Chinese Economics Thread

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About 30 percent of global CEOs rank China as their top growth market this year.

That's because there is no sign of a pickup in the eurozone and US economies, PricewaterhouseCoopers LLP said in a report on Thursday.

"The Chinese economy may be slowing down, but the China story remains attractive and critical to global CEOs' growth strategies," said David Wu, PwC China Lead Partner for Beijing.

According to PwC's latest Annual Global CEO Survey, 63 percent of CEOs in Japan, 56 percent in Australia, 48 percent in the US and 45 percent in the Association of Southeast Asian Nations believe that China will play a critical role in their growth plans.

Although the central government has lowered China's growth target to 7.5 percent for 2012, the projection is still more than double the growth rate for the global economy.

China's rapidly increasing middle class - expected to account for 40 percent of the country's population by 2020 - will from a vast consumer market that is expected to drive the economy and provide business opportunities for multinational companies, according to PwC.

Meanwhile, Chinese CEOs are also expanding their businesses overseas. According to the survey, 75 percent of businesses in China expect growth in their Southeast Asian and East Asian operations. That's followed by 66 percent expecting growth in Latin America, 57 percent in Australia and 51 percent in North America.

Moreover, the supply of talent could prove to be decisive for the growth prospects of Chinese companies.

According to the survey, more than half of Chinese respondents - far higher than the global average of 31 percent - say the talent crunch has prevented their businesses from innovating effectively.

To bolster their workforces, half of China's CEOs plan to expand their headcount by more than 5 percent this year. However, 59 percent say it's becoming increasingly difficult to hire in their industries. The difficulties are cutting across all sectors, and there is an acute shortage of senior and middle managers.

In response to the talent shortfall, Chinese CEOs are looking at alternative channels.

Two-thirds are investing in workforce development outside of their own companies to build a bigger base of potential employees, while 59 percent expect to source more workers globally, according to the report.

 

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March 14 – China's power consumption rose 22.9% year on year to 386.3 billion kW hours in February and 6.7% year on year to 749.7 billion kW hours in the first two months of 2012, the National Energy Administration said. In the first two months, power consumption by the primary sector was down 4.7% to 12.3 billion kW hours; power consumption by the secondary sector was up 4.8% to 531.6 billion kW hours; power consumption by the tertiary sector was up 10.3% to 94 billion kW hours; power consumption by civilians was up 14.9% to 111.7 billion kW hours.

March 13 – China's electricity price will rise 5% annually through 2015 to offset burgeoning coal prices and help power generators repay debts, the China Electricity Council predicted. The council said electricity, if compared to oil, gas and coal prices, is underpriced in China.

March 12 – Investment in China's power generation industry is expected to total ¥6.1 trillion in the five years through 2015, up 88.3% from the previous five-year period, the China Electricity Council predicted.

March 8 – China will halve the taxes on energy-saving vehicles and vessels and stop levying vehicles and vessels powered by new energy, the Ministry of Finance said. Those manufacturing or importing such transport tools can apply with the ministry for the tax breaks. The Ministry of Finance and the Ministry of Industry and Information Technology will irregularly update the list of environmentally friendly vehicles and vessels in the future.

March 5 – China installed 18 million kW of wind power capacity in 2011, bringing the total capacity to 65 million kW, the largest worldwide, according to a meeting on innovation in the wind power industry. The nation aims to run 200 million kW of wind power capacity by 2020.

February 28 – State Grid Corp of China, the nation's biggest power producer, said it plans to invest ¥100 billion developing renewable energy in Yunnan province between 2011 and 2020, with ¥35 billion to phase in by the end of 2015.

February 27 – Electricity consumption in China is expected to grow 8.8% annually between 2011 and 2015 before slowing to 5.6% in the following five year period, with power shortages worsening in the decade, according to the China Electricity Council.

February 27 – Energy input for industrial output in China is projected to fall 21% from 2010 levels, or the equivalent of 670 million tons of coal, between 2011 and 2015, the Ministry of Industry and Information Technology said.

February 23 – China's natural gas output rose 7.3% to 101.2 billion m3 in 2011, the Ministry of Land Resources said. The nation's oil output largely remained unchanged at 201 million tons last year.

February 20 – Energy consumption by China's manufacturing sector will fall 21% between 2011 and 2015 from levels during the previous five years, according to the Ministry of Industry and Information Technology. The manufacturing sector guzzled the equivalent of 2.4 billion tons of coal in 2010, or 73% of the nation's total energy consumption.

February 13 – China's daily desalination capacity will reach 2.2 million to 2.6 million tons by the end of 2015, according to a five-year plan released by the State Council, the nation's cabinet.

February 10 – China will consume 493 million tons of petroleum this year, up 5% from 2011, according to a research institute run by PetroChina Co. The nation's petroleum consumption was up 4.5% to 470 million tons last year; the growth was well below the 7.1% average seen in the past decade. The institute also predicted China's crude oil imports would total 266 million tons in 2012.

February 9 – China installed 18GW wind power capacity in 2011, accounting for 40% of the world's total increment, according to the Global Wind Energy Council. China had 62.7GW in wind power capacity as of the end of last year.

February 8 – China raised fuel prices for the first time in almost a year in response to rising prices in international markets and to encourage production. The National Development and Reform Commission raised retail gasoline and diesel prices by ¥300 per ton, equivalent to ¥0.22 a liter on average for gasoline and ¥0.26 a liter for diesel.

February 8 – China's electricity consumption unexpectedly dropped 7.5% in January compared to a year ago, a person familiar with the matter said, adding that monthly declines have been rare over recent years. It is believed that the weeklong Chinese New Year holiday, when industrial productions were suspended, was the reason.

 

[Equation]

I heard a businessman in an interview with the BBC the other day thats its all lies that the Chinese are raising the prices and restricting mining for enviromental concerns, because the price he has to pay for R.E's is lots lots lots more than what a domestic user is required to pay.

He's entitled to his opinions but either way the REE lies in China's land and they're not obligated to sale or force to sale at someone else's acceptable price tag.

 

[AssassinsMace]

Speaking of actions based on lies and exaggeration...

Supposedly this guy sparked all the news surrounding the negative reporting of Apple factories recently.

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This American Life retracts Apple episode, says Daisey fabricated parts


By Liz Goodwin

National Affairs Reporter


Daisey (MikeDaisey.blogspot.com)The public radio show This American Life has retracted an entire storyline told by comedian and self-described Apple "fanboy" Mike Daisey that aired in early January after Daisey's translator said he made up significant details of the tale.

In a press release, the show says the episode was the most popular in its history and was downloaded 888,000 times. The episode also sparked a petition for Apple to improve its working conditions that was signed by a quarter of a million people.

Daisey said in the 39-minute episode that he became curious about the conditions of Chinese factories where Apple products are made after he discovered photos of factory workers that were left onto his iPhone by mistake. He travelled to the factories in Shenzhen, China and interviewed workers there, who told him they endured terrible working conditions. Daisey described meeting workers whose hands were shaking after they were poisoned with the neurotoxin hexane and meeting several children right at the gates of the factory who were as young as 12 years old.

The China correspondent for the NPR show Marketplace, Rob Schmitz, wrote that he decided to track down Daisey's translator after he found it suspicious for Daisey to ferret out some of the worst labor abuses reporters have been tracking for years in a six-day trip to the site. Translator Cathy Lee told Schmitz that she never saw the underaged or poisoned workers, and that she also never saw armed factory guards, which Daisey describes.

So why didn't This American Life talk to Cathy Lee earlier, before they aired the episode? In a press release, the show says Daisey told them he lost her cell phone number. "At that point, we should've killed the story," show host Ira Glass said in the release. "But other things Daisey told us about Apple's operations in China checked out, and we saw no reason to doubt him. We didn't think that he was lying to us and to audiences about the details of his story. That was a mistake."

This American Life claimed it did "weeks of fact checking to corroborate Daisey's findings," when airing his original episode.

A new episode explaining how the show was duped will air Friday at 8 p.m. According to Schmitz, Daisey admits on the show that he never talked to poisoned workers.


Daisey, however, stands by his original storyline. "It uses a combination of fact, memoir, and dramatic license to tell its story, and I believe it does so with integrity," Daisey said on his blog. On the show, he struck a more contrite note. "I'm not going to say that I didn't take a few shortcuts in my passion to be heard," Daisey says on the soon-to-be-aired episode, according to the press release. "My mistake, the mistake I truly regret, is that I had it on your show as journalism, and it's not journalism. It's theater."

The New York Times published a series on Apple's business practices, including the working conditions in its Chinese factories, later in January. More than 100 factory employees were injured after using a poisonous chemical to clean screens, and two explosions in separate iPad-making factories cause multiple deaths and injuries. Workers were packed into dorms and pressured to work 24-hour-a-day shifts, and some underage workers have helped build Apple products. Apple wouldn't comment for the article.

---------- Post added at 12:22 PM ---------- Previous post was at 11:41 AM ----------

He's entitled to his opinions but either way the REE lies in China's land and they're not obligated to sale or force to sale at someone else's acceptable price tag.

Yeah, why don't the complainers just declare China having a monopoly and ban import of their rare earths like they do with DeBeers and diamonds. That's the hypocrisy of their own thinking. More manipulation of the truth and notorious lies. There's nothing rare about rare earths. China doesn't dominate by taking over. Others choose to not produce. So China doesn't hold a monopoly. China can spin too because what they demand is Chinese be their slaves so they don't have to spend the money doing it themselves. Now all of the sudden they want cheap Chinese labor that takes away jobs in their own countries.

 

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The decision to slow down economic growth by the Chinese government caused worldwide concerns. It seems when China gets a cold, the world sneezes. The key is finding how the slowdown will affect China and the rest of the world.

China, in all respects, is a unique country. Its 30 years of economic reform has created a new model of growth, although it may not be applicable for any other developing nations.

After a period of pragmatic review of China's growth, its top leaders have decided to re-evaluate the growth model and to focus more on improving its people's livelihood. Indeed, from the Chinese central government to the general public, it has long been understood that China's current economic system is neither sustainable nor healthy. Some scholars argue that China will surpass the U.S. as the world's superpower, but most other Chinese are rather sapient in the country's outlook.

"Made in China" for years had been the tagline of the engine driving for China's economic growth – cheap labor and environmental sacrifices. Now, the era of its low cost manpower is coming to an end. Employers in "Made-in-China" factories have been suffering from labor shortage since 2008, and environmental agencies are ramping up efforts to control pollutants in water and on land. To this end, a slowing down of its economy is a good sign. However, it is questionable as to whether an economic slowdown will restore an already devastated environment. Furthermore, to what extent can the Chinese government effectively address such issues at both the local and provincial levels?

Externally, because China is losing its advantages in low cost labor, Chinese exports are facing extreme difficulties in shrinking overseas markets. Internally, exporters are having a hard time in getting financial support from state-owned banks. In the latest economic reports, China's exports have declined dramatically in the first two months of the year, resulting in its first trade deficit in a decade. Its trade balance will risk further slide for the rest of this year.Having long relied on its exports, China is more sensitive than ever to external demands – particularly the economic recoveries in the U.S. and the EU.

For a fairly long time, China has been cash-rich with sufficient capital and investment. With US$3.2 trillion in foreign reserves, the Chinese government could invest generously in just about any projects it desires as part of any foreseeable stimulus plan. Unfortunately, China's apparent wealth is only skin-deep, which can be exposed by mismanagements of its assets.

Take railroads as an example. To stimulate the economy, the Chinese government invested hundreds of billions of RMB in high-speed railways. However, financial operators overestimated Chinese citizens' spending abilities in pricing the tickets, and traveler volume on high-speed railways has been far below capacity.

In comparison with other countries, the Chinese government has been granted almost unlimited spending power, but taxpayers have little say as to how the government spends their tax money. Nevertheless, with regard to the role of government in the economy, the huge capacity of government investments has been seen as the workhorse of Chinese economic stimulus strategy.

It is time for a change. China needs to transfer its economy from one of government investment to one of domestic consumption. Hopefully, a lower targeted economic growth will allow local governments to work more efficiently on supporting social welfare, such as assisting low-earning families and individuals.

Promoting growth in rural regions is another key to China's continued success. China has a long history of prejudice against rural life and farmers. With urbanization as part of its development strategy, China is becoming more urban and less agricultural.China's agriculture has been left far behind in its efforts to globalize its economy, and the cost of this omission may be much higher than the government has anticipated.China's soybean and corn supplies now rely heavily on imports from the U.S. It is hard to imagine a nation with such a huge population having to survive with such a high dependency on imported food and grain.

Moreover, China's key trading partners do not favor China's growing stature. Earlier this week, U.S. President Barack Obama vowed to move strongly against China on "rare earth materials." At this particular time ahead of its presidential election, other U.S. politicians would also be more than happy to hammer China down on any issues involving American voters' interests. There will no winners in a bilateral trade war. When China's growth slows, the U.S. will suffer more than its politicians could expect.

It is a tough time for China. The slowdown signals challenges ahead for the country as well as the rest of the world.

 

[RedMercury]

Having 2500 rmb a month of disposable income isn't bad. It is the saving mentality that is broken. In any other culture, saving 33% of your income is great already.

 

[Player 0]

Having 2500 rmb a month of disposable income isn't bad. It is the saving mentality that is broken. In any other culture, saving 33% of your income is great already.

Agreed, by comparison Taiwanese and SKorean salary earnings only save about 10%, still enough to keep them afloat and reasonable compared to the USA where the average saving rate is 3-5%

 

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China has become the world's third-largest tourist destination, receiving 135 million inbound travelers in 2011, said a tourism official.

Shao Qiwei, head of the China National Tourism Administration, also said Friday that China has seen a rapid growth in outbound travel and has become highly significant in sustaining the growth of global tourism.

Chinese people made a total of 70.25 million visits to other countries or regions in 2011, making it the biggest source of outbound tourists in Asia, according to Shao.

 

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China should propose the initiation of talks on a free trade agreement with the United States to reduce trade frictions and create benefits for both, a former senior commerce official has said.

"Why shouldn't we consider establishing an FTA between the world's two largest economies?" asked Wei Jianguo, former deputy minister of commerce.

"We could study the feasibility of the matter," Wei said, adding that China and the US have highly complementary economies.

China should also "accelerate its steps" on establishing an FTA with Japan and South Korea, Wei said, which would connect the three top economies in Asia.

Wei's proposals come as the US is aggressively expanding its influence in the Asia-Pacific region and expects to grow its economy and create employment by taking advantage of the fast economic growth in Asia.

The world's largest economy is advancing a trade agreement in Asia, known as the Trans-Pacific Partnership, to remove trade and investment barriers among the nations involved. Nine countries, including Australia and Vietnam, have agreed to join the pact and set a goal of reaching a final agreement by the end of this year.

China is not included.

Last year, Japan, the world's third-largest economy, also announced its desire to join the Trans-Pacific Partnership talks, but the matter is pending.

China is trying to transform from a big exporter to a great consumer, while the US pledges to double its exports in five years.

Asia, including China, is a major destination for promoting American goods.

"The China-US FTA could help the US expand exports to China, reducing trade frictions," Wei said.

US experts said an FTA between China and the US should be a good thing.

"Any approach by China to initiate discussions with the US on a free trade agreement should be welcome," said Vikram Nehru, senior associate of Southeast Asian Studies at the Carnegie Endowment for International Peace, a Washington-based think tank.

But he stressed that "China should be aware that US concerns extend well beyond trade barriers and are likely to include "behind-the-border" trade issues.

These trade issues could involve explicit budgetary subsidies and implicit policy-related subsidies to State enterprises.

Regulations that shield State enterprises from competition in domestic markets such as restrictions on government procurement and barriers that inhibit new firms from entering key manufacturing and services sectors, could also be a problem, Nehru claimed.

The protection of intellectual property rights of US companies by the Chinese legal system is also a big concern, Nehru said.

"I think the time has come for a new and bolder approach," Maurice Greenberg, former chief of AIG and now chairman and CEO of C.V. Starr and Co, said in an article in the Wall Street Journal in January.

"China and the US should open negotiations for a free trade agreement between our two countries," he said.

"The negotiations will not be easy. There will be numerous impasses, and the negotiations will probably last for many years. But discussing problems in the context of driving toward a potential agreement is far better than lengthy dialogues without an end result," Greenberg said.

"Even if we fail to reach an agreement on many issues, progress should be possible on some issues, and that will create a better trade climate. The alternative is that we drift along constantly irritating each other in a low-grade trade war that will leave businesses and consumers in both countries losers."

Many are worried about a trade war between the world's top two economies as the US recently announced the establishment of an interagency trade-enforcement unit to investigate whether nations, including China, play by trade rules.

The US House of Representatives recently passed a bill allowing the US Commerce Department to continue to charge countervailing duties worth $5 billion on imports from China.

But a China-US FTA may not be established soon.

"In the short term, talks on a China-US FTA are highly unlikely," said Zhang Yunling, director of the division of international studies under the Chinese Academy of Social Sciences.

The US is strongly committed to advancing the Trans-Pacific Partnership, setting up trade rules in Asia based on its own wishes, Zhang said.

There are many things that have to be addressed before the talks could start, including the US recognizing China's market economy status, an issue that the two nations have long been arguing over.

 

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China has overtaken the US as the world's biggest market for art and antiques, according to a report.

The historic turning point was also an important indicator of seismic shifts in the wider global economy, said the report titled 'The International Art Market in 2011'.

The study was released by the European Fine Art Foundation, organisers of the European Fine Art Fair, Xinhua reported.

China's share of the global art market rose from 23 per cent in 2010 to 30 per cent last year, pushing the US to second place with a share of 29 per cent, it said.

The British art market, which was overtaken by China in 2010, was third with a 22-per cent market share while France was a distant fourth with a share of six per cent.

Sales of art and antiques at auctions in China saw a dramatic rise of 177 per cent in 2010 and a further 64 per cent increase in 2011. The modern and contemporary sectors accounted for nearly 70 per cent of the market.

With strong growth seen in China, the global art market continued to recover last year.

Sales revenue grew seven per cent year-on-year, but was 63 per cent higher than in the crisis-hit 2009.

"The dominance of the Chinese market has been driven by expanding wealth, strong domestic supply and the investive drive of Chinese art buyers," said Clare McAndrew, a cultural economist specialising in the fine and decorative art market.