Chinese Economics Thread

[Blitzo]

Wasn't the government trying to cool off growth for the last two years, and every economist and their dog was advising that as well? Well now growth has slipped a little -- still well above everyone else -- suddenly it's cause to panic?

On another note

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By Bob Davis

China reported that GDP growth slowed substantially in 2011 to 9.2%, compared to 2010’s 10.4%. But maybe it slowed more – a lot more.

That’s the suspicion voiced by China analyst Derek Scissors of the Heritage Foundation in Washington DC, who has long maintained that Chinese stats are about as reliable as the Boston Red Sox during a pennant run.

“China’s economic statistics are usually inconsistent, occasionally wildly inconsistent, and do not seem to be improving in quality,” Mr. Scissors writes. He says in 2011, Chinese authorities are “very likely exaggerating growth.”

His evidence: Growth in auto sales plunged . Orders for news ships, a big export item, fell even harder. Meanwhile, oil imports increased just 6%, compared to 17.5% in 2010.

Add to that a fall in foreign exchange reserves in the fourth quarter of 2011, which, he says, suggests that Chinese investors find a “sluggish world economy being more attractive than China’s own.”

Mr. Scissors says that bad data leads to bad policy. The faster the Chinese economy is seen to grow, the less incentive there is for Chinese leaders to try to shift their economic growth model to rely more on domestic consumption – a move that’s been urged by government officials around the world and a slew of economists.

Things are so bad he calls for the U.S. Department of Commerce to compile its own estimates of Chinese economic indicators.

But Tom Orlik, a Wall Street Journal columnist and author of “Understanding China’s Economic Indicators,” thinks the China-is-lying case is itself exaggerated. Chinese collection of statistics “is not perfect,” he writes in his book. “Some data points are more reliable than others. But neither is it a farce.”

... So apparently the chinese authorities are lying about growth numbers? Then what else are they lying about? And they could've been lying for the last twenty years about growth omgosh we've all been played! the skyscrapers and cities and the population elevated from poverty were all part of a massive fabricated hoax!

lool

 

[escobar]

Wasn't the government trying to cool off growth for the last two years, and every economist and their dog was advising that as well? Well now growth has slipped a little -- still well above everyone else -- suddenly it's cause to panic?

On another note

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... So apparently the chinese authorities are lying about growth numbers? Then what else are they lying about? And they could've been lying for the last twenty years about growth omgosh we've all been played! the skyscrapers and cities and the population elevated from poverty were all part of a massive fabricated hoax!

lool

this guy is from heritage foundation. you have to expecting this silly analysis. Nothing good come from this think thank when it is about china.

---------- Post added at 09:06 PM ---------- Previous post was at 08:56 PM ----------

On the other hand he is not wrong. A good part of PRC economy is hidden; essentially in the service sector because they don't want to pay tax.
i remember there was a report 2 or 3 years ago saying that the GDP is underestimated by about 30% and the domestic consumption by 60%.

---------- Post added at 10:04 PM ---------- Previous post was at 09:06 PM ----------

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Jim O’Neill, the economist who coined the term BRIC a decade ago, said China’s fourth-quarter growth rate, while the slowest in more than two years, was stronger than many analysts had forecast and was a “blow” to those predicting a “hard landing” for the nation’s economy.

China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said yesterday in Beijing. That exceeded the 8.7 percent median estimate of 26 economists surveyed by Bloomberg News and is above the 8 percent that signals a “soft landing” for China, according to SinoPac Financial Holdings Co.

O’Neill, chairman of Goldman Sachs Asset Management, said in an interview on Bloomberg Television’s “InsideTrack” with Erik Schatzker that if China grew at an annual rate of 7.5 percent this decade, as he forecast, it would contribute more to world growth in dollar terms than the U.S. and Europe combined.

“It’s the most important thing in the world,” said O’Neill, who last month published his new book, “The Growth Map,” with predictions of “rosy prospects” for the BRIC nations of Brazil, Russia, India and China and other developing markets. “Some democracy a la Chinese style is going to emerge,” he said. “They want more freedom but they really want more wealth.”
Overheated Market

One of China’s key economic challenges is its overheated property market. Yet China’s policy makers, by tightening monetary policy, managed to stem the property bubble, O’Neill said, something Western policy makers had failed to do before the subprime property meltdown that began in the U.S. in the middle of the last decade.

“China’s property prices have turned because Chinese authorities have deliberately stopped them,” he said. O’Neill said China’s authorities were raising wages to boost the domestic economy and move away from its dependence on exports, while seeking to address international concerns that its yuan currency is undervalued.

“There are two ways of dealing with exchange-rate issues, one is moving the nominal exchange rate; the second is to raise your prices and wages higher than everybody else, and the Chinese are deliberately doing that with wages,” he said.

The yuan traded at 6.3150 yesterday, compared with 6.3165 Jan. 16, according to the China Foreign Exchange Trade System. The People’s Bank of China set the yuan’s reference rate 0.09 percent stronger at 6.3250. It is allowed to trade 0.5 percent on either side of the daily fixing.
Greek Concerns

Regarding concerns that Greece may default, O’Neill said China’s economy generates the equivalent of Greek gross domestic product every four months. “Greece itself is not that important,” he said. “What is important,” according to O’Neill, is “how Greece deals with the restructuring or a default, which seems quite possible, and the contagion of that through the rest of Europe is extremely important.”

O’Neill said European markets had “sort of” shrugged off last week’s Standard & Poor’s downgrade of France and eight other European countries. He said it wasn’t clear whether that was because people perceived the European Central Bank is “going to be doing more and more” or there are “some signs of some stabilizing in the economy.”

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PRC/US GDP Forecast from

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Year GDP(yuan) GDP growth USD/CNY China GDP China+HK US GDP


2011 47.2 9.2 6.3 7.5 7.8 15.2
2012 53 8.0 6.1 8.7 9.0 15.9
2013 59 8.5 5.8 10.2 10.5 16.5
2014 66 8.5 5.5 11.9 12.2 17.2
2015 73 8.5 5.2 14 14.3 18
2016 80 8 4.9 16.3 16.7 18.8
2017 88 8 4.6 19.1 19.5 19.6
2018 97 8 4.3 22.6 23 20.5
2019 107 8 4.1 26 26.5 21.5
2020 115 7.5 3.9 29.6 30 22.4
2021 125 7.5 3.7 33.7 34.2 23.4
2022 135 7.5 3.5 38.5 39 24.5
2023 145 7 3.3 44 44.5 25.6
2024 157 7 3.1 50.6 51 26.7
2025 170 7 3 56.5 57 27.9
2026 183 7 3 61 61.5 29.2
2027 198 7 3 66 66.4 30.5
2028 214 7 3 71.2 72 31.9
2029 235 7 3 78.4 79 33.3
2030 259 7 3 86.4 87 34.8

 

[ABC78]

Hey guys here's a presentation by Thomas PM Barnett covering Sino/American economics.

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[Hendrik_2000]

For once some one in the west said the truth

China's success challenges a failed economic consensus

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It's public ownership that has allowed Beijing to ride out the west's crisis. Without it, recovery will be harder everywhere

How the tables are turned. As Britain tips back towards recession and the eurozone hovers on the brink of implosion, George Osborne hurried off to the former British colony of Hong Kong this week to drum up business for the City as a future trading centre for the Chinese currency. On Tuesday he was in Beijing to lobby China to do what neither the British private nor public sector is prepared to do – invest in crisis-ridden Britain.

The chancellor's quest follows the European Union's fruitless attempt to convince China to use some of its colossal reserves to back the eurozone's bailout fund. And given the relative performances of the European, US and Chinese economies in recent years, it's not hard to see why western politicians now feel the need for Chinese support.

It's a commonplace that China is the world's emerging economic giant. After 30 years averaging more than 9% annual growth, China is now the world's second largest economy and its fastest-growing market. Hundreds of millions of Chinese have been taken out of poverty, as its international share of manufacturing has risen from 2% to 20% in 20 years.

But it has been the slump in Europe, the US and Japan that has most dramatically underlined the yawning gap in performance between the world's long-established economic powers and China. In the four years from 2007 to 2011, US national income increased by less than 0.6% (the figure is still being revised down), the EU shrank by 0.3% and Japan declined by 5.2%. In the same period, despite the decline in export markets in those economies, China grew by more than 42%.

But there is a deep reluctance in the austerity-afflicted western world to consider the reasons for such an astonishing gap. Europe is already heading ever deeper into the second phase of the crisis that erupted in 2007-8, now centred on the eurozone. When the credit agency S&P downgraded nine states' creditworthiness and the eurozone's own bailout fund, warning that "fiscal austerity alone risks becoming self-defeating", Angela Merkel's response was to press for the adoption of even tighter austerity.

It is a recipe for economic disaster. Meanwhile, western analysts are predicting that China is heading in the same direction – as they have consistently and wrongly done for the past decade, but especially since the crash of 2008. The latest predictions of a "hard landing" for China focus on inflationary pressure, a legacy of bad bank loans, an overheated housing market, and the impact of stagnation or worse in Europe and the US.

Maybe the pessimists will be proved right at last, but there are powerful reasons to suggest otherwise. Chinese growth for 2011 was 9.2%, compared with forecasts for Britain of around 1%. It's expected to drop back this year to between 7% and 8% – the kind of crisis to dream for. Last year's inflation is cooling off, as is the property bubble which, unlike in the US and Britain, was funded by savings rather than borrowing.

As the Shanghai-based British economist John Ross argues, China has a strong record of absorbing bad loans in the wake of the 1997 Asian debt crisis, and is cushioned from the collapse in western demand by the fact that most of its trade is with the developing world.

But crucially – unlike Britain, the US and the stricken eurozone economies – China has a modest budget deficit of around 2%. Which points to the central reason why China was able to ride out the global crisis of 2007-8 with such dramatic success. China's response was to launch the biggest stimulus programme in the world, investing heavily in infrastructure.

But instead of doing it through deficit spending and printing money, the Chinese government was able to use its ownership and control of the banks and large state companies to increase lending and investment. Which is why China has grown by 10% a year since the crash, while the west and Japan have shrunk or stagnated.

China has travelled a vast distance from the socialised economy of the Maoist period and has a huge private sector and large-scale foreign investment. But its hybrid economic model continues to be based around a publicly owned core of banks and corporations. So while in Europe and the US governments rely on indirect (and so far entirely ineffective) mechanisms to reverse the collapse of private investment at the heart of the crisis – and private banks and corporations hoard bailout cash – China has the leverage directly to boost investment, jobs and incomes.

And that state-owned core has been central to the country's extraordinary growth over the past three decades. Of course that advance has also been based around the largest migration of workers in human history. And the costs of its economic rise have been massive: from rampant corruption and exploitation of low-wage labour to environmental degradation, decline in health and education provision, an explosion of inequality and serious restrictions on civil rights.

Strikes and rural upheavals across China – as well as political shifts – are now challenging and having their impact on those failures. But China's authoritarian system can also lead people elsewhere to ignore some powerful lessons about its economic experience. And one of those is that what used to be celebrated across the political mainstream in Britain and Europe as a "mixed economy" – along with long-discarded levers such as capital controls – can deliver results that a privatised, deregulated economy is utterly unable to do.

There's no sense in which the evolving Chinese economic model could or should be transplanted to Britain or Europe. And having long ago sold off public stakes across the economy, most European states don't have anything like the financial or industrial leverage that China does to drive economic growth.

But it would also be obtuse not to recognise that a private-sector and market failure is at the heart of the current crisis; or to reconsider the role that new forms of public ownership could play in a modern economy in the light of China's experience; or to refuse to use publicly owned institutions that do exist, such as Britain's part state-owned banks, to forge a way out of the crisis. China's success represents a global opportunity, as George Osborne has grasped. But it should also be a challenge to a failed and discredited economic consensus.

 

[escobar]

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Despite of a grim outlook, both China’s imports and exports will see a moderate growth at the beginning of 2012, the commerce ministry spokesman Shen Danyang said in Beijing Wednesday.

Shen admitted that currently China is challenged by a worrisome foreign trade situation. However, positive factors such as cheap yet high-quality labors, stable policies will help overcome the shadow cast by serious and complicated business environment.

According to the customs’ statistics, China’s gross value of imports and exports exceeded 3.64 trillion U.S. dollars in 2011, up 22.5 percent than a year earlier. Trade surplus maintained the decline trend since 2009, reaching 155.1 billion U.S. dollars in 2011 with a cut of 14.5 percent.

It’s noteworthy that the performance with its largest trade partner, the European Union, was outperformed by that with emerging markets in the past year.

For example, the overall trade volume between China and Brazil in 2011 enjoyed an upswing of 34.5 percent, much higher than 18.3 percent with Europe whose prolonged debt crisis curbed export demand.

Shen said the Chinese government has beefed up the support to domestic exporters especially the medium and small enterprises (SEMs). It is highly possible that Chinese firms will keep competitiveness and achieve a steady growth in 2012 if China’s economy insists on the endeavor of rebalancing and restructuring.

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People's Bank of China, China's central bank, said on Jan. 17 that it has signed a 35-billion-yuan (5.6 billion U.S. dollars) currency swap agreement with the Bank of the United Arab Emirates (UAE).

The agreement will last for three years and is extendable by mutual consents, according to a statement posted on the website of the People's Bank of China.

The swap is aimed at enhancing bilateral financial cooperation and promoting trade and investment as well as ensuring regional financial stability, it said.

Since the onset of the global financial crisis in late 2008, China has signed a total of 1.3-trillion-yuan currency swap agreements with 15 countries and regions such as South Korea, Malaysia, Hong Kong, Belarus, Argentina, etc. Some of the agreements have taken effect and promote the bilateral trade and investment between China and these economies.

 

[AssassinsMace]

This is what I find ironic is the wrap that the Chinese people are living in a world of ignorance because of goverment censorship yet this article shows clearly the Chinese are aware of their own situation and that of the US.

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The Chinese view of SOPA
By Evan Osnos | The New Yorker – 2 hrs 9 mins ago...


As members of Congress edge away from the Stop Online Piracy Act, leaders of the opposition can count among their most frequently used rhetorical tools a metaphor that has come to define this debate: SOPA = China.

The legislation would impose a “chilling internet censorship regime here in the U.S. comparable in some ways to China’s ‘Great Firewall,’” Wired wrote. Sergey Brin—who led G-Day, Google’s withdrawal from mainland China—said that the bills would “put us on a par with the most oppressive nations in the world.” Rebecca MacKinnon, an Internet-freedom expert who used to be journalist in Beijing, says they would impose a “censorship mechanism that is almost identical, technically, to the mechanism the Chinese use to censor their Internet.”



So, how does it all look to the people who actually live with it? In China, the reaction to American protests has ranged from sympathy to gentle Schadenfreude, as Chinese Web users try to sort out whether they are being held up as victims or patsies or pirates. After several years in which American diplomats have inveighed against Internet censorship in China, the proposals have inspired a bit of snickering. “The Great Firewall turns out to be a visionary product; the American government is trying to copy us,” one commentator wrote. A Chinese message making the rounds on Thursday said: “At last, the planet is becoming unified: We are ahead of the whole world, and the ‘American imperialists’ are racing to catch up.”

Fittingly, perhaps, the discussion has unfolded on Weibo, the Twitter-like micro-blogging site that has a team of censors on staff to trim posts with sensitive political content. That is the arrangement that opponents of the bill have suggested would be required of American sites if they are compelled to police their users’ content for copyright violations. On Weibo, joking about SOPA’s similarities to Chinese censorship was sensitive enough that some posts on the subject were almost certainly deleted (though it can be hard to know). But among those that survived, a commentator known as Dr. Zhang wrote: “I’ve come up with a perfect solution: You can come to China to download all your pirated media, and we’ll go to America to discuss politically sensitive subjects.”

There are, needless to say, differences of degree. While Chinese sites censor references to Tiananmen Square, Falun Gong, the Dalai Lama and other third-rail political issues, the force comes not in the act of censorship, but in the instances when prosecutions follow: the Chinese woman sentenced to a year of reform through labor for retweeting a joke, or the student detained for forwarding what authorities called a “rumor” about the murder of eight village officials. (h/t Isaac Stone Fish at Foreign Policy.)

After Chinese Web users got over the strangeness of hearing Americans debate the merits of screening the Web for objectionable content, they marvelled at the American response. Commentator Liu Qingyan wrote:

We should learn something from the way these American Internet companies protested against SOPA and PIPA. A free and democratic society depends on every one of us caring about politics and fighting for our rights. We will not achieve it by avoiding talk about politics.

There was little expectation that Chinese Web sites would ever band together to express their opposition to censorship: “Baidu, would you dare do something like this?” one asked.

The most eloquent response to the controversy, perhaps, was one that nobody saw at all. Commentator Shi Han wrote about trying to post a comment to Tencent, the giant Chinese portal. “I’ve written a short article about SOPA. But when I tried to put it up, Tencent replied with a message: ‘Your content has not passed review.’”

 

[Equation]

This is what I find ironic is the wrap that the Chinese people are living in a world of ignorance because of goverment censorship yet this article shows clearly the Chinese are aware of their own situation and that of the US.

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Only the bias ultra liberal media believes that the Chinese people are totally ignorant because of government censorship. They put together some silly conniving human rights group watch dog to promote their rhetoric. They forget that there overseas Chinese that don't agreed to their causes and therefore passed on the news and view of exchanges through phones, overseas visits with relatives, writing letters, etc., all this before the internet became big. Chinese people (along with the rest of the world) already had basic understanding of the geopolitical world better than most Americans do.

 

[escobar]

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What provides some relief in today's chilly global economic climate is not just the continuous growth of emerging countries as the world's economic engines, but also the strong performance of luxury goods, especially in China.

It is predicted that the value of luxury goods bought on the Chinese mainland will reach 100 billion yuan ($16 billion) in 2011 for the first time ever, with an annual growth rate of 25 to 30 percent, which means China is likely to surpass Japan as the world's largest purchaser of luxury goods in 2012, according to the latest report from Bain Capital.

Consultancy firm McKinsey & Co also expects China to be the largest luxury goods market in the world by 2015, accounting for more than 20 percent of global sales.

"At this pace, Chinese consumers will, in the medium to long term, make up 70 percent of the global luxury market's growth," said Bernard Malek, a partner at Roland Berger.

Financial results support their confidence, as the luxury brands, especially top-end manufacturers, have indeed benefited from soaring sales in China. Richemont, one of the world largest luxury groups, for example, has seen its share price triple from 2009 lows and now trades at 17 times 2011 forecast earnings, with 2.6 billion euros ($3.4 billion) net in cash. Burberry and Prada appear stretched on multiples of more than 20 times.

However, many high-end brands are finding the luxury market in China is different from the one they are used to in Japan.

Although the affluent population in Japan is much larger, in China the people who buy luxury goods are willing to spend a much bigger share of their income on them - 10 to 15 percent in China compared with only 4 percent in Japan, according to the latest McKinsey survey "Insight: China-luxury goods".

Also Chinese buyers of luxury goods are generally much younger, 15 to 20 years younger on average. Young consumers in Japan have been moving away from luxury goods due to the weak Japanese economy in recent years. Even working women who still live with their parents, once famous for their consumption of luxury goods, are not such prominent high-end spenders as they used to be. In China gift-giving is also a significant factor in the sales of luxury items.

It has taken less than five years for China to grow from a very small market for luxury brands to their most important market. Yuval Atsmon, a partner at McKinsey, who led the research on buyers of high-end brands, believes the reason for China's importance is "clearly due to its already huge size and the massive growth potential, but also due to high profitability levels, often better than other markets".

Allowing for the spending of Chinese shoppers abroad, which some brand managers estimate is similar to their spending in China, Chinese people could soon represent more than 50 percent of the business of outlets selling quality brands. For some that is the case today.

Lutz Bethge, global chief executive officer of Montblanc, said: "Apart from the similarities with other Asian markets, the Chinese mainland has unique characteristics in its faster growth of the wealthy population and its rising middle-class segment which not only represents growing consuming power, but also means a rapidly growing interest in luxury goods."

"What is remarkable in our experience is that the purchasing power from second- and third-tier cities in China has also been growing very fast," he added.

As with their expansion strategy in Japan, luxury brands in China are now under pressure to open more retail outlets in China since it is still far from being a saturated market. For instance, Herms at present has 20 shops in China, fewer than half of the number of shops it has in Japan. Chanel has only eight boutiques in China. There are more than 50 in Japan.

However, Atsmon said: "It is possible that even as Beijing or Shanghai become markets as big or bigger than Tokyo, there will be fewer but bigger stores. As for smaller cities, the brands want to reach more cities where there is a clear demand for their goods, but they must ensure they do not compromise their standards as they rush to expand, which is especially important in China, as for many consumers this will be their first exposure to the brand." Some brands are prepared to expand more slowly than others, concentrating on quality rather than quantity.

Montblanc, for instance, which has been investing in China for nearly 10 years, opened its "worldwide concept" store in Beijing on Jan 12, at which it will offer a unique customer experience for Chinese shoppers. As Montblanc's biggest investment in the Chinese market yet, the new four-level store in Sanlitun, displaying a full spectrum of its luxury collection, from its ever-growing range of genuine Swiss timepieces to writing instruments, leather, jewelry and accessories, is also the largest Montblanc boutique in the world. It indicates how important the China luxury market is seen by the brand.

China has become the largest market in the world for many top brands. Montblanc, although it now already operates nearly 100 boutiques across China, including the recent launch of a large new boutique in Guangzhou, still chose Beijing for its largest store, showing the brand's commitment and confidence in China.

Besides recruiting and training high quality shop assistants for boutiques, McKinsey also suggests luxury brands can leverage their cultural heritage since it can add value and increase the attraction of products for Chinese people.

Many brands are looking to exploit their heritage by building small museums and staging exhibitions. However, more than one-third of Chinese shoppers prefer products with Chinese designs and traditional elements, especially the emerging middle-class customers, according to McKinsey.

"It is critical to establish our luxury European brand heritage image well before we consider local elements because we need to make the customers believe in the brand first in terms of reliable quality, European craftsmanship and the prestigious status of owning a Monblanc product," said Bethge.

But even if they want to, luxury brands cannot ignore the preferences of Chinese buyers. For instance, the traditional desirability of gold for Chinese people mean that Montblanc watches and writing instruments that contain gold are their best sellers in China. They have also launched products specific to the Chinese market, such as the Fortune Number 8 writing instrument introduced in 2009 - eight is seen as the most auspicious number in China.

Some brands have gone as far as launching Chinese lines - most notably Shang Xia (topsy-turvy in Mandarin), a new brand established by Herms especially for China. Many brands now have exclusive lines for the Chinese market. This is a particular strong trend for watches.

Atsmon said: "We will see more Chinese designs, trends and insights influencing the European teams, very possibly with parts of the design team actually being in Shanghai. This trend is already being seen with some luxury car makers."

Because it will become the largest luxury market in the near future, those brands that have a strong position in China may need to behave as if they are Chinese companies. This will include not only their investment strategies and designs, but also management. While Japan has a very prominent share, the current trend in China suggests it will become a bigger market and therefore more important than Japan for the makers of luxury goods.

 

[escobar]

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China’s GDP growth rate of 9.2 percent in 2011 marks a sound beginning of the 12th Five-Year Plan period (2011-2015). The government-led investment boom did not occur last year, indicating in some sense that the country's macro-economy is maturing.

At present, the country remains in a long period of rapid economic growth, and a GDP growth rate of around 9 percent is normal and reasonable. Overly rapid economic growth may cause inflation, while slow economic growth is not conducive to absorbing a growing rural labor force.

The European sovereign debt crisis was mainly caused by European countries' overspending practices. The pace of China's economic development has only a limited role in helping resolving the debt crisis, unless China greatly increases its imports from or investments in Europe. The recession caused by the debt crisis has marked adverse effects on China's exports. In other words, if the European debt crisis remains unresolved, China's export and GDP growth will continue to slow down this year.

China's trade surplus dropped in 2011, indicating net exports' role in boosting the country's economic growth is weakening. Investment remains the main driving force for China's economic growth, and the role of consumption needs to be further enhanced.

For a long time to come, urbanization and reforms of the social structure and people's income structure will play a fundamental role in boosting domestic consumption and improving people's purchasing power. Furthermore, the services industry will play a vital role in boosting domestic consumption.

This year, the fiscal policy for improving people's livelihood as well as the projected accelerated development of China's central and western regions will promote the country's economic growth to a certain degree. Overall, the country's GDP growth in 2012 will be largely the same as that of last year.

---------- Post added at 11:32 PM ---------- Previous post was at 11:31 PM ----------

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FOREIGN direct investment in China rose 9.7 percent in 2011 from a year earlier to a record US$116 billion, though it fell for a second month in December, the Ministry of Commerce said yesterday.

December saw a total of US$12.2 billion from overseas investors, a fall of 12.7 percent compared to the previous year. In November the decrease was 9.7 percent.

There was a marked decline in investment from the United States and the eurozone. Last year, the US channeled US$2.9 billion non-financial direct investment to China, 26 percent less than a year earlier.

Capital from the 27-member European Union also lost 3.6 percent to US$6.3 billion.

Shen Danyang, a ministry spokesman, said China had developed more sources of foreign investment.

"The FDI growth rate was not particularly high in recent years, it was mainly because of corrections in the world economy that made global investors very cautious," Shen said. "But we believe China remains one of the most attractive destinations for foreign investment because of its stable economic and political environment."

Foreign investment from emerging markets picked up quickly and investors in Asia are becoming a major source for China's FDI growth with an increase of 13.9 percent last year.

China's service industry attracted US$55.2 billion foreign investment last year, or 47.6 percent of the total FDI. It was the first time foreign direct investment in the service industry surpassed the amount flowing into the country's manufacturing sector.

China updated its guidelines for foreign investors last month to outline sectors where investment is encouraged, restricted or banned.

Under the new rules, China allows foreign investment in hospitals and financial leasing firms, but doesn't welcome foreign-funded automobile factories or polysilicon plants.

Meanwhile, China's outbound non-financial direct investment rose 1.8 percent year on year to US$60 billion in 2011, slower than the pace of 5.2 percent in the first 11 months.

"The outbound FDI growth last year was also not substantial because of gloomy global economic conditions," Shen said, adding that some countries had put restrictive policies in place for foreign investment.

China's investment in Europe and Africa surged last year, however. Investment in Africa grew more than 50 percent while that in the European Union nearly doubled, the ministry said.

 

[escobar]

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China's fiscal revenues jumped by a quarter in 2011 to a record 10.37 trillion yuan ($1.64 trillion), China's Ministry of Finance said on Friday, leaving Beijing with plenty of financial firepower to help manage an economic soft-landing.

Although Chinese governments, including Beijing and local governments, rushed to spend almost 2 trillion yuan in December alone, China's full-year fiscal deficit of 519 billion still fell short of the 900 billion yuan that had been penciled into the budget in March.

The figures are subject to revision, but if the numbers hold, the official fiscal deficit will fall to 1.1 percent of China's gross domestic product of $7.47 trillion, an enviable level when compared with the world's other major economies that are saddled with heavy government debt.

The finance ministry said the strong 24.8 percent growth of fiscal revenues in 2011 -- much higher than the budgeted 8 percent -- reflected China's rapid economic growth and handsome corporate profits.

"Some local government revenues that had originally been excluded from the budget were included in 2011, which amounted to an increase of about 250 billion yuan...and pushed up nationwide fiscal revenue growth by three percentage points," the ministry said in a statement on its website

For many years, China's fiscal revenues have been rising faster than the overall economic growth, which was 9.2 percent last year, and the growth rate of household income, offering the government a growing share of the national wealth.

Corporate income taxes rose 30.5 percent in 2011, while value-added taxes and import duties also rose quickly.

Personal income tax revenues jumped 25 percent for the full year of 2011, but the ministry noted that personal income tax revenues in the last quarter fell 5.5 percent as China lifted the personal income tax threshold starting from Sept 1.

Beijing is trumpeting the so-called "structural tax cut" policies for 2012, or tax cuts for selective sectors such as small household businesses and vegetable vendors.

But these tax cuts were far from being sufficient, independent economists said. Andy Xie, an economist, argued that China should cut taxes by 1 trillion yuan.

China's fiscal expenditures in 2011 were 10.89 trillion yuan, an increase of 21.2 percent.

According to the rough breakdown from the ministry, government spending on education jumped 28.4 percent, healthcare was up 32.5 percent and transport up 36.1 percent.Government spending on affordable housing surged 60.8 percent in 2011 as Beijing started a nationwide campaign to build up millions of new government-subsidised apartments.

Spending on "energy efficiency and environment protection" by the world's largest emitter of greenhouse gas rose only 7.2 percent.

China's finance ministry said the numbers were all subject to revision. China will finalises its 2011 fiscal figures in March when the finance minister delivers a report to the country's largely ceremonial parliamentary gatherings.

($1 = 6.3167 Chinese yuan)