Chinese Economics Thread

[crobato]

SHANGHAI (AFP) ¡ª China is considering a plan to invest five trillion yuan (730 billion dollars) in the transport sector in the next three to five years, state media reported Wednesday.

The investments would include roads, waterways and ports, drastically boosting previous plans for investment, the China Business News reported, citing an unnamed source.

The plan partly overlaps with a previously announced proposal to spend about two trillion yuan in the sector between 2006 and 2020, the report said.

"The additional funds would be able to boost domestic demand swiftly," the source was quoted as saying.

China is ramping up construction to stimulate the domestic economy and create jobs amid a slowdown in overall economic growth.

The global financial woes were instrumental in slowing growth in the world's fourth-largest nation to nine percent in the third quarter, the lowest in around five years.

Last month, the State Council, or cabinet, approved a plan to spend two trillion yuan on construction of new railways by 2020. About 1.2 trillion yuan had already been allocated, state media reported.

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[Spike]

It is called the Shoe Fitting Fluoroscope.

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Text for its radio commercial---

"Every parent will want to hear this important news! Now, at last, you can be certain that your children’s foot health is not being jeopardized by improperly fitting shoes. STORE NAME is now featuring the new ADRIAN Special Fluoroscopic Shoe Fitting machine that gives you visual proof in a second that your children’s shoes fit. The ADRIAN Special Shoe Fitting machine has been awarded the famous PARENT’S MAGAZINE Seal of Commendation . . .a symbol of safety and quality to millions of parents all over America . If your children need new shoes, don’t buy their shoes blindly. Come in today, let us show you the new, scientific method of shoe fitting that careful parents prefer. STORE NAME invites all of you to visit us today for an interesting demonstration. We know that once you buy shoes that are scientifically fitted, you will shop at STORE NAME all of the time. "

This sounds like one of those crazy commercials from the game "Fallout."

 

[crobato]

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Chinese town thrives on Russian wealth

Tetsuya Suetsugu Yomiuri Shimbun Staff Writer

HEIHE, China--The shopping street in Heihe, Heilongjiang Province, was crowded with Russians from Blagoveshchensk, about a kilometer away across the Amur River, and other far eastern Russian cities.

I entered a gyoza dumpling restaurant, where I found most of the 20 customers were Russians.

"We're very busy as Russians now can visit China without a visa," said Wang Zhijun, 26, the restaurant's manager. "We've even set up two branches."

A 44-year-old taxi driver said, "My income has increased by 50 percent recently."

In the 1990s, the Heihe government set up a special trade zone on Daheihe Island about a square kilometer in size, on the Amur River and allowed travel without visas to and from Russia. The local government expanded the trade zone to the whole of the city center, which is about 15 square kilometers, in 2004.

People travel to and from the trade zone by ship in summer and by bus or hovercraft in winter, when the river is frozen over. According to the Heihe government, about 300,000 Russians visited the city from January to August, an increase of about 22 percent from the same period last year.

Heihe's prosperity is mainly the result of the booming Russian economy, boosted mostly by natural resources exports.

"Russians' salaries were smaller than Chinese's 10 years ago, but it's now a few times that of the Chinese, thanks to recent economic growth," a Heihe government official said.

According to the official, the cost of food and drinks and the prices of electric appliances, clothes and other products in Heihe are "half or less than half" of those in Russia.

Considering such changes, the Chinese government has taken measures to boost existing trade in areas bordering Russia, setting up trade zones in Heihe, Suifenhe, Dongning and other cities in an attempt to attract Russian capital.

Russia's economic power also is boosting the development of the downstream areas of the Tumen River, which have been stagnant in recent years.

Japan, China, Russia and South Korea are engaged in a marine transport project connecting Niigata, Russia's Trojtsa and South Korea's Sokcho.

"In recent years, Russia's booming economy has helped develop roads to Trojtsa Port and facilities at the port," said an employee of a Japanese company engaged in the project. "Now we have an opportunity to develop a distribution route from China's northeastern region via the Sea of Japan to Japan."

The Niigata-Trojtsa route was test-operated on Oct. 23, and the whole route is scheduled to open by spring.

"It takes about 10 days to transport cargo from Hunchun via Dalian to Tokyo, while it takes only three days via the Sea of Japan," said an official of the Hunchun government of Jilin Province, which borders Russia and North Korea and is about 70 kilometers from Trojtsa. "Once the marine traffic operation gets on track, I'm sure many Japanese companies will set up branches here."

An expressway connecting Changchun, capital of Jilin Province, where Toyota Motor Corp. has a factory, and Tumen, in western Hunchun, opened in September. China plans to develop the Sea of Japan marine route into a major traffic artery for product distribution from its northeastern region.

However, China is wary of Russian-style business methods. Russia, apparently aiming to decrease the influx of Chinese products, reduced the maximum amount of foreign products allowed into the country tax-free from 50 kilograms to 35 kilograms. According to sources, Russia also is reluctant to simplify customs procedures for products brought into the country via the Sea of Japan.

China and Russia finally settled the demarcation of their border earlier this year after long discussions. The trade volume between the two countries, which rose 25 percent in the January-August period from the same period in 2007, is still expanding. Chinese local government officials say they are optimistic about the future of China-Russia business.
(Nov. 7, 2008)

 

[crobato]

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"Big Bang" Policy to Keep China's Economy Going

November 07, 2008 22:54 Beijing Time
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To invigorate the fizzling economy, the Chinese government is preparing for a "big bang" policy package including injecting more capital into the construction of railways, ports and energy resources and increasing the sales of treasury bonds on long-term infrastructure projects.

The large economic stimulus package will be released after the decision is made at the annual Central Economic Working Conference slated for late November in Beijing, as some officials related to the situation told the Hong Kong-based Wen Wei Po newspaper on Wednesday.

The report mentioned members at the conference will work out how to stimulate domestic consumption and maintain economic growth, and also outline the country's economic policies next year, facing the impending worldwide financial crisis.

With the global financial crisis rippling through the United States and Europe, China's once supercharged economic growth has slowed sharply, dropping from 12.6 percent in the second quarter of 2007 to about 9 percent in the third quarter of this year, according to national statistics.

Falling exports and unstable consumer prices have created big macro-economic challenges for the central government to counter-attack an economic slump, according to the National Development and Reform Commission (NDRC), which has been closely monitoring economic trends.

Some Beijing analysts forecast the economic conference will announce some easing monetary policies and upgrading industry sector standards. Relevant departments, including the NDRC, the central bank, the Finance Ministry and the Commerce Ministry, may also map out plans on taxes, credit and foreign trade.

"Aside from active fiscal policies, the government should cut taxes to lower enterprises' costs and alleviate people's financial burdens, encouraging investment and consumption, the two main engines of the country's economic growth," said economic experts in reaction to a report by the State Information Center, a NDRC research institution.

They also suggested a reasonable allocation of the present market resources in order to promote the upgrade of China's economic structure.

"Under the present economic situation, massive investment in infrastructure construction can stimulate the declining domestic demand and stabilize investment," said Zhang Xiaojing, Dean of the Macro-economic Research Department from Institute of Economics at the Chinese Academy of Social Sciences.

 

[crobato]

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China okays $586 billion stimulus to boost economy

By Kirby Chien Kirby Chien – Sun Nov 9, 6:56 am ET



BEIJING (Reuters) – China's cabinet has approved a massive stimulus package worth 4 trillion yuan ($586 billion) through 2010 to boost domestic demand, the official Xinhua news agency said on Sunday.

Investments will be targeted at infrastructure, social welfare and other key sectors as part of an "active" fiscal policy, Xinhua said.

It did not say how the extra spending would be financed.

China ran a consolidated budget surplus in the first half of the year of more than $170 billion, but tax revenue growth is slowing sharply as the economy reels under the impact of the global credit crunch.

The cabinet also announced an explicit shift in monetary policy, which it now described as "moderately easy."

The People's Bank of China has already cut interest rates three times since mid-September and scrapped lending quotas in a bid to support the economy.

Lending to small and medium enterprises will be increased as part of the plan, Xinhua said.

Officials have been flagging measures to pump up demand since gross domestic product growth slowed unexpectedly sharply to 9.0 percent in the third quarter from 10.4 percent in the first half.

Indicators for October have been even weaker.

Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.

Sector that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.

The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies' tax bill by 120 billion yuan a year, the agency added.

(Editing by Alan Wheatley and David Holmes)

 

[crobato]

There you go, the attack of the Chinese knockoff cars that not even Mercedes is immune.

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excerpt:

"You'll do a double-take the first time you see a BYD F8: It looks a lot like a Mercedes. BYD, short for Build Your Dream, is a top producer of cell-phone batteries and began building cars five years ago. The F8, which BYD intends to start selling in China this winter, sports the same grill as the German carmaker's CLK, but the back looks like a Renault Megane CC. Unlike the CLK, which comes with a V-6 or V-8, the F8 has a front-drive 4-cylinder engine."

 

[Scratch]

Where will the $586B actually come from? Financed by dept, taken from the standing federal budget, or are there reserves that can and will be used?
My main point here is, will this affact federal spending somewhere else, i.e. defence?

 

[crobato]

I don't think it will affect defense at all. In fact, I expect production related to defense to pick up, for example among aircraft, tank and especially with shipyards. The vast Chinese shipyard industry is expected to lose some business. To make up, they would have to start building more warships, the production of which had trouble finding schedules when the building schedules for the commerce ships were running backlogs in terms of years. The question is what ships are they going to pound out? Don't tell me if they're going to pound out hordes of Houbeis like Big Macs.

 

[bladerunner]

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China okays $586 billion stimulus to boost economy

By Kirby Chien Kirby Chien – Sun Nov 9, 6:56 am ET


BEIJING (Reuters) – China's cabinet has approved a massive stimulus package worth 4 trillion yuan ($586 billion) through 2010 to boost domestic demand, the official Xinhua news agency said on Sunday.

Investments will be targeted at infrastructure, social welfare and other key sectors as part of an "active" fiscal policy, Xinhua said.

It did not say how the extra spending would be financed.

China ran a consolidated budget surplus in the first half of the year of more than $170 billion, but tax revenue growth is slowing sharply as the economy reels under the impact of the global credit crunch.

The cabinet also announced an explicit shift in monetary policy, which it now described as "moderately easy."

The People's Bank of China has already cut interest rates three times since mid-September and scrapped lending quotas in a bid to support the economy.

Lending to small and medium enterprises will be increased as part of the plan, Xinhua said.

Officials have been flagging measures to pump up demand since gross domestic product growth slowed unexpectedly sharply to 9.0 percent in the third quarter from 10.4 percent in the first half.

Indicators for October have been even weaker.

Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.

Sector that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.

The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies' tax bill by 120 billion yuan a year, the agency added.

(Editing by Alan Wheatley and David Holmes)

Is this an extra amount or a new total with a slightly increased amount from what they had budgeted for because of the downturn. Therfore they may be double counting. In reality. the extra amount may only be a third more or so. eg $200 billion.

 

[crobato]

Premier Wen seeks prompt response


Premier Wen Jiabao Monday urged local governments not to "waste a single minute" in implementing the 4-trillion-yuan ($586 billion) stimulus plan unveiled on Sunday.

Stock investors monitor the market changes at a securities office in Fuyang, Anhui Province Nocember 10, 2008. The Shanghai stock index rose 7.27% at the government's massive economic stimulus plan. [CFP]

Stock investors monitor the market changes at a securities office in Fuyang, Anhui Province Nocember 10, 2008. The Shanghai stock index rose 7.27% at the government's massive economic stimulus plan. [CFP]

"In expanding investment, we must be fast, effective and forceful. We must focus on priorities and adopt a down-to-earth attitude to implement the measures," he told an executive meeting, which was presided by him and attended by provincial leaders and Cabinet ministers.

The country's top agenda is to achieve "steady and relatively fast" economic growth and prevent "economic ups and downs" amid global and domestic economic challenges, Wen said.

"We are confident, and capable, of overcoming the current difficulties," he said.

The government on Sunday announced it would spend $586 billion over the next two years to finance projects in 10 major sectors, such as low-income housing, rural infrastructure, roads, airports, water, electricity, the environment and technological innovation.

"The country should strengthen management of large-scale investment projects, conduct feasibility studies and increase investment efficiency and profits," Wen said in a statement.

He said the stimulus package was crucial to tiding over current difficulties and maintaining long-term growth momentum. It is also meant to help bolster global growth by boosting Chinese investment and consumer spending.

"Fast and stable economic development is not only our development need but also our biggest contribution to the world," he said.

Saying the government would play a leading role in fighting against the economic slowdown and the impact of the international financial crisis, Wen asked "various fronts", especially the private sector, to join the efforts.

In growing signs of a slowdown, the growth of electricity supply and demand dropped from 5.1 percent in August to negative in Octorber. In the iron and steel sector, at least 30 percent of firms have reportedly stopped production, and this trend has started to spread to other sectors.

Other points Wen made at the meeting include:

promoting stable and healthy development of the real estate sector, which plays a large role in the economy and can spur such sectors as iron and steel, and cement production.

increasing competitiveness, especially of medium- and small-sized enterprises.

increasing people's incomes and expanding domestic consumption.

raising tax rebates to help export-oriented companies, which have been severely hit by the financial crisis.

Wen also said implementing the stimulus plan offers an opportunity to push forward the long-waited revision of oil and natural gas prices by linking them with global markets. But he did not set a timetable for the move.

(China Daily November 11, 2008)