situation of agricultural production was steady with expected bumper harvest of grain. Given the increase of summer grain for six consecutive years, the total output of early rice reached 33.27 million tons, an increase of 1.67 million tons over that in the same period of last year, up 5.3 percent. A bumper harvest of the grain for the whole year is to be achieved. The output of meat maintains steady growth, with 52.80 million tons of port, beef and mutton output in the first three quarters, up by 5.6 percent. Of this total, the output of pork was 34.95 million tons, up by 6.3 percent; the total stock of pigs was 468 million, up 2.2 percent, while the number of slaughtered pigs was 463 million, up by 6.4 percent.

2. The growth rate of industrial production increased on a quarterly basis and the decrease rate of profits made by industrial enterprises slowed down. In the first three quarters of this year, the total value added of the industrial enterprises above designated size was up 8.7 percent year-on-year, or 6.5 percentage points lower than that in the same period of last year. Of this total, the growth in the first quarter was 5.1 percent, the second quarter 9.1 percent, and that in the third quarter was 12.4 percent. Analysis on different types of enterprises showed that the value added growth of the state-owned and state holding enterprises went up by 4.1 percent; collective enterprises, 7.9 percent; share-holding enterprises, 11.0 percent; and 3.4 percent growth for enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan province. The year-on-year growth of heavy industry was 8.7 percent, and 8.7 percent for the light industry. Among the 39 industrial divisions, all were increased over the same period of last years. In terms of different areas, the growth in eastern, central and western regions went up by 7.5 percent, 8.7 percent and 13.8 percent respectively. The production and market of industrial products went on well. In the first three quarters of this year, the sales ratio of industrial products was 97.43 percent.

In the first eight months of this year, the profits made by industrial enterprises above designated size stood at 1,674.7 billion yuan, a year-on-year decrease of 10.6 percent, narrowed down by 12.2 percentage points as compared with that from January to May. Among the 39 industrial divisions, 36 divisions registered narrowed year-on-year growth or decrease with profits.

3. Investment in fixed assets enjoyed fast growth with acceleration of growth in investment in real estate. In the first three quarters of this year, the investment in fixed assets of the country was 15,505.7 billion yuan, a year-on-year growth of 33.4 percent, or a rise of 6.4 percentage points as compared with the growth in the same period last year. The investment in urban areas reached 13,317.7 billion yuan, up by 33.3 percent, or 5.7 percentage points higher while that in rural areas was 2,188.0 billion yuan, up by 33.6 percent, or a rise of 10.3 percentage points. The investment in the primary industry, secondary industry and the tertiary industry in urban areas went up by 54.8 percent, 26.9 percent and 38.1 percent respectively. In terms of the areas, the investment in eastern, central and western regions grew by 28.1 percent, 38.3 percent and 38.9 percent respectively. The investment in infrastructures was increased by a large margin. In the first three quarters, the investment in infrastructure (excluding electricity) went up by 52.6 percent, of which, that in the railway transportation, up by 87.5 percent, that in road transportation, up by 50.7 percent, and that in health, social security and social welfare up by 72.9 percent. In the first three quarters, the investment in real estate development was 2,505.0 billion yuan, up by 17.7 percent year on year, or a 7.8 percentage point higher than that in first half of this year.

4. Sales on domestic markets continued to steadily accelerate with higher growth rate at or below county level than that in cities. In the first three quarters, the total retail sales of consumer goods reached 8,967.6 billion yuan, a year-on-year rise of 15.1 percent; the real growth was 17.0 percent after deducting the price factors, which was 2.8 percentage points higher than that in the same period last year. The retail sales in cities reached 6,101.3 billion yuan, up by 14.8 percent, and the retail sales at and below county level stood at 2,866.3 billion yuan, up by 16.0 percent. Grouped by different sectors, the sale by wholesale and retail businesses was up by 15.0 percent and that by lodging and catering industry was up by 17.4 percent. Among the sales by wholesale and retail businesses above designated size, apart from the telecommunication devices, the sales of all the other 20 categories of commodities realized positive growth. Of these, the sale of furniture increased by 32.3 percent, and that of the automobile up by 24.5 percent.

5. The month-on-month changes of consumer price and producers’ price reversed from decreasing to increasing while the year-on-year decrease narrowed. In the first three quarters of this year, the consumer price index went down by 1.1 percent. Of which it dropped by 1.3 percent in cities and 0.7 percent in rural areas. Grouped by commodity categories, three out of eight went up while the rest five dropped: prices for tobacco, liquor and articles rose by 1.6 percent, price for household facilities, articles and maintenance services up by 0.6 percent, health care and personal articles up by 1.0 percent; prices for food down by 0.1 percent, clothing down by 2.3 percent, transportation and communication down by 2.6 percent, recreation, education, culture articles and services down by 0.7 percent, and housing down 4.4 percent. The month-on-month change of consumer price in July reversed from decreasing to maintaining the same level, the month-on-month change in August and September was up 0.5 percent and 0.4 percent respectively. In the first three quarters, the retail prices of commodities dropped by 1.6 percent year-on-year. The producers’ prices for manufactured goods went down by 6.5 percent year on year, by the end of September the month-on-month changes enjoyed growth for six consecutive years, it was up 0.6 percent in September. In the first three quarters of this year, the purchaser’s prices for raw material, fuel and power decreased by 9.5 percent year-on-year. The year-on-year growth of the prices for housing in 70 large and medium-sized cities went up by 0.1 percent.

6. The foreign trade continued to drop but the decrease rate obviously lowered. In the first three quarters of this year, the total value of imports and exports was US$ 1,557.8 billion, down 20.9 percent year-on-year. Of this total, the value of imports and exports in the first quarter down 24.9 percent, second quarter down 22.1 percent, and third quarter down by 16.5, with obviously narrowed declining rate. In the first three quarters of this year, the value of exports was US$ 846.6 billion, down by 21.3 percent; the value of imports was US$ 711.2 billion, down by 20.4 percent. The trade surplus was US$135.5 billion, down by US$ 45.5 billion year-on-year.

7. The income of urban and rural residents continued to grow with rapid increase in transfer income. In the first three quarters of this year, the per capita income of urban households was 14,213 yuan. Of this total, the per capita disposable income of urban population was 12,973 yuan, a year-on-year growth of 9.3 percent, or a real growth of 10.5 percent after deducting price factors. Of the total per capita income of urban households, the income from wages and salaries was up 10.2 percent year-on-year; transfer income was up 15.7 percent; net operating income up 5.0 percent; the property income up 12.3 percent. The per capita cash income of rural population was 4,307 Yuan, up by 8.5 percent year-on-year, or a real growth 9.2 percent after deducting price factors. Of this total, the income from wages and salaries was up 9.9 percent; income from the sale of agricultural products up by 4.0 percent; income from production operation in secondary and tertiary industry up by 10.5 percent; property income up by 11.7 percent; transfer income up 26.4 percent.

8. The money supply grew rapidly with continued increase in loans of financial institutions. By the end of September, the supply of broad money (M2) was 58.5 trillion yuan, a year-on-year growth of 29.3 percent, which was 11.5 percentage points higher than that at the end of last year; that of the narrow money (M1) was 20.2 trillion yuan, a rise of 29.5 percent, or 20.5 percentage points higher; the cash in circulation (M0) was 3,678.8 billion yuan, up by 16.0 percent, or 3.3 percentage points higher. The amount of outstanding loans of all financial institutions was 39.0 trillion yuan, increased by 8.7 trillion yuan over that at the beginning of this year, or an increase of 5.2 trillion yuan as compared with the same period last year. The amount of outstanding deposits of all financial institutions was 58.4 trillion yuan, an increase of 11.7 trillion yuan over the beginning of the year, or 5.2 trillion yuan more than the same period last year.



At present, it’s the crucial stage for the national economy to realize a stable growth, yet the basis of the economic recovery still needs to be consolidated, and the insufficient external demand is still severe, with the arduous task of expanding domestic demand and adjusting the structures. In the following period, we should continue the implementation of the scientific outlook on development, maintain the consistency and stability of the macro-economic policies in accordance with the central government’s decisions and deployment of economic activities, insist on the proactive fiscal policies and moderately lenient monetary policies, fully implement, enrich and optimize the arrays of plans and policy measures to deal with the international financial crisis. At the same time, we should improve the relevance, flexibility, effectiveness and consistency of the macro-policies, and strive to realize stable and fast development of the national economy.

http://www.businessinsider.com/chinese-gdp-rockets-89-higher-in-q3-2009-10

China's Stimulus-Based Rally Is Just Beginning

If you think the stimulus based rally in the United States is impressive you should see the stimulus in the pipeline in China. A recent report from Nomura Securities says the stimulus based recovery is only just getting started and is likely to peak in mid to late 2010. That means the liquidity fueled rally in stocks might not be close to finished and adds credibility to SocGen’s theory that China will be a bigger bubble than Japan.

Many investors have voiced concerns over the front-loaded package, but the 4 trillion RMB package will actually pay more in 2010 than it did in 2009 as it the stimulus is drawn out over a longer timeframe. Nomura details the investment:

China’s investment stimulus is unlikely to fade soon because much of the investment is for massive multi-year government infrastructure projects. The amount of funds in motion is much larger than the originally mooted RMB4.0trn. The calculations are straightforward: According to the original plan, RMB1.7trn was to be funded by central and local governments, while the other RMB2.3trn was to be largely financed by the banks (see “China’s stimulus: A confusing package”, Global Weekly Economic Monitor, 20 March 2009). Since the plan was to be implemented over a two-year horizon (2009-10), this means that a maximum of RMB1.15trn in additional bank loans per year would be needed to reach the original planned target. Yet loan growth in the first eight months of this year has already exceeded RMB8.0trn, of which RMB4.0trn was on medium- and long-term corporate loans (compared with only RMB1.9trn for the whole of 2008). As private sector investment is known to have been lacklustre so far this year, the majority of these bank loans can therefore be expected to be directed at stimulus projects. Based on these numbers, we estimate that the total planned investment amount of the stimulus projects started so far exceeds RMB7-8trn. These projects will likely last longer than the originally slated two years. So will the investment boom, in our view…. and a massive amount remains in the pipeline.

Although the monthly injections are set to peak in 2009 the annual payment in 2010 will actually be about 40% larger in 2010 than it is in 2009:

http://i245.photobucket.com/albums/gg64/z0rgggg/others2/f.png

Adding fuel to the fire are signs of life in the global economy. Private sector investment is starting to pick-up in recent months and could only add to the investment boom.

In addition to strong public investment, private sector investment has also begun to pick up recently. For example, property investment growth surged to 34.6% y-o-y in August from 19% in July (and from 1% in January), returning to its growth range in 2007 and 1H 08. Meanwhile, FDI inflows into China rose by 7.0% y-o-y in August after falling for seven months in a row, reflecting renewed confidence on the part of foreign investors as the V-shaped recovery unfolds. We expect the recovery to gain more momentum, forecasting real GDP growth to reach 11% y-o-y in 4Q 09 and 13% in 1Q 10. As it does, and more demand for consumer and capital goods is created in the process, we believe that private sector investment should pick up further.

If you think the stimulus based boom in the U.S.A. has been impressive just wait until the Chinese stimulus plan picks up full steam in 2010. The 82% rally in the Shanghai Index is likely to continue as government stimulus expands. The outperformance of the emerging markets and the reflation trade could very well have fuel well into 2010. After that, governments and central bankers will likely be forced to deal with an asset bubble and the extraction of liquidity on a scale that is truly unprecedented…..The global printing press isn’t only causing massive potential problems in the U.S.A. - this is a global issue. Let’s just hope that the boom/bust policies of the Federal Reserve and the Chinese government don’t lead to massive long-term problems. I fear we’re quickly approaching the point of no return with regards to extracting government liquidity…..

http://www.businessinsider.com/chinas-stimulus-based-rally-is-just-beginning-2009-10

I guess the government will start to reduce lending to prevent inflation. So the 4th quarter growth is not likely to surpass 10%.

I guess the government will start to reduce lending to prevent inflation. So the 4th quarter growth is not likely to surpass 10%.

Banks have already slowed down the lendings and the economy has still been growing. It's highly likely that the growth rate for Q4 will be above 10% again so will be for the first quarter of 2010 given the low levels in these two quarters one year ago. After that, there will be a big uncertainty.

China launches Nasdaq-style market to spur small businesses
China held a launching ceremony Friday for its Nasdaq-style market, ChiNext, in Shenzhen, Guangdong Province.

The first batch of 28 selected firms will make their debut on Oct. 30 on the Shenzhen-based exchange.

The growth enterprise market (GEM) will boost start-ups of high technology and high growth, said Shang Fulin, chairman of the China Securities Regulatory Commission, at the launching ceremony.

It could help channel social resources to competitive new-born sectors and innovative enterprises, Shang said.

Zuo Xiaolei, chief economist with the Galaxy Securities, told Xinhua that the launch of ChiNext is a historic event in China's capital market and it defines the multi-layer development pattern of the country's capital market.

"It helps connect China's innovation-oriented companies with the country's innovation growth strategy and will definitely bring influences to China's innovation economy," she said.

It took ten years for China to go from mulling the idea of setting up the new board to finally launching it. The market is aimed at helping small and medium-sized Chinese enterprises that have been struggling to raise funds.

He Chengying, General Manager of the Development Research Department with Guosen Securities, said ChiNext improves channels for small business of high growth and high creativity to raise funds.

"It's especially necessary to help the small and medium-sized enterprises to raise funds after the global financial crisis. The time is ripe to launch the new board," He said.

He said high growth was the advantage of the exchange, as was better than the main board.

"Whether a growth enterprise market could succeed has much to do with its indigenous culture. The Nasdaq's success has a lot to do with the United States' immigration culture full of innovation," He said.

"China chose Shenzhen as the GEM's base. The city also boasts immigration culture full of innovation spirit," He said.

Since the 1970s, the GEMs have been an effective way for various countries to support start-ups. A total of 75 GEMs showed up in the world, but only about 40 survived and are active.

"The GEM poses relatively more risks than the main board as the GEM serves enterprises of innovation and growth," Shang said at the launching ceremony.

He Chengying urged the regulator to tighten monitoring and check speculation to protect small investors' interests.

"Many of the companies are oversubscribed," He said.

IPO launches in China have often seen steep price hikes followed by even steeper falls as investors snapped quick profits.

The launch of the new board will not affect the main board as the enterprises are small and the fund-raising volumes are relatively small too, He said.
http://news.xinhuanet.com/english/2009-10/23/content_12308120.htm

Profits of central SOEs down 13.7% in Jan-Sept

Profits of China's 135 central-administered State-owned enterprises (SOEs) fell 13.7 percent in the first nine months from the same period a year ago, according to the State-owned Assets Supervision and Administration Commission.

The profits totaled 551.96 billion yuan ($81.17 billion) in the January-September period. The decline rate was 2.7 percentage points lower than that for the first eight months.
Their business revenue was 8.67 trillion yuan, down 2.9 percent year-on-year, 1.7 percentage points lower than that for the first eight months.

The enterprises paid taxes of 804.65 billion yuan, up 5.3 percent year-on-year.

[China Daily]

Domestic firms face tough battle for top oil assets

China's State-owned oil giants are likely to lose out to global rivals in a race for top energy assets, as they lack experience and hit a protectionist wall, forcing them to settle for smaller, but riskier buys.

This inability to buy top assets could limit growth potential at PetroChina, Sinopec and CNOOC, and put CNOOC at risk of missing its ambitious production targets, analysts said.

Kosmos Energy's recent decision to award its prized Jubilee oil field stake in Ghana to Exxon Mobil over CNOOC is the latest sign that Chinese energy companies are not ready for oil prime time, bankers said.

"The other (oil field) partners like Tullow and Anadarko would probably prefer Exxon to be successful as it has greater technical capability," said David Hewitt, an analyst with CLSA.

Chinese oil firms are already being hemmed in by recent consolidation that has limited the number of assets on the global market. Protectionism has also limited their options in markets from Australia to the US.

Such concerns derailed CNOOC's $18.5 billion bid for Unocal in 2005, and observers said similar worries have left China National Petroleum Corp's (CNPC) bid for a majority stake in Repsol's Argentine unit YPF on life support.
"The challenge they face in large corporate deals is one of resource nationalism," said Neil Beveridge, an analyst with Sanford C. Bernstein.

With so many options off the table, remaining possibilities could include Canadian oil firm Opti Canada Inc, which may be on PetroChina's radar, and its peer Nexen Inc, which CNOOC and CNPC may be interested in, bankers said.

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091024/0013729e4a9d0c4c8c7d44.jpg

[China Daily]

Newly employed in urban areas hit 8.51m in first nine months

New employment positions filled in China's urban areas hit 8.51 million in the first nine months of 2009, the Ministry of Human Resources and Social Security (MHRSS) announced Friday.

The figure accounted for 94 percent of the government's annual target of 9 million, ministry spokesman Yin Chengji told a press conference.

"The employment situation has been generally stable this year," Yin said. "It is better than what we had expected."

The number of newly employed people in China's urban areas had reached 900,000 a month since the beginning of the second quarter.

"We predicted that the number for the whole year would top 11 million at yearend," said Yin.

During the first nine months, 4.02 million laid-off workers found new jobs, accounting for 80 percent of the government's target of 5 million for the whole year.
By the end of the third quarter, 9.15 million people had registered as unemployed in urban areas, a rate of about 4.3 percent, unchanged from the number reported at the end of the second quarter.

"We are confident that the rate will still be at the present level at the end of this year," said Yin.

He said that 74 percent of the 6.11 million new graduates from the country's universities and colleges had been employed as of September 1, which was moderately higher than the ratio from a year earlier.

The government has resorted to a series of measures to help college graduates find jobs, such as giving them preference in military recruitment and encouraging them to take grass-roots posts in the countryside and relatively poor western regions.

Yin called for the continued implementation of a three-year employment project launched in April to offer internships to a total of 1 million graduates, providing a transitional period before they started career-related jobs.

The economic recovery had eased severe unemployment situation of migrant workers.

"We thought that the employment situation for migrant workers was generally stable," said Yin.

An MHRSS study of 250 Chinese villages showed that, by the end of September, the number of migrant workers in cities was 94 percent of the number at the same time last year, said Yin.

The central government has been urging local governments to offer free training for unemployed migrant workers to help them find new jobs or start businesses in their hometowns.

[China Daily]

Experts beware Yuan rise as hot money risk brews

BEIJING: Chinese exporters should brace themselves for a steady rise in the value of the yuan while the steep hiking of asset prices looks set to continue, say analysts studying the movements of "hot money."

Although the value of the yuan, China's currency, has hovered at around 6.83 to the US dollar for the past several months, analysts say the rush of international short-term speculative funds has already begun with China's economy showing signs of improvement.

The country saw a massive exodus of hot money because of the global financial crisis in the fourth quarter of last year and the first quarter of this year, said Zhang Ming, an economist with the Institute of World Economics and Politics under the Chinese Academy of Social Sciences.

From the second quarter, the situation reversed with an influx of hot money, he said.
No official figures concerning hot money have been released, but analysts have compiled a scratchy picture from the unusual coincidence of China's increasing foreign exchange reserves and declining trade surplus and reduced expenditure of foreign investment in China.

Zhang estimated the amount of hot money inflow at US$88 billion from the second quarter.

Analysts normally calculate hot money by deducting foreign direct investment and a trade surplus from the country's foreign exchange reserve increase.

"The shrinking trade surplus and expanding forex reserves in the third quarter this year indicate hot money influx is rising again," said Sun Mingchun, chief China economist of Nomura Securities.

"The inflow will not only put further appreciation pressure on the currency, but also create more liquidity and fuel inflation of the country's asset prices," he said.

"With a large hot money inflow, China will have no choice but to let the yuan appreciate or to create more liquidity in order to maintain a stable foreign exchange rate," said Zhuang Jian, a senior economist with the Asian Development Bank.

Once the yuan appreciated, profit margins of China's exporters, already suffering from falling orders, would be further squeezed as their products would become more expensive and less competitive, Zhuang said.

Hot money flows into China through multiple channels, including falsified international trade with over-invoiced exports and underground private banks.

Zhang said hot money would continue flowing into China this year and in the first half of 2010 as the attractions remained: strong liquidity, soaring asset prices, increasing anticipation of yuan appreciation and recovery of the US economy.

China was facing renewed pressure to let the yuan strengthen as an "undervalued yuan" was again the focus of international conferences, including the gathering of the Group of Seven (G7) and the Group of 20 (G20), and the US dollar weakened, he said.

Although Chinese equity prices had fallen sharply since August, they still had room to increase during the rest of this year, he said, and housing prices, already very high, were likely to continue rising.

The hot money inflow was also a result of the Chinese economy performing better than those of other countries, Sun said.
The world's third largest economy, China's economy grew 7.1 percent in the first half. Although it was much lower than the double-digit annual growth during the 2003-2007 period and the first two quarters of last year, it was still among the fastest-growing economies in the world.

The government set an annual target of 8 percent for this year, which would not be a problem, Xiong Bilin, an official with the National Development and Reform Commission, the country's top economic planner, said Monday.

However, Zhang warned the asset bubble could burst if hot money flowed out, which was also likely to cause depreciation of the yuan in the short term.

"To avoid such situations, the Chinese government must take precautionary measures, such as enhancing supervision of capital flows into and out of the country, adjustment of domestic credit policy and reining in asset prices by increasing supply," he said.

[China Daily]

China's GDP forecast to grow 10.6% in Q4

China's GDP will grow 10.6 percent in the fourth quarter of 2009, with the consumer price index (CPI) turning positive and gaining 0.5 percent, according to the Langrun Forecast released last Saturday at the China Center for Economic Research (CCER) of Peking University.

China's target of eight-percent GDP growth is almost sure to be realized and the country's CPI is likely to turn positive, the Forecast showed. It also spotlights that China's domestic demand is increasing at a high speed and the export sector is recovering.

The Forecast was the work of 21 organizations, including the State Information Center, the China Academy of Social Sciences, Morgan Stanley, the China International Capital Corporation Limited and the CCER.

http://www.chinadaily.com.cn/china/2009-10/26/content_8851092.htm

Kailuan Group starts coal chemical project in Erdos
Kailuan Group, the parent of Kailuan Energy Chemical Co Ltd, on Oct. 22 started construction on a coal chemical plant in Jungar Banner, Erdos, Inner Mongolia Autonomous Region, sources reported.
The RMB 8-billion project, which will have an annual output of 400,000 tons of ethylene glycol and will add hydrogen to 400,000 tons of coal tar per year, will comprise two phases. The first phase will cost RMB 3.88 billion and will be competed in 2012.
An officer in charge of project said that the plant, which is scheduled to be competed in 2013, will reap RMB 7.2 billion in operating revenue and will realize about RMB 2.2 billion in gross profit.
Reportedly, Kailuan Energy Chemical on Oct. 10 signed a contract with Industrial Bank Co Ltd to provide one of its subsidiaries an RMB 400-million guarantee with a period from Oct. 10, 2009 to Oct. 10, 2012. The subsidiary is 94.08% owned by the energy firm and is located in Tangshan, Hebei Province.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=28194

CNPC to build RMB 20-bln petrochemical base in Jiangsu
China National Petroleum Corp, the parent of PetroChina Co Ltd, plans to invest RMB 20 billion to build a petrochemical base in Yangzhou, Jiangsu Province, sources reported.
According to a strategic investment agreement signed with the Jiangsu government yesterday, CNPC will start construction on a refined oil reserve and a logistics center in 2010. In addition, the oil giant will build a base for producing chemical raw materials and a 1,000-kilometer refined oil pipeline.
CNPC owns part of a liquid natural gas terminal that is currently being built in Rudong, Jiangsu. The terminal, which will be completed in 2011, will have an annual capacity of 3.5 million tons. CNPC plans to add 300 gasoline stations in the province by 2015.
Reportedly, Sinopec Group, the rival of CNPC, recently discovered a large natural gas field. It covers an area of around 340 square kilometers and is predicted to have reserves of 120 billion cubic meters.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=28192

FedEx expects continuous growth in China parcel delivery business
U.S.-based FedEx Corp recently said its express parcel delivery business in China will continue to grow, and the company will expand its presence in western China, Dow Jones Newswire reported.
The business that the company launched in China in 2007 is growing well, and its key selling point is a high level of reliability, according to David Cunningham, Jr., Asia-Pacific president of FedEx's core express segment.
However, competition with local rivals is very tough, and the company will keep price rates attractive as Chinese consumers are very conscious of prices, said Cunningham.
The company will focus on developing its parcel delivery business model in China. In the meantime, the company will continue to expand its business in the country's western regions, which represents 50% of the population of China.
FedEx Express, a subsidiary of FedEx Corp, earlier reopened its upgraded customer service center in central China's Wuhan City, in a bid to offer better service for international express customers in East China and domestic time-definite customers, according to an earlier report from China Knowledge.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=28189

Cities set to see two million more jobs

2009-10-23

China will probably create two million more jobs in urban areas this year than officials targeted, the government said, adding to evidence of an acceleration in economic growth.

Employment is stable and the nation will exceed the goal of nine million additional urban jobs, Yin Chengji, a spokesman for the Human Resources and Social Security Ministry, said.

Urban registered unemployment was 4.3 percent at the end of last month, compared with 4.2 percent at the end of last year.

The news comes a day after government figures showed that the economy expanded at the fastest pace in a year in the third quarter, as industrial production and retail sales accelerated.

Policymakers may as a result begin removing monetary stimulus as soon as by the end of December in order to stem inflation and asset bubbles, analysts said.

The labor situation is improving, said Tao Dong, a Hong Kong-based economist at Credit Suisse Group AG. That's going to make Beijing fell more comfortable to start the process of normalizing the monetary policy.

The number of extra urban jobs was 8.5 million in the first nine months and is likely to top 11 million, matching the increase in 2008, Yin said. He added that while unemployment remains a major issue as the financial crisis lingers, the labor market is better than expected, in contrast with six months ago, when he was very concerned.

http://www.thestandard.com.hk/breaking_news_detail.asp?id=16862&icid=2&d_str=20091028

ChiNext Stocks Soar in Debut on China Start-up Bourse

Oct. 30 (Bloomberg) -- The 28 companies listed on China’s new start-up board surged when trading began today on the first market for stocks to be introduced in the nation in half a decade.

“China’s stock market has this tendency of chasing everything new,” said Zhang Xiang, Guodu Securities Co.’s Beijing-based chief strategist. “Most of the investors buying start-up stocks are retail investors, so we think the average first-day gains will be around 90 percent.”

The ChiNext market, which has fewer listing requirements than the nation’s two main boards, was created as an alternative for smaller Chinese companies, such as filmmaker Huayi Brothers Media Corp., looking to raise funds. Chinese companies including Baidu Inc. have sold stock on the Nasdaq Stock Market because they couldn’t meet requirements of the main boards in Shanghai and Shenzhen for three years of annual profit before listing.

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091030/0022190fd2dc0c54921029.jpg

“We want to find companies with value and the most potential to grow,” said Xie Jing, a fund manager who helps oversee $732 million at China Nature Asset Management Co. in Shanghai. “The start-up board certainly provides us with more alternatives to diversify our investment.”

The first 10 companies approved for share sales on the ChiNext board, based in the southern city of Shenzhen, raised 6.68 billion yuan ($978 million), double their initial target of 3.16 billion yuan. Trading on the new board may have a higher probability of being “irrational,” Shang Fulin, chairman of the China Securities Regulatory Commission, said last week.

Huayi surged 129 percent to 65.50 yuan at 9:41 a.m. local time in Shenzhen; Lepu Medical Technology (Beijing) Co. jumped 103.5 percent to 59 yuan; Beijing Toread Outdoor Products Co. rose 152.5 percent to 50 yuan; and Anhui Anke Biotechonology (Group) Co. increased 160.6 percent to 44.30 yuan.

Control Risk

“We’ll make sure risk can be estimated, detected and controlled,” Shang said in Shenzhen on Oct. 23.

China last introduced a new market for stocks in June 2004, when Shenzhen’s board for small and medium-sized companies began trading. Zhejiang NHU Co., the first company listed on the board, almost doubled in its trading debut.

The Shenzhen Stock Exchange, which will also host ChiNext, introduced rules in July for its board of small and medium-sized companies that require stocks to be suspended for 30 minutes if the shares rise or fall by more than 20 percent on debut.

A second 30 minute halt kicks in when the stock rises or falls by more than 50 percent, with a final halt of the stock until 2:57 p.m. local time if stocks soar or plunge by 80 percent. Chinese markets end trading at 3 p.m.

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091030/0022190fd2dc0c5492762a.jpg

http://www.bloomberg.com/apps/news?pid=20601089&sid=a2Thh3.Be.MM

http://www.chinadaily.com.cn/bizchina/2009-10/30/content_8873310_2.htm

All stocks trigger suspensions on ChiNext's debut

All 28 stocks on China's new Nasdaq-style market for small and medium-sized companies had been temporarily suspended within the first two hours of trading on its opening day Friday.

The stocks on the ChiNext exchange in Shenzhen, Guangdong province, had all been suspended at least once by 11:20 am under rules to prevent wild fluctuations in share prices.

To reduce speculation, the Shenzhen Stock Exchange issued special suspension rules if any stocks fluctuate too wildly on the first day of trading on ChiNext.

Under the rules, if any stock fluctuates beyond 20 percent from its opening price, it will be suspended for 30 minutes; if a stock fluctuates again beyond 50 percent of its opening price, it will be suspended for 30 minutes; and if a stock fluctuates more than 80 percent from its opening price, it will be suspended until 2:57 pm, three minutes before daily trading ends.

All stocks reported rises from their IPO prices after trading began at 9:30 am Friday.

Film production firm Huayi Brothers Media Corp was the biggest winner, more than doubling by 122.74 percent from its IPO price, to open at 63.66 yuan ($9.32) per share.

Zhongyuan Huadian Co Ltd increased the least by 46.26 percent from its IPO price to open at 47 yuan per share.
ChiNext is aimed at providing fund-raising channels for small and medium-sized high technology businesses with high growth.

The central bank and the financial system would continue to support ChiNext, said Zhou Xiaochuan, governor of the People's Bank of China, the central bank, at the opening ceremony.

IPO launches in China have often seen steep price hikes followed by even steeper falls as investors snapped quick profits.

Chinese shares opened higher on Friday morning, with the benchmark Shanghai Composite Index up 1.58 percent to open at 3,007.25.

The Shenzhen Component Index rose 1.92 percent to open at 12,427.1.

[China Daily]

Second board sizzles on debut, creates overnight billionaires

The ChiNext stock market, mainland’s long-awaited Nasdaq-style second board, debuted on Friday with a speculative surge that more than doubled the price of all 28 stocks during intraday trade – a good sign for companies lining up to list on the country’s stock markets.

The bubbly open to a market that hopes to turn local start-up firms into budding Microsofts or Intels stirred concerns about speculative froth, but analysts said circuit-breakers would curb excesses while a steady supply of new shares would help to keep mainland stock valuations under control.

“We certainly won’t build positions at such high prices,” said a senior manager at a mainland mutual fund, who could not be quoted by name as he was not authorised to talk to the media.

The huge interest has created dozens of yuan billionaires overnight among the firms’ founding shareholders, while retail investors lucky enough to win an IPO subscription lottery could cash in on the debut day for up to 40,000 yuan – a small fortune for mainland’s small investors.

ChiNext, part of the Shenzhen Stock Exchange, started out with a market capitalisation more than 100 times that of mainland’s main Shanghai Stock Exchange, which launched in 1990, and vastly deepens the country’s capital markets by expanding funding channels for small innovative firms.

Regulators are reviewing more than 100 IPO applications for ChiNext and industry officials estimate that at least 1,000 firms are preparing to float shares on the market next year.

Mainland has 10 million small and mid-sized companies starved for loans from domestic banks, which favour big state-owned enterprises. Spurred in part by a lack of immediate access to funds at home, 22 mainland start-ups have joined the US Nasdaq Stock Market this year, bringing the total of such firms listed on the US market to 116.

Overnight billionaires

Market players had expected at least one-third of the ChiNext stocks to more than double on the first day, and while all 28 achieved that goal at some point during the session, only 36 per cent managed to retain those gains to the close.

It is typical for IPOs listing in Shenzhen to double or triple on their debut because of their low capitalisation.

ChiNext also halted trade in all the new stocks at least once for 30 minutes during the morning after they rose 20 per cent from their opening price, triggering exchange circuit-breakers intended to curb excessive speculation.

Most were hit with a second 30-minute halt when they extended their gains to 50 per cent, and a handful, including film studio Chengdu Geeya Technology Co, were hit with a third halt after shooting up 80 per cent.

Geeya was the biggest gainer of the day, more than tripling from its IPO price, while rival Huayi Brothers Media Corp was the most actively traded stock, with investors drawn by the famous celebrities associated with the two firms.

The value of Huayi chairman Wang Zhongjun’s shares in the firm ballooned to 3.1 billion yuan, while Pu Zhongjie, president of medical equipment maker Lepu Medical Technology, saw his holdings’ worth surge to 3.8 billion yuan.

“Almost all companies have now seen their share prices surging to excessive valuations, betraying rampant speculation,” said Zheng Weigang, head of investment at Shanghai Securities.

“Such intense investor enthusiasm bodes very well for upcoming IPOs on the market, but we expect speculation to die down after a couple of months or so, mainly because regulators are pushing large numbers of new shares into the market.”

High prices fail to deter

The 28 listees, almost all private companies in contrast with the state-owned corporations that dominate mainland’s main board, completed recent IPOs at prices averaging 56 times last year earnings.

Based on forecast this year earnings, analysts estimated the average price/earnings (PE) ratio for the IPO prices at around 40 times, while the huge gains in Friday’s trade pushed that up to around 75 times, according to Reuters calculations.

Investors have not been deterred by the high prices, however.

The companies raised a combined 15.5 billion yuan from their IPOs, with an average oversubscription ratio exceeding 120 times.

The high valuations on ChiNext appeared also to boost the main board, where the benchmark Shanghai Composite Index closed up 1.2 per cent. The average forecast PE for main-board shares is about 30 times.

ChiNext’s initial 28 start-ups had a market capitalisation of 70 billion yuan before trading started, doubling to about 140 billion yuan at the close.

In contrast, the Shanghai bourse listed only eight firms on its debut in December 1990, with a combined market capitalisation of less than 700 million yuan. The exchange, now boasting a capitalisation of 17 trillion yuan and the world’s fifth largest, traded only 126,000 shares worth 494,000 yuan on its first day.

Soros: China will emerge as winner from current economic turmoil

Budapest, Oct. 30 (Xinhua) -- Investor and philanthropist George Soros forecast in Budapest on Friday that China would emerge as the big winner of the global financial crisis.

Soros called on Chinese leaders to "rise to the occasion" and take an active role in the creation of a new multilateral financial order urgently required to reinvent the "broken international financial system."

Soros also warned that "the worst financial crisis since WWII" may not be over. The Hungarian-born billionaire sounded a pessimistic note throughout the week and said that those who believe the global economy is stabilizing are wrong.

In the last of a week-long series of lectures on capitalism and the global financial crisis at the Central European University in the Hungarian capital, Soros spoke of disarray in the international financial system and confusion in the political arena.

Soros urged greater international cooperation and called for a reorganization of the world order to prevent a total breakdown. "The total freedom of financial capital to move around internationally has proved to be a source of instability and needs to be curbed. A new grand bargain is required," he said, referring to the Bretton Woods conference at the end of WWII which led to the establishment of institutions such as the International Monetary Fund.

"Global markets need global regulations, but the regulations that are currently in force are rooted in the principle of national sovereignty. A new multilateral system needs to be invented that would serve the interests of both the United States and China and of course the rest of the world," he said.

"Such an institution could then decide how to treat financial institutions that are too big to fail and would consider new rules to control capital movements," Soros said.

The reorganization of the prevailing world order should also extend beyond the financial system and involve the United Nations, especially membership of the Security Council, Soros argues, if progress is to be made in resolving issues like global warming and nuclear proliferation.

"The process needs to be initiated by the United States but China and other developing countries ought to participate in it as equals. They are reluctant members of the Bretton Woods institutions which are dominated by countries that are no longer dominant. The rising powers need to be present at the creation of the new order to ensure that they will be active members of it. Hopefully the Chinese leadership will rise to the occasion. It is no exaggeration to say that the future of the world depends on it."

Soros believes in the long-term the United States stands to lose the most from the recent turmoil and China is poised to emerge as the greatest winner.

"In the United States, the crisis was an internally-generated event leading to the collapse of the financial system, while China was largely insulated from the financial crisis although there was an external shock to exports. The new world order that will eventually emerge will not be dominated by the United States to the same extent as the old one. China may be able to take its place to some extent," Soros said.

It is also in China's interests, however, to submit to a new multilateral system, according to Soros. "In order to continue rising China must make itself more acceptable to the world, move towards a more open society, combining an increased measure of individual freedom with the rule of law."

http://news.xinhuanet.com/english/2009-10/31/content_12363369.htm

China sets up $1.32B high-tech VC funds

2009-10-30

BEIJING: China's top economic planner said on Friday that it had launched venture capital funds totalling 9 billion yuan ($1.32 billion) jointly with several provincial governments and private investors to support the country's growing high-tech sector.

Investments will focus on electronic and information industries, the biological and pharmaceutical sector and environmental and energy-related projects, the National Development and Reform Commission, the powerful planning agency, said in a statement on its website (www.ndrc.gov.cn).

It said that seven provincial-level governments had joined the venture capital scheme: Beijing, Jilin, Shanghai, Anhui, Hunan, Chongqing and Shenzhen.

"The purpose of setting up the funds is to direct capital to invest in competitive high-tech enterprises and to improve their capacity for innovation," the statement said.

The money will be spread among a total of 20 venture capital funds. The central government contributed 1 billion yuan, local governments pitched in 1.2 billion yuan and the remainder came from private investors, Xinhua news agency said.

It did not provide any details about who the private investors were or about how the venture capital funds would be structured.

http://www.chinadaily.com.cn/china/2009-10/30/content_8876285.htm

China creates 7.57 million new jobs in first eight months

2009-10-31

China has created 7.57 million new jobs in the first eight months of this year in a bid to guarantee employment amid global economic downturn, a senior legislator said in Beijing Friday.

The number accounted for 84 percent of the full-year target in 2009, and the employment situation was better than expected, said Huang Zhendong, chairman of the Committee for Internal and Judicial Affairs under the National People's Congress (NPC).

Huang made the remarks in a report on the enforcement of Trade Union Law delivered at the 11th session of the 11th NPC Standing Committee on Friday.

About 3.57 million laid-off workers had been re-employed in the first eight months, or 71 percent of the 5-million target for the whole year, Huang said.

Most of the migrant workers who had returned home after being laid off had found new work. Some even started their own businesses in their hometowns, Huang said.

As the global financial crisis spread rapidly in the second half of last year, many enterprises suffered problems of overcapacity or even bankruptcy, causing an increase in unemployment, Huang said.

A series of counter-measures including expanding domestic demand to boost employment, encouraging business startups and offering help to special groups, had made notable achievements, he said.

http://www.chinadaily.com.cn/bizchina/2009-10/31/content_8877308.htm

China's economy gains on domestic demand: economist
China has made remarkable achievements in the past decade thanks to its huge trade surplus and now it turns to gain momentum from domestic demand, Jim O'Neill, chief economist at Goldman Sachs, said Monday.

O'Neil, who first dubbed China, India, Russia and Brazil "Bric" in 2001, told Xinhua that China could be "the largest economy in the world" in 2027 with its GDP of $21 trillion, and its consumption could be $10 trillion, or nearly 50 percent of the whole GDP.

He said Goldman Sachs expects China's GDP to increase by 9.4 percent and its domestic demand up 13.3 percent this year, and in 2010 both figures could be even bigger.

However, the average growth rate of China's GDP between 2011 and 2020 is estimated at 7.7 percent, and gradually scales down in the next few decades, O'Neil said citing a Goldman Sachs report during a news conference.

When asked about serious challenges that could hinder China's economic growth, O'Neill said domestic demand was so important that China should continue to put in more effort. He said a sophisticated social security system was another priority.

Helen Qiao, a China economist with Goldman Sachs, said it could take a long time for China's economic structure to redress the balance.

"China's savings rate could decline 5 percentage points by 2015, and another 12 percentage points from 2015 to 2025. It represents a good sign for the increase of consumption," Qiao mentioned in her report: Outlook on Global and China's Macroeconomy.

Statistics showed that in 2008 China's GDP ranked third after the United States and Japan. And China's contribution to global economic growth amounted to 22 percent, surpassing the United States to be the world's No. 1. The figure was expected to be 50 percent this year.
http://www.chinadaily.com.cn/bizchina/2009-11/03/content_8905263.htm

China's Changing Worldview Is Bad For Your Business
Posted by Steve on November 5, 2009 at 08:28 PM

In a recent article, entitled China's GDP growth likely to reach double digits again, Xinhua repeats another of the endless reports we here in China are constantly seeing projecting double digit growth for the Chinese economy for the mid and long term.

But the important thing about this article is not its prediction. The important thing is its underlying assumption that the U.S. and European economies are now irrelevant and the economies of China and India are now set now set to dominate the world:

"The U.S. economy will recover pretty slowly, and its contribution to the world's economic growth is not nearly as important now as it used to be decades ago," Quah said.

"The world economic center is gradually shifting from the U.S. and Europe to emerging countries like China and India, where the recovery pace is faster than developed countries," he said.

A recent article in the Financial Times, entitled, "Gold extends record high on India purchase," echoes this view. In reporting on recent purchases of gold by the Indian central bank, the Finance Minister of India is quote as saying:

Pranab Mukherjee, India’s finance minister, said the acquisition reflected the power of an economy that laid claim to the fifth-largest global foreign reserves: “We have money to buy gold. We have enough foreign exchange reserves.” He contrasted India’s strength with weakness elsewhere: “Europe collapsed and North America collapsed.”

This is now the new paradigm for the governments of China and India. The U.S. and Europe are finished and the world belongs to them. It is irrelevant whether this is true. The key is that this paradigm is believed by the governments of both countries. I experienced the same thing in Japan in the late 1980s, when Japan was convinced it would soon own the world and that the U.S. and Europe were destined to fade away. We know what happened there. As for China and India, who knows?

This new confidence greatly impacts foreign companies entering the China market. The current attitude in China is that "you can come, but we really do not NEED you here. Our WTO obligations mean we will allow you to enter our market, but we are really not excited about that." This blasé attitude is often a shock to our clients. It is something to prepare for, however, since the attitude seems to be pervasive and growing within the Chinese government and it is impacting how Chinese companies must conduct their business in China.

Where we are seeing the greatest impact from this new attitude is in the shutting down of illegal foreign businesses. Whereas in the past, foreign businesses caught operating in China illegally would usually be fined fairly lightly and given the opportunity to come clean by paying all back taxes, we have seen a distinct tightening in both enforcement and penalties just over the last six months. My co-blogger, Dan Harris, is always saying that if our firm gets one report of something in China it is an isolated incident, two reports is a trend, and three reports is a fait accompli (he majored in French). We have gotten so many reports of foreign businesses being shut down in China this year that I do not even know what to call it.

I do know, however, that I should point out the mistakes these companies made and talk a bit about what led to their problems. Two of these companies were registered in Hong Kong and they told us that they thought registration in Hong Kong constituted registration on the Mainland. Their not so crazy argument was that Hong Kong is part of China, so why not? Ignoring the policy reasons (and ignoring the fact that being registered to do business in New Jersey does not make you registered to do business in Kentucky), the only answer is that registration in Hong Kong DOES NOT equal registration in China and if your business is not registered in China, you are operating here illegally.

One of the other companies was registered to do business in China, but as a representative office. It operated as a representative office for a year or so, but then realized that it would do better having its product made in China and sold in China, rather than simply marketing the home office's product for import into China. Within only a few months of its shift to its more profitable model, the government was at its door seeking back taxes and imposing large fines. This company was convinced its leading Chinese competitor had reported them to the authorities and I have every reason to believe this was true. Again, though, the key point here is that the Chinese government does not really care if you are here or not and if some Chinese company wants you gone and there is a legal basis for your exit...well, good luck.

I should say, however, that Chinese businesses do not generally share the government's view towards foreign business, at least with respect to those with which they are not in direct competition. They have a much more complex, realistic, and business-like view of the world. It is the government regulators and "gatekeepers" of which we need to be on guard.

http://www.chinalawblog.com/2009/11/cjhna_and_india_and_us_collaps.html

There's No Bubble in China

I find it utterly amazing how the same group of commentators who could not “see” the U.S. housing bubble – the largest asset-bubble in human history, can suddenly see “bubbles” everywhere (except in the U.S. economy).

The most frequent target of these “bubble sightings” is China, where the simplistic reasoning of these “experts” seems to be that if China's economy is growing much faster than anywhere else, then this must be where the next “bubble” will occur.

However, much as these “experts” were all wrong in failing to see the massive U.S. bubble, they are wrong again in imagining bubbles where none exist. For the benefit of those who need assistance in understanding what an asset bubble is, the definition is very simple. There are two components: over-valued assets, and an excessive amount of leveraged debt. While both conditions are necessary, neither is sufficient by itself.

The mere presence of over-valued assets does not represent a “bubble”. Assets become mis-priced in markets all the time – sometimes under-valued and sometimes excessively valued. When this happens in normal market conditions, markets “correct”; whereas with a bubble, there is inevitably a subsequent “debt implosion” of varying degrees of magnitude.

The reason why a true asset-bubble always ends in some manner of debt-implosion is because of the second (necessary) component of a bubble – excessive, leveraged debt. Again, even too much leverage (by itself) does not indicate a “bubble” if the underlying assets are not mis-priced.

It is over-valued assets which inevitably lead to a market “correction” at some point in the future, and it is the addition of leveraged debt which turns a “correction” into a “debt-implosion” - because of vast numbers of defaults on that debt. Corrections alone do not imply defaults, because if the debtors have not taken on excessive debt, then they can withstand a correction without defaulting.

Having dealt with definition of terms, let's look at the facts of the Chinese economy. First, there are vast levels of savings in the Chinese economy. It was because of the vast amount of savings in the Japanese economy that an economic downturn of well over a decade resulted in relatively few bankruptcies and defaults – despite the fact that all the other ingredients of a huge asset-bubble were present.

China's economy is growing much more rapidly than other economies. A growing economy generates real increases in wealth. Rising wealth supports higher asset prices, thus a rapidly growing economy can sustain a much more rapid rate of asset-appreciation.

However, the China-bashers still insist that there is one ingredient of a “bubble” in China: too much leveraged debt, they claim. Given that these same “experts” were totally incapable of spotting excessive leveraged debt in the U.S. economy, it should be of little surprise that once again the experts are totally wrong.

China's four largest banks, which account for nearly half of new loans originated in China this year, have seen their total deposits quadruple while lending has only tripled. It should be obvious even to the inept, China-bashers that if China's biggest banks are taking in $4 of deposits for every $3 dollars that they lend, that they have been getting steadily less-leveraged all year. This is in contrast to the behavior of U.S. banks during the housing bubble (and Wall Street Ponzi-scheme) – where U.S. banks were lending out $30 of debt for every $1 they took in, in deposits. Can you spot a slight difference here in the degree of leverage?

To provide even further assistance in educating the experts, let me introduce them to a real “bubble”: the U.S. bond market. At a time when the U.S. is dumping more supply onto the market than at any time in history, bond prices remain near all-time highs. It is straight out of Economics 101 (presumably the experts managed to pass that course) that when you increase the supply of any good that you depress the price. An extreme increase in supply should result in an extreme decline in price. Thus, the first condition for a bubble is satisfied: a grossly over-valued market.

It is even easier to point out the excessive leverage, because it exists in so many ways. To begin with, the U.S. debt-to-GDP ratio is increasing exponentially – a sure sign of excessive leverage of the U.S. government, by itself. However, there is an even more obvious indicator of excessive leverage: the need for the U.S. government to “buy” much of its own bonds to prop-up the prices. Without any possible doubt, this is the most blatant example of an over-leveraged market on the planet – yet it remains “invisible” to most of the experts (and all the China-bashers).

As a further note, we are seeing very similar behavior in U.S. equity markets, where the Plunge Protection Team permanently pumps-up valuations of U.S. equities through buying-up shares, and in the U.S. housing market – where U.S. banks have also artificially (and radically) reduced supply, through simply holding millions of foreclosed U.S. properties off of the market (see “Fantasy Housing Numbers a Prelude to NEXT U.S. Crash”).

You don't suppose the same group of experts who already totally over-looked one, enormous U.S. asset-bubble could fail to see several more, do you?

http://seekingalpha.com/article/171754-there-s-no-bubble-in-china

Rising orders at Canton Fair signal recovery

2009-11-05


The rise in new orders at the 106th China Import and Export Fair (Canton Fair) signaled signs of export demand recovery from its bottom, experts said Thursday.

Combined trading volume of new orders at the 106th Canton Fair, which closed Wednesday, topped $30.47 billion, up 16.2 percent from the spring Canton Fair, according to the Ministry of Commerce (MOC).

"I am optimistic about the recovery of China's exports, as demand in overseas markets has been on the rise," said Zhang Hanlin, director of China National Institute of WTO under the Beijing-based University of International Business and Economics.

The foundation of foreign trade recovery is sound, and a steady growth in exports could be expected in the first half of next year, he said.

The rise reflected an increase in export demand from the first half of this year when the world economy was hit hard by the economic downturn, said Professor Zhang Junsheng, a foreign trade expert at the university.

China's foreign trade continued to fall in September, but the rate of decline slowed sharply. The total value of imports and exports for September was $218.94 billion, down 10.1 percent from the same month last year, but up 14.2 percent from August.

"Yet exports have not fully recovered, as the trade volume was still down 3.4 percent compared with last year's autumn fair. The foundation of global recovery will not be solid until the second half of next year, which makes foreign trade prospects uncertain," Zhang Junsheng said.

Short and mid-term orders accounted for 92 percent of total orders at the fair, reflecting the cautious attitude of foreign buyers, said Wen Zhongliang, an official with the MOC's Department of Foreign Trade.

The 106th Canton Fair opened on October 15 in southern Guangzhou city, and the next fair will open on April 15, 2010.

http://www.chinadaily.com.cn/bizchina/2009-11/05/content_8920108.htm

The Coming Wave of Consolidation in Chinese Industries

Companies should understand consolidation trends in China to better handle changes within their industries and take advantage of investment opportunities.
by Seth Harlem and Ron Schramm.

Consolidation within industries will be a central theme in China's efforts to restructure its industries and promote industrial modernization in the coming years. The significance of consolidation for China and why it is likely to take place are particularly acute questions during the current economic crisis, when firms within certain industries are under great pressure to perform, merge, be acquired, or vanish.

The consolidation process can be thought of as a rationalization within an industry where firms that are not operating at their full potential either go out of business or are folded into more efficient firms. The competitive process generally leads to firms operating at an optimal size within an industry, depending on such factors as market-based or geographic niches. In the early stages of an industry, when companies usually make above-average profits, firms of varying levels of efficiency are able to stay in business. Furthermore, with new entrants the number of firms in the sector surges. Eventually, though, inefficient firms drop out and industries stabilize with fewer, but on average larger, companies. Innovation and regulatory changes put pressure on inefficient firms, and the macroeconomic slowdown will reduce profits; these developments force inefficient firms out of business and are among the major causes of industry shakeouts.

These major causes—combined with government encouragement—set the stage for widespread industry consolidation. China's industries are just beginning this process. As Andy Rice, senior vice president for International Business at the Jordan Co., puts it: "There will be a lot of opportunities from consolidation in China, and many reasons for consolidation to occur." As consolidation unfolds in China, a number of opportunities will emerge that could provide enormous benefits for Chinese consumers, surviving companies and employees, investors, and businesspeople who assist in the process.

Examining China's industrial landscape

To determine the likelihood and readiness of industry shakeouts or consolidations, China Macro Finance, LLC (CMF) recently examined a sample of 10 industries in China: bituminous coal, cement manufacturing, auto parts, motor vehicle manufacturing, metal shipbuilding, dairy products, cotton and chemical fiber, sewage treatment and recycling, pharmaceuticals (original drug manufacturing), and rubber parts. The first five industries were selected because the PRC government has announced plans to consolidate them; the second five industries were selected at random from CMF's database on private Chinese companies (see China Macro Finance (CMF) Analytics).

The 10 industries contained 33,651 companies and totaled 12.3 million employees. The data allow analysis of the current state of particular industries and the future of those industries—specifically the possibility of industry consolidation. Furthermore, combining this information with PRC government consolidation goals highlights opportunities for investors and key due diligence insight for companies seeking healthy, stable partners that will be on the right side of an industry shakeout.

For instance, China's auto industry is one of the industries slated for consolidation. The auto industry revitalization plan, released in March 2009, aims to consolidate many small, regional manufacturers into a group of "Big 10" internationally competitive auto manufacturers. CMF data suggests that the auto industry is ripe for consolidation. How does consolidation in an industry such as auto manufacturing benefit foreign companies? A February Wall Street Journal article explained: "The weeding out of [small Chinese auto] companies...could in the short term benefit big foreign auto makers such as Toyota Motor Corp. and Volkswagen AG by reducing competition in the world's second-largest car market after the US. Upstart auto makers have put enormous downward pressure on retail prices for cars in China, hurting foreign players' profitability." Of course, as the article points out, consolidation could also help the remaining domestic companies.

An analytical look at the consolidation potential

Though Chinese industries appear to follow the same theoretical statistical distributions for firms in an industry found anywhere else in the world, the specific underlying metrics differ and are revealing. Industries around the world tend to have a large number of small firms (1-5 employees) and a small number of large firms, where the latter are responsible for producing the lion's share of industry output. Such a pattern leads to an average firm size greater than median firm size, which in turn is greater than the modal firm size. This pattern also holds for China, but Chinese industries have not yet reached the metric norms that one would expect in a mature, consolidated industry.

CMF's proprietary data on private Chinese companies were used to examine the above 10 industries in China to see how they compare to benchmarks for consolidated industries; CMF reviewed benchmarks indicated by numerous studies across industrialized countries and thousands of companies. Firm size for each Chinese industry was gauged based on the number of employees at each firm. (Number of employees has been shown to be an effective measure for firm size, but results using revenues would be similar.)

The table compares Chinese industry consolidation with international benchmarks (see Table). The row marked "C parameter" is an index of how consolidated an industry is, based on the Zipf statistical distribution model. (C values close to zero suggest great potential for consolidation, while those close to one suggest that the industry has already consolidated. Values lower than one suggest that more consolidation is still possible.) In the United States, where industry consolidation is mature, "C" is close to one. The C parameter data indicates that each Chinese industry examined has great potential for consolidation.

The figure shows a typical distribution of firms in China's rubber parts industry compared to what a mature, consolidated industry would normally look like (see Figure). The figure reveals that China has too many small and medium-sized enterprises (SMEs) and not enough large firms. China has 44 rubber firms with more than 500 employees; the largest is the Zhongding Group with 9,565 employees. In contrast, the United States has 129 rubber firms with more than 500 employees. The average number of employees in the United States for all industries is around 840 per firm—in China the figure is 239. Over time, the rubber and other industries in China will likely gravitate toward the degree of scale and concentration found in the United States.

Another way of looking at the shortfall in consolidation in China is to use the "80/20 rule" (or er ba dinglu in Chinese), which is used in the West and China. According to this rule of thumb, based on the Pareto statistical distribution model, about 80 percent of output will come from the largest 20 percent of the firms in an industry in a mature, consolidated economy. The table shows that few industries in China exhibit this characteristic. The cement industry falls short by the largest amount with 32 percent fewer firms in the top 20 percent than expected, followed by the sewage treatment and recycling industry down to the auto industry, which is close to what one would expect for the top 20 percent of firms. Interestingly, the bituminous coal industry appears to have an excess of firms at the top, perhaps because of its central role in the historical development of industry in China. Examination of other industries (auto parts, for example) shows an excess of small firms compared to the norm in more mature economies. Though each industry has its own characteristics, the general picture is the same across the industries examined: the industries have too many SMEs relative to large firms, and the largest firms are still too small.

Drivers of China's industrial consolidation

A variety of China-specific factors will lead to greater concentration in Chinese industries in the next five years:

# Falling provincial barriers Since economic reform began, local and provincial governments have built their own enterprises, often protecting them with measures that keep out competitors from other parts of China. For example, the top 10 cement firms in China—including the Shandong Shanshui Cement Group Ltd. and the Conch Cement Co., Ltd.—are located in seven provinces, implying that each province has protected local industry and promoted its own "cement champion." As market forces and the central government pull down provincial walls, several factors—some of which are discussed above—will likely drive a few of these firms to merge. (CMF's research examined the consolidation potential of each industry from a national perspective—not from provincial and local perspectives. Provinces and cities in China that have many small companies in an industry designated by Beijing for consolidation may view such policies as damaging to their economies. Firms operating in consolidating industries in China will need to cooperate with all levels of government and balance central policies with local conditions.)
# Tax and legal reforms In the past, provinces attempted to block consolidation because local officials feared that a local company's acquisition by a company from a different province would reduce the jurisdiction's value-added tax (VAT) revenue. In recent years, however, China has reformed national tax laws to allow VAT to be reallocated based on where in China value is added.
# Financial system enhancements As the country's financial system becomes more sophisticated, new financing modes will make China's vast pool of savings increasingly available for domestic mergers and acquisitions.
# Economies of scale As discussed above, many firms in the 10 industries examined are not large enough to produce goods at low, competitive costs. Compared to more mature industries in advanced economies, China has fewer large enterprises and many more SMEs.
# Economies of scope Firms can find economies of scope in producing a wider range of complementary products, but most firms in China produce a limited range of products. Mergers and acquisitions are an excellent way to edge into new product lines.
# Quality standards China has leveraged its cost advantage, but quality standards have not kept pace. In the coming years, consolidation will allow for a new focus on quality. Key Principal Partners Corp. Chair John Sinnenberg says: "In markets growing as quickly as some of the markets in China, the ability simply to supply product qualifies one as a supplier. Customers will eventually factor in quality (including on-time delivery), and marginal players will disappear. The problem at the moment is that quality suppliers cannot get paid for their service as their customers are not used to measuring the total cost of quality."
# Integration of operations As some firms move operations and transcend provincial boundaries, other firms will follow their suppliers and customers, consolidating and integrating operations in even more industries.
# Rise of Chinese competitors China hopes to create globally competitive firms to expand sales around the world and to protect domestic industries from foreign competition. Large firms that can generate domestic profits will be best placed to compete globally, particularly in areas such as research and development and marketing.

The significance of consolidation in China

China's real economic growth in the next few years will rely less on the raw accumulation of resources, such as capital, land, and human resources, and more on productivity improvements realized through technological progress. Part of this progress will occur as a result of industrial consolidation. The merging of firms and the shutdown of inefficient firms will be a major driver of China's economic growth and prosperity. This type of transformation will improve living standards in China and reap returns for foreign and domestic investors in successful companies.

In contrast to Western economies, where consolidation usually occurs as a result of market forces, in China, the government plays a significant role in prescribing certain industries for consolidation—the cement industry being a prime example. The alignment of market forces and government goals will likely drive industry consolidation in China. Nevertheless, private sector firms, such as domestic and foreign private equity and process improvement firms, will see great opportunities no matter what drives industrial consolidation in China. The growth of truly global Chinese firms will profoundly affect China and the rest of the world as global players across a wide variety of industries will find that there are a few very large "new kids on the block."

Greater competition will change the landscape of global business. Previously unrecognized brands will rise to prominence. Consumers will find a new array of products and designs at more competitive prices. Some multinationals will find themselves on the outside looking in as new domestic giants are created in China; others will find themselves part of a process of acquisition-fueled growth, becoming giants themselves.

http://www.chinabusinessreview.com/public/0911/schramm.html

There's No Bubble in China

I find it utterly amazing how the same group of commentators who could not “see” the U.S. housing bubble – the largest asset-bubble in human history, can suddenly see “bubbles” everywhere (except in the U.S. economy).

......

http://seekingalpha.com/article/171754-there-s-no-bubble-in-china

Another point may not be known to outsiders. In most of China's small cities, like in my hometown, personal loan including mortgage from banks is almost impossible. So people just buy houses using cash when they can afford it. Sometimes they borrow money from relatives or get support from parents etc. If people don't borrow bank's money, I don't know where the bubble comes from.

China-Thailand economic & trade co-op meeting held

chinaview.cn 2009-11-10 21:39:58


Wang Yang, secretary of the Guangdong provincial committee of the Communist Party of China, addresses 2009 China (Guangdong)-Thailand economic and trade cooperation meeting in Bangkok, capital of Thailand, on Nov. 10, 2009. The meeting aims to urge China, especially south China's Guangdong Province, to cooprerate with Thailand in economy, trade and tourism. More than 1,300 representatives from 138 Guangdong enterprises and governmental agencies and circles of industry, commerce, finance and tourism in Thailand attended the meeting.

http://news.xinhuanet.com/english/2009-11/10/xin_0221106102146531510526.jpg

China's industrial output up 16.1% in Oct

2009-11-11

China's industrial output rose 16.1 percent in October from a year earlier, as the economy saw a consolidated recovery of growth with massive government spending.

The increase rate was 7.9 percentage points higher from a year earlier and 2.2 percentage points higher than September, according to figures released by the National Bureau of Statistics (NBS) Wednesday.

Industrial output of the world's third largest economy increased 9.4 percent year-on-year over first 10 months this year.

Although the growth rate was 5 percentage points lower than that of a year earlier, it was 0.7 percentage points higher than that of the first nine months, said the NBS.


http://www.chinadaily.com.cn/bizchina/2009-11/11/content_8950078.htm

China urban fixed-asset investment up 33.1% in first 10 months

2009-11-11

China's urban fixed-asset investment rose 33.1 percent in the first 10 months to 15.07 trillion yuan ($2.21 trillion), compared with the same period a year earlier, the National Bureau of Statistics (NBS) announced Wednesday.

The growth rate was 5.9 percentage points higher than that in the same period of last year, but 0.2 percentage points lower than that in the first nine months, NBS spokesman Sheng Laiyun said at a press conference.

The NBS had no figure for the month of October.

http://www.chinadaily.com.cn/bizchina/2009-11/11/content_8950005.htm

CPI falls 0.5% in October, PPI down 5.8%

2009-11-11

BEIJING: China's consumer price index (CPI), a main gauge of inflation, dipped 0.5 percent year on year in October, the National Bureau of Statistics (NBS) said Wednesday.

The rate of decline was 0.3 percentage points lower than that in Septemper.

The producer price index (PPI), a major measure of inflation at the wholesale level, dropped 5.8 percent in October from a year earlier, according to the NBS.

The rate of decline was 1.2 percentage points lower than that in September.

New loans sharply down in Oct

China's new yuan-denominated loans in October were down 51 percent from September, the People's Bank of China, the central bank, announced Wednesday.

Growth of the new yuan loans slowed to 253 billion yuan (37.06 billion U.S. dollars) from September's 516.7 billion yuan (75.68 billion U.S. dollars), according to the central bank.

Yuan loans outstanding at the end of October were 34.19 percent higher than a year earlier, almost the same as September's reading of 34.2 percent.

The broad M2 measure of money supply, which covers cash in circulation and all deposits, was up 29.42 percent in October from a year earlier to 58.62 trillion yuan, the central bank said.

Annual growth of the narrow M1 measure of money supply, which covers cash in circulation plus current corporate deposits, accelerated to 32.03 percent from 29.3 percent in September.

Yuan lending in the first 10 months totaled 8.92 trillion yuan, far exceeding the government's target of 5 trillion yuan for this entire year.

Retail sales up 16.2% in October

China's retail sales in October rose 16.2percent year on year, the National Bureau of Statistics said at a press conference Wednesday.

Urban fixed-asset investment up 33.1% in first 10 months

China's urban fixed-asset investment rose 33.1 percent in the first 10 months to 15.07 trillion yuan (2.21 trillion U.S. dollars), compared with the same period a year earlier.

The growth rate was 5.9 percentage points higher than that in the same period of last year, but 0.2 percentage points lower than that in the first nine months, NBS spokesman Sheng Laiyun said at a press conference.

The NBS had no figure for the month of October.

Industrial output up 16.1% in Oct

China's industrial output rose 16.1 percent in October from a year earlier, as the economy saw a consolidated recovery of growth with massive government spending.

The increase rate was 7.9 percentage points higher from a year earlier and 2.2 percentage points higher than September, according to figures released by the NBS Wednesday.

Industrial output of the world's third largest economy increased 9.4 percent year on year over first 10 months this year.

Although the growth rate was 5 percentage points lower than that of a year earlier, it was 0.7 percentage points higher than that of the first nine months, said the NBS.

Imports, exports drop 10.7% in Oct

China's imports and exports fell 10.7 percent in October year on year, but with monthly exports exceeding 100 billion U.S. dollars for a fourth straight month this year, the General Administration of Customs announced Wednesday

http://www.chinadaily.com.cn/china/2009-11/11/content_8949509.htm

China's imports, exports drop 10.7% in Oct

2009-11-11

China's imports and exports fell 10.7 percent in October year-on-year, but monthly exports exceeded $100 billion for a fourth straight month this year, the General Administration of Customs announced Wednesday.

Imports stood at $86.8 billion for October, a decrease of 6.4 percent compared with the same month last year, while exports dropped 13.8 percent to $110.8 billion.

From January to October, the country's imports and exports totalled $1.76 trillion, down 19.9 percent compared with the same period last year.

Imports for the first 10 months were $798.13 billion, down 19 percent year-on-year; exports declined 20.5 percent to $957.36 billion.

The trade surplus for the first 10 months was down 27.2 percent at $159.23 billion.

The European union was China's biggest trading partner for this period, though bilateral trade declined 18.7 percent to $292.42 billion in value; the United States was second with bilateral trade at $239.36 billion, down 14.9 percent; Japan followed with bilateral trade down 19.3 percent at $182.34 billion.

Exports dropped 13.8 percent in October year-on-year, the smallest decline rate since January. In September, the rate was 15.2 percent.

"This suggests improving demand from overseas," said Zhang Junsheng, an international trade expert with the University of International Business and Economics, while forecasting exports would continue the downward trend until the first quarter next year.

Exports of labor-intensive products for the first 10 months showed a lower rate of decline than the average 20.5 percent drop in exports, the administration said.

In the year to October, the export value of garments dropped 10.9 percent, textiles were down 12.9 percent, and shoes fell 6 percent.

Meanwhile, imports of crude oil rose 9.4 percent, steel was up 10.3 percent, and iron ore increased by 36.8 percent, despite the 19 percent drop in total value of imports.

Zhang said this was because of rising industrial output and urban fixed-asset investment, which required more imports of some bulk stocks.

The National Bureau of Statistics announced Wednesday that industrial output of the world's third largest economy increased 9.4 percent year-on-year over first 10 months, and urban fixed-asset investment rose 33.1 percent to 15.07 trillion yuan ($2.21 trillion).


http://www.chinadaily.com.cn/bizchina/2009-11/11/content_8951067.htm

China's new loans sharply down in Oct

2009-11-11

China's new Yuan-denominated loans in October were down 51 percent from September, the People's Bank of China, the central bank, announced Wednesday.

Growth of the new yuan loans slowed to 253 billion yuan ($37.06 billion) from September's 516.7 billion yuan ($75.68 billion), according to the central bank.

Yuan loans outstanding at the end of October were 34.19 percent higher than a year earlier, almost the same as September's reading of 34.2 percent.

The broad M2 measure of money supply, which covers cash in circulation and all deposits, was up 29.42 percent in October from a year earlier to 58.62 trillion yuan, the central bank said.

Annual growth of the narrow M1 measure of money supply, which covers cash in circulation plus current corporate deposits, accelerated to 32.03 percent from 29.3 percent in September.

Yuan lending in the first 10 months totaled 8.92 trillion yuan, far exceeding the government's target of 5 trillion yuan for this entire year.


http://www.chinadaily.com.cn/bizchina/2009-11/11/content_8950233.htm

China Mobile Promises To Save 11.8 Billion Kilowatts Over Next Three Years
China's top mobile communication services provider China Mobile has signed a commitment agreement with the Ministry of Industry and Information Technology to save energy.

According to the agreement, which the parties state is the first of its kind in China, China Mobile will reduce its power consumption by 20% by the end of December 2012 to save a total of 11.8 billion kilowatts of electricity. To fulfill this target, China Mobile will further carry out its green initiative with the support of the Chinese government.

China Mobile launched a green initiative focusing on energy saving and emission reduction in 2007. The company says that it will work to develop an environmentally-friendly communications industry within the company, the industry and the society. For this purpose it has signed a memorandum of understanding with 53 major suppliers and made an energy efficiency standard in addition to expanding the use of green package for communication products, developing energy saving air conditioners for its base stations and promoting the use of small and recycled SIM cards.

In addition, China Mobile will strengthen the promotion of energy saving technology and design in its communications network and improve the energy efficiency of its communication system and affiliated facilities by applying such renewable energy as wind power and solar power for its base stations.
http://www.chinatechnews.com/2009/11/12/11024-china-mobile-promises-to-save-11-8-billion-kilowatts-over-next-three-years

Central bank hints at resumption of yuan appreciation

2009-11-12


BEIJING: China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism," the central bank said in a 46-page monetary policy report.

The comments, published just days before a visit to Shanghai and Beijing by US President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.

The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.

The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.

The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.

Back to a Basket?

Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.

"I think the wording change ... shows that it is an irresistible trend for China to resume yuan appreciation," said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.

"It is not sustainable for the yuan to always be pegged to the US dollar; after all, the repegging since late 2008 was just part of China's measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later."

The central bank's report came just hours after data that showed the world's third-largest economy had firmly put the worst of the global financial crisis behind it.

Factory output growth surged to a 19-month high of 16.2 percent in October. While exports were still down in year-on-year terms, economists pointed to the likelihood that they would start growing again soon.

Some analysts said the statement could have been timed to send a signal ahead of Obama's November 15-18 visit to China. Obama said on Monday that he planned to raise the currency issue during his trip.

No Sudden Shift

However, analysts were quick to caution against expecting any sudden shift in the yuan's actual value, given China's penchant for carrying out any reforms gradually.

"The central bank's worries about capital flows, liquidity, and inflation signal growing pressure for yuan appreciation," said Ben Simpfendorfer, strategist with the Royal Bank of Scotland in Hong Kong.

"But I'm not looking for gains in the currency until the second quarter as the export sector still faces large challenges and margin pressure."

Markets priced in a slightly greater appreciation over the coming year. Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.6075 bid late on Wednesday compared with Tuesday's close of 6.6320.

Yuan appreciation implied by NDFs, which moves inversely with the forwards, was around 3.3 percent in a year compared with 3.06 percent before the announcement.

Xing with CICC said he was expecting even greater appreciation, of 3 to 5 percent next year, in the face of growing external and internal pressure.

"For China's own sake of balancing its economic growth and reducing its large surplus in the trade account, it is also necessary for the government to make the yuan more flexible."

http://www.chinadaily.com.cn/china/2009-11/12/content_8957376.htm

Secret sauce

Nov 12th 2009
From The Economist print edition
China’s rapid growth is due not just to heavy investment, but also to the world’s fastest productivity gains

PRODUCTIVITY growth is perhaps the single most important gauge of an economy’s health. Nothing matters more for long-term living standards than improvements in the efficiency with which an economy combines capital and labour. Unfortunately, productivity growth is itself often inefficiently measured. Most analysts focus on labour productivity, which is usually calculated by dividing total output by the number of workers, or the number of hours worked. According to new figures published on November 5th, America’s output per hour worked has increased by 4.3% over the past year, thanks to big job cuts. Even more impressive is China, where labour productivity has risen by 7-8%.

The snag is that labour productivity is an incomplete gauge of efficiency. Firms can boost output per man-hour by investing more and equipping workers with better machinery. But once the extra capital spending is taken into account there may be little or no gain in overall economic efficiency. Part of the jump in America’s labour productivity during the “new economy” era of the late 1990s reflected a rise in investment as a share of GDP. The huge increase in China’s labour productivity in recent years is partly due to heavy investment rather than true efficiency gains.

A better gauge of an economy’s use of resources is “total factor productivity” (TFP), which tries to assess the efficiency with which both capital and labour are used. Once a country’s labour force stops growing and an increasing capital stock causes the return on new investment to decline, TFP becomes the main source of future economic growth. Unfortunately TFP is much harder to measure than labour productivity. It is calculated as the percentage increase in output that is not accounted for by changes in the volume of inputs of capital and labour. So if the capital stock and the workforce both rise by 2% and output rises by 3%, TFP goes up by 1%. Measuring hours worked is fairly easy, but different ways of valuing a country’s capital stock can produce different results.

The OECD publishes figures for its rich-country members. These show that since 1990, average TFP growth has been remarkably similar in America, Japan, Germany, Britain and France, at around 1% a year. A recent report by Andrew Cates, an economist at UBS, attempts to estimate TFP growth in emerging economies over the past two decades (see chart). He calculates that China has had by far the fastest annual rate of TFP growth, at around 4%. Probably no other country in history has enjoyed such rapid efficiency gains. India and other Asian emerging economies have also enjoyed faster productivity growth than other developing or developed regions. In contrast, productivity in Brazil and Russia has risen more slowly than in rich economies.

These figures undermine a common claim—that China’s rapid growth has been based solely on overinvestment. Sceptics like to compare China with the Soviet Union, where heavy investment also produced rapid rates of growth for many years before it collapsed. But the big difference is that TFP in the Soviet Union actually fell by an annual average of 1% over 30 years to 1988. In contrast China’s productivity has been lifted by a massive expansion of private enterprise, and a shift of labour out of agricultural work and into more productive jobs in industry. China’s average return on physical capital is now well above the global average, according to Goldman Sachs. A decade ago it was less than half the world average.

Why have the Asian economies led the pack? The most important determinants of longer-term productivity growth are the rate of adoption of existing and new technologies, the pace of domestic scientific innovation and changes in the organisation of production. These, in turn, depend on factors such as the openness of an economy to foreign direct investment and trade, education and the flexibility of labour markets.

Using a composite index of technology penetration and innovation (including, for instance, computers and mobile phones per head), Mr Cates finds a strong link between the rate of increase in an economy’s technological progress and its productivity growth. China’s level of technology is still well behind that in America, but it has seen by far the fastest rate of improvement over the past decade. This is not just because China started from such a low base but also because it is more open to foreign investment than many other emerging economies, including Japan and South Korea when they were at similar stages of development. China’s TFP growth is almost twice as fast as that of Japan and South Korea during their periods of peak economic growth.

UBS’s analysis suggests that the financial health of firms and governments also matters for productivity growth. Although TFP measures the extra gain in economic efficiency after taking account of the direct impact of a larger capital stock, weak balance-sheets constrain the availability of capital for new technology and innovation. The financial crisis may therefore reduce TFP growth in many rich countries. Some analysts also worry that future productivity growth in emerging economies will be curbed by slower growth in world trade and capital flows. But Mr Cates argues that healthier domestic balance-sheets in most emerging economies, along with continued rapid adoption of old and new technologies, should support robust productivity gains. He thinks that China, India, Indonesia and Brazil look particularly well placed. China’s surge in infrastructure spending will also help.

That said, even if China’s productivity growth remains faster than that of the developed world, it is likely to slow unless the government pushes ahead with bolder reforms. China’s growth is still too capital-intensive. Opening up the service sector to private firms and making it easier for workers to shift from rural to urban areas would result in a better allocation of labour and capital. That would help sustain rapid growth but would also make it more job-intensive. The resulting fall in labour-productivity growth might cause alarm among some analysts, but TFP would remain strong.

http://media.economist.com/images/20091114/CFN472.gif

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478048&story_id=14844987

China's Huawei takes No. 2 spot in mobile gear

Fri Nov 13, 2009

HELSINKI, Nov 13 (Reuters) - China's Huawei Technologies [HWT.UL] took the No. 2 position in the global mobile network gear market in the third quarter, almost doubling its market share from a year ago and surpassing Nokia Siemens (NOK1V.HE).

Competition for new business in the telecommunications equipment market has been cut-throat during the past few years, driven by Asian vendors, and the outlook remains tough.

Sweden's Ericsson (ERICb.ST) continues to lead the market with a 32 percent share, researcher Dell'Oro said on Friday.

Further strengthening its position, Ericsson on Friday closed its $1.13 billion acquisition of CDMA and LTE assets of bankrupt Nortel Networks (NRTLQ.PK). [ID:nWNAB5917]

Huawei's market share rose to 20 percent from 11 percent a year ago, Dell'Oro said in its quarterly market review, while the market share of Nokia Siemens Networks (SIEGn.DE) [NSN.UL] dropped to just below Huawei.

Last week Huawei won a contract to build Norway a fourth generation (4G) mobile network, replacing the older networks of Ericsson and Nokia Siemens Networks in their own backyard.

The deal is the largest one so far for the new LTE technology in Europe, making it a milestone for Huawei.

Nokia Siemens has struggled with falling market share for several quarters as its owners Nokia and Siemens have looked for profits from the ailing business unit. Last week it unveiled plans to cut up to 5,800 positions.

Smaller network gear vendor Motorola Inc (MOT.N) is in the early stages of a potential sale of its $4.5 billion television set-top box and network equipment business, two sources said earlier this week. (Editing by Simon Jessop and Steve Orlofsky)

http://www.reuters.com/article/CMPSRV/idUSLD56804020091113

Chinese oil firms eye new-energy automobile field
China's state-run oil firms CNPC, Sinopec Group, and CNOOC Group, are all eying the development of new-energy automobiles
, signaling the country's intent to develop its related industry.

Sinopec Group has established a cooperative relationship with Beijing Motorcar Industry Stockholding to jointly develop new-energy automobiles.

CNPC signed in September a framework agreement with Huaneng Power International to cooperate in natural gas power generation.

CNOOC Group recently invested five billion yuan in Tianjin Lishen Battery Joint-Stock, a firm engaged in the production of Lithium-ion batteries, especially for vehicles, to lay down 20 battery production lines.

Sinopec primarily focuses on the development of vehicles fed on natural gas and hybrid engines, CNPC is mainly engaged in researching ethanol feedstock fuel powered vehicles, and CNOOC engages in the manufacturing of electric cars and building battery charging stations.

According to China's Ministry of Finance, China will invest 20 billion yuan by 2012 to promote the use of new energy engines.
http://www.tradingmarkets.com/.site/news/Stock%20News/2655975/

China's contribution to world's economic growth to exceed 20%

The worst of the global downturn had passed with joint efforts from countries around the world, said Cheng Siwei, chairman of International Finance Forum (Beijing), former vice chiarman of the Standing Committee of the National People's Congress. Chinese economy has hit the bottom and rebounded, and world's economy is on the winding road to revitalization. It can be expected that world's economy may recover to positive growth by 2011.

He stated that during the financial crisis, the whole world cast their eyes on China, even hoping that China would take the lead. However, China's GDP only takes up by 6 percent of the world's and average GDP ranks outside the top 100, so China is not likely to be a global leader, instead just able to afford responsibility in accordance with its strength and development level. China should firstly do its own things well, and its economic growth rate will reach 8 percent this year, which contributes to more than 20 percent toward world's economic growth. That is the contribution of China for global economic development.

As a conclusion, Cheng stressed the balance between savings and consumption, domestic and foreign demands, financial innovation and supervision, virtual economy and real economy, economic development and sustainable development, regional integration and economic globalization.

By People's Daily Online

http://english.people.com.cn/90001/90778/90862/6814370.html

Five Reasons China Is Not a Bubble

A year ago, nobody thought China could manage 8 percent GDP growth in 2009. With year-to-date growth coming in at 7.7 percent through the first three quarters and getting stronger, China is poised to break that 8 percent mark rather easily.
The success of the stimulus and the lofty economic numbers China has managed to produce amidst a global crisis has led many to claim China is the next great bubble.
We see five reasons China is not a bubble and believe that its prospects remain strong for at least the next 20 years.

1) Consumption Continues to be Strong
China is transitioning to a consumption-based workforce. Retail sales rose 16.2 percent in nominal terms during October and have been accelerating. The retail sales figure isn’t a perfect proxy, but it is the best available indicator of overall consumption because it does include sales to consumers and not just purchases made by the government.
We also saw strong growth in industrial production (IP) and power generation both were up more than 16 percent on a year-over-year basis in October. Housing starts were up more than 50 percent (yoy) for the second straight month.

2) Structural Changes to Domestic Economy
http://static.seekingalpha.com/uploads/2009/11/16/389729-12583896031695-Frank-Holmes.png
We’re seeing a transition to a service-related economy. The service industry is the fastest-growing sector (roughly 20 percent faster than construction) and now accounts for one-third of China’s workforce.
In general, the size of the service sector is directly correlated to the amount of goods and services an economy consumes. This is why the government has spent such a large amount of the stimulus on areas that benefit the domestic market—that’s where it thinks the economy is headed.

3) Stimulus Exit Strategy in Place
http://static.seekingalpha.com/uploads/2009/11/16/389729-125838958090323-Frank-Holmes.png
China’s stimulus exit strategy is simple--create a strong economic base that the private sector can launch from. After private investment surpassed that of state-owned enterprises in September, the two flip-flopped during October.
Given the environment, month-to-month fluctuations like this are to be expected since private investment is dependent on how willing Chinese citizens are to put their own money at risk. Even though Beijing is determined to wean China’s economy off of government stimulus, the government will not hesitate to ramp up activity should the private investors become risk-averse.

4) Government Controls on Flow of Money
After lending more money over the first five months of 2009 than all of 2008, we’ve seen loan numbers come down. There’s a longstanding pattern of new loans slowing down during the second part of the year as banks have historically rushed to meet government-mandated loan quotas.
The magnitude this year’s slowdown—trillions of yuan—is evident of Beijing’s dedication to prevent a bubble from forming. Once the figures grew too large, the government moved quickly to hit the brakes.
While U.S. regulators have many holes to plug in order to keep the economy afloat, the limited number of investment options available to Chinese citizens—basically stocks, bank savings and property—makes it easier for the government to institute controls.
This is what happened in 2007 when the government forced a slowdown in the housing market before it overheated. After its economy grew 12.6 percent in the second quarter of 2007, China took more aggressive actions to cool its economic growth. The government raised lending rates and also raised reserve requirements to shrink the pool of money available for lending.

5) China’s Long-Term Goals Match Up With Short-Term Goals
In the U.S., the Federal Reserve and policymakers are faced with conflicting goals. They need people to spend in order to get the economy rolling again, but their end game is to have the American people spend less and save more.
It’s the opposite for China.
The problem in China is excess savings and not enough spending. The short-term and long-term challenges are the same—to get people to spend more.
Recent signals that China will begin letting the yuan appreciate against the U.S. dollar are not new. For several years, Beijing has stated a gradual appreciation of the yuan will benefit the economy, and CLSA expects Beijing to resume a 5 to 7 percent annualized appreciation process about midway through 2010.
Rapid economic growth may be common in emerging economies, but there’s only one China. Already the world’s third-largest economy on a nominal GDP basis and second-largest based on purchasing power parity, the Chinese aren’t making a break from the back of the pack—they’re leading it.
Domestic consumption, the rise of the service sector and increased private investment won’t make China immune to economic bubbles, but these strengths will provide some protection from external forces.

Romeo Dator, co-manager of the China Region Fund (USCOX), contributed to this analysis.

http://seekingalpha.com/article/173620-five-reasons-china-is-not-a-bubble

Xiamen set to be core of new economic zone
In line with the central government's newly agreed strategy to accelerate the construction of a powerful advanced manufacturing center along the western coast of the Taiwan Straits, Xiamen has announced its own plans to optimize its industrial structure and boost its economic development. This new initiative by Xiamen, a city in the southeastern coastal province of Fujian, places it at the very core of the western straits economic zone.

The city's central areas will be planned in line with the development of hi-tech industries according to the new plan. These industries will be capital, technology and labor-intensive, as well as being environmentally friendly.

The new plan calls for the increased use of digital information technology in automated manufacturing and management systems. It also envisages a greater uptake of a range of digital products and integrated systems, all aimed at improving the efficiency of the businesses in question.

The construction of advanced industrial facilities will be accelerated to promote and develop new industrial clusters.

Facilities will be upgraded in the Torch Industrial Area in Xiang'an, the Tong'an Industrial Area, the Xiamen Software Park and the Jimei Heavy Manufacturing Area.

Under a scheme intended to nurture new industrial clusters, the electronic information industry will focus on the development of computers and related technology, digital audio, telecommunication equipment, electronic components and a raft of other products.

The machinery sector will prioritize the production of passenger vehicles, construction machinery, aircraft maintenance, electrical equipment, shipbuilding and equipment for the deep processing of tungsten products.

The chemical sector will concentrate on a number of areas, including fine chemicals and rubber tire production.

Advanced technology will also be used to upgrade light industry, food processing, building materials and other traditional industries.
http://www.chinadaily.com.cn/bizchina/2009-11/17/content_8983596.htm

Why Is China Booming? Surprise, It’s Not the Stimulus

Launched amid much worldwide rejoicing when the financial crisis struck last year, China’s Rmb 4 trillion ($585 billion) stimulus package is given much of the credit for China’s continued strong economic performance this year. China’s GDP growth is likely to exceed 8%, and the domestic stock market is up by over 70% since the start of the year.

A Keynesian miracle? To read a lot of the financial commentary on China, you might well conclude this is so, that government spending has single-handedly kept the economy jaunty, while both firms and consumers sank into a deep funk. It’s a great story, and provides a simple explanation for how China dodged the bullets that struck all other major economies. Other countries looked on enviously, and urged China to continue the fiscal pump-priming to help out the overall world economy.

Problem is, the analysis is flawed. China’s stimulus plan is not all it’s cracked up to be. While the additional government spending has clearly played a part, it is not the only reason why China’s economy has remained so sound this year. The unsung heroes of China’s economic success this year are its ordinary consumers. It’s their continued confidence and increased spending that have really made the difference.

Economic statistics are notoriously iffy in China. The further one gets from the economic lever-pullers in Beijing, the harder it becomes to track economic activity. That’s another reason why the stimulus plan was so often singled out as the main spur to China’s growth. It’s easier to calculate how much additional the Chinese government is spending building expressways than it is to see how many pairs of socks or bowls of noodles Chinese are buying.

Another reason: a lot of the economic commentary comes from folks who believe that governments really are responsible for what happens, good and bad, in an economy. Again, it’s just so much simpler to view things this way, that powerful government men can pull out their checkbooks and spend their way to national prosperity. These are often the same people who will tell you, wrongly, that Roosevelt’s New Deal spending lifted the US out of Depression.

China’s supporters and detractors both give the government too much credit. There are those who are convinced China’s economic growth is all some kind of fraud, cooked up by the central government, and that once the extra government spending is dialed down, the economy is certain to crash.

Again, pure hogwash.

In China, the government rightly deserves credit for excellent economic management, for creating the circumstances, both marco and micro, that allow the Chinese economy to continue to thrive. I’ve said it frequently, including in public forums: China is the best-managed major economy in the world.

But, again, let’s also commend the country’s one-billion-plus consumers, too often seem as miserly skinflints, saving up all their money for their great-grandchildren’s rainy days. It just ain’t so. China’s consumers, with an ever-increasing choice of products, services and shops, are spending ever-increasing sums on improving the quality of their lives. Newer and better housing. New cars. Holidays. New wardrobes. You name it.

I see it every day here, the untethered exuberance of the Chinese consumer. It’s true that in the early part of this year, there was a relative lull. Back then, shops were working harder to attract customers, by putting a lot of their goods on sale at steep discounts. About four months ago, the situation began to change markedly. No more major knockdowns. Prices now all seem to carry list price, and the prices for many common consumer products are as high, or higher, than in the US.

Not much of this, it goes without saying, gets noticed by the world’s financial commentariat. Car sales in China are at an all-time high, and China is now the world’s largest car market. But, listen to the commentators, and they’ll tell you it’s the result of some small government tax breaks on new car purchases. Helpful, yes. The main spur? No. Car prices in China are still, in dollar terms, generally much higher than in the US. Based on a percentage of average disposable income, car prices in China are probably among the most expensive in the world. Same goes for property prices. Yet, Chinese keep buying.

They will keep buying, at or near this record pace, long after any tax breaks phase out. Chinese want the new cars to drive on the new expressways to carry them to the new shopping malls to buy the new furniture for their new apartments.

Of all the economic statistics I’ve seen lately, the one that best captures what is going on now in China is this: revenues in China’s restaurant industry were up 18% during the first half of 2009, to over $120 billion. That’s not due to stimulus, or bank loans, or tax concessions, or a government mandate to entertain more. It’s largely because Chinese are out having a good time, more often, and spending a lot more doing so than they did a year ago.

It’s one of the best barometers of a nation’s mood, restaurant spending. In China, the mood is buoyant, the outlook bright, and the woks are working overtime.

http://seekingalpha.com/article/173930-why-is-china-booming-surprise-its-not-the-stimulus

China Fends for Itself
John Ross is visiting professor at Antai College, Shanghai Jiao Tong University.
November 17, 2009, 11:54 am
China’s War on Low U.S. Interest Rates
By THE EDITORS of NY Times
President Obama visits China at a true turning point in world financial history — one his advisers have probably not pointed out to him. This year, under the impact of the financial crisis, for the first time for a century and a half the United States has been overtaken as the greatest generator of capital in the world and by the country he is now visiting.
The world’s No. 1 capitalist country — the U.S. — is no longer the world’s greatest generator of capital.
To set out the data, the Bureau of Economic Analysis measured combined U.S. company, government and domestic savings, that is the finance generated for investment, in the second quarter of 2009, the latest available data, at $1.4 trillion.
China does not publish quarterly savings data, but it is relatively easy to calculate them from published figures on investment and the balance of payments. At official exchange rates, which understate the size of China’s economy, China’s finance available for investment, that is its savings, reached slightly over $2 trillion in the second quarter of 2009. This more than $600 billion lead over the United States is sufficiently large that, even allowing for a margin of error given the indirect way China’s figures must be calculated, there is no doubt that China has now overtaken the U.S.
The striking reality is that the world’s No. 1 capitalist country is no longer the world’s greatest generator of capital.
This financial strength is why China has been able to reorient its economy to domestic demand and why its stimulus package has been successful. China would undoubtedly genuinely prefer the U.S. consumer to recover quickly — that would be, in the language it uses, a “win-win situation.”
But China is sufficiently financially strong that its economy can expand even if the consumer recovery is rather longer delayed. Meanwhile, a weaker dollar would devalue China’s treasury bond and other U.S. holdings and internationally reduce the purchasing power of U.S. consumers to buy China’s exports.

The information below was compiled by The New York Times earlier this week and it provides some useful graphics for comparison of the two more important economies on the globe. Some things revealed in the data will surprise no one such as the fact that China is growing rapidly or that corporate America is still much larger. However, we think a visual representation like this is just too good not to share.

If the world changed this much in just the last decade, imagine what is ahead in the next. Consider the fact that using the growth rates stated in the graphic, China’s economy would overtake the United States in GDP in the year 2019. Of course, we know that it is unrealistic to expect the growth of these complex economies are constant from decade to decade, but still an amazing fact considering China’s GDP was one-eight our size at the turn of the millennium. By the same logic, Chinese billionaires would outnumber their American counterparts by more than 10 to 1 by 2019.

And hey, remember when General Electric (GE) was the largest company in the world?

http://i245.photobucket.com/albums/gg64/z0rgggg/others2/image7.png

http://www.insidefutures.com/article/121142/Contrasting%20the%20American%20and%20Chinese%20Economies.html

OECD prospects for China.
http://www.oecd.org/dataoecd/52/10/36761580.pdf

http://img517.imageshack.us/img517/2289/oecd.jpg


OECD Hikes China GDP; Stimulus To Remain, Need Tighter Credit

BEIJING (MNI) - The momentum of China's economic recovery has picked up and fiscal indicators suggest that the government can continue to lend support via its stimulus program, the Organization for Economic Cooperation and Development said in its latest Economic Outlook published Thursday.

But the mix of that spending should change in favor of social services while credit growth needs to be reined in to avoid a build-up of non-performing loans, it said.

The Paris-based organization said that it expects China to grow by 8.3% this year, up from its 7.7% projection in June and March's 6.3% prediction. In 2010, the Chinese economy will grow by 10.2%, up from 9.3% in June and 8.5% in March.

The OECD singled China out as a country providing a "well established source of strength for the more feeble OECD recovery."

It said that the government's comfortable fiscal position means that stimulus policies are likely to continue to support growth while domestic demand will remain strong on the back of a recovering outlook for employment.

But those stimulus policies will be withdrawn in 2011, the OECD said, resulting in a moderation of growth to 9.3%, with the housing market and some revival in export markets continuing to offer support.

Although government finances suggest that its fiscal spending program can be maintained for the time being, the OECD cautioned that the lending frenzy which lent so much support to growth during the first half of this year could result in more bad loans in the banking system down the line.

"Credit conditions may need to be tightened to prevent the emergence of inflationary pressures and asset bubbles if the money and credit boost this year has a bigger than expected impact on demand," it said.

The OECD also noted a divergence between consumer and producer prices as downstream price pressures build on rising food costs. The consumer price index is projected to fall 1.1% in 2009, after surging 5.9% last year, and climb by just 0.1% in 2010 and by 1.0% in 2011.

http://imarketnews.com/node/4931

I don't want this post to sound like a country vs country shit. I'm just using the available countries in the article, I think this info is quite interesting for many forumers.

I've used the data from the IMF (the most accurate imo)
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20091120/forbes_india_091121/20091121?hub=World

GDP 2008 (billions of USD)
USA: 14,441
China Mainland: 4,327
India: 1,206

Fortune of the 100 richest people in each country (billions of USD)
USA: 775 (5.3% of the GDP)
China Mainland: 170 (3.9% of the GDP)
India: 276 (22.8% of the GDP)

Stunning.
Anyway it is not like the fortune of the whole population = GDP. When these people measure wealth they include all assets, properties, whatever. Am I wrong? The combined fortune of the whole population is much, much larger than the annual GDP.

I think US, Europe and China are totally different in the ways of fortune re-allocation.

Europe is well-known to re-allocate fortune through taxes. Very high tax rate in Europe and the social security mainly depends on that.

US re-allocates fortune mainly through stock market. US citizens consistently get rich and assured by owning shares of American companies.

China re-allocates fortune through state-owned companies. Unlike the rest of world, most of Chinese super huge companies are State-owned. It is said if needed the government will transfer the ownership of these companies to national social security funds. Chinese citizens are and will be assured by state-owned entreprises.

Sure, there are many mixes between them. For example, Chinese and European people also have huge assets in the stock market whilst Americans and Chinese also get assured by taxes etc etc. But I think China's situation is quite unique, only France gets closer but still not the scale.

Well, as a result of different Fortune re-allocation model, you can see there're not so many billionnaires in China compared with its economic size. Another reason is lots of big Chinese private firms are not listed in the stock market and thus are not mesured by market value. For example, Chongqing's biggest private firm(Longfor group) just launched its IPO this week and it immediately became the largest private firm of the mid-west by market value and the founder family became one of China's top 10 richest. Btw, CQ's no.2 and no.3 private firms are still unlisted and these people are the hidden super-rich and there're lots of them in China.

Regarding India, it is basically either monopoly or duopoly in most of its industries. It creates lots of billionaires but meanwhile the economy is not very efficient and the fortune allocation is extremely inequal too.

Well, as a result of different Fortune re-allocation model, you can see there're not so many billionnaires in China compared with its economic size. Another reason is lots of big Chinese private firms are not listed in the stock market and thus are not mesured by market value. For example, Chongqing's biggest private firm(Longfor group) just launched its IPO this week and it immediately became the largest private firm of the mid-west by market value and the founder family became one of China's top 10 richest. Btw, CQ's no.2 and no.3 private firms are still unlisted and these people are the hidden super-rich and there're lots of them in China.

I wonder if all those "hidden" super-rich would make a good bulk for the undercounted Chinese GDP. Everybody knows that the Chinese economy is undercounted, specially because the underestimated service industry. But I suspect that all those billionaries would make a good contribution to the hidden economic size; maybe China´s GDP is much larger than we thougth even accounting the underestimated service sector.

Fortune of the 100 richest people in each country (billions of USD)
USA: 775 (5.3% of the GDP)
China Mainland: 170 (3.9% of the GDP)
India: 276 (22.8% of the GDP)

It´s totally outrageous a so huge wealth concentration in a +1 billion population country with the biggest number of undernourished children in the world and a IDH even lower than many Subsaharan African countries. And worst of all they proudly boast about that in the Forbes ranking :ohno:

I wonder if all those "hidden" super-rich would make a good bulk for the undercounted Chinese GDP. Everybody knows that the Chinese economy is undercounted, specially because the underestimated service industry. But I suspect that all those billionaries would make a good contribution to the hidden economic size; maybe China´s GDP is much larger than we thougth even accounting the underestimated service sector.


If they registered the whole service sector and the yuan were allowed to float till reaching its natural value China's nominal GDP would be probably close to $10 trillion US dollars already I guess.

edit

Far East seeks 66b yuan for hybrids venture
Far East Golden Resources Group Ltd, headed by Yang Rong, who fled China in 2002, is seeking 66 billion yuan to build hybrid cars in the country, a sum about 44-times its market capitalization.

Three China-listed companies have agreed to back the plan, and Far East is also in talks with private-equity firms, Yang, also known as Yeung Yung, told reporters in Hong Kong yesterday by videoconference from the US. The company will soon name the three listed backers, he said, without elaboration.

Far East plans to begin making hybrid cars as China supports alternative-energy vehicles to pare oil imports and reduce pollution. The company has announced plans for a possible 20 billion yuan investment in Shenyang and for a $7.8 billion project in Alabama in the US.

A third of the funding for the Chinese hybrid-car venture may come from private-equity investors, said Yang. Far East would supply technology and management to the project and charge as much as $500 in licensing fees for each hybrid car sold, he said.

The company last week said it signed a memorandum of understanding to build a 10 billion yuan facility for making hybrid vehicle engines, transmissions and motors in the Shenyang-EU special economic zone. The planned plant will be able to make 1 million packs per year, according to a statement.

The company also said it is considering building a 10 billion yuan factory for making 1 million cars a year in the same zone, located in northeastern China.

Far East's hybrid-car project in Alabama may begin production as early as next year, Chief Financial Officer Wilson Hui said. The company said in September that it formed a partnership that will seek investors to put up a minimum of $500,000 for shares to be sold in a private placement.

Yang, the former chairman of Brilliance China Automotive Holdings Ltd, said he might return to China on business related to the project. He didn't elaborate. Yang fled to the US after the government accused him of economic crimes.
http://www.chinadaily.com.cn/bizchina/2009-11/24/content_9028485.htm

Guys we'd better not talk about India in the Chinese forum to avoid confrontation and lengthy lectures from some people.

China 2009 Gold Demand, Output May Gain to Records (Update1)

Nov. 30 (Bloomberg) -- China, the world’s largest gold producer, may break records for both demand and output this year as jewelry consumption soars and miners expand production after prices reached all-time highs, the China Gold Association said.

Gold demand may be more than 450 metric tons compared with 395.6 tons in 2008, and output may climb to 310 tons, compared with 282 tons a year earlier, Zhang Yongtao, deputy secretary- general of the association, said at a conference in Kunming yesterday. China’s gold production increased by an average 9.5 percent in the past eight years, he said.

China overtook South Africa to become the world’s largest producer in 2007 and the World Gold Council said in July that the nation may pass India as the biggest consumer. Bullion touched a record of $1,195.13 an ounce Nov. 26 as a weaker dollar drove demand for precious metals as an alternative asset.

“China is likely to become the number-one supplier and consumer of gold this year,” said Rozanna Wozniak, investment research manager at the World Gold Council. Global jewelry demand remained weak in the third quarter, with China being the exception, according to slides provided by the council.

Bullion, up 33 percent this year, is set for a ninth annual gain as central banks, pension funds and individual buyers seek to protect their assets from potential currency debasement and inflation. Gold may climb to $1,500 an ounce as the dollar falls amid low interest rates, Kenneth Tropin, chairman of Graham Capital Management, told Barron’s in its Nov. 30 issue.

Inflation Risk

“The inflation concern this year has boosted the Chinese consumer demand for things like property, autos and gold,” Zhou Shijian, professor at Tsinghua University, said yesterday from Kunming, capital of the southern Yunnan province.

Unprecedented lending by Chinese banks and a benchmark one- year rate at a five-year low of 5.31 percent have helped to fuel the nation’s economic rebound this year. China may need to rein in credit growth to tame inflationary pressures and keep asset bubbles from emerging as growth accelerates, the Organization for Economic Cooperation and Development said Nov. 19.

“Certainly, the momentum in the Chinese economy will continue and that’s probably supportive of the underlying consumption of gold. I think that will continue,” said David Barclay, commodity strategist with Standard Chartered Bank in Hong Kong.

Jewelry sales in China will climb at a “double-digit” pace this year as record household savings fuel demand for investments and wedding gifts, Hong Kong Resources Holdings Ltd. Chairman Kennedy Wong said Oct. 23. Middle-class buyers in China, who have only just started to purchase gold as an investment product, drove a 16 percent gain in gold and silver jewelry sales in the first nine months, said Wong, whose company has 219 jewelry stores in mainland China.

Price Falls

Gold for immediate delivery declined 0.1 percent to $1,176.38 an ounce at 3:41 p.m. in Shanghai on speculation that some investors locked-in gains from a rally to a record last week, as news of Dubai World’s plan to delay loan payments rattled global markets.

Bullion found support last week from International Monetary Fund sales. Sri Lanka bought 10 metric tons from the IMF for about $375 million, following India and Mauritius, the IMF said. China is “quite a likely” buyer in coming weeks, Ben Westmore, an analyst with National Australia Bank, has said.

“From the Chinese point of view, the percentage of gold in its reserves is extremely low to the extent that you would expect the total reserves to increase just to maintain a constant proportion,” the World Gold Council’s Wozniak said. “In terms of gold, it would imply that they need to keep buying.”

Reserve Buying

China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar, the China Youth Daily said today, citing Ji Xiaonan, head of the supervisory committee at the state-owned Assets Supervision and Administration Commission.

“We recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years,” the paper quoted Ji as saying. China increased its gold reserves by 76 percent to 1,054 tons since 2003, the official Xinhua News Agency reported in April.

Dubai World’s possible default may give China an opportunity to invest its foreign currency reserves in the metal and oil, Ji said in a separate report by the Economic Information Daily.

Shares of Chinese mining companies have jumped this year with Zijin Mining Group Co., the nation’s largest gold producer, more than doubling, outpacing a 70 percent gain in the benchmark Shanghai Composite Index

“Record prices boosted profitability of Chinese miners, giving them incentive to expand production,” the China Gold Association’s Zhang said yesterday in a speech.

http://www.bloomberg.com/apps/news?pid=20601089&sid=a6NPaKwHGXnc

10,000 tons? With current gold price at US$1182 per gram, that equals to more than US$ 11 trillion!?

^^ Well that would take a while ,currently 32 grams is around 1,100 usd. or 1 gram of gold is 34.5 USD or 10,000 tonnes would be 345 billion USD.

^I see. My mistake. I thought the current price is for 1 gram of gold. Turns out 32 grams. 345 billion is really possibility, then!

Protectionism, yuan pressure 'unfair': Wen

2009-12-01

Premier Wen Jiabao Monday rejected "unfair" calls from European countries for faster reform of China's currency policies, despite lobbying from EU financial chiefs at the weekend.

"Some countries demand the yuan's appreciation while practicing various trade protectionism against China. It's unfair and actually limits China's development," Wen told reporters in Nanjing, Jiangsu province.

European Commission President Jose Manuel Barroso and Swedish Prime Minister Fredrik Reinfeldt, whose country holds the rotating EU presidency, were also at the press conference.

Wen's unusually direct response followed a one-and -a-half hour summit between China and the EU, which has 27 member-nations. The summit ended with five agreements mainly on energy and environmental cooperation.

But it also ended without a breakthrough on issues that have brought stalemate between the sides, such as trade disputes and arms embargoes.

Wen said China will keep the yuan basically stable and carry out currency reform at its own, gradual pace.

A stable yuan is not only good for the Chinese economy but the world, Wen said.

The meeting took place against the backdrop of concern about the rising euro and the possibility it might derail the recovery in Europe, which imports heavily from China.

The yuan began gaining against major currencies after a set of exchange rate reforms were introduced in July 2005. After rising nearly 20 percent against the US dollar, it hovered around 6.83 to the US dollar for about a year. In the past month or so, the euro has risen to a 15-month high.

Euro Group President and Luxembourg Prime Minister Jean-Claude Juncker joined other European leaders in lobbying China's senior officials.

The Chinese officials explained that it was difficult to make a case for "immediate renminbi appreciation" in a country where 40 million people live on less than $1 a day.

The failure of the EU appeal was expected because Europe was only thinking about itself, claimed Wu Baiyi, a European studies expert at the Chinese Academy of Social Sciences.

Zhao Junjie, Wu's colleague, said that while China is not able to quickly change its currency policy, Beijing had made efforts in the past year to fill the EU trade gap.

"Actually, some of the goods bought by the dozen purchasing groups that China sent to the EU during the past year were bought only for the sake of the EU," he said. "But the EU still wants more."

Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong, told Bloomberg: "China will only adjust on its own terms and in its own time. It's decided that now is not the time to do that."

Despite lingering disputes, including trade protectionism and the EU's ban on the transfer of technology to China, Wen Monday raised expectations for improved relations with Beijing's largest trading partner.

"China and Europe walking together hand-in-hand will make the steps of humankind more steady, and that best illustrates the strategic significance of our ties," said Wen.

Barroso and other EU leaders Monday also applauded fresh Chinese commitments on countering climate change.

Stanley Crossick, founding chairman of the European Policy Centre, said Europe will need to commit to lifting its arms embargo against China.

"Beijing is right that listing China among a handful of embargoed pariah states is totally inconsistent with the treatment of a strategic partner," he said.

Crossick suggested that EU officials be trained in contemporary China and taught Mandarin.

Wen opened the door to better understanding Monday, announcing that 2011 will be the year for China-EU youth communication and the establishment of other youth and cultural exchange mechanisms.

http://www.chinadaily.com.cn/china/2009-12/01/content_9081886.htm

Rural home appliance sales top 50b yuan on subsidy

2009-11-20

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091120/002170196e1c0c709f1436.jpg


China's rural home appliance subsidy program has boosted home appliance sales to 50.84 billion yuan ($7.45 billion) during the first 10 months of this year, according to statistics released by the Ministry of Commerce (MOFCOM).

A total of 27.88 million units of home appliances have been sold during the period, as registered on jdxx.zhs.mofcom.gov.cn, a MOFCOM-affiliated website that monitors the program.

Among the nine kinds of home appliances selected in the program, sales of refrigerators topped others to reach 13.67 million units, generating 27.92 billion yuan, according to statistics from the website. Sales of color TV sets, air-conditioners, and washing machines came after, reaching 8.29 billion yuan, 6.45 billion yuan and 3.75 billion yuan respectively.

Of the 348 companies participating in the program, 17 reported sales more than 1 billion yuan, 14 companies failed to sell any of their products and another 17 sold fewer than 10 units, according to the website.

As of Nov 15, 80 percent of home appliance buyers got the subsidy, according to Zeng Jian'an, director of the economic development sector of the Ministry of Finance (MOF).

After nine months' implementation, the MOF and MOFCOM fixed flaws in the program by eliminating price caps on the products, simplifying subsidy procedures and allowing local governments to expand product categories.

The home appliance and electronics industry accounts for 10 percent of China's gross domestic products, and 35 percent of China's total exports volume.

The rural home appliance subsidy program was launched nationwide by the MOFCOM and the MOF in February this year, at a time when home appliance makers were reeling from the financial crisis.

The program offers subsidies to rural consumers on purchase of refrigerators, color TV sets, mobile phones, washing machines, computers, air-conditioners, water heaters, micro-wave ovens, and electromagnetic ovens.

http://www.chinadaily.com.cn/bizchina/2009-11/20/content_9046876.htm

China's Huawei Challenges European Rivals on Quality

NOVEMBER 29, 2009

STOCKHOLM—Huawei Technologies Co.'s challenge to European rivals has largely focused on its pricing advantage. But industry watchers say the Chinese network-equipment vendor, which last week won a contract from Belgian telecommunications provider Belgacom SA, now has another key selling point: the quality of its technology.

As the telecom industry emerges from the global economic slump, European telecommunication-gear companies—global market leader Telefon AB L.M. Ericsson; Nokia Siemens Networks, a joint venture between Finland's Nokia Corp. and Germany's Siemens AG; and Paris-based Alcatel-Lucent SA—are likely to face increased pressure from world No. 2 Huawei in their own backyard.

Huawei, which like smaller peer ZTE Corp. is based in the southern Chinese city of Shenzhen, was founded 1988, and revenue and earnings have risen steadily.

Its sales increased to $18.33 billion last year, the latest figure available, from $5.98 billion in 2005, while profit rose to $1.15 billion from $681 million.

While European vendors have, to some extent, been able to keep these low-cost Chinese rivals at bay through superior equipment, Huawei is growing quickly both because it offers lower prices than most rivals and because the quality of its equipment is getting better, said analyst Scott Siegler at research firm Dell'Oro, based in Redwood, Calif. "When we talk to service providers that use Huawei's equipment, we have been told that it is excellent technology, he said."

Huawei's share of the global infrastructure market almost doubled in revenue terms to 20.1% from 10.9% in the third quarter from a year earlier, leaving behind Nokia Siemens and Alcatel-Lucent, according to Dell'Oro.

In the same period, Ericsson's market share remained largely flat at 31.6%. Nokia Siemens's share of the market fell to 19.4% from 23.7%, and Alcatel-Lucent's, to 13.1% from 14.3%. ZTE remained the fifth-largest vendor, but its market share rose to 6.8% from 4.2%.

It is in Europe where the battle is really heating up. Norway's largest telecom operator, Telenor ASA, this month selected Huawei to supply its new Norwegian wireless network, replacing gear supplied by Ericsson and Nokia Siemens.

The six-year contract, which includes services and maintenance, was handed to Huawei on the basis of several criteria, including price and technical specifications, Telenor Norway Chief Executive Ragnar Karhus said.

The quality of Huawei's equipment has improved and the company is now "completely in line" with the European vendors in terms of technology and services, Mr. Karhus said.

Last week, Huawei won another European deal, to upgrade Belgacom's radio-access networks under a long-term agreement. Belgacom is Belgium's largest telecommunications operator.

Telecom operators typically sign contracts with equipment vendors running for several quarters or even years, and this could slow the entry of new vendors to some extent.

Still, operators across Europe are expected from next year onward to gradually introduce equipment based around a fourth-generation standard known as Long Term Evolution. This should give the Chinese vendors another opportunity.

"We expect the transition to 4G will allow Huawei to gain momentum in Europe," Goldman Sachs said in a recent note to investors. "Clearly there are rising competitive risks in Western Europe."

That risk was spelled out clearly by Nokia Chief Financial Officer Rick Simonson, who said recently there is increasing price competition "primarily from the Chinese competitors ZTE and Huawei."

Telenor's Mr. Karhus said Huawei supplies particularly effective multibase stations, which support several transmission frequencies and technical standards in the same box, increasing operators' flexibility.

Nokia Siemens in October posted a 21% drop in third-quarter revenue from a year earlier and said it will lose more market share this year than expected, even as it gave a more positive outlook for the overall market.

As Nokia Siemens is consolidated in Nokia's balance sheet, it has a significant impact on the handset maker's financial performance. Nokia reported a worse-than-expected third-quarter loss after it booked a €908 million ($1.36 billion) goodwill impairment on the joint venture because of "challenging competitive factors and market conditions" in the network-infrastructure business.

Huawei has so far had much less success in overseas regions outside Europe, including in the big U.S. and Japanese markets. Last year, the Americas contributed only 12% of the company's contract sales, compared with 47% from Asia Pacific and 41% from Europe, Middle East and Africa, according to Huawei spokesman Ross Gan.

Due in part to political sensitivity, it has been difficult for Huawei to gain a foothold in North America and Japan, the world's third-largest telecom-equipment market, after the U.S. and China, said analyst Tina Tian at research firm Gartner Inc.

The U.S. government last year blocked Huawei from buying U.S.-based networking-equipment company 3Com Corp. because it had government contracts to provide security software.

Still, Huawei's Mr. Gan said the company expects business momentum to continue in North America and Japan, adding that its main competitive strength is still to provide services at a lower total cost of ownership.

In the U.S., it provides telecom equipment and services to Cox Communications Corp. and Clearwire Corp.

Robert Fox, chief branding officer of Huawei's branding division, said in a recent interview that next year it hopes to add 600 employees to its 900 existing staff in North America. Globally, it has more than 87,500 workers.

Despite its rapid growth, it will still take some time before Huawei approaches the position of market leader Ericsson, which has expanded its presence in North America through the acquisition of Nortel Networks Corp. assets and has won a number of large service contracts with operators including U.S.-based Sprint Nextel Corp.

Ericsson and Alcatel-Lucent earlier this year also won a major contract to supply Verizon Wireless with its fourth-generation wireless network. Vodafone Group PLC has a minority stake in Verizon Wireless, which is majority owned by Verizon Communications Inc.

http://online.wsj.com/article/SB10001424052748703499404574561370246441540.html?mod=WSJ_hpp_sections_business

China to Increase Its Gold Reserves

Yesterday, China's Economic Information Daily published remarks by a senior Chinese official indicating that Dubai's debt crisis could be a good opportunity for China to purchase gold and oil assets. Ji Xiaonan (Chairman of the Supervisory Committee overseeing large state-owned enterprises) was quoted as saying that the Dubai debt crisis "could give China an opportunity to put some of its foreign exchange reserves into gold or oil."

China is relatively well insulated from the Dubai crisis, as there are no reports of Chinese banks with debt exposure to Dubai. And while there are a few Chinese real estate and construction firms with limited exposure to projects in the Emirates, nothing seems to be grave. Yet Dubai's issues portend the perception of a looming dollar crisis in the West.

The graph below highlights China's net international investment position (in 2008).

http://static.seekingalpha.com/uploads/2009/12/1/462107-12596610200145-Erik-Bethel_origin.jpg

What used to be less than US$ 2 trillion in Fx reserves (above) is now US$2.27 trillion. Much of this is parked in U.S. treasuries. Over the past year, Chinese officials have been pressing to move more of the country’s reserves into hard assets and commodities such as gold and oil.

Yesterday, we picked up the China Youth Daily newspaper in which Ji Xiaonan claimed that "China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar. We recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years."

For those readers that are unfamiliar with the gold market, it bears mentioning that China is the world’s largest gold producer. And according to the China Gold Association, the country may soon break records in supply and demand for gold. In 2007, China overtook South Africa to become the world’s largest producer. And this past July, the World Gold Council said China could surpass India as the world's largest consumer as well.

http://static.seekingalpha.com/uploads/2009/12/1/462107-125966123968626-Erik-Bethel.jpg

Although China recently raised its national gold holdings, it has done so by buying domestically mined gold. China has not shown any interest (yet) in buying from international gold markets. Perhaps as a result of this, shares of Chinese gold mining companies have rocketed this year. Shanghai and Hong Kong-listed shares of companies like Zijin, Shandong Gold and others are up 3x-4x this year alone. But the main factor at play is fear of a U.S. dollar devaluation.

http://static.seekingalpha.com/uploads/2009/12/1/462107-125966133748486-Erik-Bethel.jpg

Source: Capital IQ

What are the major take-aways?

* People in China are seriously starting to take notice of the fragility of the U.S. dollar and are loading up on commodities.
* Chinese retail investors are also starting to take notice. As an example, there are "gold retail stores" popping up throughout major cities where individuals can buy mini gold bullion. There's even a China Gold Store located in Beijing Airport's new Terminal 3.
* Another example is that while it was illegal to buy gold two years ago, Chinese citizens can now go to the bank and purchase "paper gold" certificates. Paper gold is basically the Chinese equivalent of an ETF and is supposedly backed by bullion held at the banks.
* Chinese gold mining stocks are red hot and up 2-4x since last year.
* China has US$2 trillion and is going to start deploying it in overseas mining assets.

For investors, what is the play? Among others, we think there are good opportunities in Toronto listed mining companies, especially those with assets in Latin America (Peru, Chile, Mexico, etc). Why Latin America? Because since last November when the Chinese Central Government put out a Latin America Policy Paper, Chinese firms are tacitly encouraged to go to Latin America. Countries like Peru, Chile and Mexico have stable governments, ample supplies of gold, and favorable mining laws. And a good number of firms with assets in these countries trade in Toronto. We see many of them getting acquired by Chinese mining companies.

http://seekingalpha.com/article/175911-china-to-increase-its-gold-reserves

Gold May Hit $2600 If China Increases its Holdings

Gold continues making new record highs on a regular basis as demand increases among governments.

According to newspaper reports, China’s gold demand might be more than 450 tonnes this year, up from 395,6 tonnes last year, and the country will most likely be a buyer in the coming weeks. The yellow metal has finally surpassed the $1200/oz mark as investors continue using the yellow metal as a hedge against the weakening dollar and against concerns that central banks will not remove QE in time. Whether the rise of gold is symptomatic of a greenback bear market versus its innate bullishness, that’s up for debate. In the meantime, the precious metal keeps making new highs. And it may go much, much higher. According to Gluskin Sheff Chief Economist David Rosenberg, gold could hit $2623/ per troy oz.

From Breakfast With Dave:

“Gold just capped off its best month in a year — up 14% in November and 34% so far in 2009. Not even the S&P 500 can compete with that. Helping drive the latest gains was the news out of the China Gold Association that the country’s gold demand is on pace this year to exceed 450 metric tonnes, a 14% increase over the 395.6 tonnes in 2008. (In contrast to India, jewelry sales are up double-digits in China so far this year.) By way of comparison, China, which recently surpassed South Africa as the world’s largest producer, is on its way to 310 tons of newly mined output this year, or more than 30% below its level of demand.

It’s not just the middle-class in China that is starting to buy gold, but the central bank, which has very deep pockets, is going to do likewise. We just came across a Bloomberg News article quoting an official from the state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) as saying “we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” China’s reserves, after a 76% buildup since 2003, currently stand at 1,054 tons, so we are talking here about the prospect of some pretty heaving buying in coming years.

If China were to lift their gold reserves to 5,000 tonnes, which is equivalent to about two years of global production, that shift in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based on our models. If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park.

Make no mistake, we are gold bulls. Central banks have deep pockets and production of gold is stagnant so the demand-supply backdrop for bullion is bullish. At the same time, we have to pay respect for market positioning over the near-term. The market for precious metals is overextended right now after the parabolic move of the past two months. The net speculative long position has swelled to a record 273,552 contracts (100 ounces each) on the COMEX. Open interest has never been higher, at 693,661 contracts. So this is one crowded trade — as is the short-trade on the USD against all the major currencies, especially the commodity-based units.

So, we could get a meaningful gold correction at any time, and we are talking about a correction in what is still a secular bull market — the 200-day moving average is $970/oz, which means we could get as much as a 20% pullback and no fundamental trendline would be violated. We remain long-term gold bulls, and our commentary remains fundamentally bullish, but anything that could spark a countertrend rally in the U.S. dollar, which is our principal near-term concern, would put gold at a much better price point for investors than the peak we are at today.”

http://wallstreetpit.com/12567-gold-may-hit-2600-if-china-increases-its-holdings

Eco-economic zone to be set up in Shandong
An "efficient eco-economic zone" will be built near the Yellow River Delta, the last untapped big river delta in China, hexun.com reported.

The State Council recently announced the approval of the "Development Plan of an Efficient Eco-Economic Zone at Yellow River Delta" proposed by the National Development and Reform Commission (NDRC).

The "efficient eco-economic zone" will be modeled on an ecology-friendly and intensive mold encouraging a circular economic and industrial system and green factories which discharge few or zero waste, according to reports.

The zone will cover 26,500 square meters and 19 cities and towns in Shandong province, east China - one sixth of the land area of Shandong.

"It will provide a good chance for Shandong's economy to take off," an unnamed official said.

It's estimated that the region's GDP will reach 930 billion yuan ($136 billion) by 2015 and 1.5 trillion yuan ($ 219 billion) by 2020, the report said.
http://www.chinadaily.com.cn/china/2009-12/02/content_9104033.htm

China approves firm's bid for Australian Felix
(Xinhua)
Updated: 2009-12-06 14:34

JINAN: China's Yanzhou Coal Mining Co. Ltd. has got an official approval to take over Australian coal mining company Felix Resources, according to the company's bulletin on the Hong Kong Stock Exchange on Friday.

The deal involving A$3.3 billion (US$3 billion) in a contractual agreement reached by the two companies in August would be the largest of its kind between Chinese and Australian firms.

Yanzhou Coal said in the bulletin that the National Commission of Development and Reform has approved the company's bid to take over 100 percent of the stake in Felix.

The company said that after the takeover of Felix, it will obtain an approved coal reserve of 1.5 billion tons in Australia. Its annual coal output in Australia is expected to exceed 10 million tons, accounting for one third of the company's production in China.

Yanzhou Coal, headquartered in east China's Shandong Province, is listed on stock exchanges in Hong Kong, New York and Shanghai. It owns Austar Coal Mine in Australia, and mines in north China's Shanxi Province and Shandong Province, according to information on the company's website.

Bank lending to be cut back next year

2009-12-08

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091208/002170196e1c0c87f5f053.jpg
A worker cleans a Bank of China branch in Guangzhou. Credit growth is supposed to be tightened moderately next year

Chinese banks are set to cut back lending in 2010 but the number and size of loans will still be instrumental in supporting the nation's economic growth and industrial restructuring drive, senior experts and industry insiders said.
Despite the government's pledge to maintain a moderately loose monetary policy next year, the credit flood this year could not be repeated, a top executive at Bank of China told China Daily on condition of anonymity.

"The regulator has ordered banks to control the pace of lending next year, and credit growth is likely to be maintained at about an annualized 17 percent," he said.

During the three-day Central Economic Work Conference, the annual gathering to lay out economic policy for the coming year, that ended yesterday, the government promised to "maintain the continuity and stability of the economic policy".

Experts said it did not indicate a continued galloping credit expansion in 2010.

"Credit growth is supposed to be tightened moderately next year, but it will not derail the nation from the road of economic restructuring," said Li Jianwei, a senior economist at the Development Research Center, a think tank affiliated to the State Council.

Research conducted by his team said credit growth of some 17 percent and 20 percent would be sufficient to support the economy growing beyond 9 percent next year.

In response to a government call to spur domestic consumer demand and restructure the industrial landscape, Bank of China, the nation's third largest lender, said it would adjust its loan portfolio to support the nation's economic restructuring drive and enhance personal financing services.

"The bank will continue to fund the key projects on the top of the government's agenda, such as energy saving and low-cost housing projects, as well as give loans to small and medium-sized companies," it said.

"As for those projects that do not comply with the country's industrial and environmental policy, the bank will cut lending and seek an exit from these projects," the bank said in a statement on its website.

Chinese banks had advanced 8.9 trillion yuan in new loans as of the end of October with an annualized loan expansion rate of above 30 percent in an effort to shore up the slowing economy.

The total new loans are likely to hit 10 trillion yuan this year, nearly tripling the amount extended by Chinese banks in 2008.

http://www.chinadaily.com.cn/bizchina/2009-12/08/content_9135308.htm

China's wealth surge tops in Asia

The Chinese mainland saw 70 percent of its affluent people reporting a rise in their wealth over the past six months, topping the level of all other Asian countries, accoding to a survey by HSBC and the marketing research company Nielsen.

Among respondents on the Chinese mainland, over a third said their net worth grew by up to 10 percent, 18 percent said wealth grew between 11-24 percent, 12 percent between 25-50 percent and 3 percent by over 50 percent.

In spite of the rapid rise in wealth, the survey found that affluent mainlanders were among the biggest savers in Asia. They allocate 28 percent of their monthly incomes to savings, insurance or investments, after Singapore (33%) and Taiwan (32%).

Forty percent of income was for daily and recurrent expenses and 32 percent for dining, entertainment, clothing, travel and electronics.

When asked about changes they expect to make to their investments in the next six months, half of the mainland respondents plan to increase investments while 10 percent said they would reduce investments. Over 71 percent said they plan to invest in stocks over the next half a year.

"The affluent are fast becoming savvy about protecting, growing, and managing their newly created wealth, providing momentum towards a more robust and holistic financial planning approach in China," said Bonnie Qiu, head of personal financial services at HSBC Bank (China) Co Ltd.

The survey was conducted between September and October 2009 in the eight Asian-Pacific markets of Australia, India, Indonesia, Japan, the Chinese mainland, Malaysia, Singapore and Taiwan. On the Chinese mainland, the survey targeted rich individuals between 30 and 55 years old with monthly personal incomes of more than 12,000 yuan or total liquid assets of 500,000 yuan.

http://www.chinadaily.cn/bizchina/2009-12/08/content_9141022.htm

Survey indicates better job prospect

2009-12-09

Wu Liwei, a postgraduate major in journalism from Renmin University of China, has been trying to find a job for some time. And though the 24-year-old is yet to get a satisfactory offer, Wu said yesterday that she still felt lucky and hopeful.

"Next year looks better than even this year," Wu said. "A friend who majored in the same subject last year said many big companies had stopped recruiting then."

But this year, staff from a lot more companies, including big names, visited her university for campus recruitment. "I have attended about 10 such recruitment fairs, and many of my classmates have got offers. I am waiting for the right one," she said.

Most university graduates like Wu feel the same. And it's true that China's recruitment prospects are better now than last year or early this year.

Buoyed up by the ongoing economic recovery and domestic consumption, the willingness of potential employers to hire people in 2010 will be stronger than this year, with companies in second-tier cities showing greater interest, a Manpower survey released yesterday said.

According to the survey, conducted by the world's leading employment service provider, 19 percent of the potential employers said they would hire people in the first quarter of next year - 2 percentage points higher than in the fourth quarter of 2008, and also the highest since late last year.

Those who aim to cease recruitment in the next quarter add up to only 5 percent of the total, 1 percentage point lower than in the previous quarter and the lowest in a year.

Manpower has done such quarterly recruitment studies in China for five years. This time, it interviewed 4,317 enterprises from home and abroad for the survey.

"Actually, the recovery helped improve China's labor market from the second quarter of this year," said Danny Yuan, managing director for Manpower China. "Now, employers are more confident of hiring people next year,"

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20091209/00221917f7600c8923d440.jpg


Xu Zhixue, senior consultant with Beijing-based Zuoyou Consulting Group, a leading local human resource service provider, corroborated Yuan.

Zuoyou's clients are usually big State-owned enterprises (SOEs) in telecom, aerospace and mining sectors, such as Beijing Mobile. "They (SOEs) were worried over the economic trend and most of them had scaled back their recruitment," Xu said.

"But since the last quarter, they have recovered their confidence. Now, we are much busier than before," he said.

China's economy began showing strong signals of recovery in the third quarter of this year, with GDP growth reaching 8.9 percent. Decline in exports began easing off, too, and the sector is expected to have taken to the growth trajectory in late 2009.

According to Manpower, employers in the finance, insurance and real estate sectors could be the biggest recruiters next year, with the mining and construction industries registering the fastest growth in the past quarter.

The survey also shows employers in cities like Chongqing, Xi'an, Qingdao, Wuhan, and Suzhou expect to see a stronger hiring environment than their counterparts in major cities.

http://www.chinadaily.com.cn/photo/2009-12/09/content_9149482_2.htm

China to further boost domestic consumption in 2010: State Council

2009-12-09

BEIJING: China's State Council said Wednesday that the government will continue to tap into the domestic market for a stable and relatively rapid economic growth next year.

Policies to boost consumption will be further strengthened and most of the current policies will be continued, according to an executive meeting of the State Council, chaired by Premier Wen Jiabao.

China will continue to expand domestic consumption next year and especially to highlight consumption's role in boosting economic growth, as China's economy will still face many challenges next year, according to the meeting.

Policies to subsidize rural households to buy electric appliances will be continued next year and policies to subsidize rural households to buy automobiles will be prolonged to the end of next year.

After home appliance replacement ended trial operation in May next year, the policies will be fully carried out and further promoted. Measures to subsidize agricultural equipment will be continued.

Policies to reduce purchase tax on passenger cars will be continued but adjusted to 7.5 percent for models with engine displacements of less than 1.6 liters.

The central government has implemented a series of policies in improving people's living standards and promoting consumption since the fourth quarter in 2008 to fight the global financial crisis.

The policies have effectively tapped consumption potentials and boosted China's economic recovery, according to the meeting.

The meeting also issued a guideline on trial operation of social insurance fund budget to put social insurance fund under government budget management.

http://www.chinadaily.com.cn/china/2009-12/09/content_9150751.htm

China to raise people's earnings

2009-12-10

BEIJING -- The Chinese government is to raise the earnings of the middle and low income groups to boost consumer spending, said a senior economic planning official here Wednesday.

Zhang Ping, minister in charge of the National Development and Reform Commission (NDRC), the country's top economic planning agency, made the remarks at a national meeting on development and reform.

The government will step up research on the optimization of the income distribution mechanism to improve residents' spending capability, Zhang told the meeting.

The government will also raise the pensions for enterprise retirees and improve treatment for those who enjoy special care, Zhang said, adding the government will continue to make improving people's livelihood a priority in 2010.

He said the government will exert more efforts to well address problems that have close bearing on public interests and ensure that all public members share the fruits of the development and reform, so as to safeguard social harmony and stability.

He noted more affordable housing will be offered to middle and low income families, and efforts will be stepped up to curb speculation in housing transaction.

The reconstruction of urban shantytowns, obsolete industrial and mining districts, as well as forestry regions will continue. Nomads will be encouraged to settle down, he said.

Zhang also said the government-led investment should play a bigger role in job creation. The basic social pension system should be completed to ensure social security.

Participants to the annual Central Economic Work Conference which concluded Monday agreed to fully implement and continuously improve the stimulus package and policies to cope with global financial crisis and boost development, and strengthen the role of domestic demand, especially consumption demand, in driving economic growth.

http://www.chinadaily.com.cn/2009-12/10/content_9150946.htm

Income-fueled growth

2009-12-09

Efforts to boost income growth are certainly needed as China tries hard to make domestic consumption a new growth engine. But no less important are redistribution efforts to enhance the purchasing power of the many low-income families.

The decision that Chinese authorities made at the recent Central Economic Work Conference to strengthen income redistribution next year has obviously struck a chord in the hearts of the public.

Even the worst global recession in several decades has not stopped the continuous income growth that Chinese people have been enjoying over the past three decades.

Official statistics show that real urban household disposable income expanded by 10.5 percent in the first three quarters of this year while real rural household cash income rose 8.5 percent during the period.

Such income growth must have contributed considerably to the country's broad-based pickup in consumer spending. Retail sales increased by 17 percent in real terms, pushing up the country's gross domestic product growth by 4 percentage points.

However, in spite of the greater role domestic consumption played in stoking economic growth, consumer-led demand is still nowhere near enough to make up for declining exports this year, not to mention picking up the potential slack if the country reduces its dependence on investment for growth.

Since everyone knows that one cannot make bricks without straw, it is easy for Chinese policymakers to reach a consensus on the need to increase household incomes.

But the country's fairly high savings ratio indicates that boosting domestic consumption is not all about keeping raising incomes.

In addition to an inadequate social welfare net that has long depressed consumption, the widening income gap has emerged as an increasingly big consumption restraint.

The meeting, which is held once a year in Beijing to set the tone for economic development for the next year, emphasized that a good balance should be kept in maintaining a relatively fast and stable economic growth, economic restructuring and dealing with predicted inflation next year.

The message from top Chinese officials is encouraging. They have not only recognized the urgency of income redistribution, but also decided to address the problem.

To lower the country's savings ratio to help ease global imbalances, policymakers should take measures to distribute more corporate earnings, which are the main driver of the nation's increased savings, to individuals.

To narrow the income gap, the country may need to fine tune its tax and fiscal policies in favor of low-income households.

The government is yet to give details on how it plans to encourage consumer-led growth via income redistribution. Whatever they are, the earlier they come, the better they will serve the people and the economy.

http://www.chinadaily.com.cn/opinion/2009-12/09/content_9143918.htm

Wage rises on way to lift spending
THE Chinese government would raise the earnings of middle- and low-income groups to boost consumer spending, a senior economic planning official said in Beijing yesterday.

Zhang Ping, minister in charge of the National Development and Reform Commission, the top economic planning agency, made the remarks at a national meeting on development and reform.

The government would step up research on and optimization of the income distribution mechanism to improve residents' spending cvapability, Zhang told the meeting.

The government would also raise pensions for enterprise retirees and improve treatment for those in special care, Zhang said.

He said the government would exert more effort to address problems that had close bearing on public interests and ensure that all people shared the fruits of the development and reform.

Participants at the annual Central Economic Work Conference, which concluded on Monday, agreed to fully implement and improve the fiscal stimulus package and policies to cope with the global financial crisis and boost development, and strengthen domestic demand, especially in consumption, to drive economic growth.

http://www.shanghaidaily.com/sp/article/2009/200912/20091210/article_422229.htm#ixzz0ZGeYXrTn

Rich getting richer, but poor becoming resentful

2009-12-10

SHANGHAI: Amid a widening wealth gap between rich and poor, a new survey has found that 96 percent of the public said they feel resentful toward the rich.

The latest survey, released by the Zhejiang Academy of Social Sciences, also shows that 70 percent of 1,159 respondents said they feel "a big gap" between the rich and poor in China now, with more than half of the people saying the gap will become bigger.

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20091210/00221917f7600c8a76dd14.jpg
The survey, launched in the first half of the year, was based on questionnaires handed out to 10 social groups including public servants, entrepreneurs and farmers.

"I believe that the wealth gap is a much more serious problem nationwide," said Qiu Liping, a professor of social stratification at Shanghai University.

"Our society is in dire need of a platform for dialogue between the rich and poor," he said. Such a platform, he said, will minimize the resentment against the rich.

"People do not always hate the rich. People hate those who are immorally rich," he said.

But most of time, people do not make that distinction. Cherry Chang, an editor of a luxury magazine in Shanghai, said her car, a red Porsche, has been vandalized three times in the past two weeks.

Her friend's Lamborghini fared no better. "I think there are many people in this city who harbor a deep resentment against the rich," she said.

The wrath aimed at the wealthy has been a hot-button issue recently, and can go past vandalism to include kidnapping and even murder.

Yi Zhao, a civil servant from Guangdong province, admitted that he dislikes the rich.

"Most of them collect wealth at the expense of the poor. Take those real-estate manipulators for example. They control the property market aiming for a higher price and a considerable profit," he said.

"On the other hand, I simply can't accept the skyrocketing prices. Isn't it unfair to the majority who are unable to afford an apartment, even if we squeeze together the savings of three generations? "

However, Xiao Xiaowei, a 24-year-old self-employed from Wuhan, capital of Hubei province, said she actually respects the rich, especially billionaires.

"It's true that some of them get rich illegally or at the expense of the poor, but getting rich surely requires some other qualities, such as excellent interpersonal skills. They have the capabilities that others don't have," Xiao said.

Chang also said she worked hard to buy herself an apartment and a car. "If those people have the time to hate us and envy us, why don't they spend the time working, using diligence and intelligence?" asked Chang.

Zhang Qi, a 28-year-old professional in Beijing, said getting rich and making money are not just about working hard.

"I haven't thought much about making a lot of money. Life is hard for me - and I am privileged with a decent job. For those who are less privileged, life must be even harder," Zhang said.

http://www.chinadaily.com.cn/china/2009-12/10/content_9151067.htm

US companies find an oasis of profit in China

2009-12-10

Many US companies hit hard around the world by the global economic downturn have reported profits from their dealings in China, according to a survey by the American Chamber of Commerce in Shanghai.

The chamber's China Business Report 2009, which was released yesterday, shows most corporate members saw a growth in revenue and profit in China and the report ranked the nation a top investment destination for 2010.

"Many American companies are finding that their performance in China has outshone those in other markets," said J. Norwell Coquillard, chairman of AmCham Shanghai.

"This year's report offers businesspeople, policymakers and opinion leaders a valuable resource to better understand the China market, which is sure to play an even larger role in the world economy for years to come," Coquillard said.

More than 40 percent of respondents said the profit margins of their China operations in 2009 were better than their global averages. This was in stark contrast to the situation a decade ago, when 58 percent of US companies surveyed said their margins in China were narrower than in many other countries.

Most respondents were positive about doing business in China. More than 90 percent said they were "optimistic" or "slightly optimistic" about the five-year outlook. That compared to 81 percent in 2008.

Eighty-two percent of survey respondents expected even more revenue from China operations in 2010.

Some 74 percent ranked China one of their top-three investment priorities - among them, 64 percent planned to increase their investments in China in 2010.

Fifty-eight percent increased their investment in China this year.

Only 5 percent were planning to scale back on their investments in China.

The survey was based on the responses of 369 US companies with operations in China.

"China remains a recommendable investment spot for American companies, the majority of which are focused on competing in China's growing domestic market," said Brenda Foster, president of AmCham Shanghai.

Companies said they faced new challenges in 2009 that were mainly centered on sales and the retention of customers.

Competition from Chinese companies was also increasing, said the US firms.

One silver lining from the global financial crisis was the fact that it had become easier to recruit new talented individuals, said the report.

http://www.chinadaily.com.cn/bizchina/2009-12/10/content_9152031.htm

State reveals 1st steps to lift economy

2009-12-10


The State Council, the nation's top administrative authority, said the country will push to boost consumer spending in line with a strategy laid out at the recent Central Economic Work Conference.

The top cabinet will also raise the cost of second-hand house transactions in a move that analysts said is aimed at curbing speculative housing deals that have pushed up prices and created a lot of headaches among buyers.

Another key move was an increase to the purchase tax on small cars to 7.5 percent, from the current 5-percent level, effective until the end of next year.

At the end of last year, when the Chinese economy was mired in the global recession, China decided to exempt sales taxes on houses if they had been held for two years or more. Previously, the limit was five years.

Now the government has decided to resume the five-year sales tax exemption to curb speculative deals, said Dong Yuping, economist with the Chinese Academy of Social Sciences' Institute of Finance and Banking. The move can cut the cost of house transfers, ultimately benefiting the housing market.

"It is not aimed at dampening the whole sector," he said.

The Central Economic Work Conference, which concluded on Monday, said that the government encourages people to buy houses for their own use and increase the supply of ordinary and low-cost houses.

Yesterday, Xinhua reported that Zhang Ping, minister of the National Development and Reform Commission, said at the commission's annual work conference that China will curb speculative home purchases.

Speculation is a major factor behind soaring house prices, Dong said, adding that the move was expected and should have been carried out earlier.

By October, housing prices in China's 70 big and medium-sized cities had been on the rise for eight consecutive months compared to monthly prices from 2007. Many people, especially the young, have complained that houses have become unaffordable.

"The State Council meeting's decision will weaken the momentum of further price rises, although I'm not sure whether it will push down prices," Dong said.

The new vehicle tax policy, which applies to cars with an engine size of 1.6 liters or less, is a sign that the government may want to reduce subsidies for the rich who can afford cars due to the wide income gap between people in cities and the countryside, said Dong.

It is in line with the Central Economic Work Conference platform to improve the country's distribution of income, he said.

The new tax rate is still lower than the original 10 percent purchase tax, which was cut last year to encourage people to buy cars. Analysts said the latest change may slow white-hot car sales in China, the world's largest market. Sales of cars in the nation jumped 98 percent in November from a year earlier.

The cabinet meeting said it will also enhance the "cash for clunkers" plan, which was initiated last year to help boost spending.

The subsidy cap will be raised to 18,000 yuan ($2,640) from 5,000 yuan ($730) per car.

It will also continue to subsidize individual purchases of electric household appliances and agricultural machines and provide financial assistance to the unemployed.

http://www.chinadaily.com.cn/bizchina/2009-12/10/content_9152023.htm

Labor disputes skyrocket in Beijing

2009-12-10

About 80,000 workers had been involved in disputes with their employers by the end of November, double the number of last year, a senior official of the Beijing trade union said.

The city's arbitration committee has received more than 70,000 labor disputes cases this year, and many involved more than one employee.

There were 26,000 disputes during the same period in 2007 and 49,000 in 2008, said Zhang Hengshun, director of law department of Beijing municipal federation of trade union.

The most important reason behind the drastic increase is that arbitration has been free of charges since May 1, 2008, when the Law on Mediation and Arbitration of Labor Disputes took effect, Zhang said.

"The payment stopped some employees who wanted to apply for arbitration before the law took effect," Wang Fang, a lawyer from Beijing Zhicheng law firm.

Formerly, employees were charged 300 yuan for arbitration. Free arbitration has encouraged more employees to choose legal channels to resolve their labor disputes, Wang said.

But as the number of arbitration cases increases, so has the amount of time spent waiting for a result, Wang said.

She said that the legal action launched in October, would have to wait until August next year for a result.

The number of arbitration cases in Chaoyang, Haidian and Fengtai districts is more than other districts in Beijing.

Arbitration is the first step to resolve labor dispute and employees or employers can file lawsuits if they do not agree with the results.

Mediation is the best way to reduce the arbitration cases and shorten the waiting list, but the effect is not very good, Wang said, because some employers agree to mediation in order to exhaust employees rather than seeking a solution.

Labor dispute cases accepted and heard by Beijing courts increased almost twice on the number last year, a report released by the Beijing Second Intermediate People's Court said yesterday.

The court accepted and heard 4,506 labor dispute cases till Nov 10 this year, which is 180 percent what it was in 2008, it said.

About 50 percent of the cases were related to overtime rates and payment, the court said.

http://www.chinadaily.com.cn/metro/2009-12/10/content_9154121.htm

http://graphics8.nytimes.com/images/misc/nytlogo152x23.gif (http://www.nytimes.com/)

December 10, 2009

Recession Elsewhere, but It’s Booming in China

By KEITH BRADSHER (http://topics.nytimes.com/top/reference/timestopics/people/b/keith_bradsher/index.html?inline=nyt-per)



GUANGZHOU, China — For the first time, Chinese will buy more cars this year than Americans. Demand is so high that drivers put their names on long waiting lists for the most popular models.

“I’m disappointed, but what can I do?” asked Zhang Ge Lu, a 28-year-old interior designer. He came recently with two friends to a row of dealerships here in southeastern China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) to buy a black Toyota RAV4, only to be told that he would have to wait two months for delivery.

And it is not just cars. For more and more consumer goods, China is surpassing the United States as the world’s biggest market — from cars to refrigerators to washing machines, even desktop computers.

The Chinese market is “on full tilt — booming is an understatement these days,” said John Bonnell, the director of Asia vehicle forecasting at J.D. Power & Associates.
China is pulling ahead at this particular moment partly because Americans, debt-laden and worried about their jobs, are pulling back. After decades of gorging on consumption, Americans are saving. And the Chinese, whom economists thought were addicted to saving, are spending more.

Among China’s 1.3 billion people, rising incomes are finally making large numbers of Chinese prosperous enough to make big-ticket purchases.

The question is: will they keep spending? The Beijing government is increasing consumption with rebates, subsidies and heavy bank lending. Whether China can turn the spending spree into the seeds of a true consumer society matters not just to China, but to the world.

For years, the West has pushed China to increase domestic consumption and reduce its dependence on exports — that’s because its overdependence on exports has distorted global trade.

To keep its export machine humming, China kept its currency undervalued to make its goods more competitive in foreign markets. The county beggared its own citizens, keeping salaries and bank deposit interest rates artificially low to support exporters.

China’s trade surpluses and extensive intervention in currency markets have led it to amass $2.27 trillion in reserves, mainly in United States Treasuries, mortgage (http://topics.nytimes.com/your-money/loans/mortgages/index.html?inline=nyt-classifier)-backed securities and other dollar-denominated investments (http://topics.nytimes.com/your-money/investments/index.html?inline=nyt-classifier), helping to keep interest rates low and finance Americans’ borrowing. Chinese parsimony enabled American profligacy.

If the Chinese buy more and Americans save more, a more stable global economic exchange can take shape. In the meantime, China’s rapid consumption growth is good news for the whole world. For the first time, China, not the United States, is a locomotive helping to pull the global economy out of a slump. But China’s tiny appetite for American exports means that the main benefit has gone to commodity exporters and to businesses in China.

Automakers are on track to sell 12.8 million cars and light trucks in China this year, virtually all of them made in China (although many are foreign brands), compared with 10.3 million in the United States. Appliance manufacturers expect to sell 185 million refrigerators, washing machines and other pieces of kitchen and laundry equipment in China this year, compared with 137 million in the American market.

In desktop computers, China moved solidly ahead of the United States in the third quarter, buying 7.2 million compared with 6.6 million in the United States.
Retail sales are growing 17 percent a year in China after adjusting for inflation, almost twice as fast as the overall economy.

Americans have been cutting back on purchases of everything from shoes to furniture to jewelry. But Chinese households are crossing a series of income thresholds at which cars and other big-ticket purchases become affordable.

At the same time, Chinese banks are stepping up consumer lending. The proportion of car sales financed with loans (http://topics.nytimes.com/your-money/loans/index.html?inline=nyt-classifier) has doubled this year, to nearly 25 percent, although most Chinese still head for dealerships with bricks of 100-renminbi notes, each note worth about $14.62. Credit card spending rose 40 percent in the first nine months of the year compared with the same period last year, yet China still has just one credit card for every eight people, compared to two credit cards for each American man, woman and child.

While it is spreading creature comforts, China’s lending-based prosperity may also be sowing the seeds of future economic problems. China’s Banking Regulatory Commission recently told banks (http://topics.nytimes.com/your-money/investments/brokerage-and-bank-accounts/index.html?inline=nyt-classifier) to show restraint in lending for the rest of the year, fearful that some of this year’s loans could become bad debts in the next several years, as happened with the mortgage lending spree in the United States.

The regulator threatened to block banks’ overseas investments and branch openings unless they can demonstrate adequate capital to cover risks.

The size of China’s consumer market, notwithstanding its growth, will make it hard for China to rescue the world economy by itself. Total consumer spending in China is still less than a sixth of American consumer spending at current prices and exchange rates. That is mainly because China has relatively few restaurants, hotels and other service businesses, even as sales of manufactured goods have risen.

The average price tags on most Chinese products are much lower than in Western markets. For many products, including some in which China leads in the sheer number of goods, the total dollar value of sales in China is still smaller than in the United States.

The average new car sells for $17,000 in China compared with almost $30,000 in the United States, according to J.D. Power. This is because Chinese consumers buy more subcompacts and fewer sport utility vehicles. While the Chinese market is one-quarter larger in the number of cars sold, the American market is still about two-thirds larger in dollar terms.

Similarly, the United States market for household appliances is a third larger in dollars, even though the Chinese market is a third larger in the number of appliances. Cooking ranges in China are sold for countertop installation without a lot of other equipment, for example.

“You don’t have the cook-a-turkey-in-the-oven type of product in China, because we don’t have that kind of cooking,” said Philip S. Carmichael, the president of Asian operations at Haier, China’s biggest appliance manufacturer.

But in some sectors, Chinese buyers are already proving more lavish than Americans. The average flat-panel television sold in China is bigger than in the United States, according to AU Optronics of Taiwan, the world’s third-largest manufacturer of flat-panel televisions.

When car sales began surging early this year, many auto executives attributed the boom to government incentives. To stimulate the economy, the government has offered rebates for rural families to buy cars and household appliances, and has cut sales taxes on cars with small engines.

But the boom has broadened to categories that barely qualify for incentives.

S.U.V. sales rose 72 percent in October from a year earlier. At Nissan, sales of cars with larger engines that do not qualify for the sales tax reduction are growing even faster than sales of small-engine cars.

Auto sales jumped 42 percent in the first 11 months of this year compared with sales in the same period last year. And sales are still accelerating, soaring 96 percent in November compared with the same month a year ago. Auto sales in the United States plunged 37 percent last month on the same basis.

China’s consumers have the potential to buy even more in the years ahead. The savings rate is close to 40 percent — and will remain high unless and until Beijing creates a social safety net for things like health care or retirement (http://topics.nytimes.com/your-money/retirement/index.html?inline=nyt-classifier), which would encourage Chinese to spend more today.

And though annual incomes still average just $2,775 a person in cities and $840 in rural areas, Western economists predict the economy will grow almost 12 percent in each of the next two years and the renminbi is widely expected to appreciate someday, further increasing consumers’ buying power.

Hilda Wang contributed reporting.

Source (http://www.nytimes.com/2009/12/10/business/economy/10consume.html?adxnnl=1&ref=asia&adxnnlx=1260453781-9bKcnaxBeoT4Zd+Zeh7KNg)

China recovery gathers pace as export slump eases

By ELAINE KURTENBACH (AP) – 2 hours ago

SHANGHAI — The slump in China's exports eased in November as global demand improved while strong gains in industrial output and retail sales showed that the recovery in the world's third-bigggest economy is gathering momentum.

China's exports fell 1.2 percent from a year earlier last month, their smallest decline since exports began falling in November of last year, customs figures showed Friday. Imports rose 26.7 percent, helping narrow the trade surplus to $19.9 billion in November, from $24 billion in October.

"The decline in exports narrowed greatly in November because external demand is improving," said Sheng Laiyun, spokesman of the National Statistics Bureau, who briefed reporters in Beijing.

China's economy expanded 8.9 percent from a year earlier in the third quarter of this year, after seeing growth dip to 6.1 percent in the first quarter due largely to plunging demand for exports.

In another sign of relatively strong demand, the consumer price index climbed 0.6 percent over a year earlier last month as prices for food, energy, property and many commodities rose, the National Statistics Bureau reported.

Earlier this week, the government moved to support the recovery by extending tax cuts and subsidies for purchases of small vehicles and appliances, while adjusting some measures to counter rising property prices.

China has pledged to continue policies aimed at countering the impact of the global downturn, including easy credit and lavish spending launched with a 4 trillion yuan ($586 billion) stimulus package a year ago.

Boosted by massive investment and reviving demand for exports, industrial output rose 19.2 percent in November, the statistics bureau said. That compared with a 16.1 percent climb in October.

"Industrial output is still increasing and fundamentals are strengthening," said bureau spokesman Sheng Laiyun.

The unusually strong figure also reflects the relatively low base from last year, when production slowed as factories hit by the export slump closed by the thousands, he said.

Growth was strongest in heavy industries such as coal, steel, power generation and autos, the bureau said.

The report said that investments in factories and other construction rose 32.1 percent in the first 11 months of the year, to total 16.86 trillion yuan ($2.47 trillion).

Retail sales, which are playing an increasingly important role in driving growth, climbed 15.8 percent in November from a year earlier, to 1.13 trillion yuan ($166 billion).

The 0.6 percent rise in the consumer price index, the key inflation benchmark, was slightly above the 0.5 percent increase earlier forecast. Consumer prices had been falling, on an annual basis, since February.

Still, the rise is considered moderate, and reflected a seasonal jump in food prices, which are heavily weighted in the index.

"Currently, there is still no pressure from inflation," Sheng said.

While promising not to withdraw support for stimulus, China's economic planners, who held an annual strategy meeting earlier this week, said they will adjust policies to ensure more balanced growth.

In one of those adjustments, a tax cut on sales of cars with engines of 1.6 liters or smaller was extended until the end of next year, but the tax was raised to 7.5 percent from the current 5 percent. The tax was halved earlier this year to counter a slump in sales late last year.

In a move aimed at countering speculation in real estate that has drawn complaints that housing prices are becoming unaffordable for many families, the government reintroduced a 5.5 percent business tax on sales of homes bought less than five years earlier.

The tax had been suspended last year as property sales slumped as the economy slowed due to plunging exports.

Still, policies remain relatively generous, with favorable interest rates on mortgages and expectations that policies aimed at promoting migration into cities will continue to support the building boom, says UBS economist Tao Wang.

New construction rocketed almost 200 percent in November from a year earlier, while sales nearly doubled.

"The year-on-year growth of new property construction looks like a straight line shooting up to the sky," she said in a report to clients Thursday.

Housing prices rose 5.7 percent over a year earlier in November to a 16-month high, the statistics bureau reported.

Rising prices for electricity, fuel and water — and for a range of commodities — helped reverse the deflation seen earlier in the year.

http://www.google.com/hostednews/ap/article/ALeqM5j1FZRNA_nf7XY7YePH-Od-tdunFAD9CGT9A00

http://graphics8.nytimes.com/images/misc/nytlogo152x23.gif (http://www.nytimes.com/)
December 12, 2009
China Is Thriving, Its Economic Data Shows
By BETTINA WASSENER


HONG KONG — Data released by China on Friday provided fresh evidence that the nation’s economic recovery was gaining momentum, helped by government stimulus measures and lending by state-run banks over the last year.

China’s authorities were quick to prime the economy in the wake of last year’s global financial crisis, and gross domestic product (http://topics.nytimes.com/top/reference/timestopics/subjects/u/united_states_economy/gross_domestic_product/index.html?inline=nyt-classifier) is forecast to grow more than 8 percent this year — vastly more than in the United States, Europe or Japan — despite a sharp decline in exports.

On Friday, data for November showed industrial output soared 19.2 percent from a year ago, while imports jumped 26.7 percent. Exports were 1.2 percent below those of November 2008, but that shortfall was slight compared with the year-over-year declines of more than 10 percent in previous months.

Much of the increases now appearing in year-on-year economic statistics worldwide compare well to grim year-earlier figures, but often still remain well below precrisis levels.

China’s exports, for example, totaled $113.7 billion in November, and imports were $94.6 billion. That is below the levels of $134.9 billion and $106.2 billion, respectively, recorded in August 2008, before Lehman Brothers (http://topics.nytimes.com/top/news/business/companies/lehman_brothers_holdings_inc/index.html?inline=nyt-org) collapsed.

“China’s continued strong year-on-year monthly data released today were largely driven by base effects,” said Li-Gang Liu, China economist at ANZ in Hong Kong.

“November 2008 was the second consecutive month that most of these indicators experienced significant declines after the eruption of the global financial crisis. On a month-on-month basis, growth momentum remained steady.”

Still, the output and import data released Friday exceeded analysts’ expectations and showed that domestic demand was firmer than many had projected. Retail sales climbed 15.8 percent over a year earlier, only slightly less than in October. Inflation has begun to emerge as a result: consumer prices rose 0.6 percent in November, the first increase since January.

The surge in imports, fueled by the government spending and China’s huge appetite for commodities, has caused the nation’s trade surplus to shrink, to $19.1 billion in November from $24 billion in October. Some analysts say they believe China could even post a trade deficit next year.

“Trade deficits are inevitable,” economists at Société Générale (http://topics.nytimes.com/top/news/business/companies/societe_generale/index.html?inline=nyt-org) said in a report presented on Thursday in Hong Kong. “The price of China’s exports should remain relatively stable in 2010 and 2011 whilst the price of China’s imports should pick up dramatically.”

Amid mounting signs that the government-led spending boom could worsen overcapacity in the industrial sector, Beijing has begun to rein in some stimulus measures, albeit very carefully.

Bank lending in November, for example, nudged up to 294.8 billion renminbi ($43.2 billion) from 253 billion renminbi in October, but was well below levels seen earlier this year. The authorities have taken several steps — scrapping tax breaks, for instance — to curb ballooning property prices.

Beijing remains concerned about the sustainability of growth, and most China watchers do not expect Beijing to raise interest rates outright or to allow the renminbi to strengthen against the dollar (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/dollar/index.html?inline=nyt-classifier) until well into next year.

Source (http://www.nytimes.com/2009/12/12/business/global/12iht-renminbi.html?sq=&st=nyt&adxnnl=1&scp=1&adxnnlx=1260669737-7ifZxyjOepjbKQJs+5rjuA)

Baosteel to overtake Nippon Steel as No. 2 steelmaker in 2009

SHANGHAI — China’s Baosteel Group Corp is expected to overtake Nippon Steel Corp as the world’s second-largest steelmaker this year in terms of output, Chinese industry sources said Thursday.

The sources said Baosteel Group posted 31.58 million tons in crude steel production on a consolidated basis in the January-October period, already topping Nippon Steel’s forecast that the Japanese steelmaker’s group output will total below 30 million tons for the whole year. The change reflects the rise of China and the economic slump of Japan. It is also symbolic of the shift in the balance of power between Japanese and Chinese companies as Shanghai-based Baosteel Group received technical assistance from Nippon Steel in the past.

http://www.japantoday.com/category/business/view/baosteel-to-overtake-nippon-steel-as-no-2-steelmaker-in-2009

The largest is Luxembourg-based Arcelor-Mittal.

Animation becomes big business - and not just for children

2009-12-21

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091221/0013729e3c900c9916bc32.jpg
A girl kisses Pleasant Goat, a character from the animated series,” Pleasant Goat and Big Big Wolf", at a theater in Beijing. The animation industry is thriving

Once considered part of the realm of youngsters, cartoons and graphic novels have suddenly hit China's mainstream culture as the country realized their potential for profit.

In a large hall of the National Art Museum of China, the country's top gallery for fine art, the poster of a cartoon goat, very popular on TV this year, was put on show last month.

Downstairs, there are oil paintings by China's realistic artists, including a portrait of a young girl in a Mao suit wearing a badge of Chairman Mao Zedong on her chest.

Gan Yujie, 60, who frequents the museum almost every week, said she never imagined the graphic novels such as "Romance Of The Three Kingdoms" could make it to the halls of the national art museum.

"I was excited to see the works there," said Liao Xiangzhong, dean of the Animation School of Communication University of China. "The exhibition in such a museum means that animation and comic arts have been recognized by the government as 'real' arts."

Organized by the Ministry of Culture (MOC), Ministry of Finance and Ministry of Science and Technology, the show covered a wide range of categories in the field of animation and cartoon, including animation films, animation TV series, iconic cartoons and comic books.

Chinese animation began in the 1920s. The first animated feature film "Tie Shan Gongzhu", or "Princess Iron Fan", screened in 1941.

Cai Wu, minister of culture, said Chinese animation and comic arts were attracting more attention than ever in the country with unprecedented opportunities ahead.

"After so many years of accumulation, Chinese animation has been fully fledged for a take-off," said Liao. He said the growth was due to governmental support and the dissemination of the works.

He said the Chinese government had been fully aware of the value of creative works of traditional culture and was trying to find a more effective way to communicate those values to its young people.

"We should look at the animation industry in a new way," said Ouyang Jian, vice minister of culture. "It's an industry which can bring happiness and dreams to people, especially for the adolescent."

Wang Jingtian, 19, an animation major with a vocational school in Beijing, said he had the feeling that his job prospects have become brighter.

He is also a cartoon fan and used to read Manga (Japanese-style comics) in primary school parks between classes in order not to get caught by teachers.

China currently has about 10,000 companies making cartoons and comics, with more than 200,000 people employed, according to the MOC.

However, according to the ministry, about 85 percent of those companies are not yet profitable.

The exception was "Pleasant Goat And Big Big Wolf", a 6-million-yuan production telling the story of several goats fighting their enemy, Big Big Wolf, who covets fresh meat for his family. The film pocketed 8 million yuan on its opening day on Jan 16 and some 80 million yuan within three weeks, becoming the new champion of the animated box office.

Despite the achievements, people are still not satisfied with the quality of Chinese animation works.

Zheng Lili, an animation enthusiast, said homemade cartoons films still could not match the Japanese ones in storytelling.

She said: "We don't have the animated cartoons that entertain everyone, whether it be child or adult."

But professor Liao was optimistic about the future of Chinese animation. "Outstanding work entails outstanding studios which are still developing here," he said. "It takes time."

http://www.chinadaily.com.cn/bizchina/2009-12/21/content_9205462.htm

Economy needs some tweaking

2009-12-21

The Chinese economy has an excellent record in at least one respect - its GDP growth rate is likely to touch 8.5 percent this year. This may not be as high as in previous years, but is still stunning given the severe state of the world economy currently.

The domestic economy is, however, not as perfect as it looks. It has a few inherent flaws.

The government's macroeconomic policy this year was aimed at "maintaining growth, restructuring, increasing employment and improving people's livelihood".

So, even as the GDP growth rate seems robust and may exceed the targeted 8 percent, the record is patchy in other areas.

First, China's rebound may be positive in terms of the employment potential, but that is directly tied to the apparent "shortage of migrant workers".

The booming realty market may force more migrant workers to return to the cities, but if the rising investment in real estate is not sustained, then they may lose their jobs, triggering massive unemployment.

College graduates will also confront a tougher employment scenario and may turn into one of the most unstable groups in society.

If the unemployment problem is not solved, real incomes will not increase.

The economy may have grown at a fast clip this year, but disposable incomes have actually decreased and wage distribution is slowing as a result of rising corporate profits not translating into higher real incomes.

Second, a sizable chunk of public investment has gone into infrastructure creation and heavy industries. Yet, they have not set right the imbalanced industrial structure; only worsened it further.

Moreover, with more money flowing into capital-intensive sectors, the funds for creating jobs are in poor shape.

China's export-oriented industries too are having a hard time, and they face numerous obstacles pushing into the domestic market, chiefly because it is not easy for them to find the same excellent service as transnational service-oriented firms such as Wal-Mart and UPS.

The key to invigorating the sector is to energetically boost service-oriented enterprises, which also crucially improves people's livelihood.

If citizens and enterprises are respectively stimulated to spend and invest more, then domestic demand can get a leg-up.

It is always easier to drive consumption by giving more subsidies, consumption credit and distributing discount coupons to the people. Then the most effective measure, of course, appears to be helping residents to buy more houses.

Over the last 10 months, nearly 6 trillion yuan have flowed into the property and stock markets, it is estimated.

A booming housing market may directly promote domestic consumption, but is also an instance of drinking poison to quench the thirst. The central government recently took steps to cool the overheated real estate sector, but the process of urbanization is expected to continue.

The government may have intended to attract more farmers to second- and third-tier cities, but the policy may lead to unexpected side effects.

First, local governments have given little thought to receiving more migrants from rural areas. The current city planning has not chalked out issues related to housing for migrant workers, their healthcare, education for their children and future employment.

Second, farmers prefer big cities or metros to smaller ones as they have more employment potential.

These two factors mean the policy of accelerating urbanization brings in not only a need for more houses, but also speculators into the realty space.

If property prices in smaller cities too climb steadily next year, then China's housing bubble may soon burst.

What we need to do now is to readjust the structure whereby energy-intensive, polluting and export-oriented industries are curtailed, and the services sector, which was limited previously, thrown open to more investment.

If the policy were tailored to bring in more private and international money into service industries such as logistics, storage, transportation, telecommunication, finance, insurance, education and medical services, it would create huge employment opportunities.

It will also help improve China's manufacturing competitiveness, reduce energy consumption, cut pollutants and help improve people's livelihoods.

The author is with the Institute of World Economics and Politics under the China Academy of Social Sciences.

http://www.chinadaily.com.cn/opinion/2009-12/21/content_9205562.htm

China’s GDP per capita to reach US$4,000 by 2010:
China’s GDP per capita will approach US$4,000 by the end of next year, said Li Peilin, head of the social institute of the Chinese Academy of Social Sciences in the 2010 Social Blue Book report, which was released today.

Li said that China’s per-capita GDP, especially the dollar-denominated per-capita GDP, has increased rapidly in recent years. It took nearly 20 years to increase the GDP from less than US$400 to more than US$800. In 2000, when setting the goal of building a well-off society in an all-around way, China aimed to quadruple its GDP per capita within 20 years, that is, to increase it from US$800 to US$3,000. The per-capita GDP exceeded US$1,000 in 2003 and hit US$3,000 in 2008, far ahead of the schedule.

The rapid growth is attributed to high-speed economic development and decreasing population growth, according to Li, who added that the appreciation of the RMB is also a significant cause.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=29848

^^ OK but is the wage really rising as fast as the GDP number itself ? Can someone in China shed some light on this question ? Thanks.

I can only tell what I know from my friends and from my cleaning lady in Shanghai. They all have experienced a rapid wage increase in the last few years.

My friend who is an editor in a large news company earns more than 1000 €/ month. The cleaning lady gets 15 ¥/ hour. She works 8 hours a day and six days a week.

Heilongjiang to create industrial clusters for new materials
During period from 2010 to 2015, industrial clusters will be created in the fields of semiconductor lighting, high-performance light alloys, advanced composite materials, silica-based materials, new chemical materials and special materials and equipment, according to the plan.
It is expected that the core business revenue of the new material sector will reach RMB 30 billion by 2010 and RMB 100 billion by 2015.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=29879

Changsha builds a new hi-tech economic base
Changsha, capital of central China's Hunan province, is attracting huge investments from home and abroad to boost the local economy.
In a major step toward achieving the goal, the city this month signed 13 deals valued at 13.6 billion yuan in Beijing with a dozen Chinese and overseas companies.
One of the bigger deals is the one signed by the Changsha government and the China Electronics Corp to jointly build a high technology software park in the capital city of Hunan. The project will need an investment of at least 3 billion yuan.
Changsha is shifting its industrial focus on information technology, services and new energy industries as its new growth engines for the local economy.
Changsha is also actively seeking partnerships with foreign investors. The city is working with the Spanish Innovative Technology and Enterprise Management Business Center to establish a Spanish Industrial Park in Changsha Hi-Tech Zone.
The project is Spain's largest investment project in central China. Once the project is completed, Spanish enterprises will establish offices and plants in Changsha.
"Armed with well-developed industrial infrastructure, the city is planning these high technology parks to support the growing economy." said Chen Run'er, Party secretary of Changsha.
http://www.chinadaily.com.cn/bizchina/2009-12/21/content_9205687.htm

I can only tell what I know from my friends and from my cleaning lady in Shanghai. They all have experienced a rapid wage increase in the last few years.

My friend who is an editor in a large news company earns more than 1000 €/ month. The cleaning lady gets 15 ¥/ hour. She works 8 hours a day and six days a week.

Thanks for the info yello

The cleaning lady makes more than the editor? She must be the owner then?

The cleaning lady makes more than the editor? She must be the owner then?

No, you missed the € and ¥ symbol. ;)

The cleaning lady makes more than the editor? She must be the owner then?

Cleaning lady makes $2.19/hour which adds to $425/month and the friend earns $1,425/month.

China’s GDP May Surge 12% on Rebound in Exports



By Bloomberg News

Dec. 23 (Bloomberg) -- China’s growth may surge to as much as 12 percent next year, increasing the risk from inflation unless the government raises interest rates, according to Citic Securities Co., the nation’s biggest listed brokerage.

The economy may be boosted by a rebound in exports and domestic spending next year, said Zhu Jianfang, chief economist at the Beijing-based brokerage. He expects the benchmark lending rate to increase by between 27 basis points and 54 basis points from 5.31 percent. A basis point is 0.01 percentage point.

“We will see a change in monetary policy next year, otherwise, the growth will reach 12 percent, which will be a bit too fast,” Zhu said in an interview after his presentation at a forum in Shanghai.

A record 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of this year drove a recovery in the world’s third-biggest economy and increased the risk of bubbles in property and stocks. The Shanghai Composite Index surged 69 percent this year, while home prices in 70 major Chinese cities rose at the fastest pace in 16 months in November.

The economy may expand 10.1 percent next year with higher interest rates, Zhu said, increasing from his forecast of 8.6 percent growth in 2009. Economists estimate interest rates may increase 54 basis points next year, according to data compiled by Bloomberg.

‘Very Attractive’

“The recovery is strong and the economy is very attractive,” Hugh Simon, co-manager of the $1.1 billion Dreyfus Greater China Fund, said in a Bloomberg Television interview today.

China’s gross domestic product will expand 8.5 percent this year and 9.3 percent next year, according to Bloomberg News surveys of economists. The government is targeting 8 percent growth in 2010 amid a “fragile” global recovery, industry minister Li Yizhong said on Dec. 21.

Gains in housing prices have prompted the government to come up with measures aimed to curb speculations in the property industry. The government will target “excessive” growth in property prices in some cities, Xinhua News Agency reported last week.

Chinese central bank Governor Zhou Xiaochuan said yesterday reserve ratios are a tool “which we still put quite some emphasis upon.” The nation is targeting 8 percent growth in 2010 amid a “fragile” global recovery, industry minister Li Yizhong said on Dec. 21.

Worst Performer

The Shanghai Composite has fallen 3.8 percent this month, the worst performer among the so-called BRIC nations that also include Brazil, Russia and India.

“The market would fall much lower than people expect, if the government continues to crack down on the property market and tighten liquidity,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai.

The country’s banking regulator plans to slow new lending to between 7 trillion yuan and 8 trillion yuan next year, according to a person familiar with the matter.

http://www.bloomberg.com/apps/news?pid=20601089&sid=afE7uI4cnNss

China to Push Low-End Homes to Lower Prices

SHANGHAI -- China's State Council said Monday it will step up efforts to rein in what it calls an "overly fast" rise in property prices in some cities by boosting the supply of inexpensive public housing and redeveloping slum areas.

The pledge by China's cabinet underlines the top leadership's growing concern about long-term inflationary pressure building as a result of a fast economic recovery spurred by a government-engineered credit boom and massive public spending. Beijing also faces growing public anxiety over an overheated property sector, as well as a potential asset bubble in the stock market, which could eventually threaten social stability.

China's urban property prices grew at their fastest pace in 16 months in November, with residential prices surging 5.7% from a year earlier in 70 large and medium-size cities, according to National Bureau of Statistics data.

November's increase was the sixth in a row and the biggest since July 2008's 7% rise.

Wang Shi, the chairman of China Vanke Co., the country's largest property developer by market value, warned earlier this month that real-estate bubbles in some of China's biggest cities could spread to other parts of the country.

The State Council said a meeting chaired by Premier Wen Jiabao concluded that the country will speed up the construction of public housing, improve supervision of the property market and stabilize market expectations about property prices, according to the central government's Web site.

China will redevelop slum areas, state-owned factories and mines over a five-year period, it said.

The State Council also said the government will encourage banks to lend for urban redevelopment and waive some taxes for certain projects, while curbing speculative property investments and preventing housing-related credit risks.

Chen Sheng, director of local research firm China Index Academy, said the government's comments on the real-estate market are in line with Beijing's goal of adjusting the economic structure in 2010.

The policy for the property market will focus on encouraging the building and selling of government-subsidized housing, rather than on regular and more expensive residential properties, he said.

Liu Kun, an analyst at Great Wall Securities, said: "In terms of boosting the supply of public housing, it's easier said than done because local governments, especially those in poor inland areas, either lack incentives or don't have the financial resources to do so."

Despite Beijing's repeated calls for boosting the role of cheap public housing in the country's property market, local governments have been reluctant and slow to respond.

Monday's move follows the state council's decision last week that, starting next year, sales of homes by individuals will be exempt from tax only after at least five years of ownership. The government in January had reduced the period to two years to encourage home sales.

http://online.wsj.com/article/SB126081941770891017.html

China considers establishing state social security fund

2009-12-23

BEIJING, Dec. 23 (Xinhua) -- China will establish a state social security fund as a "strategic reserve," according to the country's first-ever draft law on social insurance submitted to the ongoing session of China's top legislature for its third reading.

The state security fund will be financed by the central government budget and other funds granted by the State Council, or China's cabinet, and should be used as a supplement for social security expenditure, the draft law said.

The fund should make public its income and expenses, management processes and investment, it said.

The draft law, revised after its second reading last December to take into account public submissions, specified a common right for all citizens to pay premiums and enjoy old-age pensions and insurance for medical care, work injuries, unemployment and childbirth.

More than 70,000 submissions have been received since the draft law was open to public comment a year ago, according to the National People's Congress (NPC) Standing Committee.

The revised draft law also highlighted individuals and employment units that pay social insurance fees according to the law should have the right to inquire about their payment records.

China has established several policies concerning social welfare since 1984. As of 2008, about 219 million people have pensions and about 317 million have basic medical insurance. An additional 124 million have unemployment insurance, 138 million have work injury insurance and 91 million have childbirth insurance.

http://news.xinhuanet.com/english/2009-12/23/content_12692178.htm

Tough year ahead for exporters

2009-12-25


Firms face uncertainties amid rising trade protectionism

Though he knows the worst has passed, Tian Feng still cannot relax.

As head of an export-oriented soy protein producer, Tian said his company still faces a lot of uncertainty despite overseas demand rising again in the third quarter of this year.


"We are still very concerned about next year," said Tian, general manager of Sinologry Enterprise Group Co based in the coastal city of Qingdao, Shandong province. What he is worried about is growing trade protectionism against Chinese products.

"Foreign countries may set trade barriers, such as tightening the requirements on inspection and quarantine, to protect local market players," he said.

Tian's worry may be shared by China's tens of thousands of manufacturers and exporters. Chen Deming, minister of commerce, warned yesterday that China's export situation will continue to be "grim" next year despite the improving economic conditions of its trade partners.

"The prospects for export in the year ahead are not very positive, as the world economy will not fully recover from the financial crisis in the short term," Chen told the nation's annual commerce work conference.

Moreover, "as many foreign nations and regions are expected to withdraw their economic stimulus packages during the second half of 2010, China's exporters will face a hard time," Chen warned.

During the third quarter, both the United States and the European Union, China's top two trade partners, reported positive year-on-year economic growth of 2.2 and 0.8 percent, after months of decline. Also, since August, the decline in China's exports has begun to ease, standing at merely 1.2 percent year-on-year in November, and economists predicted positive growth in December.

Although he believes there is little possibility that exports will drop in 2010 compared with this year, Chen doubted growth will remain strong.

"The possibility that China's exports could register high growth in the next year is almost zero," he said, given that "the employment rate (in the US and EU) keeps dropping and the willingness to consume is quite low."

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20091225/0013729e42ea0c9e3abd4b.jpg

China's exports posted an annual growth of about 25 percent for many years before 2008, but such a rate may not reappear for two or three years, or even longer, he added.

Chen's prediction is echoed by local governments.

"Overseas demand will inch up gradually, but there is no sign of immediate strong growth," said Jin Yonghui, director-general of the Department of Commerce with Zhejiang province.

Based in the nation's leading exporting province, Zhejiang's manufacturers found orders suddenly shrinking late last year.

"Not until this November did orders begin to grow. During the first 20 days of December, exports from Zhejiang surged by 13 percent," Jin said.

Zhejiang's exports are expected to fall by 15 percent year-on-year this year, and are expected to climb by 5 percent in 2010, compared with an annual growth of about 20 percent before the global financial crisis hit the nation's exporters in 2008.

Chen said the central government will focus on "stabilizing export growth by prioritizing exports in key industries next year, including hi-tech, services, media, medicine and culture.

As a large proportion of China's exports are attributable to the China-based facilities of multinational companies, the nation will try to encourage more overseas investment in selected areas, Chen said.

Since August, China's foreign direct investment (FDI) has started to grow, reversing a 10-month decline that began last October.

"FDI will grow on a gradual basis," Chen said.

As China's efforts to promote domestic consumption have taken off, the growth of imports will outperform that of exports next year, he said.

Besides slackened demand, trade barriers and protectionism will also challenge Chinese exporters, analysts said.

Many exporters, such as Sinologry, which targets European and North American markets, have struggled as the impact of the financial crisis materialized last year.

Over time, however, the improving global economy has not brought much comfort to them, despite a gradual pick up in overseas demand.

This year, more than 100 trade remedy cases concerning more than $10 billion were initiated against China.

The latest case was the EU on Tuesday deciding to prolong an anti-dumping tariff on shoe imports from China for 15 months, disregarding strong opposition from several European nations.

Analysts said that as China's trade partners, such as the US, become more export-driven to revive their economies, China will continue to be a major target of trade protectionist measures worldwide.

"Most of those cases violated WTO rules," said Zhou Shijian, a senior WTO expert.

More measures against high value-added categories outside manufacturing, such as a carbon tariff, will show up next year, Chen said.

Chen vowed China will step up efforts to fight trade protectionism.

Zhou Yan contributed to the story.

http://www.chinadaily.com.cn/china/2009-12/25/content_9227288.htm

Yellow book ranks China 7th in overall strength

2009-12-25

Negative growth, financial turmoil, trade issues, water pollution and military spending were keywords highlighted by scholars from the Chinese Academy of Social Sciences as they assessed the comprehensive strength of 11 nations. The results appear in the academy's latest yellow book on the world economy and international situation.

The US, Japan and Germany came out at the top, while China ranked seventh on the list.

Continuous armed conflict, terrorism and financial turmoil in 2009 have posed grave threat to the world, the book points out. And 2009 marked a year for a changing international power balance, with increased influence for newcomers to the global stage.

China experienced a steady lift of its influence both in regional and international realms. "We have seen deepening degree of China's participation in international issues," said Qiu Yuanlun, researcher with the academy.

The indicators in the book's assessment includes territory and natural resources, population, economy, military and science, said Li Shaojun, director of the Chinese Academy of Social Sciences' World Economics and International Politics Institute.

The nations were also evaluated on their social development, sustainability, security, domestic politics and international contribution.

The book noted that US is still regarded as the only superpower in the wake of the economic meltdown this year. "US tops in every indicator except for natural resources," said Li Shaojun, and it has many advantages, which are said to be "unparalleled" in the yellow book.

Military spending has risen dramatically while the worldwide economic downturn has vaporized wealth for almost everyone in 2009, said the book.

In terms of military force, the US, China and Russia lead the list. According to the book's rating system, the US achieved 90.08 points in military strength, 56.78 points more than runner-up China. "The gap between US and China is obvious, and the reason for China's high ranking in the sector is the large number of troops and weapons," said Li.

Whilst US saw no challenge in comprehensive military strength, its yearly military expenditure is 32 percent more than the total of the other 10 nations.

Russia tops the list of aggregate number of weapons, with more than 22,800 tanks. Both China and US have less than 8,000 in their armories.

The yellow book analyzed statistics from Stockholm International Peace Research Institute: 2008 world military expenditure is estimated at $1.464 trillion, a 4 percent rise on that of 2000, and 45 percent more than 1998.

The figure in 2008 is equivalent to 24 percent of global GDP. And 2000 US military spending alone was $294.4 billion. By 2008, it has increased to 607.3 billion. Between 2001 and 2008, the US spent $797 billion on the war against terrorism, of which $603 billion were spent in Iraq. The US is still bogged down in Iraq and Afghanistan, therefore, the figure is likely to increase.

http://www.chinadaily.com.cn/world/images/attachement/jpg/site1/20091225/0013729e42ea0c9e496d13.jpg

http://www.chinadaily.com.cn/world/2009-12/25/content_9228213.htm

China Raises GDP Growth Figures, Closing in on Japan

Dec. 25 (Bloomberg) -- China raised its 2008 growth estimate to 9.6 percent from 9 percent and said this year’s quarterly figures will increase, narrowing the gap with Japan, the world’s second-biggest economy.

Gross domestic product was 31.405 trillion yuan ($4.6 trillion) last year, the statistics bureau said at a briefing in Beijing today. That compares with a previous 30.067 trillion yuan and the World Bank’s estimate of $4.9 trillion for Japan.

China’s expansion will be more than 8 percent in 2009, according to government officials, and the nation is poised to overtake Japan next year, International Monetary Fund projections show. Today’s figures result from an economic census which showed a bigger contribution from services and continue a pattern of China revising up preliminary growth estimates.

“The big underlying factor propelling China’s growth is the continued migration of people from the agricultural sector to the more modern economy -- industry and services,” said David Cohen, an economist at Action Economic in Singapore. “There’s no stopping China.”

For 2009, revisions will mainly affect the value of the year’s gross domestic product, with a “very small” impact on the growth rate, said Peng Zhilong, the head of the bureau’s national economy calculation department.

China Versus U.S.

China’s expansion in 2008 compares with U.S. growth of less than 1 percent. The Indian economy expanded 6.7 percent in the fiscal year ended March 2009.

This year, the Chinese economy grew 8.9 percent in the third quarter from a year earlier, 7.9 percent in the second and 6.1 percent in the first. The government has pledged to maintain a “moderately loose” monetary policy in 2010 to sustain a rebound driven by a stimulus package and record lending.

The pace of growth is attracting more investment. Foreign direct investment climbed 32 percent in November to $7 billion from a year earlier. Luxury carmaker Bayerische Motoren Werke AG said last month that it will build a new factory worth 5 billion yuan in China to tap an auto market set to overtake the U.S. as the world’s largest.

“Investors are anxious to participate in what remains, with India, the biggest story that’s out there,” Action Economics’ Cohen said.

Today’s figures showed a 13.1 trillion yuan contribution from services in 2008, compared with 12 trillion yuan previously. The census, intended to give a better picture of the economy’s make-up, focused on industry and services rather than agriculture.

More Revisions

Gross domestic product figures for 2005, 2006 and 2007 will also be revised as a result of the census, Peng said.

China’s economy was 4.4 percent bigger in 2008 than originally estimated, today’s figures showed. In comparison, a previous census in 2005 showed the statistics bureau had under- estimated the size of the 2004 economy by 17 percent.

Besides the census, China routinely carries out a first and second check of each set of annual figures for gross domestic product, issuing revisions where necessary.

In April last year, the bureau raised the growth figure for 2007 to 11.9 percent from 11.4 percent, citing larger estimates for the contribution from service industries such as telecommunications and retailing. In January this year, it raised the estimate again to 13 percent.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a3AlS3O0AGqQ

China revises 2008 GDP growth up to 9.6%

2009-12-25

The revised volume for the agriculture sector was 3.3702 trillion yuan, accounting for 10.7 percent of GDP, down from 3.4 trillion yuan.

The figure for the industrial sector was put at 14.9003 trillion yuan, accounting for 47.5 percent of GDP, larger than the earlier figure of 14.6183 trillion yuan.

The service sector figure was 13.1340 trillion yuan, accounting for 41.8 percent of GDP. It was up from 12.0487 trillion yuan.



http://www.chinadaily.com.cn/china/2009-12/25/content_9229993.htm

Hasn't the chinese economy already over taken the japanese?

Why they keeps revising the economic growth / size?? Isn't there a fixed method to calculate it and stick to the method?? Sound fishy when they keep doing (revising) it, as if it is phoney data they use.

Why they keeps revising the economic growth / size?? Isn't there a fixed method to calculate it and stick to the method?? Sound fishy when they keep doing (revising) it, as if it is phoney data they use.

At first you don't want to show off high growth numbers because investors will feel the economy is over heating.

Japan nominal GDP may ramain above China's till 2011 because the Yen has skyrocketed this year against the American Dollar.

Japan nominal GDP may ramain above China's till 2011 because the Yen has skyrocketed this year against the American Dollar.

That's it. Average level of yen rose about 10% in 2009. Whatever, Chinese economy will be somewhere around 5.4 trillions in 2010 which will be enough to be the second largest economy.

Why they keeps revising the economic growth / size?? Isn't there a fixed method to calculate it and stick to the method?? Sound fishy when they keep doing (revising) it, as if it is phoney data they use.

GDP figures are never 100% accurate, and even developed countries revise GDP figures from time to time. In China, as any other developing country, a huge section of the retail industry isn't registered and therefore it isn't included in the GDP. Even restaurants fail to report their turnover figures to the gov so that they can pay less taxes, you know the fapiao lottery thing, etc.

Some surveys claim that consumption in China could be as far as 50% larger than official figures claim. Only this field could add one trillion dollars to the GDP.

Anyway the GDP based on American dollars will climb like crazy if they liberate the Yuan in the coming months. It jumped from 2.6 USD trillion in 2006 to 3.3 in 2007 and 4.4 in 2008. Double digit GDP growth + Moderated inflation (3-5%) + Yuan revaluation around 5-8% a year. Put these 3 things together (may happen again in 2010-2011) and the nominal GDP figure in USD will increase around 25% a year.

China ministry looks to lift domestic consumption

2009-12-25


BEIJING: China's Ministry of Commerce will make efforts to increase domestic consumption, and open new markets for foreign trade in 2010, said Chen Deming, the country's commerce minister.

Chen made the remarks at a national commerce meeting held in Beijing Thursday, saying the government would continue to stimulate domestic demand, especially consumption, amid the slow and tough world economic recovery and weak overseas demand.

In 2010, the government would increase the number of products in the "home appliances to the countryside" program, increase subsidies for automobile "old-for-new" services, and establish an electronic payment network in the countryside, to stimulate consumption.

The government would support banks, and guarantee agencies to give more financial aid to commercial enterprises, especially small and medium-sized ones, said Chen.
Online consumption would be encouraged in 2010. According to Chen, the government would encourage companies to develop e-business ventures.

Chen expected China's retail sales of consumer goods in 2009 to increase more than 15 percent from last year, to 12.5 trillion yuan (US $1.83 trillion).

Nationwide retail sales grew 15.3 percent year on year in the January-October period to 10.14 trillion yuan.

Meanwhile, the government would try to stimulate foreign trade next year, by maintaining the export tax rebates policy, and widening the export credit insurance coverage.

Relevant government departments should be mindful of exporters with regards to customs clearance, quality inspection, and foreign exchange management.

Efforts would also go to developing foreign trade through improving marketing and further tapping potential in emerging overseas markets.

"China's foreign trade volume is expected to drop 16 percent year on year to about US $2.2 trillion in 2009," said Chen.

The government also aims to "better use" foreign investment next year, with measuring including encouraging foreign companies to establish medical care and professional education training institutions.

Policy and financial support will be allocated to guide foreign companies to engage in the high-tech and new energy industries, and encourage them to set up headquarters, research and development centers, and purchase centers in China.

"China is expected to receive foreign investment of about US $85 billion in 2009, a decrease of 8 percent from the previous year," said Chen.

http://www.chinadaily.com.cn/china/2009-12/25/content_9232224.htm

Consumer spending fuels retail expansion

2009-12-26

European fashion retailers are accelerating business expansion in China thanks to the nation's increasing number of fashion-conscious consumers.

Two companies that opened new outlets in China at a rapid pace this year included Sweden's H&M and Spain's Zara, both retailers of clothing and accessories for adults and youth.

H&M is ending this year with a total of 13 new stores, raising the company portfolio in China to 27 outlets, while Zara, opened 33 new stores in China, winding down the year with 60 in total.

"In China, new store openings have more than doubled due to strong domestic consumption, which has not been affected by the global financial downturn," said Wu Shuang, public relations manager of H&M China. Globally, H&M store openings are up between 10 percent and 15 percent in 2009, said Wu.

"More H&M stores will be set up in China next year, especially in the second-tier cities," he said.

H&M, Europe's second largest fast-fashion retailer, entered the Hong Kong and Shanghai markets in 2007 and later expanded its business to second-tier cities like Hangzhou and Ningbo of Zhejiang province.

Back in August, H&M sales in Spain, the US and France were down 11 percent over July sales, the fourth consecutive monthly drop.

In 2008, average sales revenue at H&M stores in the Chinese mainland and Hong Kong was up 23 percent to 59 million yuan ($ 8.64 million), while globally average store sales was 48 million yuan.

"We are expecting favorable sales volume in China this year," said Wu, while declining to elaborate further.

Strong sales numbers were also recorded at Zara, the leading fast-fashion retailer in Europe. "The Chinese market is attractive with its soaring consumer spending power," a Zara promotion executive said on condition of anonymity. Chinese consumers can expect to see more Zara 'fast fashion' stores in the future," he said.

Fast fashion is a term used to describe fashion trends that are manufactured quickly in smaller batches to keep inventories down and allow mainstream consumers to take advantage of current clothing styles at lower prices. This type of quick manufacturing methodology is preferred by large retailers like H&M, Forever 21 and Zara, according to online apparel industry directory, Apparel Search.

This access to the latest clothing styles is popular with white-collar consumers in China.

"I have been waiting for 30 minutes to try on several pieces of clothing, but the wait doesn't matter. I love to get everything here, and the prices are acceptable," said Liu Dan, a woman in her 20s shopping at one of Zara's Beijing stores. Liu, who works in the public relations department at an international company, said she is also a regular patron of H&M in Beijing. Both H&M and Zara stores are often crowded with local consumers, especially on the weekends.

http://www.chinadaily.com.cn/bizchina/2009-12/26/content_9232872.htm

Private sector plays greater role

2009-12-26


The weight of private enterprises in the overall economy is on the rise and that of State-owned enterprises (SOEs) on the decline, Ma Jiantang, minister of the National Bureau of Statistics, said on Friday.

The number of private firms rose by 81.4 percent from 2004 to 2008 to reach 3.6 million and SOEs dropped by 20 percent to 143,000, Ma said at a press conference where China's second economic census results were released.

China has made great efforts over the past 30 years to restructure its economy. It has gradually raised the proportion of private enterprises after the market-oriented reform began in the early 1980s. As a result, the private sector has contributed an ever-growing value to the country's GDP and provided most of the jobs.

But in recent years, some major acquisitions have seen SOEs buying into private companies, sparking concern that the State may be strengthening its control over the private sector.

Ma said the census figures do not suggest SOEs are buying into private enterprises.

In terms of asset value, SOEs saw their proportion in the nation's total drop by 8.1 percentage points from 2004 to 2008 to 23 percent. In contrast, private enterprises' assets rose by 3.3 percentage points to 12.3 percent.

http://www.chinadaily.com.cn/bizchina/2009-12/26/content_9232936.htm

Chinese people cool-headed as China poised to be the world's 2nd largest economy

2009-12-26

BEIJING, Dec. 26 (Xinhua) -- China revised its 2008 gross domestic product (GDP) to 4.52 trillion U.S. dollars at the average exchange rate of 2008, narrowing the gap with Japan, the world's second largest economy with a GDP of 4.9 trillion U.S. dollars for the same year.

The revision resulted from China's second economic census which raised the country's 2008 economic growth rate to 9.6 percent from9 percent.

Given an estimate of more than 8 percent growth rate for China in 2009, accompanied by Japan's shrinking economy amid the global economic downturn, the country, currently the world's third largest economy, was poised to overtake Japan as the second largest.

"It is only a matter of time before China's total economic volume surpass that of Japan given China's robust growth," said Xu Lianzhong, a researcher with the National Development and Reform Commission.

However, Xu said the new figures coupled with the prospect of catching up with Japan in terms of total economic volume next year should serve as no cause for self-complacency.

"It is not so important to compare the total GDP with that of the Japan or other developed nations," said Zuo Xiaolei, chief economist with the Galaxy Securities.

"What matters more is the per capita figure, and in the case of China, the total figure has to be divided by 1.3 billion," said Xu.

In 2008, China's per capita GDP was 3,200 U.S. dollars, less than a third of the world's average or a tenth of Japan's 38,000 U.S. dollars, according to the World Bank's estimates.

Eclipsing Japan in total economic volume wouldn't change the fact of China being a developing country, not least because China lagged far behind the developed nations in many areas, said Zuo

"There are still wide gaps between China and the developed countries in per capita GDP, the quality of economic development, and science and technological levels," said Xu.

Zuo said China should place more emphasis on lifting the quality of economic development and solving structural problems in the economy.

These cool-headed interpretations were echoed by ordinary people in Beijing.

Zhang Ning, a civil servant at the Beijing Municipal Government, said, "the total amount may be pleasing to the ear, and I feel proud of China becoming more economically advanced, but you had to divide that by a huge denominator."

"We should not be misled by the absolute figures and the ranking. China still has a lot of work to do in improving the people's living standards and building a better social security system," said Gao Shan, a college student in China's Foreign Affairs University in Beijing.

China currently has 150 million people living in poverty and is faced with daunting challenges in poverty alleviation, according to the National Development and Reform Commission.

A report released by the Chinese Academy of Social Sciences Thursday ranked China the 7th in the world in overall strength. The relatively low ranking came as no surprise to most Chinese people.

"China has a long way to go before its education, science and technology could match with developed countries," said a netizen by the name Guxin at the online forum of www.sina.com.cn, a leading Chinese portal website.

China was also burdened with the daunting task of cutting greenhouse gas emissions per unit of GDP by 40 to 45 percent by 2020 from the 2005 level, and the marginal cost was set to rise in the future, said Zou Ji, a professor with Renmin University of China.

http://news.xinhuanet.com/english/2009-12/26/content_12706582.htm

GDP figures are never 100% accurate, and even developed countries revise GDP figures from time to time. In China, as any other developing country, a huge section of the retail industry isn't registered and therefore it isn't included in the GDP. Even restaurants fail to report their turnover figures to the gov so that they can pay less taxes, you know the fapiao lottery thing, etc.

Some surveys claim that consumption in China could be as far as 50% larger than official figures claim. Only this field could add one trillion dollars to the GDP.

Anyway the GDP based on American dollars will climb like crazy if they liberate the Yuan in the coming months. It jumped from 2.6 USD trillion in 2006 to 3.3 in 2007 and 4.4 in 2008. Double digit GDP growth + Moderated inflation (3-5%) + Yuan revaluation around 5-8% a year. Put these 3 things together (may happen again in 2010-2011) and the nominal GDP figure in USD will increase around 25% a year.

Good luck on liberating Yuan. I found that Yuan revaluation is either impossible or improbable due to Government reluctance. I know what's going on on their side but there is no way they can maintain Yuan stability versus Dollar devaluation. I guess it's time to make Euro the next currency or the IMF's currency (SDR).

Consumer spending fuels retail expansion
http://www.chinadaily.com.cn/bizchina/2009-12/26/content_9232872.htm

http://www.chinadaily.com.cn/bizchina/images/attachement/jpg/site1/20091226/002170192c4e0c9fa59117.jpg

Anyway the GDP based on American dollars will climb like crazy if they liberate the Yuan in the coming months. It jumped from 2.6 USD trillion in 2006 to 3.3 in 2007 and 4.4 in 2008. Double digit GDP growth + Moderated inflation (3-5%) + Yuan revaluation around 5-8% a year. Put these 3 things together (may happen again in 2010-2011) and the nominal GDP figure in USD will increase around 25% a year.

I don't think yuan is underestimated a lot. Without appreciation of RMB, China's nominal gdp per capita will still be over $10,000 by 2020 if it can follow Taiwan or S Korea's historical development pace.

^^ Yup, even without Yuan appreciation it's been growing a lot. But China is a big economy, unlike the Won, etc, the Yuan could become an international currency and that should be very profitable for the Chinese economy. Besides, if China doesn't appreciate the Yuan, it will be a matter of time before it faces tight trade sanctions from many developed countries, especialy once Europe and USA start importing millions of Chinese cars in a few years.

China revises 2008 GDP growth up to 9.6%


http://www.chinadaily.cn/bizchina/images/attachement/jpg/site1/20091226/0013729e4a9d0c9f8b5d0b.jpg

China may surpass Germany as world's biggest exporter

Continue reading...http://www.chinadaily.cn/china/2009-12/27/content_9234280.htm

http://www.chinadaily.com.cn/china/2009-12/28/content_9234616.htm

Wen stands firm on yuan

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20091228/0023ae73cfef0ca2393d18.jpg
Premier Wen Jiabao answers a question in an online interview with Xinhua News Agency in Beijing on December 27, 2009. [Xinhua]

Premier Wen Jiabao said Sunday that the nation will not bow to pressure from other countries to revalue the yuan because they are using the issue as a tool to curb China's development.

He also cautioned against the possibility of rising inflation in the country next year and said that it's too early to say that the national economy has fully recovered, although many economists have expressed optimism about the country's GDP growth and inflation control next year.

"We will absolutely not agree to the various calls pressuring us to appreciate the yuan," he said during an interview with Xinhua News Agency.

"They are, on the one hand, demanding the yuan's appreciation and, on the other, imposing a variety of trade protectionist measures, which, in essence, is to retard China's development."

Despite widespread acknowledgement that free trade helps the global economy, some developed countries have taken measures to block Chinese exports. On Dec 22, for example, the European Union decided to extend dumping duties on leather footwear from China for another 15 months.

By the end of November, 19 countries and regions had launched 103 trade remedy investigations against Chinese products and both the number of the cases and the money involved hit a record, according to the Ministry of Commerce.

A higher yuan would make China's exports more expensive and products from developed countries cheaper, but Wen said that maintaining the stability of the yuan's exchange rate is an important contribution to global financial stability and economic development. He cited the 1997-98 Asian financial crisis, during which Beijing's decision to keep the yuan's value unchanged is believed to have anchored regional currencies and economies.

Wen said China will, together with other countries, make more efforts to promote global trade since "no one would develop without flow of trade".

"We need action now," he said.

He also admitted there have been signs of rising inflation, but said there's no major immediate threat. "China is not facing an inflation issue for the moment ... but we should foresee such a possibility and maintain consumer prices at a reasonable level."


The consumer price index (CPI), a major gauge of inflation, rose by 0.6 percent in November, the first year-on-year growth since January this year.

Economists, however, have forecast there would not be high inflation next year as economic growth continues to pick up.

"It is impossible that there would be very high inflation for the whole of next year," Fan Gang, senior economist and member of the central bank's monetary policy committee, said at a Saturday forum organized by the HSBC School of Business of Peking University.

The country is still facing the problem of over-capacity, which means prices will not rise too high, he said.

The government will try to keep the CPI under 3 percent next year, Xia Bin, senior economist of the State Council's Development Research Center, said at the forum. It will take into account the CPI level when it pushes pricing reform of energy and resource products.

The government has been raising prices of energy and resource products, such as water and electricity, to better reflect market forces and protect the environment.

Wen also urged all nations to recognize the hard-won results of the Copenhagen climate change conference this month and build consensus for future action against climate change.

^^ Wow. Inflation is very, very likely to climb above 4% in two-three quarters. They will revaluate the Yuan then, you'll see.

CIC likely to invest in Rusal public float

2009-12-29

China Investment Corporation (CIC) may invest up to $300 million in the proposed Hong Kong float of Russian aluminum producer United Co Rusal, a source close to the sovereign wealth fund said yesterday.

CIC is, however, yet to take a final decision in this regard, as buying into the highly indebted company is still viewed as a risky investment, the source told China Daily on condition of anonymity.

Russian tycoon Oleg Deripaska's aluminum firm's plan to raise between $2 billion and $3 billion through its Hong Kong initial public offering (IPO) has been overshadowed by huge debt concerns.

The listing has been approved by the Hong Kong market regulator on condition that there would be no retail subscription.

Rusal had rescheduled its nearly $16.8 billion debt earlier this month. The proposed Hong Kong listing would value the company at between $16 billion and $22 billion with an indicative price range of $13.7 to $18.9 per share, according to Russian newspaper Vedomosti.

Apart from CIC, New York-based asset management firm BlackRock, Russian state development bank Vnesheconombank and state-controlled Sberbank have indicated willingness to participate in the IPO.

"Investment could be a tentative step for CIC, as it is still wary about the potential risks embedded in buying into a company with such a huge debt burden," said Wang Lixin, an analyst with Umetal Research Institute.

"Investment in the aluminum industry could bring decent returns, as aluminum prices have stabilized recently on the back of recovering global demand," she said.

CIC has accelerated steps to invest in energy and resource-related companies globally, including the $2.2 billion investment in Virginia-based wind generator AES Corp and HK$5.5 billion in domestic renewable energy company GCL-Poly in November, as well as the $500 million investment in SouthGobi, a Canada-based company that mines coal in Mongolia in October.

The fund, which was set up in 2007 to manage part of the nation's burgeoning foreign exchange reserves, appeared to have made a turnaround from a year ago when it faced criticism for its loss-making investments in Morgan Stanley and Blackstone.

Lou Jiwei, chairman of CIC, said in October, that the fund had invested half of its $110 billion available capital and had gained decent returns.

Sources indicated that the fund is likely to get another $200 billion capital infusion in the near term, partly due to its good performance during the financial slowdown.

http://www.chinadaily.com.cn/bizchina/2009-12/29/content_9240245.htm

Companies go west for development

2009-12-28

"Since mid-September, all the trucks transporting our products have been fully-loaded, queuing in a long line outside our company," said Yang Jinfu, manager of a private food oil company.

Yang's company set up a factory at Qinzhou Port Bonded Zone in southwestern Guangxi Zhuang autonomous region seven months ago.

"At first, we came here to look for sales markets. However, such a huge market potential in the western region inspired us to set up a factory here," Yang added.

Yang's company was headquartered in southeastern China's Fujian province where the export-oriented economy has been heavily stricken by shrinking foreign orders amid the global financial crisis.

China's vast western region, however, has taken the chance to actively attract investment and explore new domestic markets by speeding up its own infrastructure construction.

After 10 years of China's strategy to develop its western region, economic zones in the west have become an emerging engine that is driving China's economy.

The Beibu Gulf Economic Zone in Guangxi, where Qinzhou Port Bonded Zone is located, is one of the three economic zones in China's western region.

As the only river estuary in China's western region, the Beibu Gulf Economic Zone has witnessed rapid construction development since the plan for Guangxi Beibu Gulf Economic Zone Development was approved by the central government in January 2008.

"When Qinzhou Port Bonded Zone opened five years ago, we couldn't find it on a world nautical chart," said Yang Lizhong, general manager of Qinzhou Oriental Resources Co Ltd. "Foreign ships were reluctant to come here. The municipal government had to pay $120,000 to persuade a foreign ship to unload here."

Now the Qinzhou Port has become an important maritime hub in the Beibu Gulf with an annual throughput of more than 52 million tons and has formed a chain of ports in the Beibu Gulf with neighboring Beihai city's Tieshan Port and Fangcheng Port.

"China's western region has been closely connected to the world," Yang said. Improving communication and a favorable geographical location added appeal to the Beibu Gulf area, which saw an increasing inflow of investment and logistics to meet local growing consumption.

For example, Yunnan and Guizhou provinces and Guangxi Zhuang autonomous region have seen an increase in oil consumption of at least 10 percent per year, while Guangxi alone produces 800,000 tons of oil annually, meeting a small proportion of the overall demand.

A PetroChina refinery project with an annual capacity of 10 million tons has been established in the Qinzhou Port Economic Development Zone. The 20-billion-yuan project, upon completion in 2010, will not only help the southwestern region end its oil shortage, but also bring downstream industries with a total investment of more than 78 billion yuan to set up in the Beibu Gulf region.

"The largest petrochemical base in southwest China will emerge here, changing the whole economic structure of Guangxi," said Huang Yi, chief of Qinzhou's Business Promotion Bureau.

According to Huang, in 2008 alone, the city of Qinzhou introduced investment totaling 15.76 billion yuan, including 41 large-scale projects. International companies such as SK Telecom of South Korea, and Japan's Marubeni and Mitsui have also come to Qinzhou to discuss cooperation.

The Chinese government initiated the strategy of developing its vast western region in 2000. Since then large projects such as the transmission of natural gas and electricity from west to east have marked the first period of development.

The second period of the western region development will focus on innovation and the cultivation of key areas and new growing industries. After the Beibu Gulf Economic Zone was established, the development planning for the Guanzhong-Tianshui Economic Zone was approved by the State Council in 2009.

The three key economic zones are expected to act like a three-cylinder engine to boost the economy in west China, upgrading its industry structure, and promoting the development's quality.

For instance, the Chengdu-Chongqing area has been lagging behind in the IT industry compared with other regions due to its geographic position, though it boasts many IT talents and old electronic industry bases.

The financial crisis has forced the IT and relevant industries to speed up moving to the IT talent-rich western region with lower costs in human and natural resources.

In October, Intel announced it would make an investment of $75 million in its Chengdu plant. By the end of November, Intel had finished moving its assembly and test plants from Shanghai to Chengdu. Before that, Taiwan's Foxconn Technology Group had just contracted to invest $1 billion to build a manufacturing base in Chengdu.

In August 2009, Hewlett-Packard made Chongqing home for its 20 million laptop program. The city also signed with Taiwan's Quanta company to build a processing base for its 40 million laptops. It's estimated the revenue for the altogether 60 million notebooks could reach $80 billion.

http://www.chinadaily.com.cn/bizchina/2009-12/28/content_9235559.htm

Migrant worker finds better life at home

2009-12-30

BEIJING: Zhang Yunluo, a young farmer in China's eastern Shandong Province, started his heater production plant after returning home in December last year from Tianjin.

The foreign-funded firm at which he worked had been hit by slumping orders due to the economic downturn -- and Zhang, 27, paid with his job.

"It's good to stay close to my parents in the village. The first batch of energy-efficient heaters has just rolled off the production line. I believe they have a market, as farmers are more price aware of their power bills because energy price rises," Zhang says.

"I hope to sell 7,000 sets of heaters worth more than 1 million yuan next year," Zhang adds.

A year earlier, such hope would have been incomprehensible.

He was one of millions of migrant workers returning home at the end of last year as factories closed or slashed production.

China had about 225 million migrant workers by the end of 2008.

"I decided it might be a good timing to start my own business. I have worked at foreign-funded firms in Beijing, Suzhou and Tianjin as a salesman and technician. My city experience helped in a business plan."

TIMELY HELP

About 100,000 yuan ($14,640) of his hard-earned wages and relatives' money went to the 400-square-meter workshops and machinery.

"Village heads gave me a preferential policy for using the land to build workshops. I only pay 2,000 yuan a year, as my factory is the first company set up in this village of 1,500 residents," Zhang says.

A deputy town head would introduce him to property developers of neighboring towns. They are Zhang's ideal potential clients.

The city government halved Zhang's annual business tax rate to 1.5 percent, in line with measures taken by local governments nationwide to support returning migrants' business dreams.

"Working capital shortage was my biggest problem. The low land rentals, promotion opportunities and lower tax rates were a timely boost to my small factory," Zhang says.

BETTER LIVES

After seven years away from home, he now employs seven villagers.

"Two technicians can get a monthly salary of 1,500 yuan, while the other five support staff can earn more than 400 yuan a month," Zhang says.

In big cities like Beijing, 400 yuan can only buy a family a big meal, but in Chinese rural areas, 400 yuan a month is substantial money.

The per capita net income of Chinese farmers hit a record 5,000 yuan in 2009, up 6 percent from 2008, according to a statement from the annual Central Conference on Rural Work.

"My employees are all older than me. They are of the 'sandwich generation', who have to take care of their parents and children. So they prefer to stay in the village to work," Zhang says.

"I believe my life will get better and so it will for my employees. I bought a government-subsidized washing machine to wash employees' work clothes. Several workers have bought washing machines and color TV sets with subsidies and income rises before the New Year," says Zhang.

More than 81.8 million household appliances, including mobile phones and TV sets had been bought by rural families by December 12, a total sales value of 143.6 billion yuan, boosted by the government subsidy that took effect nationwide since in February, Ministry of Commerce figures show.

Raising farmers' incomes by supporting their business plans and boosting their consumption can narrow the long-existing economic gaps between rural and urban areas, says Zheng Fengtian, vice dean of the Agriculture and Country Department of Beijing's Renmin University of China.

"Farmers' incomes are still low compared to city dwellers. They need better financing services to fund start-up businesses and a better social safety net in the process of China's urbanization," Zheng adds.

Experts say successful village firms like Zhang's give farmers job opportunities near homes, improve consumption and encourage urbanization.

Chinese farmers are afraid of spending, because they have low incomes and lack welfare, says Jing Linbo, vice director of the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences.

Many capital-deprived Chinese farmers face financing difficulties, as they lack proper mortgages and business credit to get access to loans, although the government is trying to improve finance for farmers.

New agriculture and farming-related loans rose 27.6 percent year on year to 1.54 trillion yuan in the first half, says Liu Zhenwei, vice chairman of the Agriculture and Rural Affairs Committee of the National People's Congress.

"I think I can get loans next year, if business goes well. I want to add a new production line and more villagers to my payroll. Many villagers are my relatives, and I hope their lives get better," Zhang says.

http://www.chinadaily.com.cn/china/2009-12/30/content_9248387.htm

Nice story, too bad they don't include the name of the company in the article, would like to know more about these energy efficient heaters.

China manufacturing growth boost

Monday, 4 January 2010

Chinese manufacturing grew by the biggest margin in five years in December, fuelling growth expectations for the world's third-biggest economy.

The purchasing managers index (PMI) from HSBC Holdings and Markit Economics reported the fastest rate of growth since records began in 2004.

The index is based on a survey of more than 400 Chinese manufacturers.

The finding supports the view among some economists that China's economy could grow by as much as 10% this year.

But the survey also renews concerns over inflation, with prices rising at their fastest rate in 17 months.

The PMI measure rose to 56.1, up from 55.7 a month earlier. A measure over 50 represents growth in the manufacturing sector.

The figure was also in line with China's official PMI figure, released on 1 January, which showed growth in manufacturing at a 20-month high.

Growth hopes

The growth in manufacturing has fuelled expectations that the Chinese economy could return to double-digit growth figures.

While other countries slipped into recession in 2009, China saw its annual GDP growth rate slip to a low of 6.1% in April last year.

Last month, the Chinese government said it was targeting a growth rate of 8%.

However, some economists believe that China is already growing at an annualised rate of at least 10%, with similar growth for 2010 forecasted.

Commenting on the figures, Qu Hongbin, chief China economist at HSBC, said the Chinese authorities' actions to help the economy were clearly working.

"The second-round effect of stimulus measures is filtering through to substantially benefit the manufacturing sector," he said.

At the end of 2008 the Chinese government announced a 4 trillion yuan ($586bn; £354bn) stimulus plan that pumped money into the economy through spending on public infrastructure projects.

Overheating?

But the expansion in manufacturing raised inflation concerns, with output prices rising at their fastest pace since July 2008 according to HSBC.

Chinese companies are also reporting rising costs of raw materials including oil and steel.

But Qu Hongbin from HSBC argued that overcapacity in manufacturing, combined with the government's ability to rein in spending will help keep a lid on inflation.

"We believe inflation will be manageable in the coming months," he said.

http://news.bbc.co.uk/1/hi/business/8439216.stm

Consumer confidence growing

2010-01-04

With the majority believing the recession is behind them, Chinese consumer confidence is expected to continue to grow in the coming year, which sends a merry note to domestic marketers.

The news was revealed in a survey by global marketing research firm ACNielsen. It also found Chinese shopper confidence remains strongest in the East and due to increasing optimism in job and financial prospects, the nation's middle and western regions are getting increasingly upbeat as well.

The rebound in shopper confidence witnessed in the second quarter of 2009 looks set to continue.

Survey of 3,000 shoppers

ACNielsen recently questioned more than 3,000 shoppers across China, discovering that consumer confidence index rose to 101 in the third quarter, from 95 in the second quarter of 2009 , largely driven by renewed trust in job and financial prospects.

Consumers in western and central China recorded the greatest lift - eight points higher than the second quarter - but shoppers in the west of the nation remain noticeably less optimistic than in other areas.

The rebound in consumer confidence has not had much influence on saving habits. Despite the fact that almost nine out of 10 Chinese consumers believe the nation is out of the recession, more than half continue to put spare cash firstly into savings, followed by investing in their children's education and purchasing new clothes.

And consumers from the wealthier first-tier cities are more likely to be investing in stocks and bonds and planning holidays compared with lower-tier cities. The latter are more likely to be purchasing books and magazines and dining out. The ongoing high savings and relatively low willingness to spend doesn't necessarily mean leaner times for marketers.

Three out of four shoppers look for value for money, which means shopping for items on promotion remains a key strategy for many. Almost two thirds take more public transport and over half put off spending on big-ticket items such as houses and cars.

What might be good news for fast moving consumer goods (FMCG) brands is that, despite a preference for purchasing only items on special promotion, many consumers say they would rather put their money into groceries and cook at home rather than go out.

A quarter of consumers would rather wait and purchase their preferred brands and pack size on promotion than switch to a cheaper option. Shoppers also say that they prefer to simply reduce purchases altogether to keep their grocery bill in check. A reluctance to save costs by switching to cheaper brands is exhibited across food and non-food categories. As non-food items generally have a specific purpose around the home and a longer shelf life, shoppers would rather wait until the item is being promoted or stock up on larger pack sizes than reduce their purchases of non-food FMCG items.

The ACNielsen report highlighted promotional shopping has taken a toll on FMCG sales.

http://www.chinadaily.com.cn/bizchina/2010-01/04/content_9258481.htm

China and Asean free trade deal begins
By Andrew Walker
BBC News

http://newsimg.bbc.co.uk/media/images/47018000/jpg/_47018061_008477982-1.jpg
The deal is supposed to be mutually beneficial


A new free trade area comes into effect on Friday, incorporating China and the six founding members of the Association of South East Asian Nations (Asean).

These countries include Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand.

They plan to eliminate tariffs on 90% of imported goods.

This will reduce the cost of trade and is likely to lead to an expansion of cross border commerce between the countries concerned.

In terms of population it will be the largest trade area in the world, with nearly 1.9bn people and it includes some of the leading export driven economies.


Cheaper materials

Chinese manufacturers will gain and so will South East Asian exporters of raw materials.

Those countries are also likely to gain access to cheaper materials and components from China.

But there have been warnings from South East Asia that some industries are not ready to compete with China and that jobs will be lost.

Other members of Asean , including Vietnam and Cambodia are due to follow suite in five years.

Regional and bilateral trade agreements have proliferated in recent years.

The World Trade Organization says about 400 are due to be in operation by 2010.

Supporters say they are a step on the way towards comprehensive global trade liberalisation.

But critics say they undermine that effort and put poor countries left out at a disadvantage.

http://news.bbc.co.uk/2/hi/business/8436772.stm


I have been waiting for couple of days, I wonder why there's no AC-FTA (ASEAN-China Free Trade Area) news in China Daily. This is quiet popular in my country media and internet forums. Some even fear that China products will overrun our market. Although public opinion said China products are low quality (people mocking and joking about it), but the fact, in our market after AC-FTA begin, most of people agree that China products cheaper than local production and have higher quality. Those China low quality products image will change soon.

Celebriton, what is your country?

Celebriton, what is your country?

He is from Indonesia.

I find it quite amusing that Indonesians are laughting about the quality of Chinese products. :lol:

He is from Indonesia.

I find it quite amusing that Indonesians are laughting about the quality of Chinese products. :lol:

Not just the Indonesians though. But I too find it amusing that those countries ,that cannot even make a half decent bicycle, are laughing at Chinese products, or even worse some of them cannot even make a glass bottle or soda can. Instead of laughing at other people, they should be questioning their country's industrial incompetence. If they think their countries make higher quality products then buy them. Those who talk a lot are usually the kind that have nothing to show.

A decade of growth

If the 9/11 terror attack on the US in 2001 set the tone for the world's political arena in the first decade of the new millennium, it is no exaggeration to say that China's rise re-defined the global economic landscape.

Statistics abound to testify to China's rising economic prowess. To name but a few, once the numbers come in China will probably have replaced Germany to become the world's top exporter in 2009; it is set to replace Japan to become the world's second largest economy next year, from the 10th place 10 years ago; and it is playing a leadership role, together with other major players, in building a more fair and rational world economic order.

The country's ascent in the past decade, however, would have been unbelievable for many Chinese 10 years ago, when East Asia was reeling in the wake of the devastating Asian financial crisis. To anchor the regional economy, China unswervingly but painfully decided to hold its currency firm, despite the domino-like fall of other regional currencies. The price it paid as a result was slumping exports and slowing economic growth at the turn of the century.

Since then, its economic leadership in the region has been growing, and so has its integration into the world economy. In 2001, China became a member of the WTO, marking a new page in the world's economic history. More recently, it has been playing an increasing role in reforming the global financial regime, which was previously monopolized by developed countries.

Economists estimate that in 2009, China could have contributed to about half of the world's economic growth. It speaks volumes about what that integration means for the world.

China's economic achievement, however, has not come easily. Internationally, it has come amid the recurrent "China threat" accusation from some countries that feel uneasy about China's rising economic power.

When the world economy suffered from falling prices, China was readily accused of "exporting deflation" to the rest of the world; when world market prices rose, China was accused of driving up prices. When the Asian currencies faced the danger of collapse in the Asian financial crisis, the yuan was asked to stand firm; when some countries suffered a trade deficit, they demanded that China raise the value of the yuan

Such drama has been repeatedly put on stage - all within the same decade.

Domestically, China has to continually push its market economy reform against frequent attempts by some to retreat to the old centralized economic management. For Westerners, who have taken for granted that the market economy is the best choice for economic development, it is hard to understand how strenuously Chinese policymakers have pushed that reform, something that was only initiated in the early 1980s.

Moreover, it is yet to solve such problems as a widening wealth gap, unbalanced regional development, restructuring of the manufacturing- and export-centered economy as well as the build-up of what will be a costly social security system.

If the past decade saw China rise to become an international economic powerhouse, the next will see how China deals with those internal economic challenges to make its development more sustainable.

(China Daily 01/04/2010)

^^ The decade from hell described by some western media outlets perhaps wouldn't be so hellish if China gained less. Political influence is somewhat a zero sum game, and someone's gain has to come as someone else's expense.

Decade of growth for China would be pretty accurate, just compare any place in China today to what it was ten years ago. Sure theres still a lot to improve on, but its sure a lot better than what it was.

Compare 'Made in China' ten years ago to 'Made in China' today, in NZ at least the stigma of 'Made in China' has died off. Not so long ago, 'Made in China' means stuff you find in $2 shops, those days are gone.

He is from Indonesia.

I find it quite amusing that Indonesians are laughting about the quality of Chinese products. :lol:

Not just the Indonesians though. But I too find it amusing that those countries ,that cannot even make a half decent bicycle, are laughing at Chinese products, or even worse some of them cannot even make a glass bottle or soda can. Instead of laughing at other people, they should be questioning their country's industrial incompetence. If they think their countries make higher quality products then buy them. Those who talk a lot are usually the kind that have nothing to show.

We can't blame both China and other countries people for it, because many importer import the China cheapest products (or cheaper that cheapest), that quality beyond your imagination. Especially for poor country, cheap price are really attractive. For greedy importer, they can get more profit too.

For most of common people, they don't know this knowledge, they just saw a product between good and bad, cheap and expensive. They never understand the story behind it, that is why they just mocking and joking about it. He actually never know that many people depend on those ultra cheap products. My knowledge isn't that wide too, I can't see the whole perspective, but I know some people depend on it since shops still sell it everywhere.


Actually I'm a bit surprise that most of Chinese people buy medium quality cloth (based on information from other thread), because cheap China cloth still being sold here. How about other products? Are Chinese people already use medium quality products widely? Or still buy cheap low quality products?

^^

I honestly found what yellow perillo and snow discussed to be funny then i tried reading what you have you say about it and the farce that you spewed out just made me go :rofl: :rofl: then by the time i finished reading it was more like :badnews:

Lu explodes myths of China's growth

Suppose we take a patient to a doctor of traditional Chinese medicine. And then we take him to a practitioner of Western medicine. Their diagnoses are most likely to be different.

Now, suppose the patient is the Chinese economy. How would one from the West diagnose it?

Highly dependent on exports, or downright mercantilism.

Very little domestic consumption. "Asians always save and never spend," as the saying goes.

Government investment plays a very big, if not unnecessary, role in the economy.

All these, however, are "China myths" propagated by some people from abroad, says Lu Zhongyuan, vice-president and a senior researcher with the Development Research Center of the State Council (China's cabinet).

Instead, argues the economist, what has created a huge room for change for China is its urbanization index, which is lower than even many other developing countries. As the urbanization drive expedites, Chinese consumers will spend more and their demand will make economic growth sustainable well into the next decade.

"China's growth has been driven mainly by domestic demand, which combines consumption and investment," says the economist who has studied in both Harvard and Oxford universities. "And despite its impressive volume of foreign trade, the contribution of net exports to China's gross domestic product (GDP) growth has been limited."

From 2001 to 2007, Lu says, net exports contributed 0 to 2.5 percentage points to GDP growth, which incidentally was around 10 percent a year.

In 2007, when GDP growth was 11.9 percent, net exports contributed only 2.3 percentage points to it. In 2009, China's exports contributed none to GDP growth because exports were estimated to have fallen 17 percent, and still the Chinese economy exceeded its target of 8 percent increase.

That being the case, "it's hard for me to understand why some people see China as following an exports-led growth model", Lu says. "Theirs is a wrong conclusion."

The flood of low-end "made in China" goods in almost every shop around the world has made observers believe that the country's exports accounted for a large percentage of its total GDP. Some even blame China's large-scale exports for the imbalance in the world economy.

Pointing out the fallacies in such arguments, Lu says the problem lies in the pattern of the global supply chain and the international division of labor. It's true that China has a competitive advantage in low-end industries because of cheap labor and land. "We do export a lot, but it is not our fault."

"The international division of labor is led by multinational companies in developed countries. Only if its pattern changes can we solve the problem of China exporting a lot," says Lu.

Now let's see if China's exports are indeed behind the imbalance in the world economy. China's exports accounted for 5.9 percent of the world total in 2003 and 9.1 percent in 2008 according to World Trade Organization data, while those of Germany took up 10.2 percent and 9.3 percent, those of the United States, 9.8 percent and 8.2 percent respectively. And in 2007, China exported 5 percent of the total exports of high-income countries.

"So why not say exports from high-income countries, or Germany, have created the imbalance?" Lu questions.

There is some problem with the statistical methods used in international trade, Lu says, because they exaggerate the role of exports in China's economic growth.

While measuring a country's dependence on foreign trade, a vast majority of economists concentrate on a simple but misleading figure: exports-GDP ratio. Since exports are defined as the total turnover and GDP measured in value-added terms, the exports-GDP ratio actually compares two incompatible things.

Lu cites an example to explain this incompatibility. The cost price of an iPod made in and exported from China is about $150 and its retail price, $300. But China gains only $3 to $5 as processing fees for making and exporting an iPod. That leaves more than $140 of added value to say Japan or any other country selling the product. So how can people blame "made in China" products for the imbalance?

A renowned economist who has won a number of top domestic prizes in economic research, Lu has always pursued "objective, cool-headed, fair, and scientific" research and endevored to help the country achieve healthy economic development instead of fanning trendy sayings to woo the public.

Unlike many economists who think China's consumption lacks vitality and its consumers have not loosened their purse strings enough to help the world economy, Lu says the opposite is true.

"Chinese consumers have kept increasing their spending They are elevating their consumption to a much higher and far costlier level, which is conducive to economic growth."

Forty years ago, when Lu joined a national campaign for young intellectuals to be an agricultural worker on a farm in Heilongjiang province after leaving his Beijing home, even a radio was a luxury for a Chinese.

Thirty years ago, when economic reform began in earnest and he became one of the first groups of college students, the best buys were bikes and watches. Twenty years ago, when Lu got his doctoral degree in economics from the CPC Central Party School, color TV sets and refrigerators were considered the best of consumer products.

Ten years ago, when he started work at the State Council's Development Research Center, people were shopping for mobile phones and computers. Today, Chinese consumers are buying cars and houses. And yet some economists say Chinese do not spend.

Chinese consumers bought about 13 million vehicles last year - the highest in the world. And sales in the real estate sector rose by as much as 35 percent in the first three quarters of the year.

"Remember," Lu says, "a Chinese consumer has to spend about 100,000 yuan for a car and about 1 million yuan to buy an apartment."

Ordinary Chinese need to save for years or decades to fish out such huge amounts. They have to save just to pay the installments. "How can one still say China's consumption lacks vitality?"

Some multinationals, however, have accepted the truth. At a recent forum, Lu was told by executives of some multinationals that they were not only increasing their input in marketing in China, but also in research and development. The reason: rise in the level of consumption.

Further increase in China's domestic demand, Lu says, depends on how fast consumers' incomes grow. He believes China's economic growth is sustainable and accordingly it will expand the job market, especially in the emerging cultural, healthcare and environment sectors.

But what happens to the migrant workers who have lost their jobs in the coastal areas? Lu says they could be relocated to small- and medium-sized cities in the country's inner provinces to propel the urbanization drive.

China has seen a generally sound balance among consumption, investment and net exports between 2004 and 2007 in its domestic growth.

Last year, however, investment's contribution to economic growth is likely to have already outpaced consumption due to the country's 4-trillion-yuan ($585.6 billion) stimulus package. But a large portion of the 1.8 trillion yuan ($263.6 billion) allotted by the central government has gone to residential housing projects for the lower-income groups.

Another part of the package has gone into ecological construction, water conservancy and pollution-control projects. "The input in infrastructure is far less than 80 percent as claimed by many," Lu says. "And the more the investment in technological development, the better."

For the whole of 2009, "investment and consumption have made up for the loss of net exports in driving recovery," he says.

As an adviser to China's top policymakers, Lu focuses on sustainable economic growth rather than academic awards.

"The inner developing need of the economy demands that its investment rate maintains a fast pace in the long term because China's industrialization will not be complete until the 2030s," he says.

His study of transitional economies as a visiting post-graduate at Oxford University and a short-term program at Harvard University have broadened his insight, but unlike the UK or the US, China has to deal with a large population, many of who are still poor.

Yet "China still has a lot of room to maneuver in its urbanization drive", because its urbanization rate, according to the World Bank, was 42.2 percent in 2007, compared to Brazil's 85.1 percent and Indonesia's 50.3 percent.

The accelerated urbanization process will be seen not only in the increase in the urban population, but also in the country's massive accumulation of fixed assets and infrastructure construction. All these will provide a strong material foundation for growth.

"As industrialization and urbanization both speed up and more residential units are sold, domestic demand will push economic growth in the future," Lu says.

http://www.chinadaily.cn/opinion/images/attachement/jpg/site1/20100107/00221917e13e0caf6dc926.jpg

http://www.chinadaily.cn/opinion/images/attachement/jpg/site1/20100107/00221917e13e0caf6dce2a.jpg

http://www.chinadaily.cn/opinion/2010-01/07/content_9278639.htm

Celebriton,

Are you even aware of how many countries in Asia ,up until this point, still cannot even make a soda can, a glass bottle or even a bicycyle ? How many of them with a population that can confidently say "Yes we do produce high quality products" , except for S.Korea and Japan. How many of them creates large corporations ? let alone a few multi-national ones. How can people claim that their countries produce better goods than China if their countries don't even have any industrial capacity nor experience at all. This is just beyond me.

Those fully industrialised countries laugh at China because they are ahead of China and already passed the stage of industrialisation, they are equipped with decent industrial expertise, skills and knowledge .They see China as a laggard. But for other developing or poor countries, what have they got to show compared to China ?

Snapdragon if you find what I said previously funny then please consider this post. Thanks.

^^

I honestly found what yellow perillo and snow discussed to be funny then i tried reading what you have you say about it and the farce that you spewed out just made me go :rofl: :rofl: then by the time i finished reading it was more like :badnews:

Celebriton,

Are you even aware of how many countries in Asia ,up until this point, still cannot even make a soda can, a glass bottle or even a bicycyle ? How many of them with a population that can confidently say "Yes we do produce high quality products" , except for S.Korea and Japan. How many of them creates large corporations ? let alone a few multi-national ones. How can people claim that their countries produce better goods than China if their countries don't even have any industrial capacity nor experience at all. This is just beyond me.

Those fully industrialised countries laugh at China because they are ahead of China and already passed the stage of industrialisation, they are equipped with decent industrial expertise, skills and knowledge .They see China as a laggard. But for other developing or poor countries, what have they got to show compared to China ?

Snapdragon if you find what I said previously funny then please consider this post. Thanks.

Companies producing good based on the market need. Based on purchasing power of the majority. That is why importers choose to buy cheap products even try to push the price even lower that lowest quality standard.

In the past, our market usually full of German, USA, Japan and local products. People here already develop quality awareness. At least if you want to sell "industrial products", there's a minimum quality limit before you sell it into the market. You can still make ultra cheap products, but if the quality is so low, you are consider as a criminal or cheater. Our local businessmen still following that unwritten law.

China cheap products broke that law. The importers sell ultra cheap products that broke after 1 month of use (even less), or even half of the shipping container are already broken.

It is famous here, that China motorcycle completely destroy after 1 year of usage. China DVD player already broken even before you open the box. China handphones quality are also very bad, for USD 30, it will broken after 3 months of usage even less. More expensive handphones can only survive 1 year. Dinner ware, including melamine plate are so thin (almost transparent), steel spoon ultra thin and easily to bend. Ceramic pottery shape are also not straight or identical to the others similar product. Glassware are cloudy (not so crystal clear). China 18W PLC lamp as bright as Philips 5W PLC lamp (sometimes it death after 3 days of usage). Etc. This kind of China products quality are everywhere, sometimes consumers even ask what is the responsibility of the producers that producing this kind of quality and what kind of importers ordering this kind of quality. This what I call cheaper than cheapest, lower than the lowest accepted standard for the sake of cheaper price.

For common consumers, I can understand if they mocking and joking for those kind of quality. I also aware that import tax and seaport bribing cost is high too, no wonder if importers ordering this ultra cheap products to win the market. Our people are also still poor, and many still earn less than USD 2 a day. That is why I also said after CAFTA begin, there's no import tax and even lower bribing cost. It still depend on purchasing power, but this time for the same price, people can buy higher quality. Rather than those quality above.

China GDP per capita is not far higher than my country. That is why I ask if this kind of quality are still widely sell and use in China? Since some part of China, some people may be still earn USD 2-3 a day or even less.

^^ For the love of god, how many times do I need to reiterate the same lines. If you think your country can produce goods that last longer than those 1 years, 6 months, 3 months and as bright as Phillips and as clear and transparent as a cellophane film then buy your country's product, well if you are confident enough with your country's competence.

^^I said it is the importer who import those cheap products. Those importer actually who makes Made in China image bad. Not all people in my country love to find information about China, those public opinion developed by experiencing China cheap products in the market. Media and internet are also have a role too.

I know what China are capable of and producing high quality products. But I try to explain how people can develop such kind of thinking on China products, what kind of products they saw on the market. While they unaware that most of their computer components, handphone they used, clothes they wear, Phillips lamp they use are Made in China too.

I don't think my country businessmen unable to open factories like that. But some people find opportunities and think it is easier to buy China OEM products rather than open his own factories. And these people choose to buy cheap products to easily win the market, because most of our people are poor. The competition even make them to push the price even lower.

I believe that many businessmen around the world, not only my country, use the same tactics. Including in Africa, South America, etc. It is consumers who recognize China products as cheap and low quality (and on these world there are more consumers than businessmen). If you want to know exactly the reason, that is the reason.

I also said we can't blame both China and importers, because these cheap products (although it make Made in China look bad) but it also a hero. You can see many poor people have DVD player, handphone, wearing better clothes, etc. The world need those cheap products. It's improve people living condition.

I also said CAFTA will make higher quality China products enter the market. If usually people for the same price buy low quality products, this time they can get even higher.

China GDP Likely Grew by 13% in December: O'Neill

China's economy likely grew by 13 percent in the last month of 2009 and market fears that the country is manipulating the data are exaggerated, Jim O'Neill, head of global economic research at Goldman Sachs told CNBC Tuesday.

"Many observers that don't really follow China closely simply don't accept that an economy where the government directs a lot of the big decisions can succeed," O'Neill told "Worldwide Exchange."

"We used to not trust Chinese data ourselves" and this is why Goldman Sachs has computed its own Chinese data for years, he added.

"According to our own proprietary Chinese GDP indicator, in December Chinese growth could have been 13 percent."

The Goldman Sachs China Activity Index shows a strong V-shaped recovery, its growth reaching 13.1 percent year-on-year in December.

The recent reading, together with the latest purchasing managers index reading, "suggests actual (gross domestic product) growth was probably in the 13 percent area towards the end of 2009," O'Neill said in a research note.

According to National Development and Reform Commission Vice Chairman Zhang Xiaoqiang, China's economy is expected to have expanded by 8.5 percent in 2009, but O'Neill said he thinks "the actual data is stronger" than the official forecast.

Bubble Fears Overblown?

Another analyst still expressed skepticism about Chinese data in general, even if the GDP figure may be underestimated.

"I think there are valid concerns out there with regards to economic data in China," Clive McDonnell, a regional strategist at BNP Paribas Securities, said.

"One is the issue of inflation. China releases its monthly inflation data before the end of the month, and that does raise a bit of skepticism there," he said, pointing out also that although the country reports car sales rises in the double digits, gasoline sales increase by only 2 to 3 percent.

O'Neill said fears of asset bubbles in China because of the country's rapid growth and lax fiscal and monetary conditions are "completely overblown." He also pointed out that the Chinese stock market has not made a new high since August.

For investors who do not know the country very well, he recommends investing in international companies with a presence there.

"I think the interesting way to approach this is … through people like Unilever and a lot of these classic names who are taking a lot of this risk for you," O'Neill said.

http://www.cnbc.com/id/34700874

Coastal China's real GDP per capita is probably around $10 000 PPP adjusting for the large black economy and higher population than official statistics suggest (too many people registered as rural).

Index futures get nod from State Council

Chinese stock index futures have been approved, in principle, by the State Council, the regulator China Securities Regulatory Commission (CSRC) said Friday, Chinanews.com.cn reported.

It would take CSRC about three months to introduce the futures to the market, according to the report.

Stock index futures are agreements to buy or sell an index at a preset value on an agreed date. The new instrument would allow Chinese investors to profit from declines in share prices and hedge risks for the first time. It will also help curb volatility in a market that slumped nearly 65 percent in 2008 and rebounded over 80 percent last year.

http://www.chinadaily.cn/china/2010-01/08/content_9290861.htm

China exports, imports surge in December

BEIJING (Reuters) - Growth in China's exports and imports last month blew past expectations, providing fresh evidence of the vigor of the economy and strengthening the case for Beijing to let the yuan start climbing again.

China

Exports leapt 17.7 percent from a year earlier, dwarfing the 4.0 percent rise forecast by economists and breaking a 13-month streak of year-on-year declines; imports surged 55.9 percent, much more than the 31.0 percent increase markets had expected.

"The strong acceleration in imports may heighten the chances of overheating and put more pressure for the government to tighten policy," said Wang Hu, an economist at Guotai Junan Securities in Beijing.

Based on the trade data, he estimated industrial output in December grew by more than 25 percent from a year earlier and that GDP growth in the fourth quarter exceeded 11 percent.

Despite the leap in exports, the even bigger jump in imports meant China's trade surplus slipped to $18.4 billion in December from $19.1 billion in November and $39.0 billion in December 2008. Economists had expected it to tick up to $19.6 billion.

China was not the only Asian exporter to enjoy a dazzling December. South Korea and Taiwan reported export growth of 46.9 percent and 33.7 percent, respectively.

But China is far bigger, overtaking Germany as the world's biggest exporter of goods in 2009. Its booming investment and consumption are helping to rebalance the world economy even though Beijing has refused to let the yuan rise against the dollar since the global financial crisis began in mid-2008, said Rob Subbaraman, chief Asia economist at Nomura in Hong Kong.

Its imports of crude oil also hit a monthly record, while iron ore shipments were the second highest ever and copper imports beat expectations.

Booming Chinese demand will be a boon for commodity exporters like Australia, said Liu Nenghua, an economist with Bank of Communications in Shanghai.

"It shows that China will continue to play an important role in driving world economic growth," he said.

YUAN PRESSURE

Liu said policy would not change in response to one month's figures, but the strong data would further reassure Chinese officials that global demand was not as weak as they had feared.

"The government needs some time to see what happens. The really critical period is the first quarter of 2010: if the situation continues to be rosy, then the government may have to change a slew of policies, including its exchange rate policy," he said.

China flagged the possibility of tighter policy settings last week when the central bank nudged up a key money market rate for the first time since August. And on Sunday the cabinet voiced fresh concern over the bubbly property market and vowed not to let speculative inflows heat it up.

Other economists agreed that the yuan could start to rise around the end of March if exports remain strong.

But any appreciation would be moderate, in the order of 3 percent for the whole year, as China strove to protect export jobs, said Lin Songli at Guosen Securities in Beijing.

"China is in need of exports to create jobs and to promote economic growth, there's no doubt about that," Lin said.

Brian Jackson, an economist with Royal Bank of Canada, said strong exports would increase pressure on Beijing to allow some appreciation, "while also making it easier to justify such a move to domestic audiences," he said in a note to clients.

Huang Guohua, a statistics official with the General Administration of Customs, called the rebound in December exports "an important turning point." He cited strength in export orders evident in last month's survey of purchasing managers as evidence that exports are set to grow further.

"It is safe to say now that Chinese exporters have come right through the period of weakness," Huang told state television.

http://www.reuters.com/article/idUSTRE6090FS20100110

China's 2009 foreign trade falls 13.9% to $2.21 trln with surplus at $196.1 bln

BEIJING, Jan. 10 (Xinhua) -- China's foreign trade in 2009 dropped 13.9 percent from a year earlier to 2.21 trillion U.S. dollars and its trade surplus last year slid 34.2 percent year on year to 196.1 billion U.S. dollars, according to figures released Sunday by the General Administration of Customs (GAC).

In breakdown, China's exports in 2009 stood at 1.2 trillion U.S. dollars, down 16 percent from in 2008, and imports reached 1.01 trillion U.S. dollars, down 11.2 percent from a year earlier, said the GAC.

In December 2009, monthly trade amounted to 243 billion U.S. dollars, which represented a year-on-year increase of 32.7 percent and a month-to-month rise of 16.7 percent.

Last month, China's exports were worth 130.7 billion U.S. dollars, up 17.7 percent from a year earlier. December's imports hit record monthly high to reach 112.3 billion U.S. dollars, up 55.9 percent from the same period of 2008, according to the GAC.

http://news.xinhuanet.com/english/2010-01/10/content_12784996.htm

I'm glad that trade surplus shrank and it should continue to shrink 'cause the surplus is useless. In the long term China just needs to maintain equilibrium of trade.

China overtakes Germany as biggest exporter
By JOE McDONALD, AP Business Writer – 1 hr 33 mins ago

BEIJING – China overtook Germany as the world's top exporter after December exports jumped 17.7 percent for their first increase in 14 months, data showed Sunday, in another sign of China's rise as a global economic force.

Exports for the last month of 2009 were $130.7 billion, data from the General Administration of Customs showed. That raised total 2009 exports to $1.2 trillion, ahead of the 816 billion euros ($1.17 trillion) for Germany forecast by its foreign trade organization, BGA.

China's new status is largely symbolic but reflects the ability of its resilient, low-cost manufacturers to keep selling abroad despite a slump in global consumer demand due to the financial crisis.

December's rebound was an "important turning point" for exporters, a customs agency economist, Huang Guohua, said on state television, CCTV.

"We can say that China's export enterprises have completely emerged from their all-time low in exports," Huang said.

Stronger foreign sales of Chinese goods could help to drive the country's recovery after demand plunged in 2008, forcing thousands of factories to close and throwing millions of laborers out of work.

Boosted by a 4 trillion yuan ($586 billion) stimulus, China's economic expansion accelerated to 8.9 percent for the third quarter of 2009 and the government says full-year growth should be 8.3 percent.

Economists and Germany's national chamber of commerce said earlier the country was likely to lose its longtime crown as top exporter.

China is best known as a supplier of shoes, toys, furniture and other low-tech goods, while Germany exports machinery and other higher-value products. German commentators note that their country supplies the factory equipment used by top Chinese manufacturers.

China surpassed the United States as the biggest auto market in 2009 and is on track to replace Japan as the world's second-largest economy soon. China passed Germany as the third-largest economy in 2007.

China's trade surplus shrank by 34.2 percent in 2009 to $196.07 billion, the customs agency said. That reflected China's stronger demand for imported raw materials and consumer goods while the United States and other economies are struggling and demand is weak.

The United States and other governments complain that part of China's export success is based on currency controls and improper subsidies that give its exporters an unfair advantage against foreign rivals.

Washington has imposed anti-dumping duties on imports of Chinese-made steel pipes and some other goods, while the European Union has imposed curbs on Chinese shoes.

The U.S. and other governments also complain that Beijing keeps its currency, the yuan, undervalued. Beijing broke the yuan's link to the dollar in 2005 and it rose gradually until late 2008, but has been frozen since then against the U.S. currency in what economists say is an effort by Beijing to keep its exporters competitive.

The dollar's weakness against the euro and some other currencies pulls down the yuan in markets that use them and makes Chinese goods even more attractive there, adding to China's trade surplus.

Even though China overtook Germany as top exporter, the customs agency said total 2009 Chinese trade fell 13.9 percent from 2008.

Commodities were among China's key imports, the agency said, with the country bringing in 630 million tons of iron ore last year, up 41.6 percent from the previous year, and 200 million tons of crude oil, an increase of 13.9 percent, as prices for both commodities fell.
Economists say China has been rushing to build up stockpiles at bargain prices since crude oil and other commodity prices plunged in 2008. That motive, more than a revival in actual industrial demand, has driven its recent import boom of oil, copper and other metals.

Associated Press Writer Gillian Wong contributed to this report.

^^I said it is the importer who import those cheap products. Those importer actually who makes Made in China image bad. Not all people in my country love to find information about China, those public opinion developed by experiencing China cheap products in the market. Media and internet are also have a role too.

I know what China are capable of and producing high quality products. But I try to explain how people can develop such kind of thinking on China products, what kind of products they saw on the market. While they unaware that most of their computer components, handphone they used, clothes they wear, Phillips lamp they use are Made in China too.

I don't think my country businessmen unable to open factories like that. But some people find opportunities and think it is easier to buy China OEM products rather than open his own factories. And these people choose to buy cheap products to easily win the market, because most of our people are poor. The competition even make them to push the price even lower.

I believe that many businessmen around the world, not only my country, use the same tactics. Including in Africa, South America, etc. It is consumers who recognize China products as cheap and low quality (and on these world there are more consumers than businessmen). If you want to know exactly the reason, that is the reason.

I also said we can't blame both China and importers, because these cheap products (although it make Made in China look bad) but it also a hero. You can see many poor people have DVD player, handphone, wearing better clothes, etc. The world need those cheap products. It's improve people living condition.

I also said CAFTA will make higher quality China products enter the market. If usually people for the same price buy low quality products, this time they can get even higher.

dude you ought to just stop embarassing yourself .

^^ For the love of god, how many times do I need to reiterate the same lines. If you think your country can produce goods that last longer than those 1 years, 6 months, 3 months and as bright as Phillips and as clear and transparent as a cellophane film then buy your country's product, well if you are confident enough with your country's competence.


To be honest ,though i hate to say this celebriton has a point . Any customer no matter how cheap has every right to complain about the product or the service he /she is buying . In this case china is going and selling its products to Indonesia and many countries which are technically and in many ways below china , but till the date an Indonesian or a Nigerian is ready to pay his hard earned money to buy a Chinese products Chinese should have the patience to listen to their criticisms even if they are annoying and in many case not justified. If CHINA has any problem whatsoever with any country which is more technically inept, complaining about its products maybe it should not sell the products to that country or that customer if it is so sensitive but it is the chinese that go to these technically inept countries and try their level best to sell their products and till date they are fighting for the customers and want Nigerians or Indonesians to buy their products . They have no option but to listen to their whining that is how business has worked for the last 2k years.

Yeah they have a right to complain but the problem is on them. They need those products so we produce them. If there's no demand, no offer then.

Why don't they buy well-known branded products of China as Chinese counterparts do? Simlply because they are too poor to afford them.
Why don't their department stores offer assurance to customers as Chinese counterparts do? Simply because they cant afford it.

In those underdeveloped society, people have to suffer bad quality products because themselves offer the atmosphere to keep bad quality products alive and prosperous.

China launches 16 energy R&D centers
China's National Energy Administration or NEA on Jan. 7 conducted a ceremony to mark the foundation of 16 national energy research and development centers that will be responsible for advancing energy conservation and technology management, source reported.

Zhang Guobao, director of the NEA, said that these centers' research covers nuclear power, wind power and efficient generation and transmission of electricity.

Zhang added that China maintains the leading status worldwide with technology in some power fields. The country exported thermal power equipment with generating output totaling 18 million kilowatts in 2009 and also won the bids for several thermal power and wind power contracts in Indonesia, the Philippines and India in the past several years.

The U.S. has earmarked US$777 million for 46 energy R&D centers.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=30347

China May Overheat With 16% Growth, Government Researchers Say

Jan. 11 (Bloomberg) -- China’s economy may grow as much as 16 percent this year with accelerating inflation and the risk of a property bubble unless policy makers reduce stimulus measures, government researchers said today.

“If the government continues with the same strength of macro-economic stimulus as in 2009, there will be notable economic overheating in 2010,” Yao Zhizhong and He Fan, economists with the Chinese Academy of Social Sciences, said in an article published in the official China Securities Journal. Local media reported today that new lending surged last week.

A stronger-than-estimated trade rebound in December may give policy makers more room to pare stimulus measures after record lending in 2009. The central bank last week guided three- month bill yields higher for the first time since August and may lift the benchmark one-year lending rate to 5.85 percent by year-end from 5.31 percent, economists forecast.

China’s exports grew 17.7 percent last month from a year earlier, the first increase in more than a year, and imports rose to a record, customs data showed yesterday. Gains were boosted by a low base for comparison in 2008.

“The export rebound will add significant momentum to China’s growth, contributing about 7.5 percentage points to growth in gross domestic product,” Yao and He said.

China’s banks lent 600 billion yuan ($87.9 billion) in the first working week of January because of pent-up demand from the end of 2009, Economic Information Daily, a newspaper affiliated to the state-run Xinhua News Agency, reported on its Web site today without citing a source.

Daily Lending

Banks loaned about 100 billion yuan a day last week, the official China Securities Journal reported separately today. The publication said Ba Shusong, deputy head of the finance institute under the State Council Development and Research Center, gave the number at a conference. Ba didn’t specify the source of his information.

That would compare with 294.8 billion yuan for all of November. December data may be released this week. Chinese lending is usually biggest at the start of each year.

The economy will expand 11.6 percent this year with “moderate” stimulus, Yao and He said. A complete withdrawal of measures to aid growth would see a dip to 7.7 percent, they said. The world’s third-biggest economy expanded 8.5 percent last year, according to the median forecast in a Bloomberg News survey of economists.

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601089&sid=aKubmz5QQxuw

With all this remarkable growth in imports and exports, overconfidence by both the consumers and the government, the commodities demand and real estate growth, there's a BIG NEED OF INTEREST RATE RISE if possible. China is overdoing it and some economists predicted that another stimulus is needed to continue the growth. Probably, another 300 Billion Euro will seal the deal. China still needs to rely on World recovery to sustain the growth of it's economy.

The World's Economic growth is still looming. It's only working due to Stimulus and Bailout Package. However, a need of another stimulus is needed to seal the deal not only in China but other Economic Powers as well such U.S, Japan, Great Britain and Germany. I have a feeling that we cannot secure this "Economic Great Recession" until the year 2013 once the Job Creation outdo the Unemployment. I hope that works.

http://graphics8.nytimes.com/images/misc/nytlogo379x64.gif (http://www.nytimes.com)


As China Rises, Fears Grow on Whether Boom Can Endure

By MICHAEL WINES (http://topics.nytimes.com/top/reference/timestopics/people/w/michael_wines/index.html?inline=nyt-per)

January 12, 2010



BEIJING — As much of the world struggles to clamber out of a serious recession (http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier), a gradual flow of economic power from West to East has turned into a flood.

New high points, it seems, are reached daily. China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) surged past the United States to become the world’s largest automobile market — in units, if not in dollars, figures released Monday show. It also toppled Germany as the biggest exporter of manufactured goods, according to year-end trade data. World Bank (http://topics.nytimes.com/top/reference/timestopics/organizations/w/world_bank/index.html?inline=nyt-org) estimates suggest that China — the world’s fifth-largest economy four years ago — will shortly overtake Japan to claim the No. 2 spot.

The shift of economic gravity to China has occurred partly because growth here remained robust even as the world’s developed economies suffered the steepest drop in trade and economic output in decades.

But that did not happen by chance: China’s decisive government intervention in the economy, combined with the defiant optimism of its companies and consumers, has propelled an economy that until recently had seemed tethered to the health of its major export markets, including the United States.

Beijing’s state-run news media, indulging in a moment of self-congratulation, have hailed China’s new economic prominence as proof of national superiority.

The country’s economic miracle, the newspaper People’s Daily boasted last week, exists because its leaders — unlike those in other, unnamed nations — can make quick decisions and ensure underlings carry them out. The Great Recession, the newspaper said, has laid bare cracks in plodding Western-style capitalism.

Yet China confronts a number of challenges about its recent surge, including whether its formula for growth is sustainable, and how it will manage its increasingly strained economic relations with the outside world. Those are likely to prove challenging issues for a leadership unaccustomed to making policy under an international spotlight.

Sustaining a global-size economy is nowhere near as simple as building one, some Chinese and Western economists say. As the Chinese navigate toward a bigger role in the world financial system, they are already running into diplomatic and political headwinds.

At home, ordinary citizens and economists alike worry that the government’s decision to flood the economy with cash has created speculative bubbles — in housing, in lending — that could burst with disastrous effect. But curbing speculation requires moves, such as raising interest rates, that could crimp the sprees of investment and industrial expansion that are the main contributors to growth.

Abroad, the pressure on China to revalue its currency, the renminbi, is strengthening, and it seems sure to intensify after trade statistics released Sunday showed that China’s yearlong downturn in export growth reversed in December. Keeping the renminbi fixed at a low rate against the dollar (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/dollar/index.html?inline=nyt-classifier)

China once could wave off complaints about its currency policies, arguing that it was a developing nation entitled to a bit of slack from its Western customers. But with the world’s fastest-growing economy — and more than $2 trillion in foreign reserves — that argument looks increasingly untenable.

“At a time when you’ve got 10 percent unemployment in the U.S. and a very slow and gradual global recovery — and China seems to be skyrocketing — the pressure on the Chinese to change some of these policies, including the exchange-rate policy, is really going to grow this year,” said Nicholas Consonery, a China analyst at Eurasia Group, a New York-based political risk research firm.

In theory, China’s growing economic clout should benefit everyone: in an interconnected world, growing trade creates jobs and money everywhere.

“China’s extremely important, no doubt about it. And over all, the more important China becomes, the better it is for the American economy,” Scott Kennedy, who heads the Research Center for Chinese Politics and Business at Indiana University (http://topics.nytimes.com/top/reference/timestopics/organizations/i/indiana_university/index.html?inline=nyt-org), said in an interview.

That Shanghai-assembled iPod, Mr. Kennedy said, is the product of American research and design and marketing, and most of the proceeds from its sale go back into American coffers. But China’s rise also poses new risks both for Beijing and for its trading partners.

Its largely bruise-free journey through last year’s economic crisis aside, not everyone is convinced that Beijing has eliminated threats to its financial and economic health.

Hit hard by an initial drop in exports that was frighteningly steep for a leadership that has long promised and delivered fast growth, China poured $585 billion in stimulus money into its domestic economy. Officials also ordered state-run banks to increase their lending by double that amount, triggering a spree of easy money that created jobs for migrant factory workers and fueled rises in the price of assets, like stocks and real estate.

Some experts fear that too much of the stimulus money was put into unprofitable projects and bad loans that will be exposed in a few years. In that view, China’s 2009 boom, in which automakers sold nearly 14 million cars and trucks, and housing prices doubled, is really a sign of an overheated economy at risk of serious recession down the road.

Judged by the numbers, China’s economy still looks robust. In Beijing, officials said, per capita gross domestic product is expected to exceed $4,000 this year, a 10 percent jump from 2009. Last month, the value of China’s exports leaped by nearly a third over the same month in 2008 — and imports jumped 55 percent, pointing toward growth in manufacturing.

But a Chinese economic crisis, which could have been shrugged off a few years ago, would be a considerably more serious event in a world in which Beijing runs the second-largest economy.

The government appears concerned. Last week, the central bank edged up the rate (http://www.nytimes.com/2010/01/08/business/global/08chinaecon.html) on an often-watched interbank loan, the first such hike in five months. That seemed to signal concern that the economy was expanding too quickly.

Many experts see few signs of immediate danger. After all, they note, China has gone on splurges before — building too many steel mills, and too many office buildings — only to see the nation’s breakneck growth sop up the excess capacity. With nearly a billion people still clawing to advance beyond peasant status, they say, China’s growth story has many chapters ahead.

Mr. Kennedy, the Indiana University expert, said he was less certain that endless growth is such a panacea. “No one defies economic laws,” he said. “Eventually you get it, whether you want it or not.” boosts China’s exports and its economy. But increasingly, it angers its trade partners.


Source (http://www.nytimes.com/2010/01/12/world/asia/12china.html?ref=global-home)



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JANUARY 12, 2010



$123,000,000,000,000*

*China’s estimated economy by the year 2040. Be warned.

BY ROBERT FOGEL | JANUARY/FEBRUARY 2010 (http://www.foreignpolicy.com/issues/177/contents/)



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In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. In other words, the average Chinese megacity dweller will be living twice as well as the average Frenchman when China goes from a poor country in 2000 to a superrich country in 2040. Although it will not have overtaken the United States in per capita wealth, according to my forecasts, China's share of global GDP -- 40 percent -- will dwarf that of the United States (14 percent) and the European Union (5 percent) 30 years from now. This is what economic hegemony will look like.

Most accounts of China's economic ascent offer little but vague or threatening generalities, and they usually grossly underestimate the extent of the rise -- and how fast it's coming. (For instance, a recent study (http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=20279) by the Carnegie Endowment for International Peace predicts that by 2050, China's economy will be just 20 percent larger than that of the United States.) Such accounts fail to fully credit the forces at work behind China's recent success or understand how those trends will shape the future. Even China's own economic data in some ways actually underestimate economic outputs.

It's the same story with the relative decline of a Europe plagued by falling fertility as its era of global economic clout finally ends. Here, too, the trajectory will be more sudden and stark than most reporting suggests. Europe's low birthrate and its muted consumerism mean its contribution to global GDP will tumble to a quarter of its current share within 30 years. At that point, the economy of the 15 earliest EU countries combined will be an eighth the size of China's.

This is what the future will look like in a generation. It's coming sooner than we think.

What, precisely, does China have going so right for it?

The first essential factor that is often overlooked: the enormous investment China is making in education. More educated workers are much more productive workers. (As I have reported elsewhere, U.S. data indicate that college-educated workers are three times as productive, and a high school graduate is 1.8 times as productive, as a worker with less than a ninth-grade education.) In China, high school and college enrollments are rising steeply due to significant state investment. In 1998, then-President Jiang Zemin called for a massive increase in enrollment in higher education. At the time, just 3.4 million students were enrolled in China's colleges and universities. The response was swift: Over the next four years, enrollment in higher education increased 165 percent, and the number of Chinese studying abroad rose 152 percent. Between 2000 and 2004, university enrollment continued to rise steeply, by about 50 percent. I forecast that China will be able to increase its high school enrollment rate to the neighborhood of 100 percent and the college rate to about 50 percent over the next generation, which would by itself add more than 6 percentage points to the country's annual economic growth rate. These targets for higher education are not out of reach. It should be remembered that several Western European countries saw college enrollment rates climb from about 25 to 50 percent in just the last two decades of the 20th century.

And it's not just individual workers whose productivity jumps significantly as a result of more education; it's true of firms as well, according to work by economist Edwin Mansfield. In a remarkable 1971 study, Mansfield found that the presidents of companies that have been early adopters of complex new technologies were on average younger and better educated than heads of firms that were slower to innovate.

The second thing many underestimate when making projections for China's economy is the continued role of the rural sector. When we imagine the future, we tend to picture Shanghai high-rises and Guangdong factories, but changes afoot in the Chinese countryside have made it an underappreciated economic engine. In analyzing economic growth, it is useful to divide an economy into three sectors: agriculture, services, and industry. Over the quarter-century between 1978 and 2003, the growth of labor productivity in China has been high in each of these sectors, averaging about 6 percent annually. The level of output per worker has been much higher in industry and services, and those sectors have received the most analysis and attention. (I estimate that China's rapid urbanization, which shifts workers to industry and services, added 3 percentage points to the annual national growth rate.) However, productivity is increasing even for those who remain in rural areas. In 2009, about 55 percent of China's population, or 700 million people, still lived in the countryside. That large rural sector is responsible for about a third of Chinese economic growth today, and it will not disappear in the next 30 years.

Third, though it's a common refrain that Chinese data are flawed or deliberately inflated in key ways, Chinese statisticians may well be underestimating economic progress. This is especially true in the service sector because small firms often don't report their numbers to the government and officials often fail to adequately account for improvements in the quality of output. In the United States as well as China, official estimates of GDP badly underestimate national growth if they do not take into account improvements in services such as education and health care. (Most great advances in these areas aren't fully counted in GDP because the values of these sectors are measured by inputs instead of by output. An hour of a doctor's time is considered no more valuable today than an hour of a doctor's time was before the age of antibiotics and modern surgery.) Other countries have a similar national accounting problem, but the rapid growth of China's service sector makes the underestimation more pronounced.

Fourth, and most surprising to some, the Chinese political system is likely not what you think. Although outside observers often assume that Beijing is always at the helm, most economic reforms, including the most successful ones, have been locally driven and overseen. And though China most certainly is not an open democracy, there's more criticism and debate in upper echelons of policymaking than many realize. Unchecked mandates can of course lead to disaster, but there's a reason Beijing has avoided any repeats of the Great Leap Forward in recent years.

For instance, there is an annual meeting of Chinese economists called the Chinese Economists Society. I have participated in many of them. There are people in attendance who are very critical of the Chinese government -- and very openly so. Of course, they are not going to say "down with Hu Jintao," but they may point out that the latest decision by the finance ministry is flawed or raise concerns about a proposed adjustment to the prices of electricity and coal, or call attention to issues of equity. They might even publish a critical letter in a Beijing newspaper. Then the Chinese finance minister might actually call them up and say: "Will you get some of your people together? We would like to have some of our people meet with you and find out more about what you are thinking." Many people don't realize such back-and-forth occurs in Beijing. In this sense, Chinese economic planning has become much more responsive and open to new ideas than it was in the past.

Finally, people don't give enough credit to China's long-repressed consumerist tendencies. In many ways, China is the most capitalist country in the world right now. In the big Chinese cities, living standards and per capita income are at the level of countries the World Bank would deem "high middle income," already higher, for example, than that of the Czech Republic. In those cities there is already a high standard of living, and even alongside the vaunted Chinese propensity for saving, a clear and growing affinity for acquiring clothes, electronics, fast food, automobiles -- all a glimpse into China's future. Indeed, the government has made the judgment that increasing domestic consumption will be critical to China's economy, and a host of domestic policies now aim to increase Chinese consumers' appetite for acquisitions.

And Europe? Europe, by which I mean the 15 earliest EU members, faces twin challenges of demography and culture, its economic future burdened by a mix of reproductive habits and consumer restraint.

Europeans, of course, won't be eating grass in 2040. Their economic decline over the next 30 years will be relative, not absolute, as technological advances and other factors should allow Europe's overall labor productivity to continue to grow about 1.8 percent annually. Yet their percentage contribution to global GDP will tumble, shrinking by a factor of four, from 21 percent to 5 percent, in a generation.

Demography is the first key issue. The population of Western European countries has been aging rapidly, and that is likely to continue over the next several decades. The basic reason: European couples aren't producing enough babies. Europe's total fertility rate has been below the level needed to replace the population for about 34 years, according to a 2005 Rand Corp. study. As a result, the percentage of women of childbearing age will decline, in the earliest 15 EU countries, from about 50 percent in 2000 (it was also about 50 percent in 1950) to the U.N. projection of about 35 percent in 2040. So we have a double whammy: Not only will reproductive-age women have sharply reduced fertility rates, but the proportion of women who are in their childbearing years will also have declined sharply. By 2040, almost a third of Western Europe's population may be over age 65.

Why are there fewer babies? One key reason is that European attitudes toward sex have evolved sharply. One-hundred fifty years ago, it was considered a sin to enjoy sex, the only legitimate purpose for which was procreation. But today, young women believe that sex is mainly a recreational activity. Behind the fertility trend is a vast cultural shift from the generation that fought in World War II, which married early and produced the great baby boom of 1945 to 1965. The easy availability of birth control and the rise of sex as recreation mean that populations are likely to shrink in many European countries. As early as 2000, the natural rate of increase (births minus deaths) was already negative in Germany and Italy. By 2040, it is likely that the natural increase will be negative in the five largest European countries, except Britain.

So what if Europeans have a little fun now and then? Well, fun has consequences. Declining fertility pushes up the age of the citizenry and shrinks the percentage of people in the workforce, and so impedes growth. Demographic changes also shape the hiring and promotion structures of individual companies, and not necessarily for the better; if the elderly cling to the best jobs well past retirement age, younger workers may have to wait an extra decade, perhaps longer, to get their turn. And because younger workers are a major source of new ideas, slowing down the ascendancy of the next generation may retard the pace of technological change. (If fertility rates remain as low as they have been, Italy's population will fall by half in 50 years. Naturally, politicians are doing everything they can. They are joining with the Holy See and telling young women: Please procreate.)

In another way, Europe's culture confounds economists. Citizens of Europe's wealthy countries are not working longer hours to make higher salaries and accumulate more goods. Rather, European culture continues to prize long vacations, early retirements, and shorter work weeks over acquiring more stuff, at least in comparison to many other developed countries, such as the United States. In my observation, those living in most Western European countries appear to be more content than Americans with the kind of commodities they already have, for example, not aspiring to own more TVs per household. Set aside whether that's virtuous. A promenade in the Jardin du Luxembourg, as opposed to a trip to Walmart for a flat-screen TV, won't help the European Union's GDP growth.

Of course, China faces its own demographic nightmares, and skeptics point to many obstacles that could derail the Chinese bullet train over the next 30 years: rising income inequality, potential social unrest, territorial disputes, fuel scarcity, water shortages, environmental pollution, and a still-rickety banking system. Although the critics have a point, these concerns are no secret to China's leaders; in recent years, Beijing has proven quite adept in tackling problems it has set out to address. Moreover, history seems to be moving in the right direction for China. The most tumultuous local dispute, over Taiwan's sovereignty, now appears to be headed toward a resolution. And at home, the government's increasing sensitivity to public opinion, combined with improving living standards, has resulted in a level of popular confidence in the government that, in my opinion, makes major political instability unlikely.

Could Europe surprise us by growing substantially more than I have predicted? It seems farfetched, but it could happen, either by Europeans curtailing vacations and siesta time to adopt a more workaholic ethos, or by more young women and their partners aligning their views of sex more closely with those of the pope than those of movie stars. Anything's possible, but don't bet on it -- Europeans seem to like their lifestyles just fine, and they've long since given up their dreams of world domination. An unexpected technological breakthrough could also shake things up, though this isn't the sort of thing economists can base predictions on.

To the West, the notion of a world in which the center of global economic gravity lies in Asia may seem unimaginable. But it wouldn't be the first time. As China scholars, who take a long view of history, often point out, China was the world's largest economy for much of the last two millennia. (Chris Patten, the last British governor of Hong Kong, reckons China has been the globe's top economy for 18 of the past 20 centuries.) While Europe was fumbling in the Dark Ages and fighting disastrous religious wars, China cultivated the highest standards of living in the world. Today, the notion of a rising China is, in Chinese eyes, merely a return to the status quo.

LO MAK/REDLINK/CORBIS

Robert Fogel is director of the Center for Population Economics at the University of Chicago Booth School of Business and winner of the 1993 Nobel Memorial Prize in Economics.

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Source (http://www.foreignpolicy.com/articles/2010/01/04/123000000000000?page=0,3)

Fogel rocks.

Not just another fake

The similarities between China today and Japan in the 1980s may look ominous. But China’s boom is unlikely to give way to prolonged slump

CHINA rebounded more swiftly from the global downturn than any other big economy, thanks largely to its enormous monetary and fiscal stimulus. In the year to the fourth quarter of 2009, its real GDP is estimated to have grown by more than 10%. But many sceptics claim that its recovery is built on wobbly foundations. Indeed, they say, China now looks ominously like Japan in the late 1980s before its bubble burst and two lost decades of sluggish growth began. Worse, were China to falter now, while the recovery in rich countries is still fragile, it would be a severe blow not just at home but to the whole of the world economy.

On the face of it, the similarities between China today and bubble-era Japan are worrying. Extraordinarily high saving and an undervalued exchange rate have fuelled rapid export-led growth and the world’s biggest current-account surplus. Chronic overinvestment has, it is argued, resulted in vast excess capacity and falling returns on capital. A flood of bank lending threatens a future surge in bad loans, while markets for shares and property look dangerously frothy.

Just as in the late 1980s, when Japan’s economy was tipped to overtake America’s, China’s strong rebound has led many to proclaim that it will become number one sooner than expected. In contrast, a recent flurry of bearish reports warn that China’s economy could soon implode. James Chanos, a hedge-fund investor (and one of the first analysts to spot that Enron’s profits were pure fiction), says that China is “Dubai times 1,000, or worse”. Another hedge fund, Pivot Capital Management, argues that the chances of a hard landing, with a slump in capital spending and a banking crisis, are increasing.

Scary stuff. However, a close inspection of pessimists’ three main concerns—overvalued asset prices, overinvestment and excessive bank lending—suggests that China’s economy is more robust than they think. Start with asset markets. Chinese share prices are nowhere near as giddy as Japan’s were in the late 1980s. In 1989 Tokyo’s stockmarket had a price-earnings ratio of almost 70; today’s figure for Shanghai A shares is 28, well below its long-run average of 37. Granted, prices jumped by 80% last year, but markets in other large emerging economies went up even more: Brazil, India and Russia rose by an average of 120% in dollar terms. And Chinese profits have rebounded faster than those elsewhere. In the three months to November, industrial profits were 70% higher than a year before.

China’s property market is certainly hot. Prices of new apartments in Beijing and Shanghai leapt by 50-60% during 2009. Some lavish projects have much in common with those in Dubai—notably “The World”, a luxury development in Tianjin, 120km (75 miles) from Beijing, in which homes will be arranged as a map of the world, along with the world’s biggest indoor ski slope and a seven-star hotel.

Average home prices nationally, however, cannot yet be called a bubble. On January 14th the National Development and Reform Commission reported that average prices in 70 cities had climbed by 8% in the year to December, the fastest pace for 18 months; other measures suggest a bigger rise. But this followed a fall in prices in 2008. By most measures average prices have fallen relative to incomes in the past decade (see chart 1).

The most cited evidence of a bubble—and hence of impending collapse—is the ratio of average home prices to average annual household incomes. This is almost ten in China; in most developed economies it is only four or five. However, Tao Wang, an economist at UBS, argues that this rich-world yardstick is misleading. Chinese homebuyers do not have average incomes but come largely from the richest 20-30% of the urban population. Using this group’s average income, the ratio falls to rich-world levels. In Japan the price-income ratio hit 18 in 1990, obliging some buyers to take out 100-year mortgages.

Furthermore, Chinese homes carry much less debt than Japanese properties did 20 years ago. One-quarter of Chinese buyers pay cash. The average mortgage covers only about half of a property’s value. Owner-occupiers must make a minimum deposit of 20%, investors one of 40%. Chinese households’ total debt stands at only 35% of their disposable income, compared with 130% in Japan in 1990.

China’s property boom is being financed mainly by saving, not bank lending. According to Yan Wang, an economist at BCA Research, a Canadian firm, only about one-fifth of the cost of new construction (commercial and residential) is financed by bank lending. Loans to homebuyers and property developers account for only 17% of Chinese banks’ total, against 56% for American banks. A bubble pumped up by saving is much less dangerous than one fuelled by credit. When the market begins to crack, highly leveraged speculators are forced to sell, pushing prices lower, which causes more borrowers to default.

Even if China does not (yet) have a credit-fuelled housing bubble, the fact that property prices in Beijing and Shanghai are beyond the reach of most ordinary people is a serious social problem. The government has not kept its promise to build more low-cost housing, and it is clearly worried about rising prices. In an attempt to thwart speculators, it has reimposed a sales tax on homes sold within five years, has tightened the stricter rules on mortgages for investment properties and is trying to crack down on illegal flows of foreign capital into the property market. The government does not want to come down too hard, as it did in 2007 by cutting off credit, because it needs a lively property sector to support economic recovery. But if it does not tighten policy soon, a full-blown bubble is likely to inflate.
The world’s capital

China’s second apparent point of similarity to Japan is overinvestment. Total fixed investment jumped to an estimated 47% of GDP last year—ten points more than in Japan at its peak. Chinese investment is certainly high: in most developed countries it accounts for around 20% of GDP. But you cannot infer waste from a high investment ratio alone. It is hard to argue that China has added too much to its capital stock when, per person, it has only about 5% of what America or Japan has. China does have excess capacity in some industries, such as steel and cement. But across the economy as a whole, concerns about overinvestment tend to be exaggerated.

Pivot Capital Management points to China’s incremental capital-output ratio (ICOR), which is calculated as annual investment divided by the annual increase in GDP, as evidence of the collapsing efficiency of investment. Pivot argues that in 2009 China’s ICOR was more than double its average in the 1980s and 1990s, implying that it required much more investment to generate an additional unit of output. However, it is misleading to look at the ICOR for a single year. With slower GDP growth, because of a collapse in global demand, the ICOR rose sharply everywhere. The return to investment in terms of growth over a longer period is more informative. Measuring this way, BCA Research finds no significant increase in China’s ICOR over the past three decades.

Mr Chanos has drawn parallels between China and the huge misallocation of resources in the Soviet Union, arguing that China is heading the same way. The best measure of efficiency is total factor productivity (TFP), the increase in output not directly accounted for by extra inputs of capital and labour. If China were as wasteful as Mr Chanos contends, its TFP growth would be negative, as the Soviet Union’s was. Yet over the past two decades China has enjoyed the fastest growth in TFP of any country in the world.

Even in industries which clearly do have excess capacity, China’s critics overstate their case. A recent report by the European Union Chamber of Commerce in China estimates that in early 2009 the steel industry was operating at only 72% of capacity. That was at the depth of the global downturn. Demand has picked up strongly since then. The report claims that the industry’s overcapacity is illustrated by “a startling figure”: in 2008, China’s output of steel per person was higher than America’s. So what? At China’s stage of industrialisation it should use a lot of steel. A more relevant yardstick is the America of the early 20th century. According to Ms Wang of UBS, China’s steel capacity of almost 0.5kg (about 1lb) per person is slightly lower than America’s output in 1920 (0.6kg) and far below Japan’s peak of 1.1kg in 1973.

Many commentators complain that China’s capital-spending spree last year has merely exacerbated its industrial overcapacity. However, the boom was driven mainly by infrastructure investment, whereas investment in manufacturing slowed quite sharply (see chart 2). Given the scale of the spending, some money is sure to have been wasted, but by and large, investment in roads, railways and the electricity grid will help China sustain its growth in the years ahead.

Some analysts disagree. Pivot, for instance, argues that China’s infrastructure has already reached an advanced level. It has six of the world’s ten longest bridges and it boasts the world’s fastest train; there is little room for further productive investment. That is nonsense. A country in which two-fifths of villages lack a paved road to the nearest market town still has plenty of scope for building roads. The same goes for railways. Again, a comparison of China today with the America of a century ago is pertinent. China has roughly the same land area as America, but 13 times more people than the United States did then. Yet on current plans it will have only 110,000km of railway by 2012, compared with more than 400,000km in America in 1916. Unlike Japan, which built “bridges to nowhere” to prop up its economy, China needs better infrastructure.

It is true that in the short term, the revenue from some infrastructure projects may not be enough to service debts, so the government will have to cover losses. But in the long term such projects should lift productivity across the economy. During Britain’s railway mania in the mid-19th century, few railways made a decent financial return, but they brought huge long-term economic benefits.

The biggest cause for worry about China is the third point of similarity to Japan: the recent tidal wave of bank lending. Total credit jumped by more than 30% last year. Even assuming that this slows to less than 20% this year, as the government has hinted, total credit outstanding could hit 135% of GDP by December. The authorities are perturbed. This week they increased banks’ reserve requirement ratio by half a percentage point. They have also raised the yield on central-bank bills.

However, too many commentators talk as if Chinese banks have been on a lending binge for years. Instead, the spurt in 2009, which was engineered by the government to revive the economy, followed several years in which credit grew more slowly than GDP (see chart 3). Michael Buchanan, of Goldman Sachs, estimates that since 2004 China’s excess credit (the gap between the growth rates of credit and nominal GDP) has risen by less than in most developed economies.

Even so, recent lending has been excessive; combined with overcapacity in some industries, it is likely to cause an increase in banks’ non-performing loans. Ms Wang calculates that if 20% of all new lending last year and another 10% of this year’s lending turned bad, this would create new bad loans equivalent to 5.5% of GDP by 2012, on top of 2% now. That is far from trivial, but well below the 40% of GDP that bad loans amounted to in the late 1990s.

Much of the past year’s bank lending should really be viewed as a form of fiscal stimulus. Infrastructure projects that have little hope of repaying loans will end up back on the government’s books. It would have been much better if such projects had been financed more transparently through the government’s budget, but the important question is whether the state can afford to cover the losses.

Official gross government debt is less than 20% of GDP, but China bears argue that this is an understatement, because it excludes local-government debt and the bonds issued by the asset-management companies that took over banks’ previous non-performing loans. Total government debt could be 50% of GDP. But that is well below the average ratio in rich countries, of around 90%. Moreover, the Chinese government owns lots of assets, for example shares of listed companies which are worth 35% of GDP.
Ying and yang

Even if, as argued above, concerns about a financial crash in China are premature, the risks of a dangerous bubble and excessive investment will clearly increase if credit continues to expand at its recent pace. The stitching on the Chinese economy could fray and burst. Would that imply the end of China’s era of rapid growth?

Predictions that China is heading for a prolonged Japanese-style slump ignore big differences between China today and Japan in the late 1980s. Japan was already a mature, developed economy, with a GDP per person close to that of America. China is still a poor, developing country, whose GDP per person is less than one-tenth of America’s or Japan’s. It has ample room to play catch-up with rich economies by adding to its capital stock, importing foreign technology and boosting productivity by shifting labour from farms to factories. This would make it easier for China to recover from the bursting of a bubble.

Chart 4 examines the relationship between growth rates and income per head for six Asian economies. Each plot shows a country’s growth rate and GDP per person relative to America’s for successive ten-year periods, starting when their rapid growth took off. It illustrates how growth rates slow as economies catch up with America, the technological leader. The fact that China’s GDP per head is much lower than Japan’s in the 1980s suggests that its growth potential over the next decade is much higher. Even though China’s labour force will start shrinking after 2016, rapid productivity gains mean that its trend GDP growth rate is still around 8%, down from 10% in the past decade.

Japan’s stockmarket and land-price bubbles in the early 1960s offer a better (and more cheerful) analogy to China than the 1980s bubble era does. Japan’s economy was poorer then, although relative to America its GDP per person was more than double China’s today, and its trend rate of growth was around 9%. According to HSBC, after the bubble burst in 1962-65, Japan’s annual growth rate dipped to just under 6%, but then quickly rebounded to 10% for much of the next decade.

South Korea and Taiwan, which experienced big stockmarket bubbles in the 1980s, are also worth examining. In the five years to 1990, Taipei’s stockmarket surged by 1,600% (in dollar terms) and Seoul’s by 700%, easily beating Tokyo’s 450% gain in the same period. After share prices slumped, annual growth in both South Korea and Taiwan slowed to around 6%, but soon regained its previous pace of 7-8%.

The higher a country’s potential growth rate, the easier it is for the economy to recover after a bubble bursts, so long as its fiscal and external finances are in reasonable shape. Rapid growth in nominal GDP means that asset prices do not need to fall so far to regain fair value, bad loans are easier to work off and excess capacity can be more quickly absorbed by rising demand. The experience of Japan in the 1960s suggests that if China’s bubble bursts, it will hurt growth temporarily but not lead to prolonged stagnation.

However, it is Japan’s experience after the 1980s that most influences the thinking of policymakers in Beijing. Many blame Japan’s deflation and its lost decades of growth on the fact that its government caved in to American demands for an appreciation of the yen. In 1985 central banks in the big rich economies agreed, in the Plaza Accord, to intervene to push down the dollar. By 1988 the yen had risen by more than 100% against the greenback. One reason why policymakers in Beijing have resisted a big rise in the yuan is that they fear it could send their economy, like Japan’s, into a deflationary slump.

The wrong lesson
Yet Japan’s real mistake was not that it allowed the yen to rise, but that it had previously resisted an appreciation for too long, so that when it did happen the yen soared. A second error was that Japan tried to offset the adverse economic effects of a strong yen with over-lax monetary policy. If policy had been tighter, the financial bubble would have been smaller and its aftermath less painful.

This offers two important lessons to China. First, it is better to let the exchange rate rise sooner and more gradually than to risk a much sharper appreciation later. Second, monetary policy should not be too slack. Raising reserve requirements is a small step in the right direction. Despite the bears’ growling, China’s economic collapse is neither imminent nor inevitable. But if it continues to draw the wrong lesson from the tale of Japan, then one day its economy may look just as tatty.

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China's economy: Not just another fake | The Economist (http://www.economist.com/displayStory.cfm?story_id=15270708)

China banks eclipse US rivals

http://www.ft.com/cms/14688186-fe6a-11de-9340-00144feab49a.gif

Chinese banks have cemented their position as the most highly valued financial institutions, taking four of the top five slots in a ranking of banks’ share prices as a multiple of their book values.

China Merchants Bank, China Citic, ICBC and China Construction Bank lead the table, followed by Itaú Unibanco of Brazil, all with a price-to-book multiple of more than three.
Over the past six years, the average price-to-book value of the biggest 50 banks has halved from two to one.

This means that investors believe the average bank is worth no more than the value of its balance sheet. Most western banks are trading at well below their book value.

But investors are attaching a growing premium to emerging markets banks, led by China Merchants, the most highly rated of the biggest 50 banks by market capitalisation, on a multiple of 4.3, according to Bloomberg data.

At the start of the last decade, the US dominated the rankings. The top five were Bank of New York Mellon , Lloyds of the UK, Morgan Stanley, Citigroup and Wells Fargo.

Only last year US Bancorp topped the table and Wells Fargo was in the top 10.

The changes, which have seen the top-rated Chinese banks double in valuation over the past year as western rivals have been derated, reflect growing confidence in emerging markets, particularly China and Brazil.

They indicate concerns about the profitability of western institutions stemming from toxic assets and the drive to force banks to increase capital and liquid funds.

Even western investment banks that have thrived over the past year have been left behind in the price-to-book league table. Goldman Sachs is ranked 22nd and JPMorgan 31st.

“Western markets generally are experiencing their worst prospects for 20 years, and that’s in the valuations,” Robert Law, banks analyst at Nomura, said.

“China in particular is a region that is perceived as less vulnerable to global downturn.”

Although Chinese bank valuations were hit by investor nervousness in 2008, the limited fallout they suffered – combined with positively received government stimulus measures – have allowed them to bounce back.

Some fringe developed economies with a reputation for tough regulatory controls and limited direct or indirect exposure to the subprime problem at the root of the crisis have benefited.

Canadian and Australian banks in particular climbed the price-to-book rankings.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

http://www.ft.com/cms/s/0/1c13f7f2-fe16-11de-9340-00144feab49a.html#

China's 30 years of economic and social progress: A Puzzle!

http://finance.cctv.com/20091222/103087.shtml

This is a very objective documentation of China's past 30 years and what lies ahead - with all her glories and problems that are still awaiting for reasonable answers.

Enjoy!

http://www.economist.com/images/ecdc_125x34.gif (http://www.economist.com/index.cfm)http://www.economist.com/images/pagehead/opinion.gif
China's economy

Not just another fake
Jan 14th 2010 | BEIJING
From The Economist print edition


The similarities between China today and Japan in the 1980s may look ominous. But China’s boom is unlikely to give way to prolonged slump

http://www.economist.com/images/20100116/D0310BB1.jpg
Illustration by Derek Bacon

CHINA rebounded more swiftly from the global downturn than any other big economy, thanks largely to its enormous monetary and fiscal stimulus. In the year to the fourth quarter of 2009, its real GDP is estimated to have grown by more than 10%. But many sceptics claim that its recovery is built on wobbly foundations. Indeed, they say, China now looks ominously like Japan in the late 1980s before its bubble burst and two lost decades of sluggish growth began. Worse, were China to falter now, while the recovery in rich countries is still fragile, it would be a severe blow not just at home but to the whole of the world economy.

On the face of it, the similarities between China today and bubble-era Japan are worrying. Extraordinarily high saving and an undervalued exchange rate have fuelled rapid export-led growth and the world’s biggest current-account surplus. Chronic overinvestment has, it is argued, resulted in vast excess capacity and falling returns on capital. A flood of bank lending threatens a future surge in bad loans, while markets for shares and property look dangerously frothy.

Just as in the late 1980s, when Japan’s economy was tipped to overtake America’s, China’s strong rebound has led many to proclaim that it will become number one sooner than expected. In contrast, a recent flurry of bearish reports warn that China’s economy could soon implode. James Chanos, a hedge-fund investor (and one of the first analysts to spot that Enron’s profits were pure fiction), says that China is “Dubai times 1,000, or worse”. Another hedge fund, Pivot Capital Management, argues that the chances of a hard landing, with a slump in capital spending and a banking crisis, are increasing.

Scary stuff. However, a close inspection of pessimists’ three main concerns—overvalued asset prices, overinvestment and excessive bank lending—suggests that China’s economy is more robust than they think. Start with asset markets. Chinese share prices are nowhere near as giddy as Japan’s were in the late 1980s. In 1989 Tokyo’s stockmarket had a price-earnings ratio of almost 70; today’s figure for Shanghai A shares is 28, well below its long-run average of 37. Granted, prices jumped by 80% last year, but markets in other large emerging economies went up even more: Brazil, India and Russia rose by an average of 120% in dollar terms. And Chinese profits have rebounded faster than those elsewhere. In the three months to November, industrial profits were 70% higher than a year before.

China’s property market is certainly hot. Prices of new apartments in Beijing and Shanghai leapt by 50-60% during 2009. Some lavish projects have much in common with those in Dubai—notably “The World”, a luxury development in Tianjin, 120km (75 miles) from Beijing, in which homes will be arranged as a map of the world, along with the world’s biggest indoor ski slope and a seven-star hotel.

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Average home prices nationally, however, cannot yet be called a bubble. On January 14th the National Development and Reform Commission reported that average prices in 70 cities had climbed by 8% in the year to December, the fastest pace for 18 months; other measures suggest a bigger rise. But this followed a fall in prices in 2008. By most measures average prices have fallen relative to incomes in the past decade (see chart 1).

The most cited evidence of a bubble—and hence of impending collapse—is the ratio of average home prices to average annual household incomes. This is almost ten in China; in most developed economies it is only four or five. However, Tao Wang, an economist at UBS, argues that this rich-world yardstick is misleading. Chinese homebuyers do not have average incomes but come largely from the richest 20-30% of the urban population. Using this group’s average income, the ratio falls to rich-world levels. In Japan the price-income ratio hit 18 in 1990, obliging some buyers to take out 100-year mortgages.

Furthermore, Chinese homes carry much less debt than Japanese properties did 20 years ago. One-quarter of Chinese buyers pay cash. The average mortgage covers only about half of a property’s value. Owner-occupiers must make a minimum deposit of 20%, investors one of 40%. Chinese households’ total debt stands at only 35% of their disposable income, compared with 130% in Japan in 1990.

China’s property boom is being financed mainly by saving, not bank lending. According to Yan Wang, an economist at BCA Research, a Canadian firm, only about one-fifth of the cost of new construction (commercial and residential) is financed by bank lending. Loans to homebuyers and property developers account for only 17% of Chinese banks’ total, against 56% for American banks. A bubble pumped up by saving is much less dangerous than one fuelled by credit. When the market begins to crack, highly leveraged speculators are forced to sell, pushing prices lower, which causes more borrowers to default.

Even if China does not (yet) have a credit-fuelled housing bubble, the fact that property prices in Beijing and Shanghai are beyond the reach of most ordinary people is a serious social problem. The government has not kept its promise to build more low-cost housing, and it is clearly worried about rising prices. In an attempt to thwart speculators, it has reimposed a sales tax on homes sold within five years, has tightened the stricter rules on mortgages for investment properties and is trying to crack down on illegal flows of foreign capital into the property market. The government does not want to come down too hard, as it did in 2007 by cutting off credit, because it needs a lively property sector to support economic recovery. But if it does not tighten policy soon, a full-blown bubble is likely to inflate.

The world’s capital

China’s second apparent point of similarity to Japan is overinvestment. Total fixed investment jumped to an estimated 47% of GDP last year—ten points more than in Japan at its peak. Chinese investment is certainly high: in most developed countries it accounts for around 20% of GDP. But you cannot infer waste from a high investment ratio alone. It is hard to argue that China has added too much to its capital stock when, per person, it has only about 5% of what America or Japan has. China does have excess capacity in some industries, such as steel and cement. But across the economy as a whole, concerns about overinvestment tend to be exaggerated.

Pivot Capital Management points to China’s incremental capital-output ratio (ICOR), which is calculated as annual investment divided by the annual increase in GDP, as evidence of the collapsing efficiency of investment. Pivot argues that in 2009 China’s ICOR was more than double its average in the 1980s and 1990s, implying that it required much more investment to generate an additional unit of output. However, it is misleading to look at the ICOR for a single year. With slower GDP growth, because of a collapse in global demand, the ICOR rose sharply everywhere. The return to investment in terms of growth over a longer period is more informative. Measuring this way, BCA Research finds no significant increase in China’s ICOR over the past three decades.

Mr Chanos has drawn parallels between China and the huge misallocation of resources in the Soviet Union, arguing that China is heading the same way. The best measure of efficiency is total factor productivity (TFP), the increase in output not directly accounted for by extra inputs of capital and labour. If China were as wasteful as Mr Chanos contends, its TFP growth would be negative, as the Soviet Union’s was. Yet over the past two decades China has enjoyed the fastest growth in TFP of any country in the world.

Even in industries which clearly do have excess capacity, China’s critics overstate their case. A recent report by the European Union Chamber of Commerce in China estimates that in early 2009 the steel industry was operating at only 72% of capacity. That was at the depth of the global downturn. Demand has picked up strongly since then. The report claims that the industry’s overcapacity is illustrated by “a startling figure”: in 2008, China’s output of steel per person was higher than America’s. So what? At China’s stage of industrialisation it should use a lot of steel. A more relevant yardstick is the America of the early 20th century. According to Ms Wang of UBS, China’s steel capacity of almost 0.5kg (about 1lb) per person is slightly lower than America’s output in 1920 (0.6kg) and far below Japan’s peak of 1.1kg in 1973.

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Many commentators complain that China’s capital-spending spree last year has merely exacerbated its industrial overcapacity. However, the boom was driven mainly by infrastructure investment, whereas investment in manufacturing slowed quite sharply (see chart 2). Given the scale of the spending, some money is sure to have been wasted, but by and large, investment in roads, railways and the electricity grid will help China sustain its growth in the years ahead.

Some analysts disagree. Pivot, for instance, argues that China’s infrastructure has already reached an advanced level. It has six of the world’s ten longest bridges and it boasts the world’s fastest train; there is little room for further productive investment. That is nonsense. A country in which two-fifths of villages lack a paved road to the nearest market town still has plenty of scope for building roads. The same goes for railways. Again, a comparison of China today with the America of a century ago is pertinent. China has roughly the same land area as America, but 13 times more people than the United States did then. Yet on current plans it will have only 110,000km of railway by 2012, compared with more than 400,000km in America in 1916. Unlike Japan, which built “bridges to nowhere” to prop up its economy, China needs better infrastructure.

It is true that in the short term, the revenue from some infrastructure projects may not be enough to service debts, so the government will have to cover losses. But in the long term such projects should lift productivity across the economy. During Britain’s railway mania in the mid-19th century, few railways made a decent financial return, but they brought huge long-term economic benefits.

The biggest cause for worry about China is the third point of similarity to Japan: the recent tidal wave of bank lending. Total credit jumped by more than 30% last year. Even assuming that this slows to less than 20% this year, as the government has hinted, total credit outstanding could hit 135% of GDP by December. The authorities are perturbed. This week they increased banks’ reserve requirement ratio by half a percentage point. They have also raised the yield on central-bank bills.

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However, too many commentators talk as if Chinese banks have been on a lending binge for years. Instead, the spurt in 2009, which was engineered by the government to revive the economy, followed several years in which credit grew more slowly than GDP (see chart 3). Michael Buchanan, of Goldman Sachs, estimates that since 2004 China’s excess credit (the gap between the growth rates of credit and nominal GDP) has risen by less than in most developed economies.

Even so, recent lending has been excessive; combined with overcapacity in some industries, it is likely to cause an increase in banks’ non-performing loans. Ms Wang calculates that if 20% of all new lending last year and another 10% of this year’s lending turned bad, this would create new bad loans equivalent to 5.5% of GDP by 2012, on top of 2% now. That is far from trivial, but well below the 40% of GDP that bad loans amounted to in the late 1990s.

Much of the past year’s bank lending should really be viewed as a form of fiscal stimulus. Infrastructure projects that have little hope of repaying loans will end up back on the government’s books. It would have been much better if such projects had been financed more transparently through the government’s budget, but the important question is whether the state can afford to cover the losses.

Official gross government debt is less than 20% of GDP, but China bears argue that this is an understatement, because it excludes local-government debt and the bonds issued by the asset-management companies that took over banks’ previous non-performing loans. Total government debt could be 50% of GDP. But that is well below the average ratio in rich countries, of around 90%. Moreover, the Chinese government owns lots of assets, for example shares of listed companies which are worth 35% of GDP.

Ying and yang

Even if, as argued above, concerns about a financial crash in China are premature, the risks of a dangerous bubble and excessive investment will clearly increase if credit continues to expand at its recent pace. The stitching on the Chinese economy could fray and burst. Would that imply the end of China’s era of rapid growth?

Predictions that China is heading for a prolonged Japanese-style slump ignore big differences between China today and Japan in the late 1980s. Japan was already a mature, developed economy, with a GDP per person close to that of America. China is still a poor, developing country, whose GDP per person is less than one-tenth of America’s or Japan’s. It has ample room to play catch-up with rich economies by adding to its capital stock, importing foreign technology and boosting productivity by shifting labour from farms to factories. This would make it easier for China to recover from the bursting of a bubble.

http://www.economist.com/images/20100116/CBB738.gif

Chart 4 examines the relationship between growth rates and income per head for six Asian economies. Each plot shows a country’s growth rate and GDP per person relative to America’s for successive ten-year periods, starting when their rapid growth took off. It illustrates how growth rates slow as economies catch up with America, the technological leader. The fact that China’s GDP per head is much lower than Japan’s in the 1980s suggests that its growth potential over the next decade is much higher. Even though China’s labour force will start shrinking after 2016, rapid productivity gains mean that its trend GDP growth rate is still around 8%, down from 10% in the past decade.

Japan’s stockmarket and land-price bubbles in the early 1960s offer a better (and more cheerful) analogy to China than the 1980s bubble era does. Japan’s economy was poorer then, although relative to America its GDP per person was more than double China’s today, and its trend rate of growth was around 9%. According to HSBC, after the bubble burst in 1962-65, Japan’s annual growth rate dipped to just under 6%, but then quickly rebounded to 10% for much of the next decade.

South Korea and Taiwan, which experienced big stockmarket bubbles in the 1980s, are also worth examining. In the five years to 1990, Taipei’s stockmarket surged by 1,600% (in dollar terms) and Seoul’s by 700%, easily beating Tokyo’s 450% gain in the same period. After share prices slumped, annual growth in both South Korea and Taiwan slowed to around 6%, but soon regained its previous pace of 7-8%.

The higher a country’s potential growth rate, the easier it is for the economy to recover after a bubble bursts, so long as its fiscal and external finances are in reasonable shape. Rapid growth in nominal GDP means that asset prices do not need to fall so far to regain fair value, bad loans are easier to work off and excess capacity can be more quickly absorbed by rising demand. The experience of Japan in the 1960s suggests that if China’s bubble bursts, it will hurt growth temporarily but not lead to prolonged stagnation.

However, it is Japan’s experience after the 1980s that most influences the thinking of policymakers in Beijing. Many blame Japan’s deflation and its lost decades of growth on the fact that its government caved in to American demands for an appreciation of the yen. In 1985 central banks in the big rich economies agreed, in the Plaza Accord, to intervene to push down the dollar. By 1988 the yen had risen by more than 100% against the greenback. One reason why policymakers in Beijing have resisted a big rise in the yuan is that they fear it could send their economy, like Japan’s, into a deflationary slump.

The wrong lesson
http://www.economist.com/images/20100116/D0310BB2.jpg
Illustration by Derek Bacon

Yet Japan’s real mistake was not that it allowed the yen to rise, but that it had previously resisted an appreciation for too long, so that when it did happen the yen soared. A second error was that Japan tried to offset the adverse economic effects of a strong yen with over-lax monetary policy. If policy had been tighter, the financial bubble would have been smaller and its aftermath less painful.

This offers two important lessons to China. First, it is better to let the exchange rate rise sooner and more gradually than to risk a much sharper appreciation later. Second, monetary policy should not be too slack. Raising reserve requirements is a small step in the right direction. Despite the bears’ growling, China’s economic collapse is neither imminent nor inevitable. But if it continues to draw the wrong lesson from the tale of Japan, then one day its economy may look just as tatty.


Copyright © 2010 The Economist Newspaper and The Economist Group. All rights reserved.


Source (http://www.economist.com/opinion/displayStory.cfm?story_id=15270708&source=most_read)
http://b.scorecardresearch.com/b?c1=2&c2=6036424&c3=&c4=www.economist.com/opinion/PrinterFriendly.cfm&c5=&c6=&c15=&cv=1.3&cj=1

^^

I don't like the conclusion. You know that raising the currency may harm the economy. Plus, the country is not ready for that yet. They have to wait until the Developed countries recovered and once the Domestic Economy catipulates and increase to 60 - 70% of the overall Chinese Economy. I am certain that the Chinese Government may do something stricter but not that strict due to the current condition of the World Economy.

^^ If they raise the currency "only a little" (say less than 10% a year) Chinese exports will be still very competitive. However the impact on imports will be quite important as all they'll have to pay less RMB for the same commodities, components, etc they import. As a result inflation is cooled drastically. China is reserving currency appreciation for periods of inflation for this reason. As soon as inflation rises above 4%~ you'll see how the Yuan starts climbing again :D

^^
I like the idea. However, there is something that needs to be agree upon. First, the recession recovery is artificial for most countries due to stimulus. I still have doubts on what will happened if the governments will not go for another stimulus this year. If all of the countries agree for another stimulus, there is probably a good sense of curbing the Yuan appreciation. However, I will not find any solidarity until the whole world economic recovery is felt through job growth and middle income growth and stability. So far, those are the hindrance that may cause some instability with the economic recovery.

Another important criteria to deal with is the housing and commercial market. The growth is so high that bubble is being created and may lead to another catastrophe. The banks need to subsidize the lending and raise the interest rates for stabilization. If not, then in 6 months, the growth will be catastrophic and may lead to a big turn around or 'burst'.

China's 30 years of economic and social progress: A Puzzle!

http://finance.cctv.com/20091222/103087.shtml

This is a very objective documentation of China's past 30 years and what lies ahead - with all her glories and problems that are still awaiting for reasonable answers.

Enjoy!

Nothing to enjoy, it's just in chinese :(

Nothing to enjoy, it's just in chinese :(

Learn Chinese and broaden your horizon and spectrum of enjoyment! :)

China Overcomes US and Becomes Brazil's Number One Trade Partner

Brazilian Ministry of Development, Industry and Foreign Trade's just released final, revised report on Brazil's international commerce in 2009 shows that in 2009, Brazil's trade with the United States totaled US$ 35.9 billion (exports: $15.7 billion; imports: $20.2 billion).

But, for the first time, trade with China was more: a total of US$ 36.1 billion (exports: US$ 20.2 billion; imports: US$ 15.9 billion). The difference was only $200 million, but that does not make it any less a historical moment.

In other economic news, the president of the Central Bank, Henrique Meirelles, reports that Brazil has now met its inflation targets for the sixth consecutive year.

He was able to make that affirmation after the government statistical bureau (IBGE) released its Broad Consumer Price Index (IPCA) for the year of 2009. The result was inflation of 4.31%. The government target was 4.5%.

Meirelles said the real significance of having inflation under control was that it created a "foreseeable" economy where investments would increase naturally. He pointed out that average GDP growth over the past few years has been 5% (almost double recent growth, which, of course, was down due to the international financial crisis).

Brazil's Central Bank (Fed) president added that wage earners benefited from controlled inflation and the job market showed a vigorous variation of employment levels.

Meirelles concluded by saying that Brazil begins the 21st century with international respect and the perspective of sustained growth over a long period that will be characterized by a substantial reduction in social inequality.

BNDES Raises US $1 billion

The Brazilian Development Bank (BNDES) has announced the conclusion of a US$ 1 billion bond offer on international markets The bonds mature in July 2020 and will have a yield of 5.634% per year.

The BNDES says that is the lowest bond yield that a non-sovereign Brazilian emitter has been obligated to pay on 10-year bonds since the beginning of the international financial crisis in 2008.

Along with that good news, according to the BNDES, demand for the papers was higher than supply, making the offer a complete success.

http://www.brazzilmag.com/component/content/article/81-january-2010/11700-china-overcomes-us-and-becomes-brazils-number-one-trade-partner.html

http://www.chinadaily.com.cn/2009image_e/logo1.jpg (http://www.chinadaily.com.cn)

Index futures on deck for foreign investors

(China Daily/Agencies)
Updated: 2010-01-14 07:57



Foreign investors will be able to trade China's new stock index futures within two or three years, according to Leo Melamed, chairman emeritus of CME Group Inc, the world's biggest futures exchange.

The China Securities Regulatory Commission said last week that it will allow trading of Chinese stock-index futures, agreements to buy or sell an index at a present value on an agreed-upon date. The regulator has yet to release details on who will be allowed to trade the futures.

Index futures are part of China's push to make more investment options available in the world's third-biggest stock market by value. China restricts overseas investors to buying so-called B shares that trade in US dollars in Shanghai and Hong Kong dollars in Shenzhen. Yuan-denominated shares are limited to Chinese citizens and approved overseas investors under the qualified foreign institutional investor, or QFII, program.

China may also expand bond market trading in the next two to three years "if everything goes smoothly" with stock index futures, Melamed said in Chicago, following a Bloomberg Television interview. Melamed advises China's regulators on the creation of its futures market.


QFII program

Foreign institutions may also be allowed to trade index futures using a portion of their QFII quota, according to Jing Ulrich, chairwoman of China equities and commodities at JPMorgan Chase & Co in Hong Kong.

The nation's stock watchdog approved 94 foreign institutions, including Abu Dhabi Investment Authority, Deutsche Bank AG, and Goldman Sachs Group Inc, as of the end of 2009 to buy bonds and stocks in China. The nation's currency regulator, the State Administration of Foreign Exchange, grants a quota to QFIIs and has set the total quota at $30 billion.

Index futures may help ease volatility after the benchmark Shanghai Composite Index doubled in 2007, slumped 65 percent in 2008 and rebounded last year. Until now, Chinese investors could only profit from gains in equities.

The first stock index contracts, based on China's CSI 300 Index, may begin trading after the annual National People's Congress meeting in March, an official with knowledge of the matter said earlier this month.

Stock index futures are agreements to buy or sell an index at a preset value on an agreed date. The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan, according to the trading rules the exchange set.

The China Financial Futures Exchange plans to increase the amount of money investors must set aside to trade stock index futures to 12 percent of the contract value from 10 percent, the Shanghai Securities News reported on Jan 12.

The exchange will also limit the number of contracts for the same settlement date an investor can hold to 100, according to the newspaper.

(http://www.chinadaily.com.cn/bizchina/2010-01/14/content_9317832.htm)Source (http://www.chinadaily.com.cn/bizchina/2010-01/14/content_9317832.htm)

^^

So China is opening up. It seems like they are starting to get aggressive. In my opinion, they better stay conservative and not do something that may give future risks not only to their market, but to their economy as well. Their market and economic system or structure is working for them smoothly. Why are they trying more? This is not a good idea. They better scrap this plan or they are going to face something they don't like. Just like what happened to Japan on the late 1980s.

I think if anybody has to worry about the lost decade of Japan it is surely not China it is US of A the exact same events . Bubbles blew the government bailed out every next company sluggish growth for the next 10 years . Thats what certainly lies ahead for the US of A

Please read the 'Not just another fake' article posted above and see why China is not like Japan in the 80-90s.

Please read the 'Not just another fake' article posted above and see why China is not like Japan in the 80-90s.

The writer was write in many things but he forgot about the GPD per capita among the Chinese population. China is still ranking very low in that category (around rank 100 - 120 in all countries respectively). Majority of the population still can't afford to live a good life that is comparable to Hong Kong, Korean and Taiwan. Many people can't even afford to use the High Speed Train. That particular category must be improve by not using inflation and currency rise.

Remember that Globalization is still vulnerable and China doesn't have the global influence in terms of products and services. Their innovation is not as good as other Developed Countries. Their system, which is good, will not work if the country will open up. Some foreign companies and investors will manipulate the market and once it goes down, they will just leave and do not care.

China's economy is good but it's not better. For the Yuan to rise and the market to open up, it needs to secure itself up with better R & D Development, Government reforms and anti-corruption, better improvisation and the most important of all, better standard of living for everyone.

Actually, I think the current economic and market system is perfect enough. There is no need for improvisation except for the few I mentioned. I think conservative approach is still the best ideal.

I heard starting 2010, China will switch their economy to domestic consumption. I don't know what Chinese government plan to do, but I believe one of it will slowly increase people income to boost domestic consumption. A very risky and fragile but also badly needed for China future.

BEIJING, Jan. 21 (Xinhua) -- China's economy expanded 8.7 percent in 2009 from a year earlier, exceeding the government's annual growth target of 8 percent, according to the official data.

Gross domestic product (GDP) reached 33.54 trillion yuan (4.91 trillion U.S. dollars) in 2009, Ma Jiantang, director of the National Bureau of Statistics (NBS), told a press conference Thursday.

China's economy rose 10.7 percent year on year in the fourth quarter. This compared with 6.2 percent growth in the first quarter, 7.9 percent in the second, and 9.1 percent in the third.

Zhuang Jian, senior economist of the Asian Development Bank, said the fourth quarter growth rate was higher than previous market expectations, with most economists expecting an increase of 10 percent year on year.

"The accelerating GDP growth in the fourth quarter was due to a low basis of the same period in 2008, when the quarterly GDP expanded 6.8 percent from a year earlier, also indicating that the country's economy is on a strong rebound," Zhuang said.

Zhu Baoliang, chief economist of the State Information Center, told Xinhua: "The GDP growth last year was far better than expected, which is a solid foundation for sustainable economic development in 2010."

According to the NBS, in 2009, the value-added of the primary sector topped 3.55 trillion yuan, up 4.2 percent from a year earlier; that of the industrial sector stood at 15.7 trillion yuan, up 9.5 percent year on year; and the tertiary sector, services, reported value-added totaling 14.29 trillion yuan, up 8.9 percent.

"Last year was the most difficult for the economy in the new century," said Ma Jiantang. "Thanks to government efforts to deal with difficulties, the economy ended an accelerating slide and began to recover."

Ma attributed the recovery mainly to the implementation of the proactive fiscal policy and moderately loose monetary policy, as well as the government stimulus package to cope with the global financial crisis.

He described the country's economic development last year as a "harvest," saying the newly released figures confirmed a V-shaped recovery.

Since November 2008, the government has adopted a series of stimulus measures, including a 4-trillion yuan stimulus package, tax cuts, and consumer subsidies to shore up growth and employment.

An important component of the stimulus package was the revitalization scheme for 10 major industries, including steel, car making, textiles and machinery, to which the government devoted huge investment.

It also put forward preferential policies to encourage sales of home appliances, cars and motorbikes in rural areas. More government investment came to infrastructure, scientific research and public services.

Meanwhile, the government shifted from a tight monetary policy in 2008 to the moderately easy monetary policy in 2009 to help the national economy counter adverse impacts of the financial crisis.

Figures from the People's Bank of China, the central bank, showed new yuan-denominated lending last year hit a record 9.59 trillion yuan, almost double that of the previous year.

The value-added of industry rose 11 percent in 2009 from a year earlier. Retail sales rose 16.9 percent year on year, while fixed-asset investment rose 30.1 percent.

Ma gave no figures for the respective contributions of exports, consumption, and investment to the GDP growth, but promised to disclose the figures at the end of the month.

Yu Yongding, a research fellow with Chinese Academy of Social Sciences, said the government's stimulus package was a success in "risk control," but some measures did not serve a balanced economy. "The government should focus more on economic structure adjustment."

Zhang Liqun, a researcher with the Development Research Center of the State Council, echoed Yu, by saying heavy investment and strong consumption had driven the economic growth to accelerate last year.

"The economic development last year was powered mainly by the engine of government-stimulated investment," Zhang said. "The country needs to seek balanced development pattern to seek sustainable development."

According to the NBS, China's retail sales totaled 12.53 trillion yuan last year, up 15.5 percent from a year earlier. The growth rate was 16.9 percent when deducting inflation.

"Although consumption expanded fast last year, domestic demand was still not as large as expected," said Zhang.

At the Central Economic Work Conference held in December, the government vowed to focus on expanding domestic consumption, supporting agriculture, and improving people's living standards in 2010.

Asked whether the government would end the stimulus package or introduce more stimulus plans, Ma said, "A key point of macro-regulation this year would be to balance the tasks of ensuring stable and relatively fast economic growth, adjusting economic structure and regulating inflation prospects."

Ma expected stable and relatively fast development of China's economy in 2010, due to the facts that world economic environment would improve slowly, and domestic investment and consumption were expected to increase.

"More over, exports and imports in 2010 will shift from a decreasing momentum to contribute to the growth of the economy," Ma said.

The NBS figures showed China's foreign trade totaled 2.2 trillion U.S. dollars in 2009, down 13.9 percent from a year earlier. But it began to increase in November, when the figure rose 9.8 percent from a year earlier.

"Although China had achieved remarkable successes in economic development and combating the world economic downturn last year, there are still domestic challenges and uncertainties in world market," said Ma.

The country this year would roll out more measures to improve the economic pattern, while eliminating outdated production capacity, controlling inflation, and preventing real estate prices from rising too fast, he said.
(xinhua)

http://graphics8.nytimes.com/images/misc/nyt-global-edition-masthead-logo.gif (http://www.nytimes.com)


January 21, 2010
China on Path to Become Second-Largest Economy
By EDWARD WONG (http://topics.nytimes.com/top/reference/timestopics/people/w/edward_wong/index.html?inline=nyt-per)




BEIJING — China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) said on Thursday that its economy rose by 10.7 percent in fourth quarter compared with a year ago, as the country continued to surge forward even as many other nations are still trying to punch through the global recession (http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier). That was up from a revised growth rate of 9.1 percent in the third quarter.

Over the whole year, the Chinese gross domestic product grew 8.7 percent, surpassing the 8 percent growth-rate benchmark that Chinese leaders assert is necessary to maintain social stability. If China keeps up that growth rate, it will very likely replace Japan (http://www.nytimes.com/info/japan/?inline=nyt-geo) as the world’s second-largest economy by the end of this year.

The National Bureau of Statistics also announced on Thursday that industrial production in December increased by 18.5 percent and retail sales rose by 17.5 percent. The December consumer price index (http://topics.nytimes.com/top/reference/timestopics/subjects/c/consumer_price_index/index.html?inline=nyt-classifier) grew by 1.9 percent and producer price index (http://topics.nytimes.com/top/reference/timestopics/subjects/p/producer_price_index/index.html?inline=nyt-classifier) by 1.7 percent.

The numbers were generally in line with earlier predictions.

Chinese officials are clearly worried about inflation and bubbles, especially in real estate, but the latest economic statistics will no doubt drive the triumphant tone of recent official pronouncements on the Chinese economy.

Much of that commentary has emphasized the contrast between China’s relatively successful weathering of the global recession and the severe downturn that still afflicts Western economies, including the United States.
A front-page signed editorial on Jan. 5 in the People’s Daily, the official mouthpiece of the Communist Party, praised the party for its far-sighted economic policies and lauded the Chinese economic model.

“When the financial crisis forced the neoliberal economic system into a dead end, the shortcomings of the capitalist system were exposed for all to see,” the editorial said. “But a China that was pushed to a crossroads proved its ‘national capabilities’ in taking on a crisis by answering with the advantage of the socialist system with Chinese characteristics.”

Economic numbers released on Thursday also showed China’s export industry was still responsible for much of its growth. Some Chinese economists have said China must restructure its economy so that it begins to rely more on domestic consumption and less on exports, which are greatly affected by the overall health of the world economy.

Chinese officials remain concerned about inflation, excessive bank lending and loan defaults. In recent weeks, they have acted on several fronts to address those issues.

On Jan. 7, the central bank raised a key interest rate, the first time it had done so in nearly five months. Five days later, regulators ordered state-owned banks to set aside a larger share of their deposits as reserves against failed loans. Investors and analysts had not expected such a move until the second quarter of this year.

On Wednesday, Bank of China ordered its credit officials to halt any new renminbi loans in an attempt to curb overheated fast lending growth in the first few weeks of this month.

Economists said China would move to further tighten bank lending to confront inflationary fears and swelling asset bubbles.

“The first half of 2010 is likely to be characterized by gradual policy tightening, chiefly through administrative measures,” Jing Ulrich, director of the China equities and commodities division of J. P. Morgan (http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org) in Hong Kong, wrote in a report on Thursday. “Concerns about capital inflows and the health of the export sector will limit the scope for interest rate tightening, but we do expect to see a moderation in new bank loans and the use of reserve requirements to manage the volume of money supply.”

Other countries, especially the United States, have also said the artificially low value of the renminbi (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/yuan/index.html?inline=nyt-classifier) gives China an unfair advantage in exports, and governments will most likely press China much harder this year to strengthen its currency.


Copyright 2010 (http://www.nytimes.com/ref/membercenter/help/copyright.html) The New York Times Company (http://www.nytco.com/)

Source (http://www.nytimes.com/2010/01/21/business/global/21chinaecon.html?ref=global-home)

So, China's economy has not reached $5T yet as of end of 2009. But it seems likely it will surpass $5T at end of 2010.

So, China's economy has not reached $5T yet as of end of 2009. But it seems likely it will surpass $5T at end of 2010.

That's simply because the inflation for 2009 was negative.

GDP for 2008: 31.40t yuan
GDP for 2009: 33.54t yuan

Increase of 6.8% only. So GDP growth was 8.7% but inflation (GDP inflation, not CPI inflation which is different).subtracts almost 2% from the GDP.

So, China's economy has not reached $5T yet as of end of 2009. But it seems likely it will surpass $5T at end of 2010.


I am not sure if surpassed or not. The real question is if it passed Japan as the second biggest economy. The Japan's GDP numbers will be release next month. I think the Chinese Government doesn't really care about the numbers but I think they passed due to revised numbers on GDP last year.

Japan's yen has increased alot. This year it will weaken, so Japan's economy in dollar terms will be smaller too. As usual, there will be deflation in Japan, also for 2010.

I think China will pass Japan this year or next year.

I am not sure if surpassed or not. The real question is if it passed Japan as the second biggest economy. The Japan's GDP numbers will be release next month. I think the Chinese Government doesn't really care about the numbers but I think they passed due to revised numbers on GDP last year.

Exactly, this kind of numbers are usually revised, and usually up..

Wasn't there some uncertainty like this a few years ago on mainland China's GDP compared to Germany's GDP?
I think at first, mainland China's GDP was estimated to be smaller than Germany's GDP that year. But a few months later, mainland China's GDP was revised up so that it was larger than Germany's.

yeah that was in 2008. The german GDP was set at 3.3 trillion usd while the Chinese Gdp was set at 3.28 trillion USD. Anyway later the figures were revised and Chinese GDP was estimated to have passed in 2008 itself.

The column writer on bloomberg who reports on Asia Till now calls China and its 3.2 trillion USD are in a mess instead of learning from the mistakes of others they are just blowing up the bubbles.In fact i have wrriten him 3 mails reminding that the Chinese gdp was 3.2 and now it is 4.4 Trillion USD, He never wrote back and also he went on use the figure of 3.2 trillion usd 3 to 4 more times.I am sure he is using it again

Govt helps college graduates get employment

2010-01-23


6.3 million students expected to earn their degrees this year

A college diploma is still the ticket to a good job in China, even under the deepest economic slump in decades, the latest official graduate employment rate shows.

"Last year, we made all efforts to help the college seniors find jobs and the employment rate reached 87 percent by the end of last year," Yin Chengji, spokesman with the Ministry of Human Resources and Social Security said at a press conference on Friday.

The data with the ministry showed that the number of college grads is more than 6.1 million last year and will reach 6.3 million this year.

Helping graduates find employment in 2010 is still at the top of the government's agenda, Yin said, adding they will provide employment information and government-funded posts in communities for those unemployed grads.

But the large number of graduates this year is posing a great challenge to the authorities in how to help them get employed, he added.

Last year alone, in order to increase the graduate employment rate, about half a million government-funded positions were provided to grads, Chen Jianhui, deputy-director of the Chinese Talents Society told China Daily on Friday.

"With the efforts taken by the authorities, getting a job for a college grad is not that difficult. For the rest of the unemployed, some of them have impractical expectations for their first jobs," Chen said.

Wang Boqing, manager of MyCOS HR Digital Information Co Ltd, said the rate is reasonable, and that many students landed work in the last half of the year.

As a senior student majoring in information engineering at Communication University of China, Ai Zeng believes the employment rate among his fellow students who graduated last year could be even higher than 87 percent.

"None of my classmates failed to find their bread last year," Ai said.

But some education experts and college grads are questioning the credibility of the graduate employment rate.

Xiong Bingqi, vice-president of 21st Century Education Research Institute, a non-governmental organization committed to public education policy, said in a speech last year that the employment rate reached the level of saturation before March last year, so a surge in late 2009 was impossible.

"It means that many problems exist in the statistical process," Xiong said, adding that many universities did not try to adjust to job market demands, but instead faked work contracts to increase the employment rate.

According to the current statistics methods, many universities regard those students who receive further education domestic and abroad, and those who start private businesses, like opening e-stores, are counted as employed, Xiong said.

According to unwritten rules at many universities, students cannot graduate if they do not find a job, Southern Metropolis Daily reported in July last year.

Yan Yiqi, a senior English major at Nanjing University, is surprised by the employment rate released recently and said that 87 percent is much higher than she expected because of the harsh job market under the economic downturn.

"The so-called employment rate doesn't reflect the truth to me since I overheard the rumor that those who flunked the postgraduate test and intend for another shot next year were grouped among those who got employment," Yan said.

Facing such fierce competition in the job market, many college seniors last year chose postgraduate entrance exams and civil servant exams as their way out.

More than 1.4 million students applied for 2010 postgraduate entrance exams, a year-on-year increase of 13 percent, according to figures from the Ministry of Education. About 5 million people took the civil servant recruitment exam last year, according to Xinhua.

http://www.chinadaily.com.cn/china/2010-01/23/content_9366164.htm

Huawei shows China's scope for organic growth

HONG KONG (Reuters) - Its history is peppered with cloak-and-dagger stories which fostered a reputation for winning technology by hook or by crook. But today Huawei Technologies' disciplined growth strategy is a beacon to many emerging markets firms.

China computer leader Lenovo's fraught purchase of IBM's PC business four years ago has become a symbol of the clumsier aspects of China's attempts at overseas expansion. But the telecoms group founded in 1987 by a former Chinese military researcher to sell pre-digital telecoms switches to Hong Kong has built its business patiently, even, at times, stealthily.

Huawei has arguably become China's most successful company on the global stage. The Shenzhen-based firm has achieved international success that other major Chinese corporations, such as Haier in consumer electronics, Geely in autos and ICBC in banking, can only dream of.

Today global communications network operators from Dubai to Nigeria to Latin America look beyond the tales of military ties and corporate espionage to do big business with Huawei. Business partners include Vodafone, Deutsche Telekom and security software leader Symantec Corp, which runs a joint venture with the company.

In its biggest success to date, the company recently beat out a top global rival, Ericsson, in its own backyard: in December, 2009, Huawei won deals to build next-generation networks for major mobile carriers in Norway and Sweden.

Such operational gains propelled the firm from obscurity to the world's No. 2 telecoms equipment maker last year, surpassing the likes of Alcatel Lucent and Nokia Siemens Networks to rank behind only Ericsson.

Both Huawei and ZTE Corp, whose main focus is on emerging markets, have had an organic growth strategy, shunning acquisitions in favor of a build-it-themselves approach.

Product development has been a cornerstone of the company since its founding by Ren Zhengfei, a media-shy former engineer with the People's Liberation Army, who struck out on his own.

OVERREACHING

That contrasts sharply with Lenovo's purchase of the pioneering IBM PC franchise in 2005. This ground-breaking acquisition by a Chinese company of a major U.S. brand name proved to be overreaching on several fronts.

The biggest issue was merging two fundamentally different cultures: Lenovo was built to sell PCs in fast-growing Asian consumer and small-business markets while the IBM PC operation had evolved into a high-end laptop business mostly aimed at professionals working for multinational firms.

First, though, the Lenovo-IBM deal had to face down U.S. national security concerns thrown up by opponents. Resistance was only overcome by creating an unwieldy co-CEO structure to run the company from both Beijing and just outside New York City, among other measures.

By contrast, Huawei has so far avoided M&A, despite a failed attempt by the Chinese powerhouse to buy fading U.S. network supplier 3Com. Going it alone works for companies like Huawei as their products aren't designed for mass consumers, said JP Morgan analyst Charles Guo.

"ZTE and Huawei are making equipment for operators, so it's not facing consumers directly," he said. "If you face consumers you need to have branding, you need to have marketing, you need to build up your brand name."

ADVANTAGES OF SCALE

Of course with China as a hinterland, Huawei and ZTE could easily afford a home-grown, gradual approach.

Analysts and industry watchers attribute much of Huawei's early ascent to prices thought to be as much as 20-30 percent below global rivals as it has drawn on China's vast pool of cheap labor.

Many competitors complain Huawei and ZTE have also ridden on the back of heavy subsidies from Beijing, which considers telecoms a vital bet on the country's future global role. Its growing market share means Huawei no longer needs to charge bargain-basement prices for new products.

"Telecoms is strategically important," said JP Morgan's Guo. "The Chinese government definitely places a lot of importance on telecoms. That's been a huge difference."

Huge is right.

A second factor working in favor of Huawei and ZTE is government support in a home telecoms market where the two major state-run operators, China Mobile and China Unicom, have spent tens of billions of dollars to build second-generation mobile networks.

Lately, the Chinese pair has stood to benefit more from an even larger $60 billion spending spree by China Mobile and Unicom, joined by new rival China Telecom, on 3G networks in China.

"In China all three operators have their own networks they don't share. This created a good home market for Huawei and ZTE to grow internally first," said Joseph Ho, an analyst at Daiwa Securities. "Eventually they were able to leverage their expertise and grow in overseas markets."

Similar market developments fostered the great U.S. and European national communications equipment suppliers over the past century -- this time, it's been compressed into the space of a decade.

GLOBAL GROWTH PAINS

As the company becomes more media-savvy, the tales of corporate espionage that have cropped up -- along with efforts by detractors to smear the company by linking it to the Chinese military -- are receding.

Earlier this decade, Huawei got tangled up in a long-running dispute with its most formidable rival, Cisco Systems: the world's largest maker of computer routers and switches accused it of stealing some of its designs.

A Huawei employee was also accused by Fujitsu in 2004 of trying to steal information about the Japanese company's products at a Chicago trade show.

There is an aspect of these aggressive business practices that may mark a willingness to take short cuts to fulfill the ambition of becoming a global player.

But such accusations are also common smokescreens thrown up by established players seeking to fend off new competition, as shown by the legal battles now shaping up between Nokia and new market entrant Apple over mobile phone patents.

Efforts by rivals to besmirch Huawei's business and technology successes may have failed to derail its growth, but Huawei has discovered that venturing overseas exposes it to the global economic cycle. Sales growth slowed sharply in 2009, to just 17.5 percent from a heady 43 percent the year before.

"The decline in their business outside of China in 2009 shows that they face the same market reality as other infrastructure providers -- and clearly get a significant benefit from their preferential treatment in the China market," said Barry French, head of marketing and communications at rival Nokia Siemens Networks.

http://www.reuters.com/article/idUSTRE60K1R520100121

China in the new decade

http://www.cibmagazine.com.cn/W_img/Edit/2010-1/20100119095016550.jpg

This year is likely to be a turning point for the world economy, not just with the global financial crisis wearing off and the world economy needing to be rebuilt, but also as the starting point for the decade, or maybe even a century-long goal of fighting climate change, finding alternatives to waning natural resources, and integrating the Chinese financial system in with the rest of the world's. With China's place in the world economy growing every day, its input into global issues and developments will be profound.

CIB looks at four of the biggest issues concerning China, and how each of them might unfold over the next year and even decade.

RESOURCES: PEAK OIL

Though the argument that peak oil — the time when new oil discoveries can no longer keep up with oil demand — is fast approaching is still controversial, the argument that we are entering a time of greater resource shortages is not. As long as the basic formula of growing demand and shrinking resources remains true, commodity prices have an impetus pushing them forward.

As one of the world's major consumers of resources — particularly in construction inputs — what happens in the commodity markets in a large part happens to China. Over the past year high coal, iron ore and gas prices have grabbed headlines across China, and led to prolonged and intense negotiations with the largest providers of those resources. As late as last November the Chinese media was reporting that electricity producers had decided to forgo group negotiation of coal prices in exchange for one-on-one contracts – in other words the problem is as of yet unresolved. "It will be really difficult to have a ‘Chinese Price' next year [2010] as the three main producers of iron ore all expect increasing demand in China," notes Luo Bingsheng, vice president of manufacturer Chinasia.

But where there are problems there are solutions to be found, and now that commodity markets have recovered from their financial crisis lows, you can expect more work to go towards producing long-term solutions to resource shortages.

These solutions are likely to come in three forms: over the short term China will increase exploration for the most needed resources, reform negotiating practices, and over the long term push the search for alternative resources.

Oil exploration has been showing diminishing returns over the past decade, putting a renewed impetus towards finding a technological breakthrough to develop an alternative resource. China has put all its innovative muscle behind electric car development, and many venture capitalists, including Andre Loesekrug-Pietri of CEL Partners and Ron Mahabir of Asia Cleantech Capital, who spoke on the issue at the recent Cleantech Forum, argue that China could leapfrog other countries in creating an electric car industry with a full host of subsidiary industries. Coal also is likely to be innovated away from, with China planning to get 15% of its electricity from renewables in 2020, though, because of China's large coal reserves the government has regularly spoken about the need to develop clean coal technologies to make usage of the fossil fuel somewhat more sustainable in the future.

Agriculture is another sector that has been facing on and off shortages due to a growing and wealthier world population, as well as several years of irregular weather patterns. We are likely to see both technological and regulatory changes in this sector in the near and mid-term. China in particular is focusing on new seed technology as a way to increase yields and bring food stores back up to normal levels, but a real change in this sector will only come when a strong international agreement is passed to support free-trade in food. "The proportion of arable land is decreasing, yields are slowing," says Charlotte Hebebrand, from the International Food & Agricultural Trade Policy Council, a Washington D.C. based thinktank. "We think open cross-border trade is what is needed to solve this problem."

WHAT TO LOOK FOR IN 2010: Continuing strong oil and metal prices, as well as a few short-term leaps in specific food-stuffs depending on weather effects. Continued resource acquisition from most countries. Progress on the Doha trade agreement — focused on agriculture — will be pushed aside for the climate agreement, but it will come up again early in the decade if there is another food scare. The agricultural sector will continue to grow heartily as technology is needed to feed the world.

WHAT TO LOOK FOR IN 2020: Increased focus on agriculture, which can be used as an alternative to increasingly more expensive oil. Hopefully by this time trade in agriculture will have become less of a taboo than it is now, but at the current impasse it's hard to be hopeful.

STOCK MARKET: WHEEL OF FORTUNE

http://www.cibmagazine.com.cn/W_img/Edit/2010-1/20100119095222462.jpg

A V, a W, a U or an L? That's the question that has been plaguing stock market and economic analysts since the start of 2009, and is likely to only be answered this year. Will we see the stock market continue to recover until it returns to its 2007 highs? Will we see a second stock market crash in the first half of 2010 as stimulus money runs out? Will we see a slow upward slant, or will it hit the bottom and stay there?

Right now it looks like something between a U and an L is most probable. World stock markets have recovered significantly from their 2008 lows, but are still at fractions of their 2007 highs, with less recovery impetus pushing them forward. There is still a chance, though, that a "slow recovery" could quickly turn into a faltering one, with 2010 looking more like the tail end of an L or W.

Though the exact reason for a second crash would differ from sector to sector, there are a few large warning signs that should give investors pause. The biggest macro one being the unemployment rate in the US, which officially stands at over 10%, but according to a larger measure of unemployment that includes people not looking for jobs or part-time work, that number could be over 17%. The American consumer has for a long time driven the world economy, and as long as no one is picking up the slack for American consumption the world economy is lacking a stable footing.

As a result of weak global consumption, Chinese exports declined for the entirety of 2009, and though that is likely to turn around early this year, another export boom is looking more and more unlikely.

The Chinese stock market has so far ignored this weak economic news, instead going from peak to peak on the back of China's fiscal stimulus and strong GDP numbers. But even if the macro story remains strong, the Shanghai market is facing a whole slew of challenges as it tries to develop into a market of global importance.

While analysts say that the stock market is likely to continue growing as long as the government continues pushing money into the system, China will have to deal with a continuing flood of state-owned shares entering the market, as well as a collection of new derivative options, which will, over the short term, increase volatility. Add the fact that it is likely there will be a short-term correction in the booming property markets — with construction now growing at 55% a year, compared to 35% during the last boom — then it seems increasingly likely that we will see some heavy volatility on the stock market.

Over the long term, though, there are plenty of reasons to be bullish about the Chinese markets. The introduction of derivatives will eventually even out the market, as it makes it easier to establish the market consensus for a reasonable stock price, and as currency controls get weaker the Chinese stock market can play a significant role in the larger, and more diversified world markets.

WHAT TO LOOK OUT FOR IN 2010: A lot of volatility, and possibly one large drop in the stock market during the middle of the year – on the tail of a correction in global stock markets. The government will do what it can to maintain some sort of confidence in the stock market, and will adapt the speed of reforms to the general market climate. Definitely expect to see more foreign activity on the board, including continuing RMB bond issues from foreign companies, and possibly even the foreigns listings on the Shanghai market.

WHAT TO LOOK OUT FOR IN 2020: Although everyone hopes that China will be a completely open economy with a floatable currency, simple cross boarder transactions, and total foreign access to their stock markets, total convertibility of the RMB is likely to be more than a decade off. What one can definitely expect, though, is slowly increasing convertibility of the RMB, and constantly growing foreign participation on the Chinese mainland boards. As that happens and derivatives get put in place, Shanghai will be considered more of a sound investment decision and less a spin of the wheel.

FINANCE: COMING TO COLLECT

A whole lot of loans were handed out in 2009 – RMB 9.2 trillion (USD 1.35 trillion) in the first 11 months. The general response from the analyst community was "this is great for fighting the financial crisis, but it is not sustainable." This year we should begin to see the results.

Though headline numbers have gone down quite a bit since the beginning of 2009 — November's new loans were at RMB 294 billion compared to RMB 1.62 trillion in January — this is almost completely due to a decrease in short-term loans, while medium to long-term lending has continued unabated. Analysts also have divergent opinions on whether or not high lending will continue into 2010; with UBS arguing that new lending will grow at a somewhat slower pace than the previous year, and Nomura arguing that loan growth should remain steady at least through 2011 in order to pay for new projects started last year.

And plenty of new projects have been started. The investment/GDP ratio rose by 4% in 2009, bringing it to 8 percentage points higher than the historical average, and the credit to GDP ratio has also risen by 20 percentage points in 2009. "The good news, in our view, is that China's economy is most emphatically not a bubble. And the bad news is that China's economy is, well, looking more and more like a bubble," said Jonathan Anderson, an emerging markets economist at UBS in a note to clients, warning that the current trends could turn ugly when the government again tightens monetary policy in the second half of 2010.

Anderson says there is "no question" that there will be a rising number of non-performing loans over the coming year or two, though he argues that it is hard to get too worked up about it because "it takes more than a year of loose behavior to generate macro prudential risks sufficient to threaten structural growth prospects."

Those more pessimistic than Anderson argue that there is a chance that several banks will need to get bailed out in the future. "Slower credit growth will boost banks' bargaining power in pricing the loans, leaving the room for net interest spread to rise," says Gao Yaoqun, an analyst with Goldman Sachs Gaohua Securities.

Some even go so far as to predict that the government will be unable to pay off the bank's debts, as happened in Dubai recently with the city-state's sovereign wealth fund. But most note that since China's current debt to GDP ratio is rather low, a bail out and restructuring is easily within the realm of possibilities, though that probably won't cheer up those invested in the bank.
Over a longer term, though, banks will need more independence and more transparent risk management techniques. China suffers from a poorly supported small- and medium-sized enterprise sector, with entrepreneurs rarely able to get loans through official channels. "[I have] tried to get a tiny bank loan in China for a small but stable [design] company with collateral and a proven financial track record; I was laughed at," says Jeremy Goldkorn, founder of popular English-language Chinese media information website Danwei.org. "For SMEs the money is just not available. You have to turn to private sources."

This is largely due to the higher risk involved in SMEs and the inability to ensure enough returns can be generated to make up for any losses through higher interest rates. If China is to foster an innovation economy by the end of the decade, this is where reforms will have to start.

WHAT TO LOOK OUT FOR IN 2010: Loans to continue growing at a medium-to-fast pace through the first half, slowing down somewhat in the second half. As money stops being pumped into the system many of the banks will come under strain, and in the worst-case need to be propped up. If lending continues unabated, excess capacity growth could cause a large hit to the economy in the end of 2010 or the beginning of 2011.

WHAT TO LOOK OUT FOR IN 2020: A more global financial sector that adheres closer to the global standard for banking regulation. Primarily this means more interest rate flexibility so banks are willing to take risks investing in small- and medium-sized enterprises, and a better ability to manage risks through cross border investment.

ECO-BUSINESS: THE WATER RISING

http://www.cibmagazine.com.cn/W_img/Edit/2010-1/20100119095359940.jpg

Although last month's summit in Copenhagen only produced a non-binding resolution towards CO2 reduction, China and the US both have detailed CO2 reduction targets set up: China promising to lower the amount of carbon released per unit of GDP by 40-45% by 2020 against 2005 levels, and America promising to lower their overall carbon output by 17% by 2020 and 83% by 2050. As these two countries account for over 40% of the world's carbon output, setting these targets has put real impetus towards blazing a path towards a greener future.

Still, there is a lot of work to be done, most of which must be done this year. Analysts commenting on the announcements noted that while the 2020 commitments are less important in and of themselves than progress made towards meeting a larger 2050 goal, they are still rather conservative. According to an International Energy Agency (IEA) report, atmospheric carbon levels need to peak at 450 parts per million of carbon-dioxide to keep the atmosphere at two degrees over pre-industrial levels – which many, though not all, climate scientists think would be a safe level. Achieving this would require fossil fuel usage to peak in 2020, and decline thereafter.

Throughout this year, world governments are going to have to come up with a way to bridge the gap between what's needed and what they can provide. For China, that is going to mean setting up regulatory regimes to police the highest polluting sectors and implementing technology solutions as fast as possible. For the world it is going to mean setting hard enforceable targets and a policy that rewards innovation in clean technology sectors while giving those most in need — and often those least able to afford it — access to new technologies. "The problem is not innovation but the application of innovation and the social and political barriers to it," notes Jean-Pierre Lehmann, a professor at IMD business school focused on global governance, "I spent some time last year at MIT and was immensely impressed by the scientific stuff lying around, but then you need the capital and the management and the will."

A stronger cap-and-trade system is one solution likely to get traction over the next year as it provides incentives for developed economies to invest in reducing the carbon output of developing economies. The Chinese government is proposing the establishment of an international fund to pay for the adoption of technology, and in the meantime is pumping money into producing home-grown technology. "We should encourage innovation, but the question is who should pay for it? China or the developed economies who created the problem," said Guangsheng Gao, director of the Climate Change Division of the National Develoment and Reform Commission, speaking at a Cleantech Group conference last month. While Xie Zhenhua, chief negotiator for the Chinese delegation at last month's meeting in Copenhagen, told listeners that "The world should solve the fund support problems quickly, for everyone's benefit."

Until the difficulties are resolved over who pays for technology transfer, though, the Chinese government is pumping its own money into the solar, wind and electric car sectors, hoping that strong home-grown technology will do the trick. Peter Corne, managing director of Eversheds China, also noted while speaking to CIB on the sidelines of the Cleantech event that he expected many companies to look for Chinese partners in developing their intellectual property, to take advantage of lower production costs in the country.

The problem might also, in and of itself, lead to innovation. "China is now clearly winning the green energy race, [and] the USA is shifting on climate because they know they're losing and they hate that," wrote Paul Gilding, former CEO of Greenpeace, on his blog.

WHAT TO LOOK OUT FOR IN 2010: Binding CO2 reduction targets are set for most major economies, as well as detailed plans for how to reach those targets, though discussions over feasibility will continue well into the decade. A stronger cap and trade system to be put in place to encourage innovation, and the sharing of carbon reduction technology. A potential agreement in regards to larger-scale technology transfer, and assistance from developed to developing countries to mitigate the negative impact on growth and poverty fighting, as well as discussions over the right type of oversight mechanism.

WHAT TO LOOK OUT FOR IN 2020: Certain technologies will become much more widespread. Total sales of gas-powered cars should have been decreasing for several years, and China might already have a fully-developed electric car sector. The government is aiming for 15% of the country's electricity to come from nuclear and renewable sources, but hopefully higher numbers will be reached. There will still be debates over whether coal can ever actually be clean. One of the stronger results of the conference in Copenhagen was initiatives to protect forestry, and China committed itself to increasing its total landmass of trees by 40 million hectares, which should help both the climate and China's constant fight against the Gobi desert. If countries come in under their targets expect a lot more panicked initiatives, and a flood of people emigrating from what were once Pacific islands.

http://www.cibmagazine.com.cn/Features/Focus.asp?id=1189&china_in_the_new_decade.html

http://graphics8.nytimes.com/images/misc/nyt-global-edition-masthead-logo.gif (http://www.nytimes.com)

January 27, 2010
News Analysis
As China Rises, Economic Conflict With West Rises Too
By KATRIN BENNHOLD



DAVOS, Switzerland — As recently as 2008, when China was still an emerging economy eager to put its best foot forward for Western consumers, it lifted censorship on several Web sites before the Beijing Olympics. At the same time, it responded to entreaties from U.S. and European politicians, allowing its currency to appreciate against the dollar.

China is no longer emerging. It has emerged — sooner and more assertively than had been expected before the wrenching global financial crisis, which badly damaged all the established industrial powers, from the United States to Europe and Japan.

These days, the renminbi is frozen at an undervalued level, and Internet controls are stricter than ever — even as Google, one of America’s most prominent companies, threatens to leave.

The severe recession has fast-forwarded history, catapulting an unprepared world into a period of uneasy cohabitation between the United States, the No. 1 economy, and its eventual successor.

“China is the West’s greatest hope and greatest fear,” said Kristin Forbes, a former member of the White House Council of Economic Advisers and one of hundreds of top officials and executives flocking to this winter resort for the annual World Economic Forum, which is taking place Wednesday through Sunday.

“No one was quite ready for how fast China has emerged,” said Ms. Forbes, a professor at the Massachusetts Institute of Technology. “Now everyone is trying to understand what sort of China they will be dealing with.”

For the first time, economists point to Chinese spending — not the U.S. consumer — as the key to a global recovery. China’s gross domestic product could overtake that of the United States within a decade, one report predicted this month, while others speculated about when the renminbi might start to challenge the dollar as the world’s reserve currency.

And as developing countries everywhere look for a recipe for faster growth and greater stability than that offered by the now-tattered “Washington consensus” of open markets, floating currencies and free elections, there is growing talk about a “Beijing consensus.”

China’s rise will be on prominent display in Davos this week, with the biggest Chinese delegation in the World Economic Forum’s history. The local Chinese restaurant has been fully booked since early January. The 54 Chinese officials and executives — including the presidents of the country’s sovereign wealth fund and export-import bank — were expected not only to rub shoulders here but also, as one put it bluntly, to “go shopping.”

When the United States was snapping at the heels of the British empire, the global hegemon of the early 20th century, the situation caused plenty of friction, even though both countries spoke the same language, shared similar cultures and were liberal democracies.

China, in contrast, is a Confucian- Communist-capitalist hybrid under the umbrella of a one-party state that has so far resisted giving greater political freedom to a growing middle class. Now its ascendancy is about to set off what many officials and experts see as a backlash on both sides of the Pacific.

“It’s not surprising that China’s remarkable economic rise would be unsettling to some,” said Pascal Lamy, the director general of the World Trade Organization.

So far, the backlash against China has been largely rhetorical. Stephen Roach, the Asia chairman of Morgan Stanley, counts 45 anti-China legislative measures introduced in the U.S. Congress between 2005 and 2007. None passed.

That could change, as tricky midterm elections loom in the United States and politicians there and in Europe become more outspoken in blaming China’s currency peg to the dollar, which gives its industries a competitive edge, for rising joblessness at home.

Some targeted tariffs have been imposed in recent months. Washington has penalized imports of Chinese tires and coated paper products. Both the United States and the European Union are restricting Chinese steel.

But none of those measures go as far as climate change proposals in France and the United States, which call for border taxes on products from countries — China in particular — that do not accept higher costs for carbon emissions in producing energy and making goods. If “the U.S. opts for friction,” Mr. Roach said, “the Chinese can be expected to respond in kind.”

China has its own version of political jockeying. Several foreign companies already complain that doing business in China has become more difficult. Lured until a few years ago by tax rates less than half of those applying to Chinese companies, executives now cite an increase in red tape and a growing number of “buy China” mandates from government procurement offices.

The standoff with Google has illustrated the difficulties foreign business faces in China. It has also starkly raised the question of who will have the upper hand in future negotiations.

“The operating environment is tougher than ever for Western companies,” said James McGregor, head of the government relations committee of the American Chamber of Commerce in China. “But unlike Google, most Western companies also need China more than ever.”

China is the biggest recipient of foreign direct investment in the world: 450 of the Fortune 500 companies have business presences there, and many of those still reeling at home are doing brisk business in China. “G.M. is hurting anywhere else, but here things are quite profitable,” Mr. McGregor said.

Business interests in China could make it harder for Western politicians to lash out. “It’s a situation the U.S. was in for a long time,” said Ms. Forbes, the M.I.T. professor. “Many people didn’t like U.S. policy, but you had to be in the U.S. market.”

If business executives are looking to China for its low manufacturing costs and sizable market, political leaders are studying a state perceived to have found a recipe for lifting millions out of poverty with fast growth, even if that means a stiff measure of domestic repression. “You hear more and more people talking about a Beijing consensus,” Ms. Forbes said.

But what exactly is the Beijing consensus? Some see it as a form of economic management with greater government involvement that is on the rise across the world. Others interpret it to mean more strictly controlled capital markets, which have made a re-appearance even in previously open countries like Brazil. Policy makers in Malaysia and Dubai focus on replicating China’s special economic zones, which afford generous terms to foreign investors in manageable geographic areas.

Some suggest that China’s lack of democracy is an advantage in making unpopular but necessary changes. “It is more challenging for democratic systems because every day they come under public pressure and every short period they have to go back to the polls,” said Victor Chu, chairman of First Eastern Investment Group in Hong Kong, the largest direct investment firm in China. “China is lucky to have the ability to make long-term strategic decisions and then execute them clinically.”

With China’s rising clout, the West has less leverage over Beijing. When China was seeking to join the World Trade Organization a decade ago, it accepted compromises to U.S. and European demands. At climate talks last month in Copenhagen, however, China blocked a comprehensive deal and refused to go beyond its earlier promises. Portrayed as a deal breaker in the Western media, at home it was celebrated as the country that stopped the West from imposing its terms on developing countries, Mr. Chu said.
Western diplomats complain about the way Beijing is dragging its feet more than Moscow on sanctions on Iran’s nuclear program and is propping up unsavory regimes across the world in its hunt for the natural resources to power its growth.

Some say Chinese officials are using their country’s $2.4 trillion in foreign currency reserves as a bargaining chip, knowing that any hint of reducing those reserves would rattle currency markets.

“As China is emerging on the global stage with unprecedented power and influence,” said David Shambaugh, a professor of political science and international affairs at George Washington University who is in China as a Fulbright scholar, “it is not proving to be the global partner the United States and E.U. seek.”

In the world of power politics, that is not particularly surprising. Like many Western countries, China will act only when it is in its interest.

Mr. Chu of First Eastern Investment said he expected China to resume a gradual appreciation of the renminbi later this year, not because Washington was lobbying for it but because signs of inflationary pressure and bubbles in the Chinese credit and housing markets were mounting. This month, the Chinese authorities raised interest rates and moved to curtail bank loans.

Kenneth Rogoff, an economics professor at Harvard University who just spent two weeks in China, warns that the country will face its share of economic troubles in the years ahead. But that will not change the underlying trend, he said.

While China remains much poorer than the advanced industrial powers of the West on a per-capita basis, its rapid growth should enable it to pass Japan this year as the world’s second-largest economy.

A new report by PriceWaterhouseCoopers predicts that China could overtake the United States as the largest economy as early as 2020. In 2003, Goldman Sachs made waves by suggesting that the Chinese G.D.P. might match that of the United States by 2041. Five years later, the forecast was revised to 2027.

According to Mr. Rogoff, over the next four decades or so, the Chinese renminbi will gradually come to rival the dollar as the world’s leading reserve currency, making China’s response to its increasingly central role in the global economy critical.

The risk, Mr. Shambaugh of George Washington University said, is that “the world will be asking more and more of China but getting less and less in return.”


Source (http://www.nytimes.com/2010/01/27/business/global/27yuan.html?ref=global-home)

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http://www.chinadaily.com.cn/2009image_e/logo1.jpg (http://www.chinadaily.com.cn/09index_top.html)


China Needs A Wealth Distribution Revolution

By Zhang Monan (China Daily)
Updated: 2010-01-21 07:52




The global economic crisis has forcefully compelled China to adjust its industrial structure and hasten the pace of reform this year.

President Hu Jintao recently and clearly suggested that the nation further adjust its national income distribution. China has responded, initiating broad reforms of how income is spread among the population.

Thirty years of booming economic development has created mounting national wealth. But uneven wealth distribution not only creates imbalances in the nation's economic structure and in international and domestic demands, but it also weakens domestic demand, one of the most important factors for sustainable development in the Chinese economy.

The difficulty in boosting domestic demand is directly related to irrational primary and secondary distribution structures.

In primary distribution, there are three "lows". Labor income is low in proportion to gross national income. Wage accounts for a lower portion of the national income and labor elements still take a low share in distribution of enterprises.

As for secondary distribution, operation capital income of State-owned enterprises cannot trickle down to residents, aggravating the secondary distribution's "reverse adjustment" of resident income. All these factors will cause the national income growth to lag, in comparison with national income accumulation and the continuous drop of spending proportionate to the gross domestic product.

China needs a wealth distribution revolution, based on principles of "giving priority to efficiency and due consideration to fairness, and sharing common fruits and promoting harmony". The institutional restriction of "encouraging production and restraining consumption" should be revamped and a system of "multiple distribution methods" should be established.

In reforming the redistribution system in China, solutions should be created in several directions. First, we should improve the level of social security work and public service. Second, further reform should be expanded to reforms of the tax system and the payment system of wages, insurance and benefits. Third, regulate the distributive relations among governments, enterprises and individuals and direct more national income to individual levels through policies.

Fourth, fine-tune the proportion between capital income and labor income and increase labor income's share in the primary distribution of national income.
Fifth, enlarge the scale and proportion of dividend sharing of State-owned enterprises to fill the gap between operation capital income of enterprises and residents.
Sixth, adjust the binary income distribution pattern of urban and rural areas.

Seventh, promote reforms of monopoly industries, introduce more competition, and regulate the profit margin of monopoly tycoons through price controls and levies.

Eighth, perfect the security of property income growth and encourage residents to expect long-term income. Lastly, reduce tax burdens for some groups of people, and raise the tax threshold to guarantee a national tax income by implementing proper policies.

Financial crisis has proved to be the turning point for China to divert its economic growth engine that is export-oriented to one that is dependent on domestic demand.

The author is an economics researcher with the State Information Center.

Copyright By chinadaily.com.cn. All rights reserved

Source (http://www.chinadaily.com.cn/thinktank/2010-01/21/content_9354134.htm)

Construction machinery makers enjoy stimulus push

2010-01-28

Construction machinery manufacturers will report better-than-expected earnings for 2009, thanks to a huge increase in demand from the government's stimulus package.

Eighty percent of manufacturery expect last year's profits to reveal record growth, above the 60 percent average reported by listed companies that filed pre-disclosures in their annual reports recently.

There are currently 96 listed machinery makers in China, and the majority of them expect revenue to be over 50 percent, while several are forecasting a 10-fold rise in revenue for 2009.

Sany Heavy Industry Co reported a 50 percent increase in profits while XCMG Construction Machinery Co - China's largest construction equipment maker - is predicting its 2009 profit will reach 1.73 billion yuan, 14 times higher than last year.

The huge profits are largely due to last year's rebound in the construction sector. The bulk of China's listed machinery makers have infrastructure and construction equipment manufacturing businesses.

Demand for construction machinery has a strong correlation to increases in fixed-asset investments. China's fixed-asset investments, including property, factories and equipment, grew 30 percent last year, according to the National Bureau of Statistics.

Infrastructure construction projects, which absorbed 80 percent of the government's 4 trillion yuan stimulus package, in combination with an up tick in new construction in the property sector, helped spur demand for construction machinery.

According to the latest annual report from the China Machinery Industry Federation, industrial output soared to a new high of 10 trillion yuan on the heels of the central government's policy of encouraging domestic consumption.

"Eighty percent of machinery sales were supplied to the domestic market," said Cai Weici, vice-president of the federation.

With demand up, several machinery makers are taking the opportunity to launch IPOs. China Erzhong Group, Deyang Heavy Industries Co, China First Heavy Industries, as well as China XD Electric Co, raised a total of 20 billion yuan in their IPOs this month.

The China Machinery Industry Federation forecasts the industry may still enjoy 50 percent growth early this year, but those figures will drop in the latter half.

http://www.chinadaily.com.cn/bizchina/2010-01/28/content_9390145.htm

CIC planning more resource investments

2010-01-28

China's $300 billion sovereign wealth fund is considering new investments in resource-related companies after bets on commodities producers from the US to Kazakhstan paid off in 2009.

China Investment Corp (CIC) increased spending on energy and mineral assets last year to profit as the global economy recovers. The Beijing-based fund avoided the worst of the credit crunch in its first full year in 2008 and may have had a return of more than 10 percent in 2009, said London-based Jan Randolph, director of sovereign risk, analysis and forecasting at IHS Global Insight.

"They have timed the upside well both in market terms, but also to fit in with the longer-term diversification strategy," Randolph said.

CIC has had "early" talks for direct investments in Brazil, the world's second-biggest iron-ore exporter, and Mexico, the No 2 silver producer, Chairman Lou Jiwei said at the Asian Financial Forum in Hong Kong on Jan 20. Lou pumped about $10 billion into commodity-related companies in the second half of 2009, according to data compiled by Bloomberg.

With China's reserves at $2.4 trillion and swelling by an average of $37.8 billion a month last year, CIC has asked the government for another $200 billion, the Economic Observer reported on Nov 21, citing a person it didn't identify.

Canadian venture

In July, CIC bought 17.2 percent of Teck Resources Ltd, Canada's largest base-metals producer, for $1.5 billion. It acquired an 11 percent stake in a unit of Kazakhstan's state-run energy company in late September, two weeks before purchasing 45 percent of Nobel Oil Group of Russia.

In November, it announced investments in US power producer AES Corp and GCL-Poly Energy Holdings Ltd, China's biggest poly-silicon producer.

AES closed at $13.31 in New York trading on Dec 31, giving CIC a paper profit of 7 percent, while GCL-Poly shares had risen 30 percent from the fund's HK$1.79 purchase price.

CIC's early investments also recovered some losses last year, with shares of Blackstone Group LP doubling and Morgan Stanley's stock surging 85 percent.

Those returns may encourage CIC to be "more aggressive", according to Zhang Zhiming, director of asset allocation research at HSBC Holdings Plc in Hong Kong.

"Most investors do momentum investing and CIC is no exception," he said. "They are sticking to a double-diversification principle. First, buy a bit of everything and be geographically spread out. And timing-wise, to be also spread out to avoid major ups and downs."

China Investment Corp will likely expand the scope of its investments this year into "all categories", including US and European markets that it largely shunned in 2009 during the crisis, Zhang said. The fund may invest in a US infrastructure project, Lou said, without giving details. It may put money in US high-speed railways, the Shanghai Securities News reported on Jan 13, citing a person it didn't identify.

CIC was created in September 2007, funded by a $200 billion chunk of the nation's foreign reserves. The $2.4 trillion in reserves - equivalent to the annual output of India and Australia combined - have increased about 60 percent since CIC was founded, driven by current account surpluses and foreign direct investments.

A CIC press official said she was unaware of the request for $200 billion in extra funds reported by the Economic Observer. The company's top executives weren't available for interviews for this story.

"CIC will soon become one of the top three sovereign wealth funds in the world with this extra capital, and one of the most aggressive in 2010 to 2015," said IHS's Randolph.

http://www.chinadaily.com.cn/bizchina/2010-01/28/content_9390095.htm

Guangdong invests RMB 24 bln in new industries
Guangdong Province, which plans to spend RMB 104.3 billion on the overall development of 45 strategic new industries and high-tech projects, has earmarked RMB 24.08 billion for this year, according to the Draft Plan for Key Projects in 2010 recently released by the Guangdong Development and Reform Commission.

A detailed development plan for new industries will be mapped this year, said Huang Huahua, governor of Guangdong Province.

Reportedly, the provincial government of Guangdong plans to invest RMB 390 billion in 300 key projects this year, among which the rail transit and energy are still the key investments. In addition, it will inject RMB 321.51 billion into 33 modern service industry projects and RMB 24.08 billion into strategic new industries and high-tech construction.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=31120

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RATE OF INFLATION "STILL LOW"

BEIJING, Feb. 10 -- Central bank governor Zhou Xiaochuan said Tuesday China's inflation rate remains "relatively low", amid ongoing debate among officials and economists on when policymakers should raise interest rates to rein in rising inflation and asset prices.

The inflation rate still needs to be "closely watched", Zhou told reporters in Sydney after a meeting with other central bankers.

China's consumer price index (CPI), a major measure of inflation, rose by 1.9 percent in December from 0.6 percent in November, due to the country's ample liquidity. The country initiated its economic stimulus plan to keep economic growth stable in late 2008. Chinese banks extended 9.6 trillion yuan (1.4 trillion U.S. dollars) in new yuan loans in 2009, almost double that of 2008, while the lending in January is forecast to reach 1.3 trillion yuan.

The rapidly rising inflation, together with surging house prices, has led to expectations of imminent interest rate hikes. The stock market has also been declining in recent trading days as investors expected more tightening policies following the country's move to raise the reserve requirement ratio of commercial banks and tighten real estate deals.

But Dai Xianglong, chairman of the influential National Social Security Fund, said in a speech in India on Monday that China was unlikely to raise interest rates in the first half of 2010 as the economic recovery was still not on solid ground.

Dai, a former central bank governor, said that despite possible policy adjustments to combat inflation and asset bubbles, money and lending supply will remain relatively loose over the course of the year.

"Interest rate hikes are not the most appropriate tool if policymakers want to control inflation," said Zuo Xiaolei, chief economist of China Galaxy Securities.

China's recent inflation rise, in essence, stems from increasing liquidity in the financial system. The best way to curb inflation is to raise banks' reserve requirement rate or conduct open market operations, she said.

China announced the raising of banks' reserve requirement ratio, or the proportion of money commercial banks must keep in reserve, on Jan 12. It has also resorted to a number of open market operations to mop up liquidity as banks rushed to lend to pre-empt a possible tightening of policy.

China may continue to raise the requirement ratio this year, possibly increasing it three or four times to 18 percent from the current 16 percent, said Qu Hongbin, chief China economist of HSBC.

Qu said an interest rate hike could come in April because inflation could be very serious if interest rates are not raised. China is scheduled to release its first-quarter economic data in mid-April.

Economists also forecast that China's CPI could be mild in January, because of the relatively high base of last January. China's traditional Spring Festival fell in January last year.

But it can rise up to 3 percent in February as consumption can still pick up during the Chinese New Year period, which starts on Feb 14, analysts said. Inflation could stabilize later, Nomura Securities reported.

"If that happens, the possibility of interest rate hikes would decrease," said Zhang Lan, head of research at Shanghai-based Changjiang Securities.

(Source: China Daily/Agencies)

CHINA'S FOREIGN TRADE UP 44.4 %

BEIJING, Feb. 10 (Xinhua) -- China's foreign trade posted a 44.4 percent growth in January 2010 year on year, the General Administration of Customs (GAC) announced Wednesday.

Exports in January stood at 109.47 billion U.S. dollars, up 21 percent from a year earlier, while imports rose 85.5 percent to 95.31 billion U.S.dollars.

The hefty increase was due to lower comparison bases a year ago when China's exports were hard hit by global financial crisis and less working days as the Lunar New Year holiday fell in January last year, the administration explained.

The trade surplus contracted 63.8 percent to 14.16 billion U.S. dollars.

The European Union and United States remained China's first two largest trading partners.

The Association of Southeast Asian Nations (ASEAN) surpassed Japan to be the third largest as the Sino-ASEAN trade surged 80 percent to 21.48 billion U.S. dollars after the China ASEAN free trade area kicked off on Jan. 1 this year.

Exports of machinery added 27 percent to 62.51 billion U.S. dollars, or nearly 60 percent of the total.

Exports of appliance and electrical products grew 33.1 percent to 24.09 billion U.S. dollars.

China's bankcard holders consumer confidence index (BBCI index) rises

SHANGHAI, Feb. 9 (Xinhua) -- Chinese bankcard holders' consumer confidence in January was up year on year, according to an index issued jointly by China Unionpay and Xinhua News Agency on Tuesday.

The Bankcard Consumer Confidence Index (BCCI) stood at 86.81 in January, 2.44 points higher from the same period last year, and stayed at basically the same level as December 2009, said the index report.

The increasing consumer confidence mainly stemmed from China's steadily improving macroeconomic conditions, the report said.

China's economy resumed a double-digital growth in the fourth quarter last year, pushing the annual figure beyond the government target of 8 percent at 8.7 percent.

The index also resulted from an increase of 9.1 million urban jobs and a higher-than-8-percent income rise for urban and rural residents in 2009, according to the report.

The report also attributed the rising confidence to people's growing demand during the New Year and the approaching Spring Festival, the Chinese lunar new year, which falls on Feb. 14 this year.

The report said China Unionpay would release the BCCI index on a monthly basis starting 2010. Editor: Yan

China’s Exports Jump 21%, Providing Yuan Ammunition


Feb. 10 (Bloomberg) -- China’s exports jumped 21 percent in January from a year earlier, providing more ammunition to trading partners calling for a stronger yuan.

Imports climbed a record 85.5 percent and the trade surplus slipped to $14.17 billion, according to data released by the customs bureau on its Web site today. The jump in overseas shipments was the biggest since September 2008, two months after the nation halted the currency’s appreciation against the dollar.

American officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the U.S. currency. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating global demand is only gradually improving.

“Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting, a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.”

Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6815 per dollar as of 1:13 p.m. in Hong Kong, indicating traders expect the currency to advance 2.2 percent against the dollar in the next year. Also today, an editorial in the state-owned China Securities Journal said that the yuan may not have “big gains” in the first half of 2010 because economic conditions haven’t improved.

Stocks pared advances after the trade report, with the MSCI Asia Pacific index up 0.3 percent after earlier rising as much as 0.8 percent.

Less Than Estimates

China’s export gain compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. Imports rose by the most since Bloomberg data began in 1991. The week-long lunar holiday that affected the numbers was in January last year and February in 2010.

Seasonally adjusted, exports fell 5.5 percent from December and imports dropped 0.9 percent, the customs bureau said.

Billionaire William Fung, the managing director of Hong Kong-listed Li & Fung Ltd., the world’s largest supplier of toys, clothes and furniture to retailers, said Jan. 27 that global demand seems to be recovering “very slowly, if at all.”

In contrast, Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong, said today’s report shows that for China the “positive trend remains intact,” and bolsters the case for the government to tighten policies and let the yuan strengthen in coming months.

Cooling Economy

The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains would help China to restrain inflation.

China last year overtook Germany as the world’s largest exporter, the German statistics office confirmed yesterday. Germany itself is benefitting from the expansion of China’s market, with its BGA wholesale and export federation projecting a 10 percent gain in shipments abroad in 2010, propelled by Chinese demand.

In Taiwan, government figures this week showed the biggest gain in its exports in more than 30 years on spending in China before the lunar holiday.

Comparisons from a year earlier are also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent.

Sources of Friction

China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.”

The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain.

Gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S.

“It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today.

Tackling Surplus

Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said.

Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers.

Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang, the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy.

A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net



http://www.bloomberg.com/apps/news?pid=20601087&sid=aLiICR3wxKGM&pos=3

China Jan car sales up 116 pct on holiday spending

SHANGHAI, Feb 9 (Reuters) - China's passenger car sales in January jumped 115.5 percent from a year earlier, the country's official industry association said on Tuesday, as car buyers packed showrooms before the Lunar New Year.

A total of 1.32 million passenger cars were sold last month in China, the world's largest auto market, compared with 610,600 units sold a year earlier and 1.1 million units sold in December 2009, the China Association of Automobile Manufacturers said.

"Demand remains strong in January as many people want to get a new car for themselves for their loved ones before the Chinese New Year," said Zhang Xin, an analyst with Guotai Junan Securities.

The week-long holiday, which starts on Feb. 14, is the biggest shopping season for the Chinese who would spend lavishly on items ranging from flat-screen TVs to the lastest digital gadgets.

But analysts noted robust January sales growth was somewhat distorted by a low comparative base a year earlier when car sales declined 7.76 percent on a slowing economy at that time.

Auto sales in China rebounded strongly since April 2009 making the country a major bright spot amid a global industry downturn thanks to Beijing's policy incentives, including a halving of sales tax for small cars to 5 percent and subsidies for buyers in rural areas.

To continue shoring up its auto industry, a major economic growth engine, the government expanded its subsidies for vehicle buyers in rural area at the beginning of 2010. The sales tax rate on small cars, however, was increased to 7.5 percent, but was still lower than the previous rate of 10 percent. [ID:TOE58909L]

Analysts expect auto sales will return to a slower but more rational growth rate of roughly 10 percent in 2010 on continued policy support from the government even though the renewed tax incentives for small cars were not as aggressive as anticipated.

Industry executives, including Chen Hong, president of SAIC Motor Corp (600104.SS), China's biggest automaker, remains sanguine about the outlook for 2010, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows. [ID:nHKG265513]

Overall vehicle sales, including buses and trucks as well as cars, totalled 1.66 million units in January, up 126.3 percent from 735,500 units a year earlier, official data showed. (Reporting by Fang Yan and Jacqueline Wong)

http://www.reuters.com/article/idUSTOE61803K20100209

Wasn't it just a few months ago that montly sales topped 1 million for first time?

Korean exports to China see record surge
Reuters in Seoul
Feb 13, 2010
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South Korean exports to China posted their biggest-ever annual growth last month, easing fears that Beijing's crackdown on excessive lending would reduce demand.

"China is trying to prevent asset markets, especially the property sector, from overheating but at the same time it is trying to boost consumption," Park Sang-hyun, the chief economist at HI Investment & Securities, said.

"That may put pressure on exports of construction goods but will keep supporting sales of consumer electronics and chips. The current policy is not strong enough to hit overall Korean exports."

Recent moves by China to head off asset bubbles and prevent its economy from overheating have fuelled concerns that its demand for raw materials, commodities and other imported goods may slow even as demand from major Western economies remains tepid.

South Korea has been one of the most worried about such a scenario as China is its largest overseas market. Those fears grew after data showed the Korean economy lost almost all of its recovery momentum in the fourth quarter last year.

But customs data yesterday showed its exports to China in January jumped 98.5 per cent over a year earlier, though the bulk of the gain came from the effect of a low base as global trade was hit hard by the financial crisis.

Average daily exports last month to its giant neighbour rose 4 per cent to US$394 million from US$379 million in December, an official at the Ministry of Knowledge Economy said. The monthly numbers are not seasonally adjusted.

For last year as a whole, shipments to China fell 5.1 per cent. Shipments to the United States rose 16.5 per cent in January from a year ago, the biggest annual gain since a 19.3 per cent rise in September 2008.

Chinese trade data on Thursday showed its export and import growth last month remained robust, although the figures were muddied by quirks in the calendar.

Is China Poised for a Leap Like Korea in 1988?
China's consumer market is now very similar to Korea's when Seoul hosted the Olympic Games in 1988, China experts say. The two are markedly similar in terms of income level, savings rate, urbanization, and the number of cars per head.

Based on Korea's experience of a sudden explosion of the consumer market after 1988, China is expected to see similar drastic changes. While the size of the market and spending behavior are different in the two countries, there are signs of a decrease in savings and increased spending in China that will strike Korean companies as familiar.

The Chosun Ilbo conducted a comparative analysis of various indices in today's China and Korea around 1988 along with Daishin Securities and IBK Investment & Securities on Dec. 3.

Experts note that China will surpass over US$4,000 in per-capita gross national income this year. Its per-capita GNI was $3,315 in 2008. For Korea, GNI per capita in 1987 was $3,321, jumping to $4,435 in 1988 and to $5,419 in 1989.

The two countries then and now are also similar in terms of GDP by purchasing power parity. Korea's per capita GDP by PPP was $5,850 in 1987 and broke the $6,000 mark next year with $6,630. China's GDP per capita by PPP was $5,970 in 2008, and is likely to go over US$6,000 soon. Yoon Chang-yong of IBK Investment & Securities said, "Korea shifted from being investment-oriented to spending-oriented after surpassing $6,000 in per-capita GDP by PPP. China's purchasing power, too, is likely to soar."

China's car market also resembles Korea's in 1988. In 1987, 39 out of 1,000 Koreans had their own car, but that rose to 48 per 1,000 people, and only four years later had jumped to 100 per 1,000. In China, 37 people in 1,000 had a car in 2008, which is likely to grow to over 40 in 2010. "Sales of cars in China are likely to increase drastically," Yoon said.

The biggest difference is in urbanization. Because China is so huge and populous, urbanization rather resembles Korea's in the early 1970s. The urbanization rate in China at the end of last year was 45.7 percent, less than the 48 percent Korea had in 1975. BOC International, Bank of China's global investment banking arm, predicts the urbanization rate in China will reach 49 percent in 2015 and 60 percent in 2030, bringing another likely boost in spending.

Samsung Securities said that China is in transition to a "mega-spending country" as a result of progress in urbanization, expansion of middle class, government measures to boost consumption, and increase in savings.

But doubters say the Chinese spending boom will not last as it is a product of government-led stimulus measures, and Beijing may implement retrenchment policies to prevent a bubble in asset prices. And while there are a myriad other factors that make it difficult to compare China now with Korea then, experts agree that Chinese consumers form a vast market with great potential for Korea.


China's economic rise has silver lining for Japan

TOKYO - China is on the verge of unseating Japan as the world's number two economy, but student Shi Minfei is one reason why Beijing's rapid growth is not all bad news for its deflation-hit neighbour.

With Japan's consumers keeping a tight hold on their purse strings, leaving the country as reliant as ever on exports, Chinese tourists like Shi are a rare example of good news for the country's long-suffering retailers.

The 20-year-old engineering student from Shanghai said she had splurged about 300,000 yen (S$4,700) on clothing, bags, shoes and cosmetics during her visit to Japan.

"I'm going mostly to shopping malls," Shi said as she hopped aboard a tour bus in downtown Tokyo, adding that the Japanese capital still has an edge over Shanghai when it comes to splashing cash.

Another visitor, a 42-year-old housewife from Beijing, said she had spent 200,000 yen on "Gundam" combat robot toys for her 12-year-old son, out of a shopping budget for the trip of up to 500,000 yen.

It is a welcome boost for a Japanese economy that has suffered two decades of malaise after its stock market and real estate bubble burst in the early 1990s, ushering in years of deflation and sluggish economic growth.

Government data due out on Monday are expected to show Japan's economy suffered a brutal contraction in 2009, possibly as much as six percent, leaving its status as the world's second largest economy hanging in the balance.

Average income per person in urban China was less than 3,000 dollars in 2009, still a far cry from nearly 48,000 dollars for a Japanese salaried worker, official figures show.

Even if Japan kept its number two rank last year, economists say it is inevitable it will soon be overtaken by China, which has a population of more than 1.3 billion and an economy that grew a blistering 8.7 percent last year.

While its relegation in the global economic rankings will be a blow to Japan's prestige, its economy might be in an even worse state if it were not for the boom in China, now its biggest trading partner and top export market.

With markets in Japan, North America and Europe in the doldrums, Japan's top carmakers and other manufacturers are increasingly relying on emerging economies including China.

Many Japanese manufacturers have opened factories in China, taking advantage of the lower labour costs and faster economic growth there. The flipside is that they face increasing competition from Chinese firms in overseas markets.

"As its population is ageing, we cannot expect Japan's domestic demand to recover," said Hiromichi Shirakawa, chief Japan economist at Credit Suisse.

"Japan has to rely on exports to limit the speed of its economic decline.

Japan's outlook would be much darker if it weren't for China," he said.

Japan's government has taken notice and started issuing visas to individual Chinese tourists last July as demand for non-group travel increases.

Foreign visitor numbers to Japan last year plunged 18.7 percent from the previous year - the fastest decline in nearly four decades - to 6.79 million due to the global recession, a strong yen and the swine flu scare.

But arrivals from mainland China edged up 0.6 percent to a record one million.

It is no wonder that travel agencies are competing to woo Chinese tourists with sight-seeing trips that include beauty treatment and healthcare.

Nippon Travel Agency is offering a one-week tour for two for about one million yen, including stays at upscale hotels and cancer check-ups at a hospital with cutting-edge equipment, a company spokesman said.

Even remote places such as Abashiri in Hokkaido, 1,000 kilometres (620 miles) north of Tokyo, are seeing an influx of visitors, after the city was chosen as a filming location for a hit movie released in China last year.

Analysis: Restructuring to make economy a "tiger"

2010-02-16

BEIJING: As China celebrates the arrival of the new lunar year, the Year of the Tiger, the world hopes China's economy will roar again in 2010, after it helped pull the global economy out of recession in 2009, the Year of the Ox.

The world's third largest economy will become a "real tiger" when the Chinese government successfully restructures the nation's economy, a task the authorities have made a priority, as evidenced by a string of recent comments by top leaders, analysts say.

In early January, President Hu Jintao called on the whole nation to strive to accelerate the adjustment of China's economic development pattern, to promote sound and fast economic and social development.

The transformation of the economic development mode, based on a comprehensive judgement on the international and domestic economic situation, should not be delayed, Hu said at a seminar of provincial and ministerial-level officials.

The key for the transformation is to achieve it "at an accelerated speed" and with practical results, he added.

Vice Premier Li Keqiang said China has entered a critical period when adjusting the nation's economic structure is the only approach to advance the country's sustainable development.

Asia Development Bank economist Zhuang Jian said the repeated call for accelerated reform reflects policymakers' determination to put it at the top of the government agenda.

Boosted by a raft of stimulus measures, China's economy expanded 8.7 percent in 2009, staging a speedy recovery after being hit by the worst global financial crisis in eight decades.

Even though Chinese exports dropped 16 percent last year, China still overtook Germany to become the world's largest exporter.

The January trade data provided solid evidence of growth consolidation, with exports jumping 21 percent year-on-year and imports surging 85.5 percent.

After having sustained the nation's fast economic growth for more than two decades, the weaknesses of China's export-led growth model were revealed with the onset of the global economic recession which originated in the U.S.

Analysts say China cannot rely on exports for growth as much as it used to anymore. The path for future growth is clear, with the nation's top leaders repeated pledges to transform the economic growth model.

"The past ten, twenty and thirty years have seen China accumulate economic strength in a quantitative way," said Wang Xiaoguang, a researcher with the Chinese Academy of Governance.

But in the future it should focus more on quality, he added.

Li Keqiang said that expanding domestic demand is the prime and long-term strategy for economic development.

To offset weak external demand, the government looked to domestic demand to shore up growth in 2009, with the government announcing a raft of policy incentives to spur consumption.

Tax cuts and auto subsidies helped propel China to becoming the world's biggest auto market last year.

Wang Xiaoguang said China still has plenty of potential to grow its consumption, with the nation's vast rural areas to provide plenty of demand.

In 2009, retail sales in rural areas grew 0.2 percentage points faster than those is urban regions.

In addition to subsidies for auto and home appliance purchases, the government said in the 2009 No. 1 document, which focused on rural development, enunciated policies to help farmers buy building materials.

Demand for building material is growing as the better-off rural residents renovate their houses to live more comfortable lives.

Although details of the new incentives have yet to be released, it will massively stimulate rural demand, Chang Xiaocun, a Ministry of Commerce official, said.

National Statistics Bureau data showed consumption contributed 4.6 percent to GDP growth in 2009, compared with 8 percent for investment and a negative 3.9 percent from exports.

"Growth will not be a problem this year as the economy has bounced back from a the big slowdown," said Wang Xiaoguang.

The blind pursuit of economic rate is not desirable for the Chinese economy, he said, adding that a growth rate between 8 percent and 9 percent is appropriate during the economic restructuring.

China's missing trillions

Economists have known for years that China's official economic data was full of inconsistencies, but new data shows that the gap between what is real and what is reported could be very wide indeed. And the good news is that the structural imbalance thought to exist in China's economy between exports and domestic consumption, might not be as severe as we thought.

Last week JPMorgan’s chief Asian and emerging market strategist Jonathan Garner visited Hong Kong to launch the group’s Asian/global emerging markets equity strategy, entitled 2010 Outlook: Headwinds Building But Further Upside Likely. In the report, Morgan Stanley suggests that China’s 2008 GDP figures could out by $US1.25 trillion – but not in the direction most economists would suppose.

China's official GDP estimate was around $US4.4 trillion for 2008 GDP, but Morgan Stanley’s estimate is more like $US5.7 trillion – an astonishing 30 per cent higher. Garner also suggests that total per capita spending of $US1,221, is actually, more like $2,183 (79 per cent higher).

Garner’s premise for this theory stems primarily from the idea that GDP is extremely difficult to calculate, especially in an economy as big as China’s.

“It [GDP] is subject to a lot of statistical inference and estimation and particularly in emerging markets, where private sector services activities of all forms, be it offering a haircut service or a car or offering, let’s say, English language tuition, all of these things that might be going in China at the moment – you have to have the statistical agency to capture it,” he said at the conference. He is essentially suggesting leakage of some spending on service-related industries.

He also points to the auto and white-goods booms of 2009. “If the stated incomes in China are correct, the official incomes, you shouldn’t have had China becoming the world’s largest auto market last year. That degree of auto sales shouldn’t have occurred, so the only conclusion must be that the incomes are understated,” he said.

The good news is that if Garner is right and his figures are closer to the real picture of what’s going on in China then the structural imbalance in the economy, between exports and domestic demand, is not as severe as market-watchers may have thought.

But the reasons for the inaccuracies might not just be as simple as GDP being hard to calculate. In a recent interview with Business Spectator, David O’Rear, chief economist of the Hong Kong General Chamber of Commerce, said that China's GDP figures have a twenty per cent margin of error. He suggests the problem is caused not only by the data being difficult to manage, but also because of political manipulation in certain areas.

China, politically, is very target-oriented. There are targets for just about everything, from production to efficiency, wind power to waste water. Not meeting those targets can be very embarrassing indeed when you’re in a developed economy like Australia or the US with scathingly critical media and looming elections.

But it is inconceivable that Chinese Premier Wen Jiabao would endure the sort of public criticism that would occur if a western leader failed to meet his or her economic targets. But that’s a bit of a non-issue, because as it happens, the targets always seem to get met.

High-profile China commentator Gordon Chang has also suggested political pressure is in part to blame for the China's skewed statistics, saying that China's government believes the maintenance of the appearance of a vibrant economy is necessary to act as a self-fulfilling prophecy.

Calling on China to increase domestic consumption based on figures that may be incorrect, as the US has done, is not the most constructive way to approach this issue. While some of the political hurdles might be more problematic, developed economies would do better to bring pressure to bear on China – through research, trade, government and diplomatic channels – to improve the statistical infrastructure in place to gather this data, and indeed offering any support or expertise that may benefit its development and improve our true picture of what's really going on in China.

http://www.businessspectator.com.au/bs.nsf/Article/China-GDP-economy-emerging-markets-pd20100215-2P8WC?OpenDocument&src=sph

^Every time the GDP figures are revised upward and nobody seems to know yet the real value of China's economy. incorrect number from local officials or uncounted economy activities??

^^ China's economy, especially the tertiary sector is largely underestimated due to the sheer amount of transactions done in cash. They are mostly not reported to officials (to avoid tax) and hence not recorded in official statistics.

It's common to even pay for a RMBXXX,XXX car with cash.

China sees growth in shipbuilding industry

26 Jan 2010

Jan. 27, 2010 (China Knowledge) - Despite the world economic crisis, China’s shipbuilding industry grew rapidly last year, as reflected in all the relevant statistics for 2009.

The gross output value of shipbuilders above the designated size was RMB 548.4 billion, up 28.7% year on year. The export value of ships and related products was US$28.36 billion, up 44.9%, and import value rose 92.5% to US$ 2.48 billion.

Reportedly, China saw ship completions increase 47% to 42.43 million dead weight tons last year. Sea ships accounted for 40.02 million DWT. New ship orders were 26 million DWT, down 55% year on year. Booked orders were 188.17 million DWT, down 8%. China's ship completions, new ship orders and booked orders accounted for 34.8%, 61.6% and 38.5% of the world's totals, respectively.

China has supplanted South Korea as the biggest ship producer in the world.

http://news.alibaba.com/article/detail/business-in-china/100239518-1-china-sees-growth-shipbuilding-industry.html

China's official GDP estimate was around $US4.4 trillion for 2008 GDP, but Morgan Stanley’s estimate is more like $US5.7 trillion – an astonishing 30 per cent higher. Garner also suggests that total per capita spending of $US1,221, is actually, more like $2,183 (79 per cent higher).

Woah!:eek2:

^^About China GDP, some media also said it should be lower than USD 4.4trillion, because many officials want to look good to the central government by increasing the GDP number beyond the real number. Uncounted GDP + overrated GDP = USD 4.4trillion is right in the middle.

^^ Yes but the NBS doesn't pay much attention to the figures reported by the provinces. If you add up the province GDPs you get a total figure much larger than the national GDP. Also the national growth rate is far slower than the average province growth, and normally only several provinces grow slower than the nation average while most them grow much faster.

Ironically, former upwards revisions prove that province reports were more accurate, lol.

By the way, notice that the article I posted hasn't been reproduced almost anywhere. That info is signed by one of the most renowned firms on financial services, yet the media didn't care at all (oops! good news for China!, don't dare to publish it!).

It's the usual trend when somebody concludes that China's potential is bigger than thought, and especialy when it shows that the size of the economy is underestimated. A couple of years ago I caught another article published by Asia Times which showed also that the real consumption is around 60% larger than official. It quoted first tier institutions too, never found it again.

Yet any piece of anti Chinese bullshit published by James Chanos, or fake stories like the one about Ordos by Al Jazeera's pseudo journalists are reproduced for months once and again, and again by virtually the whole global media.

Even the euphoric articles on China by the Nobel prized Fogel and other "economic stars" have a minor impact on the media since they offer an optimistic viewpoint. Actually I've never read Fogel's words on any Spanish langauge source, while the story of Ordos as well as Chanos' doomsaying statements were everywhere.

China's Pearl River manufacturing hub 'lacks workers'

Monday, 22 February 2010

China is facing a shortage of workers in the Pearl River Delta manufacturing hub in southern China.

Some estimates suggest factories need two million more migrant workers from other parts of China.

The shortages have been highlighted in Chinese media as the country gets back to work after the week-long Spring Festival, or Lunar New Year holiday.

Expectations of higher wages and better working conditions from new workers are being blamed for the labour shortage.

Factories in southern China started reporting that it was hard to find enough workers last August, as orders picked up after the financial crisis.

More choosy

Now, the country's state media report, the shortages are becoming significant.

Low pay is a major factor. The companies that find it hardest to recruit, and then retain workers, are those involved in low value, labour intensive manufacturing.

Migrant workers used to travel from all over China for those jobs.

But last year many of them found work that paid similar salaries closer to home, working on the infrastructure projects funded by the country's economic stimulus package.

They are still building the roads, airports and railways the government has funded.

Beijing's own research suggests that each new generation of workers is better educated, and has higher expectations in terms of salary, labour conditions and rights than those that came before them.

They are more choosy about what kind of factory they want to work in.

Some experts point out though that if companies are faced with a shortage of workers, that could force them to invest in new technology.

In that way the shortages may actually help to speed up the transformation of the economy here into one that is less labour intensive, delivering higher value.

http://news.bbc.co.uk/1/hi/business/8527621.stm

What happened to the trillions of unemployed workers that were going to revolt, etc?

What happened to the trillions of unemployed workers that were going to revolt, etc?

As the question suggests, they were going to revolt, and they are still planning to revolt, and that's the happening. :lol:

As the question suggests, they were going to revolt, and they are still planning to revolt, and that's the happening. :lol:

Since the Chinese are not revolting because of unemployment, now they certainly are going to revolt for better pay and working conditions.

It's so simple to spin a story if you are working in the media. ;)

By the way, notice that the article I posted hasn't been reproduced almost anywhere. That info is signed by one of the most renowned firms on financial services, yet the media didn't care at all (oops! good news for China!, don't dare to publish it!).

It's the usual trend when somebody concludes that China's potential is bigger than thought, and especialy when it shows that the size of the economy is underestimated. A couple of years ago I caught another article published by Asia Times which showed also that the real consumption is around 60% larger than official. It quoted first tier institutions too, never found it again.

Yet any piece of anti Chinese bullshit published by James Chanos, or fake stories like the one about Ordos by Al Jazeera's pseudo journalists are reproduced for months once and again, and again by virtually the whole global media.

Even the euphoric articles on China by the Nobel prized Fogel and other "economic stars" have a minor impact on the media since they offer an optimistic viewpoint. Actually I've never read Fogel's words on any Spanish langauge source, while the story of Ordos as well as Chanos' doomsaying statements were everywhere.

well i have read that chanos article in all the 4 languages i can read and write :P. :banana:

^No news is good news: bad news spreading fast, and that is why media is focusing on, so they can make more money.

What's the reality? These analysts and Wall Street bunch of crooks are blowing ill winds all over the world. Be it Greece, Spanish, Dubai, Iceland, foreclosure crisis, now China's bubble? They all should be in jail by now. They do not care of people losing jobs or suffering. They are thieves of this world. They are pocketing huge profits and left the countries in depressed.

Soros, Chanos, etc. should be jailed.

Rogoff Says China Crisis May Trigger Regional Slump

Feb. 24 (Bloomberg) -- China’s economic growth will plunge to as low as 2 percent following the collapse of a “debt- fueled bubble” within 10 years, sparking a regional recession, according to Harvard University Professor Kenneth Rogoff.

[...]

http://www.bloomberg.com/apps/news?pid=20601089&sid=a4MydrE5VOEM

There we go again.

Rogoff Says China Crisis May Trigger Regional Slump

Feb. 24 (Bloomberg) -- China’s economic growth will plunge to as low as 2 percent following the collapse of a “debt- fueled bubble” within 10 years, sparking a regional recession, according to Harvard University Professor Kenneth Rogoff.

[...]

http://www.bloomberg.com/apps/news?pid=20601089&sid=a4MydrE5VOEM

There we go again.

I love the way they always add as if Everyone is jumping with joy over Chinese growth and they are only ones portraying the truth.
In this article.
People say China “won’t have a financial crisis because there's central planning, because there’s a high savings rate, because there’s a large pool of labor, blah blah,” he added. “I say of course China will have a financial crisis one day.”

Which is quite funny cause all i hear in western media is riots on streets bankruptcy with mass executions on the changan jie to control disgruntled protesters and articles which show the Chinese economy as a ship with a hole the size of Paris Hilton's vagina and all set to sink down the marina trench.

Anyway at least these days they aren;t adding the human rights card and the tibetan card at the end of an article related to car sales . Thats the only good improvement i have seen over the last 5 years.

GM to Wind Down Hummer as Sichuan Tengzhong Sale Accord Fails

Feb. 25 (Bloomberg) -- General Motors Co. said it will close Hummer, the maker of military-inspired sport-utility vehicles, after Sichuan Tengzhong Heavy Industrial Machinery Co. couldn’t win Chinese approval to buy the unit.

Winding down the brand will take several months, Nick Richards, a spokesman, said yesterday. Some of the 3,000 people now employed at Hummer work on other vehicles, so GM doesn’t know how many jobs will be lost, Richards said.

Unloading Hummer was part of GM’s plan to cut its U.S. brands to four from eight after bankruptcy. The Detroit-based automaker sold its Saab unit yesterday, and absent a last-minute buyer Hummer will join Saturn and Pontiac in being shut as GM focuses on its top-selling domestic vehicle lines.

“The Hummer brand was very much a product of its time,” said Aaron Bragman, an analyst at IHS Global Insight in Troy, Michigan. “In today’s much more environmentally conscious world, it’s a brand that just doesn’t fit in.”

A Chinese government agency indicated that it wouldn’t give approval for Tengzhong to buy Hummer, said three people briefed on the deal, who asked not to be identified because the talks weren’t public. Wang Chao, China’s assistant commerce minister, said yesterday that China didn’t block the bid.

Tengzhong was “unable to obtain clearance of the transaction from the Chinese regulators within the proposed deal time frame,” according to a statement from the Chengdu-based company. The sale was worth $150 million, people familiar with the matter said on Oct. 8, a day before GM and Tengzhong announced a deal.

Small-Car Policy

A Tengzhong purchase of Hummer would have bucked China’s government policy of promoting fuel-sipping small cars, which includes cutting the sales tax on vehicles with engine displacements of less than 1.6 liters. The H2 Hummer has a 6.2- liter V-8 engine, according to GM’s Hummer Web site.

Tengzhong, a closely held manufacturer whose products include bridge parts, would have vaulted into the passenger-auto industry by buying Hummer. The company had said it wanted to expand the unit into China and other markets outside the U.S., which accounted for about two-thirds of Hummer’s sales under GM.

Richards, the Hummer spokesman, said GM would consider “viable alternatives for all or part of the brand during wind down.” GM also had said in December it would shut Saab, only to revive talks and reach the agreement that was completed yesterday with Spyker Cars NV.

Poised to Sell

GM first said it planned to sell Hummer at its June 2008 annual meeting as record fuel prices prompted the biggest U.S. automaker to focus on developing more fuel-efficient cars. U.S. sales for the unit fell 67 percent last year as the economy faltered, GM slid into a 40-day government-backed bankruptcy and Hummer’s fate was unresolved.

Hummer sales began in 1999 with the $140,000 H1, a 7,600- pound SUV (3,400 kilograms) patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger, now California’s governor. The 6,600-pound H2 debuted in 2002, followed by the 4,700-pound H3 in 2005.

“Closing Hummer simultaneously improves the health of GM, China and the planet,” said Daniel Becker, director of the Safe Climate Campaign at the Center for Auto Safety, an advocacy group in Washington. “Hummer should rest in pieces.”

U.S. deliveries for Hummer peaked at 71,524 in 2006, according to Autodata Corp., an industry researcher based in Woodcliff Lake, New Jersey. Last year’s total was 9,046.

http://www.bloomberg.com/apps/news?pid=20601089&sid=a89A2vcAkjuY

ASM Pacific Fourth-Quarter Profit Soars to Record HK$459 Million
Feb. 25 (Bloomberg) -- ASM Pacific Technology Ltd.’s fourth-quarter profit rose by more than 1,300 percent to a record HK$459 million, according to a statement to the city’s stock exchange.
http://www.bloomberg.com/apps/news?pid=20601089&sid=aKWMmwsBI.V4

http://www.bloomberg.com/apps/news?pid=20601089&sid=ajTvpNpPpfjE


China’s Top Power Companies Made 19.6 Bln Yuan, Securities Says


Feb. 25 (Bloomberg) -- China’s top five power producers will post a combined profit of 19.6 billion yuan ($2.9 billion) last year, Shanghai Securities News said today without citing anyone.

China Huaneng Group Corp. earned 6.1 billion yuan, China Huadian Corp. 2.1 billion yuan, China Datang Corp. 2.3 billion yuan, China Guodian Corp. 6 billion yuan, and China Power Investment Corp. 3.2 billion yuan, according to the report.

China Huadian’s Hong Kong-listed unit Huadian Power International Co. made a profit of more than 1.7 billion yuan, Shanghai Securities said.

Per capita GDP in south China's Pearl River Delta Region approaches $10,000
GUANGDONG, Feb. 24 (Xinhua) -- The per capita gross domestic product of south China's Pearl River Delta Region reached 67,321 yuan (9,855.2 U.S.dollars) in 2009, a statement from Guangdong Province's Statistics Bureau said Wednesday.

The figure, approaching 10,000 U.S.dollars, is a sign the region has entered the late stage of industrialization and is one step closer to modernization, experts said.

The region, which includes the major cities of Guangzhou, Shenzhen and Dongguan in south China's Guangdong Province, is one of China's most important export bases.

http://news.xinhuanet.com/english2010/china/2010-02/24/c_13186139.htm

On another unrelated note .

Taiwan's Per capita GDP=15,563 USD nominally and 30,200 including PPP.

So Guangdong has probably crossed the 10,000 USD Nominal Per capita income by now. So yeah its closing in on taiwan very quickly :D

http://news.xinhuanet.com/english2010/china/2010-02/24/c_13186139.htm

On another unrelated note .

Taiwan's Per capita GDP=15,563 USD nominally and 30,200 including PPP.

So Guangdong has probably crossed the 10,000 USD Nominal Per capita income by now. So yeah its closing in on taiwan very quickly :D

But why is the USD GDP in Taiwan so low compared to its PPP GDP? Taiwan is almost at Japan's level (and could grow 7% in 2010 compared to 2% in Japan) in PPP but not even close at USD GDP.

^^ Their currency is ver undervaluated too I think.

Tense times in Chinese iron ore price talks (http://news.bbc.co.uk/2/hi/business/8506195.stm)

Due to stand trial in China, Stern Hu knows just how sensitive the country is about how much it pays for the vast iron ore imports its giant steel industry needs.

Mr Hu, an Australian national, is the head of the Anglo-Australian mining group Rio Tinto's iron ore business in China.

He and three Chinese colleagues - Wang Yong, Ge Minqiang and Liu Caikui - were arrested in July last year and subsequently charged with bribery and violating commercial secrets. They are now set to go on trial later this year.

The four are accused of spying on Chinese steel mills for six years, and in the process helping to inflate the price China pays for its iron ore imports. Rio Tinto strongly denies the accusations.

The arrests of the four came last year as China failed to agree already overdue 2009/10 annual iron ore prices with the world's three largest producers - Rio, fellow Anglo-Australian miner BHP Billiton, and Brazil's Vale.

With talks now starting for the 2010/11 financial year that begins on 1 April, China's ill-tempered approach appears to be continuing.


I understand there is a lot of internal pressure in China to get a new benchmark agreement
Phillip Price, steel editor, Metal Bulletin

Earlier this week, Wu Xichun, the chairman of the China Iron and Steel Association (CISA), the industry body that organises the Chinese representation at the separate negotiations with Rio, BHP and Vale, verbally attacked reporters who questioned how this year's talks were likely to proceed.

"Please don't report on it any more, you're not doing us any favours," the Reuters news agency reported him as saying.

"So don't ask me anything about iron ore talks!" he shouted. "Nobody from CISA will tell you anything about it.

"You'd better not waste your time and keep on prying."

High drama

So why is China being so jittery?

Unlike any other raw metal, the worldwide price of iron ore is primarily set on an annual basis.

This process - the establishment of global annual "benchmark" prices - has traditionally been of benefit to both the iron ore miners and the steel companies, as it introduces long-term stability to what has always been a sector prone to boom and bust.

The way it has worked in recent years is that the three miners each negotiate separately with Japan, South Korea and China - the world's three largest iron ore importers - and the first to agree a price with one of these countries sets that year's benchmark, which the other two then broadly follow.

With billions of dollars at stake, it is a game of high drama and huge implications.

The system failed last year because China refused to accept the benchmark deals agreed by South Korea and Japan, which themselves were not signed until June - three months late.

While South Korea and Japan negotiated a price cut of approximately 30% in the face of the then global recession, China said this was not enough, and so refused to follow suit.

Read the rest of the entry here. (http://news.bbc.co.uk/2/hi/business/8506195.stm)

But why is the USD GDP in Taiwan so low compared to its PPP GDP? Taiwan is almost at Japan's level (and could grow 7% in 2010 compared to 2% in Japan) in PPP but not even close at USD GDP.



Well it is just a myth that taiwan has high per capita GDP, mainly created by media and of course Taiwanese political parties to emphasize how huge the economic difference is and how far more advanced the Taiwanese are . In reality since, 1990 the Taiwanese economy has stagnated very badly after the bursting of the bubble in Japan. From 2000 Its economy has gone downhill . Also the Taiwan dollar very frequently is undervalued.

and a quick look at this list http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita

south korea is at 16,300 USD
Taiwan 15,500 USD

Sany Heavy to Invest $200 Million in Brazil Manufacturing Base

Feb. 26 (Bloomberg) -- Sany Heavy Industry Co. plans to invest $200 million in a manufacturing base in San Paolo, Brazil to produce excavators and other construction equipment, according to a filing to Shanghai’s stock exchange. The company expects the base to generate $500 million of annual sales within five years and $2 billion of annual sales within 10 years, according to the statement.

http://www.bloomberg.com/apps/news?pid=20601089&sid=auRaMsHmEMfE

http://graphics8.nytimes.com/images/misc/nytlogo379x64.gif


February 27, 2010
China, Defying Global Slump, Faces a Labor Shortage
By KEITH BRADSHER (http://topics.nytimes.com/top/reference/timestopics/people/b/keith_bradsher/index.html?inline=nyt-per)




GUANGZHOU, China — Just a year after laying off millions of factory workers, China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) is facing an increasingly acute labor shortage.

As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.

Factory wages have risen as much as 20 percent in recent months.

Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.

The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.

But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.

Since China does not release reliable, timely statistics on employment, wages are considered the best barometer of labor shortages. And temp agencies here in Guangzhou raised their rate for factory workers this week to $1.17 an hour, from 95 cents an hour before the new year holiday.
The rate was 80 cents an hour two years ago, before the global financial crisis temporarily depressed wages and demand.

The dearth of returning migrants set off a desperate scramble this week to recruit the workers who did step off long-haul buses and trains returning from the interior.

At a government-run employment center in downtown Guangzhou, employers seeking workers outnumbered job-hunters Thursday afternoon.

Outside, Liang Huoqiao, a 22-year-old plastics worker, joined a small group of men and women studying a 40-foot-wide list of companies seeking workers.

“You can walk into any factory and get a job,” he said.

The official China Daily newspaper said on Thursday that surveys of employers showed that one in 12 migrant workers was not expected to return here to Guangdong Province. Cities farther north along China’s coast are also running low on labor; Wenzhou alone posted a shortage of up to one million workers.

Guangdong provincial officials announced on Wednesday that they were considering increasing the minimum wage, which varies by city and ranges from $113 to $146 a month.

Higher wages could ease labor shortages by prompting factories to reduce their work forces.

But many factories already pay well above the minimum wage. They are wary of further pay increases because it is not certain they can pass the increased costs on to their customers — in particular, strapped importers in the United States and the European Union (http://topics.nytimes.com/top/reference/timestopics/organizations/e/european_union/index.html?inline=nyt-org).

Rising wages suggest the re-emergence of a worker shortage that was becoming evident before the financial crisis. A government survey three years ago of 2,749 villages in 17 provinces found that in 74 percent of them, there was no one left behind who was fit to go work in city factories — the labor pool was dry.

Mass layoffs in late 2008 and early 2009 because of the global financial crisis temporarily masked the developing shortage of industrial workers. But two powerful trends were still working to reduce the supply of young people headed for factories.

For one, the Chinese government has rapidly expanded postsecondary education. Universities and other institutions of higher learning enrolled 6.4 million new students last year, compared to 5.7 million in 2007 and just 2.2 million in 2000.

At the same time, China’s birth rate has been sliding steadily ever since the introduction of the “one child” policy in 1977.

Labor shortages have returned quickly in recent weeks as these long-term trends have collided with a recovery in overseas demand for Chinese goods.

Far more jobs are available these days in China’s interior. Government projects like rail and highway construction have absorbed millions of workers, particularly after Beijing allocated nearly $600 billion to economic stimulus spending in 2009 and 2010. Consumer spending is also rising briskly; auto sales more than doubled last month from a year before, and this has created many jobs in retailing, restaurants, hotels and other inland businesses.

Even before the holiday, companies were struggling to find the employees needed to keep assembly lines running.

At many factories, white-collar managers and engineers were forced to spend time on assembly lines to meet deadlines before the lunar New Year, because laborers were in such short supply. The managers often struggled with the tedious but intricate tasks required to make everything from toys to DVD players

“People working in the office, like me, have been asked to help on the factory floor,” said Sky Niu, the sales manager at the Hengjia Electronics Company in Dongguan. “Of course, we can only help on the simpler tasks, such as packing.”

The labor shortage is not benefiting workers just through higher wages. Personnel managers here say they are also abandoning the informal tradition of not hiring anyone over 35 — they say they are now hiring workers up to 40 years old, and sometimes older, despite concerns about whether they can keep up week after week with the rapid pace of Chinese assembly lines.

It remains to be seen if Chinese factories will learn from their hiring difficulties now and be less quick to lay off workers during the next global downturn.

The current system “is not stable, it’s not healthy,” said Han Dongfang, the director of the China Labor Bulletin, a Hong Kong-based group that advocates collective bargaining.

Though the wage boost increases the prospect of inflation, it may have another more salutary aspect. The Obama administration has been pushing China to let the renminbi (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/yuan/index.html?inline=nyt-classifier) rise against the dollar (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/dollar/index.html?inline=nyt-classifier), which would erode some of China’s formidable advantage in export markets. Rising wages in China have the same effect — while also giving Chinese families more spending power.

Letting wages rise benefits workers, said Jing Ulrich, the chairwoman of China equities and commodities at J. P. Morgan (http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org). Letting the currency rise benefits currency speculators, she said.

Mr. Liang, the 22-year-old plastics worker, said that he expected his pay to double in the next five years and added that he already had set his priorities.

“For sure, I want to buy a car,” he said. “Car first, then maybe marriage later.”


Hilda Wang contributed reporting.

Source (http://www.nytimes.com/2010/02/27/business/global/27yuan.html?ref=global-home)

^^

I can't believe this country is facing a labor shortage with 1 billion people. this must be an early April Fools Day Joke. I will not believe this. It's just way too ridiculous. This makes me want go to China and start a business or find a very good job. lol!

^^

I can't believe this country is facing a labor shortage with 1 billion people. this must be an early April Fools Day Joke. I will not believe this. It's just way too ridiculous. This makes me want go to China and start a business or find a very good job. lol!

There is no labor shortage just shortage of labor that is ready to work at low wages or wages they are ready to offer.

Nonetheless The reasons are quite logical . Basically there is no across of the board labor shortage in china only in Guangdong province . Primarily because the cost of living in Guangdong province has risen very dramatically and with low wages . It is hardly an incentive for innerland province workers to move south to guangdong. Also they are lot of industries that have moved inland over the last two years . Thanks to government polices that are prodding businesses to move inward and also due to newer freight lines . So a migrant worker perfers an inner province with a wage slightly lower closer to home where cost of living is much much lower than guangzhou than move to guangdong where though labor cost might be slightly more but living expenses are very high

^^

I can't believe this country is facing a labor shortage with 1 billion people. this must be an early April Fools Day Joke. I will not believe this. It's just way too ridiculous. This makes me want go to China and start a business or find a very good job. lol!

China has trillions of unemployed workers likely to revolt today, and tomorrow it faces a dramatic shortage. Today they smash anybody who dares to protest. Tomorrow it is the country with the highest number of riots, etc. How? Well, you have to read about the doublethink principle in George Orwell's 1984 to understand how the media works when "reporting" China's news :D

China has trillions of unemployed workers likely to revolt today, and tomorrow it faces a dramatic shortage. Today they smash anybody who dares to protest. Tomorrow it is the country with the highest number of riots, etc. How? Well, you have to read about the doublethink principle in George Orwell's 1984 to understand how the media works when "reporting" China's news :D

What do you mean? I haven't read George Orwell's summary yet. Is this a fabrication made by the media (Western?) or something they are taking advantage of once there is unemployment or economic downturn later on?

^^ The thing is, facts, truth, etc, are irrelevant things, and you can mantain two completely opposite statements at the same time as long as they serve to feed your prejudices or purposes. Politicians play this game all the time, that's not new. The problem comes when joruanlists join the game, and surprisingly people keep trusting them.

China Daily
中國日報

Zhejiang facing worst labor shortage in 7 yrs
By Zhang Jiawei (chinadaily.com.cn)
Updated: 2010-02-27 17:15

East China's Zhejiang province is facing the most severe labor shortage since 2003, with an average of 383 jobs for every 100 registered job seekers after the Spring Festival, the local Hangzhou Daily newspaper said Saturday citing the province's human resource department.

The province's labor needs are expected to increase by 20 to 30 percent over last year as its economy is rebounding strongly. Supply of workers is down because the labor-rich provinces in China's central and western regions retained people who used to go work in the southeastern coastal regions as their economy develops fast, the newspaper reported.

To fix this, the province plans to train and use local workforces and to recruit workers from other provinces, the newspaper said.

The province plans to send four groups to the country's labor-rich provinces to recruit workers. Some enterprises will join the groups, according to the newspaper.

Source (http://www.chinadaily.com.cn/china/2010-02/27/content_9513994.htm)


Zhejiang sending recruiters to find laborers
By Chen Ziyan (chinadaily.com.cn)
Updated: 2010-02-27 14:56

Zhejiang province will send four work teams to provinces with a surplus of laborers to recruit migrant employees amid the most severe labor shortage over the past seven years, according to Hangzhou.com.cn.

A survey released Friday by the Zhejiang Provincial Human Resources and the Social Security Bureau shows a great disparity between job vacancies and job applicants after the Spring Festival holiday.

Demand for labor is expected to increase by 20 percent to 30 percent compared to last year due to the strong economic recovery of the province, according to the Zhejiang Employment Management Services.

The four teams accredited by Zhejiang province will cooperate with labor-exporting provinces on interprovincial labor services, and some enterprises will participate in on-site recruiting.

Source (http://www.chinadaily.com.cn/china/2010-02/27/content_9513764.htm)

^^I heard China economy improved a lot. Many migrant worker choose to find job in their own homwtown or another city rather than work as lowly migrant worker in Zhejiang and Guangdong. No more cheap workers in China, Zhejiang and Guangdong need to rise their salary.

I also read China is too big, a continental country. A worker shortage in this place and high unemployment in other place. I read University graduate student need to find work in inland city rather than Beijing, I heard inland city provide better opportunities than already fulled coastal city.

In the last interview, Wen Jiabao said to fight high employment, graduated university students need to start their own business. This is a good news, I hope the government can provide loan for this graduated students to start their own business that can provide jobs to many others. Young people are full of idea, although lack of experience. I think China economy in future will be different from what we saw today and in the past. Young people full of idea, creativity, innovation and colorful.

1st quarter GDP growth rate estimated at 11.4%

China's first-quarter GDP growth rate is expected to reach 11.4 percent according to the Langrun Forecast issued February 27 by 22 institutions including the National School of Development under Peking University, the Department of Economic Forecasting of the State Information Center, Essence Securities and ICBC.

The 22 institutions have respectively produced forecast data on the first-quarter GDP growth rate, with a weighted average growth rate of 11.4 percent. Of them, Blue Oak Capital estimated the highest growth rate of 13.5 percent, while the Unirule Institute of Economics estimating the lowest growth rate of 9.5 percent.

Furthermore, according to the forecast data from the 22 institutions, the first-quarter CPI is expected to increase by 2.4 percent, industrial added value by 19.7 percent, total investments in fixed assets by 28 percent, and gross retail sales of consumer goods by 18.2 percent. Both imports and exports will surge in the first quarter, with exports expected to be up by 25.2 percent and imports expected to be up as high as 47.5 percent.

According to the Langrun Forecast, China's economy has once again begun to develop rapidly and inflation may occur.

Song Guoqing, a professor from Peking University's National School of Development, said that signs of low inflation have presently emerged. However, it has faded away compared with November and December of last year. CPI rose sharply month-on-month in December 2009, dropped to a certain degree in January 2010, and basically remained unchanged in February 2010. Generally speaking, chances for inflation caused by excessive demand are slim, as the impact caused by credit expansion in 2009 on the CPI has been fully released.

The National Bureau of Statistics released relevant macroeconomic data for February 11, 2010. The data shows that China's GDP reached 33.53 trillion yuan in 2009, up 8.7 percent year-on-year if relevant calculations are based on comparable prices, with the growth rate dropping by 0.9 percentage points from the previous year.


http://english.people.com.cn/90001/90778/90862/6905154.html

OMG, hopefully the Chinese Government can control the inflation and put as many people in a working position as possible. I hope that the government can start to build flats and apartments as well to allow the local people to have new homes, and not simply letting private investors do all the building, as they will make the prices really high.

China allocates 28.6 billion yuan to support farmers

2010-03-02

BEIJING – China's central government has allocated 28.6 billion yuan ($4.2 billion) to support farmers, the Ministry of Finance said in a statement Monday.

The bulk of the funding -- 18.6 billion yuan -- would be used to subsidize farmers in growing improved varieties of crops such as rice, corn, and cotton.

The other 10 billion yuan would subsidize purchases of farm machinery such as sowers and reapers, said the statement issued to Xinhua.

The funding aimed to improve motivation in agricultural production, and stabilize the country's grain production, according to the statement.

Farmers across the country would be eligible for the subsidies.

The funding was on top of 86.7 billion yuan of subsidy funding to grain-growing farmers nationwide in February.

The financial support for agriculture came as severe drought continued in the nation's west and south.

The National Meteorological Center (NMC) issued a drought alert on Sunday warning the severe drought would continue over the next three days.

The State Flood Control and Drought Relief Headquarters said Saturday the drought, which started at the beginning of February, had affected 4.64 million hectares of arable land and left 12.7 million people and 8.4 million heads of livestock short of drinking water.

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20100302/0023ae73cfef0cf6862350.jpg
A farmer ploughs the field in Tongnan County, Southwest China's Chongqing Municipality, February 28, 2010

http://www.chinadaily.com.cn/china/2010-03/02/content_9521304.htm

Urban-rural income gap widest since reform

2010-03-02

Experts warn disparity will continue to expand if govt fails to act soon


BEIJING: China recorded its widest rural-urban income gap last year since the country launched its reform and opening-up policy in 1978.

Think tank researchers warned the gap will continue to widen in the coming years if effective measures to narrow the difference are not implemented soon.

The urban per capita net income stood at 17,175 yuan ($2,525) last year, in contrast to 5,153 yuan in the countryside, with the urban-to-rural income ratio being 3.33:1, according to the latest figures from the National Bureau of Statistics.

The Ministry of Agriculture had earlier said that the ratio in 2007 was 3.32:1, which narrowed by to 3.31:1 in 2008.

Although there has yet to be an official announcement, China Daily's calculations reveal 2009 saw China's widest urban-rural income gap in the past 32 years.

"I am afraid the (urban-rural) income gap will continue to expand as the country focuses its efforts on urban sprawl, rather than rural development," Song Hongyuan, director of the Research Center for the Rural Economy in the Ministry of Agriculture, told China Daily.

Several think tank organizations have raised similar warnings ahead of the upcoming annual sessions of top legislators and political advisors, which open Wednesday and Friday respectively, expecting the income disparity issue to top the discussion agenda.

Song Xiaowu, president of the China Society of Economic Reform, said the widening urban-rural income gap has partly resulted in China's increasingly "appalling income disparity between the haves and have-nots".

Song's organization has already organized a high-level forum and the input and proposals from experts will be submitted to the leadership for review.

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20100302/001ec95974af0cf68f8f2a.jpg

According to Song, the wealth gap is due to low salaries for employees and migrants in many companies, as well as rapidly growing profits for the management of State-owned enterprises, real estate developers and some private companies.

Zhang Dongsheng, director of the Income Distribution Department of the National Development and Reform Commission, admitted that the government "has said more than it has done" to bridge the income gap.

"We (the government) didn't think comprehensively on how to address the income disparity issue," said Zhang. "However, social equality and equal human development are the essence of our society, which is becoming richer than ever before."

Chi Fulin, president of the Hainan-based China Institute for Reform and Development, urged the government to unveil an overall program to double people's income within five years. He said that in the post-crisis era, China must primarily resort to domestic consumption, instead of investment and foreign trade to keep its economy on the fast track.

"To boost domestic consumption, I am urgently expecting the government to announce a program to double people's per capita income in five years," said Chi, who is a member of the National Committee of Chinese People's Political Consultative Conference (CPPCC). He will submit the proposal to the annual session this week.

As China is set to draft its 12th Five-Year Plan (2011-15) this year, the country "should take the opportunity and list the double-income target as a national goal", Chi said.

http://www.chinadaily.com.cn/china/2010-03/02/content_9521611.htm

Growth pattern transformation lifts social well-being

2010-03-03

Fan Meipeng, a 52-year-old farmer from a poverty-stricken county in central China's Anhui province, never dreamed he could earn over 200,000 yuan ($29,411.76) last year.

Just two years ago, his annual income was around 10,000 yuan, barely enough for his family to scrape through.

"I never thought I could make so much money in my life. I thank the government for helping me shake off poverty," Fan said.

Fan and his fellow villagers used to make a living growing rice in the low-lying areas by the Huai River. But excessive reclamation resulted in floods and damaged the environment.

In a bid to increase farmers' incomes and protect the fragile ecological environment, the local government gave subsidies to those farmers who built sandbanks to protect the farms, as well as installed biogas production units and planted vegetables.

Fan now runs an effective and environment-friendly farm, with 600 pigs, four pig-manure biogas units and several hectares of vegetables.

"My life keeps getting better and better. I hope the central government will continue to come up with new strategies to improve people's livelihood," Fan said.

Fan's example is one of many resulting from China's push to adjust the country's economic development pattern, which currently relies too much on investment and exports.

The global economic crisis has highlighted the urgency to transform China's development pattern to promote sound and fast economic and social development.

Chinese President Hu Jintao said on February 3 that "on the surface, the global financial crisis impacted on the speed of China's economic growth, but in essence it was the economic growth pattern that was worst hit."

Increasing farmers' income is key to boosting domestic consumption to advance the transformation of the growth pattern as China has a rural population of 720 million and farmers' purchasing power remains weak due to relatively low income and lack of a sound social security system.

The central government announced on January 31, 2010 to offer subsidies to farmers to increase output of grain, potato, highland barley and peanuts as well as to buy new agricultural machinery and construction materials.

Southern China's Guangxi Zhuang autonomous region earmarked one billion yuan last year to help three million migrant workers find employment again and 83,000 start their own businesses.

To further improve people's livelihood, Chinese Premier Wen Jiabao pledged to build five million affordable houses and reconstruct two million substandard ones this year.

Sun Ziduo, head of the Institute of Economics under Anhui Provincial Academy of Social Sciences, said: "such government moves will not only improve people's well-being, but also boost domestic demand and accelerate transformation of the growth pattern and help maintain social stability."

He also said China should speed up development of the social security net, the fourth driving force of economic growth after investment, exports and domestic consumption.

Wang Kaiyu, a senior researcher with Anhui Provincial Academy of Social Sciences, said: "a sound social security system could help decrease 'precautionary savings' and boost domestic consumption."

The nationwide rural basic living guarantee system was completed in 2007, benefiting 42.91 million people as of 2008.

http://www.chinadaily.com.cn/bizchina/2010-03/03/content_9531976.htm

If rural people getting richer, there will be no 15 mega cities with population min 25 million people like what McKensey said. I hope rural people getting richer, but I also hope people keep migrate to the big cities.

I wonder why China didn't develop industrialize agriculture like in US?

If rural people getting richer, there will be no 15 mega cities with population min 25 million people like what McKensey said. I hope rural people getting richer, but I also hope people keep migrate to the big cities.

I wonder why China didn't develop industrialize agriculture like in US?

You can't compare US wide-open plains with the small rice growing plots in East Asia. It's totally different.

If rural people getting richer, there will be no 15 mega cities with population min 25 million people like what McKensey said. I hope rural people getting richer, but I also hope people keep migrate to the big cities.

I wonder why China didn't develop industrialize agriculture like in US?

The farmers in US got hundreds of acres of farms. If you go to the big plains like in the state of Iowa, Indiana, Wisconsin and Oklahoma, the farms there are so big. The farmers themselves are making a lot of money. That's why they can afford advanced farming technologies from small dust planes to big harvesters. The only disadvantage of this lifestyle is boredom.

http://graphics8.nytimes.com/images/misc/nyt-global-edition-masthead-logo.gif (http://www.nytimes.com)

March 4, 2010
Market Defies Fear of Real Estate Bubble in China
By DAVID BARBOZA (http://topics.nytimes.com/top/reference/timestopics/people/b/david_barboza/index.html?inline=nyt-per)



SHANGHAI — The spacious duplex comes with crocodile-skin bedposts, hand-carved bronze doors inlaid with Swarovski crystals — and a $45 million price tag.

It is still on the market, but Charles Tong, the developer of Tomson Riviera, a luxury riverfront complex in the heart of the financial district here, says he is having no trouble finding takers for similarly priced units.

“We’re selling three to four apartments every month,” said Mr. Tong, seated in a white Versace (http://topics.nytimes.com/top/news/business/companies/versace/index.html?inline=nyt-org) easy chair. “Now, people here want something more luxurious; they’d like a new lifestyle.”

Everyone agrees China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) is in the middle of a spectacular real estate boom. The question is whether it is in the middle of a rapidly growing real estate bubble.

When other recent booms collapsed — in the United States, for instance — they depressed entire economies. In China’s case, a bursting bubble could affect much of the world. China is the fastest-growing large economy and, so far, a main engine pulling the world out of recession.

Beijing is clearly concerned. Authorities have recently moved to rein in the easy credit that has helped finance China’s hyperdevelopment, including making it more difficult for home buyers to take out a second mortgage.

Last year, a record $560 billion of residential property was sold in China, an increase of 80 percent from the year before, according to government statistics that are widely considered reliable. And with prices soaring, developers are scrambling to build more mansions, villas and high-rise apartments with names like Rich Gate, Park Avenue and Palais de Fortune.

Signs of exuberance are everywhere. An investor in Shanghai recently bought 54 apartments in a single day; a villa sold for $30 million last year; and in December a consortium of developers paid more than $3.5 billion for a huge tract of land in Guangzhou, one of the highest prices paid for any property, anywhere. In the city of Tianjin, in north China, developers have created a $3 billion “floating city,” a series of islands built on a natural reservoir, featuring villas, shopping malls, a water amusement park and what they say will be the world’s largest indoor ski resort.

“This is wild,” said Andy Xie, a former Morgan Stanley (http://topics.nytimes.com/top/news/business/companies/morgan_stanley/index.html?inline=nyt-org) economist who is now an independent analyst. “By all the traditional measures, like rental yield, this is a bubble.”

Speculators are snapping up properties on the expectation that prices will continue to rise, as prices have nearly every year for more than a decade. And powerful developers are working with local governments to transform old cities into urban dreamscapes.

But Shanghai, China’s wealthiest and most dazzling city, is the epicenter of the boom. Prices here have risen more than 150 percent since 2003, pushing the price of a typical 1,100-square-foot apartment up to $200,000, according to real estate experts. (Shanghai residents typically earn less than $5,000 a year.)

A buying frenzy has gripped the city, leading to billion-dollar land auctions and long waiting lists.

“The speed you buy a house here is faster than you buy vegetables,” said Andy Xiang, an advertising executive who recently put down a large cash down payment to get the right to pay $1.3 million for an apartment in the city’s exclusive Xintiandi area.

Few residences, though, are as upscale as Tomson Riviera, which consists of four golden-hued towers overlooking the Huangpu River, with a central garden mapped out in the shape of a dragon. The apartment complex’s entrance has original artworks by Salvador Dalí (http://topics.nytimes.com/top/reference/timestopics/people/d/salvador_dali/index.html?inline=nyt-per) and well-known Chinese artists. The apartments, a few of which have been decorated by Armani and Fendi, as well as Versace, lease for $7,000 to $17,000 a month — to high-level executives from companies like General Motors (http://topics.nytimes.com/top/news/business/companies/general_motors_corporation/index.html?inline=nyt-org).

Those who buy an apartment here tend to be extremely wealthy, like Liu Yiqian, an eccentric Shanghai entrepreneur whom Forbes magazine says is worth about $540 million.

Mr. Liu, 47, got his start driving a taxicab in Shanghai but eventually made a fortune investing in the stock market. In an interview this week, he acknowledged owning hundreds of apartments in Shanghai (he said he could not remember exactly how many), including a 6,000-square-foot apartment in Tomson Riviera, which he bought in 2008 for about $11.5 million.

“I invest in properties,” Mr. Liu said, noting that he also collects art, antiques and jade. “I think in Shanghai in five to seven years the real estate prices will be even higher.”

As they try to modulate the market, local and central governments here are walking a thin line. Land sales were a major source of government revenue, raising about $234 billion last year, an amount equal to over a third of the cost of China’s half-trillion-dollar stimulus program.

Whether the country is in the middle of a bubble has become the subject of a debate. Some economists, like Nicholas R. Lardy at the Peterson Institute for International Economics in Washington, say the housing boom is being propelled by a huge urbanization push that is creating premium-priced houses.

Other analysts say prices are being propped up by greedy developers and government policies that are making housing increasingly unaffordable for the masses migrating to big cities.

Despite the fear of a bubble here, Mr. Tong said his prices were just right, particularly because of so much hidden wealth in China. The publicly listed company is controlled by his family.

“I have a friend,” he said. “She makes maternity clothes. Her company has 20 percent of the world’s market share, and they’re not even a listed company.”

Still, Tomson’s prices are soaring. The most recent apartment sold for about $2,300 a square foot. The average luxury apartment in Manhattan sold for just under $1,900 a square foot in the fourth quarter of 2009 (http://www.prudentialelliman.com/images/marketreports/manhattan_q4_2009.pdf), according to Prudential Douglas Elliman real estate.

Indeed, for the price of a Tomson apartment in Shanghai, a buyer could easily purchase a 6,000-square-foot home in Los Angeles built by Frank Lloyd Wright (http://topics.nytimes.com/top/reference/timestopics/people/w/frank_lloyd_wright/index.html?inline=nyt-per) and now for sale ($10.5 million), or a 52-acre site with a 22-room residence in New Canaan, Conn. ($24 million).

But a sales agent at Tomson Riviera says this is the future financial capital of the world, not the dying one.

“Look at this bronze door,” said Wang Yaodong. “That costs $50,000! Look at these Gaggenau appliances. They were made in Germany.” The glasses were imported from Belgium, the Jacuzzi from Italy. And don’t worry about losing your key, he said, “This lock can read the palm of your hand.”

Source (http://www.nytimes.com/2010/03/05/business/global/05yuan.html?adxnnl=1&ref=global-home&adxnnlx=1267763216-4CXyp8wzB8pyJ4dGLcnEUg)

Everyone agrees China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo) is in the middle of a spectacular real estate boom.

Everybody? Everybody? I stopped reading from here, no wonder why the NYT is blocked from time to time. These well fed thugs believe they can ruin the performing of a major economy by flooding the world with fake rumors about its coming collapse? I love this Pravda style propaganda, it doesn't matter if we publish contradictory statements all the time, the result is always the same: collapsing! Collapsing real estate, collapsing exports, collapsing labor market, collapsing investments, collapsing stocks, collapsing gdp growth, collapsing banks, collapsing government! collapse, collapse, collapse!

I Think z0rg this was an article from 2004 or 1999 or 2007 or 2001 Ohh well i just checked they published the same shit again in 2010 :D

China targets GDP growth at 8%, CPI rise of about 3% for 2010 (http://www.pna.gov.ph/index.php?idn=3&sid=&nid=3&rid=262625)

BEIJING, March 5 (PNA/Kyodo) -- China is setting a target of eight percent growth in gross domestic product this year with an emphasis on "sound development," Chinese Premier Wen Jiabao said in his annual policy speech to the opening session of the National People's Congress (NPC) on Friday.

Speaking to some 3,000 deputies inside the Great Hall of the People, Wen said the country faced a "very complex situation" in terms of its development environment in 2010, even though it is expected to be a better year than 2009.

The country faces "many destabilizing factors and uncertainties" in its external environment, he said, including a resurgence of trade protectionism and global problems such as climate change.

Setting GDP growth target lower than the actual growth rate of 8.7 percent last year, Wen added, was to highlight that economic work is not focused on a "reckless pursuit of faster growth" but on adjusting the economic structure and transforming the pattern of economic development.

One of the country's main targets was to create jobs for more than nine million people expected to enter the urban workforce and keep urban unemployment at no higher than 4.6 percent.

The rise in the consumer price index, the main gauge of inflation, is targeted at three percent.

Wen said China will continue to implement a "pro-active" fiscal policy and a "moderately easy" monetary policy and strive to make polices more "targeted and flexible" in light of new circumstances and conditions.

"We need to skillfully handle the relationship between maintaining steady and rapid economic development, restructuring the economy and managing inflation expectations," he added.

The yuan exchange rate will be kept stable at an "appropriate and balanced level," Wen said further.

His annual government work report traditionally kicks off the NPC, China's highest legislative body.

Deputies to the parliament are elected from across the country's provinces and autonomous regions, including representatives from each of China's more than 50 ethnic minority groups.

The NPC will stretch over 10 days and see delegates discuss work proposals and vote on the reports.

Generally, laws proposed are expected to be passed as the Congress has not been known to reject a bill since the convening of the first session in 1954. (PNA/Kyodo)