Chinese Economics Thread

[maozedong]

from Singtao newspaper reported,According to Chinese statistics, China last year, there 5-60,000 closure of small and medium enterprises, but at the same time has increased 70,000 new SME. Earlier this year, Chinese authorities did not importance of those closed down enterprises, the authorities at the time that is necessary to strengthen macro-control, and that China Economic restructuring needs.
However, since the United States of the financial tsunami that affected the global economy, the Chinese government changed the measures to prevent the economic of China downturn, the Chinese government does not want too many small and medium enterprises closed down, decided to actively help small and medium enterprises, the Chinese Government used 4,000 billion yuan To promote economic, as well as the 10 economic measures, is one of the active support of SMEs.

 

[Schumacher]

Opportunities for Philippines or not, here're the economic numbers for Oct. Both CPI & PPI keep falling, crucially consumer spending still a robust 22% especially more so given the falling inflation & exports growing close to 20%, with imports falling far more due to lower resources prices giving another record surplus.
It's early days in the crisis but so far, the numbers show China holding up well as I've predicted & really see no reasons to change this opinion especially now with the stimulus coming.

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[crobato]

China's industrial output slows sharply in October: govt

BEIJING, Nov 13 (AFP) Nov 13, 2008

China's factory output abruptly weakened last month, the government said Thursday, as Premier Wen Jiabao warned the impact of the global crisis was "much worse" than expected.

Industrial production grew 8.2 percent in October from the corresponding month a year ago compared with 11.4 percent in September, the National Bureau of Statistics said in a statement.

"It's a very low figure. Everyone had expected China's economy would slow down, but not so sharply. People had still thought it would be double-digit growth," said Benny Lui, a Hong Kong-based economist at Core Pacific Yamaichi.

"This slow growth in industrial output indicates the risk of a hard landing is still lingering," he said.

Several key product categories last month either grew by single digits or declined compared with a year earlier, statistics from the bureau showed.

For example, China produced 730,000 vehicles in October, a drop of 0.7 percent from a year earlier, while production of crude steel was down 17.0 percent over the same period, the bureau said.

As the industrial figures came out, the statistics bureau's newspaper quoted Premier Wen as making one of the most sombre assessments yet of the effect of the global financial meltdown on the world's fourth-largest economy.

"The impact of the global financial crisis on the Chinese economy is much worse than many had expected," the bureau's director, Ma Jiantang, quoted Wen as saying in the China Information News.

Exports of industrial products were up by just 6.8 percent from October 2007, reflecting the slowdown in key markets such as the United States and Europe.

China's policy makers began the year worrying if they would be able to rein in inflation, while economic growth was a decidedly secondary objective, but have signalled now that they have switched their priorities around.

October's industrial output showed just how much has changed in the economic environment since the outbreak of the global crisis, with growth less than half the 17.9 percent recorded in October 2007, from a year earlier.

The upshot is likely to be economic growth in China of between nine and ten percent this year, the first time since 2002 that it will have slipped into single digits, analysts said.

The drastic deceleration in industrial production suggests the 1997-98 Asian financial crisis -- the last major foreign crisis facing the Chinese economy -- may no longer be a suitable point of reference.

"This was a larger and sharper fall-off than during the Asian financial crisis a decade ago," said Ken Peng, a Citibank economist based in Shanghai.

China's initial stance was that the global financial crisis would not cause too much harm to its economy, but in recent days policies out of Beijing have changed markedly.

On Sunday, the government announced a spending package worth four trillion yuan (590 billion dollars) aimed at lifting economic growth.

Although it was unclear how much was actually new spending, economists said the money would go some way to alleviating the plight of China's manufacturers.

"The outlook of China's industrial sector is not all doom and gloom," said Sherman Chan, a Sydney-based economist with Moody's Economist.com.

"The massive fiscal stimulus package announced earlier this month should help to give the industrial sector a much-needed helping hand," she said in a note.

In the first 10 months of the year, industrial output increased 14.4 percent from the same period in 2007, according to the bureau.

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[crobato]

China Prepares for Urban Revolution (Businessweek)

.....The numbers are overwhelming: Over the next 17 years, 350 million rural residents (more than the entire U.S. population today) will leave the farm and move to China's cities. That will bring the Chinese urban population from just under 600 million today to close to 1 billion, changing China into a country where more than two-thirds of its people are city dwellers, says Jonathan Woetzel, a director in McKinsey's Shanghai office. The change will reverse China's centuries-old identity as a largely rural country. Thirty years ago, when China started modernizing its economy, more than 80% of Chinese lived in the countryside. And just six years ago it still was about 60%. Today China is just under 50% urban.

Roads, Rails, and Skyscrapers
The newly urbanized population will live in eight megacities, those with a population of more than 10 million, as well 15 big cities with populations between 5 million and 10 million. In addition, by 2025 China will probably have at least 221 cities with a population over 1 million, estimates Woetzel. That compares with 35 cities of that scale across all of Europe today. These new urbanites are expected to be a powerful booster of growth: Urban consumption as a share of gross domestic product will most likely rise from 25% today to roughly 33% by 2025. "Urbanization is the engine of the Chinese economy—it is what has driven productivity growth over the last 20 years," says Woetzel. "And China has the potential to keep doing this for the next 20 years."

Meeting the infrastructure needs of the newly expanded cities will be both a challenge and an opportunity. More than 5 billion square meters of road will need to be added and as many as 170 mass-transit systems built, providing potential lucrative business opportunities for the likes of Siemens (SI), General Electric (GE), and Caterpillar (CAT). More than 40 billion square meters of floor space will be built in 5 million buildings—with up to 50,000 skyscrapers above 30 stories among them. "The needs in this market just keep getting bigger and bigger," says Masahiro Yoneyama, chairman of Komatsu (China). Yoneyama expects Chinese sales of its hydraulic excavators, dump trucks, and forklifts to grow 30%, reaching $2.5 billion this year......

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[crobato]

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China to invest more than 1 trillion yuan in grid construction

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2008-11-16 15:56:20 Print

Special Report: Global Financial Crisis

BEIJING, Nov. 16 (Xinhua) -- The State Grid Corporation of China (SGCC), the country's biggest power supplier, plans to more than double its investment for the next two years to a total of 1.16 trillion yuan (169.9 billion U.S. dollars) for grid construction nationwide.

"We decided to add about 500 billion yuan investment to the original 550 billion yuan scheduled for 2009 and 2010 in a bid to help stimulate domestic demand," said a statement on the corporation's website.

The planned investment is yet to be approved by the State Council, or China's Cabinet.

SGCC general manager assistant Lu Jian said the company had already arranged 12 billion yuan in the fourth quarter for the development of urban and rural power supply in the country's central and western regions.

"We got 2.73 billion yuan from the central government. The rest was from bank loans and company funds," he said.

The State Council announced on Thursday a 100-billion-yuan package to accelerate national economic development in the fourth quarter. SGCC was granted 68.2 percent of the 4 billion yuan that went to support grid building.

Experts said power construction could directly benefit industries such as metallurgy, building materials, electricity and machinery manufacturing, as it would promote investment, consumption and trade.

Industry statistics show that the construction of every 100 kilometers of power lines of a 500-kilovolt grid project consumed 5,000 tons of steel, 2,000 tons of aluminum and 7,000 cubic meters of cement.

In 1998, the government invested more than 300 billion yuan in grid building projects to stimulate the domestic economy and fend off the financial crisis in the southeast Asia, according to the SGCC announcement.

 

[crobato]

Two articles in one.

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BEIJING, Nov. 17 -- Chinese banks should be alert to the risks of growing bad loans and narrowing profit margins amid a worsening global financial crisis and domestic interest rate cuts, a senior banking regulator has warned.

China Banking Regulatory Commission Vice Chairman Jiang Dingzhi told a financial forum in Beijing on Saturday that China's banking system, despite being generally healthy, faces growing risks.

"Our judgment is that losses at overseas financial institutions will widen further, and capital shortfalls will become more serious," Jiang said

"The financial crisis won't end in the near term. So we should not turn a blind eye to the risks " Jiang said, warning that the first risk China may face in the coming years is "exported inflation" from developed economies.

He said many developed economies have taken quick action to inject huge liquidity and credit into their banks to stabilize financial systems and it is likely that the banks will export capital to developing countries such as China (through direct investment or loans).

"That may cause high inflation (for us) and we should keep a close eye on cross-border capital flows," said Jiang.

Jiang also warned that bad loans, especially in the real estate sector, are the second risk that China's banks are confronted with.

"Bad loans are already showing an upward trend, especially in the property market where the mortgage default risk is growing at an accelerating pace," Jiang said, without elaborating.

Jiang also said Chinese banks may encounter growing losses from their overseas investment as the global financial crisis remains "far from over".

The government said earlier that Chinese banks suffered "very limited losses" overseas as their exposure to bankrupt global financial companies was not much.

Jiang said Chinese banks also face narrowing profit margins as the central bank cuts interest rates to boost the slowing economy. Banks are encouraged to lend after the government announced a 4 trillion yuan (586 billion U.S. dollars) stimulus plan a week ago.

The People's Bank of China has cut interest rates thrice this year after economic growth cooled to 9 percent in the third quarter, the slowest rate in five years. He said the banks will see declining profits next year as lower interest rates shrink margins and loan defaults may increase.

However, Jin Liqun, chairman of the supervisory board of China Investment Corp, said Chinese banks should continue market-oriented reforms despite the risks.

"All these risks cannot be used as excuses to defer further reform in the banking system," said Jin at the forum. "Only with market-oriented reforms can our banks further build up their capabilities in profit-making and risk-prevention."

Jiang said China's banking system remains "in good health" with all major indicators at their best levels ever.

Banks' total assets, 59.3 trillion yuan at the end of September, were five times the level of 10 years ago when the Asian financial crisis erupted, he added. And banks reduced their average bad-loan ratio to 5.49 percent at the end of September, from 6.3 percent at the end of March.

"These sound indicators are the basis of our confidence to battle financial crisis," Jiang said.

(Source: China Daily)

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China's central bank official warns of inflation risk

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2008-11-17 09:36:54 Print

BEIJING, Nov. 17 -- The China shouldn't relax monetary policy too fast, even amid an economic slowdown, a central bank official said Sunday.

"Monetary policy shouldn't be loosened too fast because there is still a risk that inflation will rebound," Jiao Jinpu, vice president of the People's Bank of China's Graduate School Council, told reporters at a financial conference in Beijing.

"The lagging effect of China's monetary policy may be more obvious while all major economies are slowing down."

The central bank has cut benchmark interest rates three times in two months, scrapped restrictions on how much banks can lend and shifted from a "tight" to "moderately loose" monetary policy after growth expanded at the slowest pace in five years in the third quarter, Bloomberg News said.

"Monetary policies shouldn't be adjusted too aggressively or it may have negative long-term consequences," said Wu Jinglian, a senior economist at the State Council Development and Research Center, at the conference. "Measures to bolster the economy should come more from the government's fiscal policies."

China's under-developed financial system, volatilities in money and loan growth and turbulent global financial markets are factors hindering the effectiveness of the central bank's policy adjustments, Jiao said.

"As the global financial crisis is having an increasing impact on China's economy and financial system, we must constantly observe the situation and use a mix of measures flexibly and prudently to counter risks," said Jiao.

(Source: Shanghai Daily)

 

[crobato]

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China to strengthen rural water conservation with $2.9 bln

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2008-11-18 20:37:25 Print

BEIJING, Nov. 18 (Xinhua) -- China will spend 20 billion yuan (about 2.9 billion U.S. dollars) on rural water conservation projects as one of the steps it is taking to stimulate domestic demand, the State Council, or the cabinet, said here on Tuesday.

  The investment will be part of the fourth-quarter stimulus spending, which has been put at 100 billion yuan.

"The money will mainly go to projects that will reinforce risky water reservoirs, save water in major irrigation areas and improve drinking water safety in rural areas, as well as other projects," said Chen Lei, head of the Ministry of Water Resources.

According to the National Development and Reform Committee (NDRC), the nation's top planning body, provincial economic planners and water resource departments will work together to ensure all the governmental funds are allocated to specific projects covered in the plan within 10 days. All the projects must be completed by March.

Vice Premier Hui Liangyu provided further information on the country's broad picture for the next decade in terms of rural water conservation.

"Our target is to enhance the safety of key reservoirs by 2010, provide qualified drinking water for all rural residents by 2013 and complete the construction of water-saving facilities for large-scale irrigation areas across the country by 2020," he said.

These projects will address prominent rural development problems. Statistics indicate that 53 percent of China's arable land lacks basic irrigation facilities, causing 50 billion kg of grain to be lost every year.

More than one third of the 85,000 reservoirs nationwide are rated as risky, while about one third of all counties and villages lack qualified water supply equipment.

According to Hui, the plan is also in line with China's first mid- and long-term grain security plan, released by the NDRC on Nov. 13.

The plan targets grain production of at least 500 billion kg by 2010 and more than 540 billion kg by 2020. Output was 501.6 billion kg last year.

"To achieve the multi-billion kilogram increase in grain output, we will step up the improvement of rural farming infrastructure," he said.

Hui predicted grain output would increase for a fifth consecutive year in 2008 to exceed 512.3 billion kg, the peak harvest, which was in 1998.

 

[crobato]

China warns jobs outlook 'grim' as economy slows

By CHRISTOPHER BODEEN, Associated Press Writer

BEIJING – Chinese officials warned Thursday that the country faces a "grim" employment outlook with demand for workers falling and job seekers in the cities outnumbering new jobs by two-to-one as the economy slows.

Officials from the national police chief to local leaders have warned job losses could spark protests threatening social stability and one-party communist rule.

"Since October, our country's employment situation has been affected along with changes in international economic conditions," Human Resources and Social Security Minister Yin Weimin said.

"The current situation is grim, and the impact is still unfolding," Yin said.

The global financial meltdown has dealt a body blow to China's vital export industries that account for 40 percent of the economy, causing thousands of factories making toys, shoes and cheap electronics to fold. Millions of laid-off migrant workers have flocked back to their rural homes and local governments nationwide have found themselves deprived of key sources of tax revenue.

China's economic growth fell to 9 percent in the latest quarter after expanding 11.9 percent last year, and economists warn of further declines in the new year.

In response, the government has rolled out a 4 trillion yuan ($586 billion) stimulus package, betting that extra spending on airports, highways and other construction will help produce jobs. Seeking to forestall mass layoffs, two provinces are also requiring companies to seek government permission before firing large numbers of staff.

The urban middle class is also starting to feel the pinch, and already cutthroat job competition among college graduates could worsen considerably if the economy continues to deteriorate, said Zhang Xiaojian, vice minister of Human Resources and Social Security.

Numbers of graduates will rise from this year's 5.59 million to 6.1 million next year, but urban areas can generate just 12 million jobs for the 24 million people entering the labor force, Zhang said.

Government agencies will seek to spur employment of graduates in the private economy or by offering them incentives to take up low level jobs in remote, underdeveloped regions, he said.

Despite the dire outlook, the current job situation remains "basically stable" with the registered urban unemployment rate lying at just 4 percent, Yin said. The official government rate is widely believed to underrepresent the true number of unemployed because it leaves out large swaths of the private or informal economy.

The Human Resource Ministry's Web site gave the total number of jobless as 8.3 million.

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[crobato]

Chinese carmakers also seek government aid
Caught in a slowdown, they urge policy changes rather than bailouts. Some are deferring export plans and cutting their costs.
By Don Lee
November 20, 2008
Reporting from Shanghai -- America's Big Three aren't the only carmakers turning to government with hat in hand.

Hit by a dramatic slowdown in sales, Chinese auto executives are cutting production, shelving plans to export to the U.S. and, a la Detroit, looking to Beijing for a little help.

Unlike the heads of General Motors Corp., Ford Motor Co. and Chrysler, who were in Washington this week pleading for $25 billion in aid, Chinese automakers generally aren't in dire financial straits. Rather than begging for cash or loans, Chinese managers say, they're pushing for policy changes, such as lower consumption taxes and pump prices, that might help jump-start sales.

Government needs to "provide an environment to encourage people to buy cars," said Cui Yizhang, marketing director at JAC Motors, a commercial vehicle maker in Anhui province.

In the interim, Cui said, JAC is tightening its belt. Production employees' work has been cut to three to four days a week from six plus daily overtime earlier in the year. The company has slashed salaries of high-ranking executives 40% and those of middle managers 20%.

For most of the last several years, China's auto market was booming, with annual sales volume growth often exceeding 20%.

But with sagging stock and property markets -- not to mention a global economy turned upside-down -- consumers started to pull back on purchases in the spring.

Sales in August and September fell from year-ago levels, and despite a 3% rebound in October, analysts are forecasting no growth next year.

GM and Ford's sales in China have slipped more than average, according to J.D. Power & Associates.

A few Chinese carmakers such as Shenzhen-based BYD Auto, which recently got an infusion of $230 million from investor Warren Buffett, are continuing to show solid growth in China, as are some foreign brands including Toyota Motor Corp. and Nissan Motor Co.

But overall, the downshift in China's car market is affecting domestic sales as well as exports, forcing manufacturers to pull back on their once-ambitious plans for international expansion. The global financial crisis already has contributed to a sharp slowdown in Chinese vehicle shipments to countries such as Russia and Ukraine, its top two overseas markets.

At home, competition has intensified as domestic and foreign carmakers deal with bulging inventory and major production cuts.

"Because of the impact from the credit crunch, we will hold our U.S. export plans temporarily," said Yan Zhi, director of the international trade department at Hunan Changfeng Motors, where sales of its Liebao model tumbled 34% last month. In fact, after attending the Detroit Auto Show the last two years, Yan said his company would skip the one coming up in January.

Several others won't be there either, including Chery Automobile Co., considered one of the most promising Chinese automakers. Its sales this year through October have fallen 8%, according to J.D. Power. Chery, based in Anhui province, had once hoped to break into the U.S. market by 2008, but in an interview this year, a spokesman said the company was now looking at entering within five years.

"I don't think any of these carmakers are eager to export to the U.S.," said Jia Xinguang, an independent auto analyst in Beijing. "Right now, the competition in the domestic market is very heated, and they are all putting their energy into it."

Jia and other industry analysts don't think Beijing will come to the rescue, at least not at this stage. Government officials may see this as an opportunity for restructuring and consolidation in the fragmented industry, said Michael Dunne, the Shanghai-based managing director of J.D. Power in China. Besides, he asked, "which ones do you subsidize?"

Although the Chinese car market has softened, it's nothing like what's happening in the U.S., said Luo Lei, deputy secretary general of the China Automobile Dealers Assn. in Beijing. The U.S. market is mature and saturated, he said, whereas in many Chinese cities, the potential for expanding car sales remains robust. And as Bejing continues to try to stimulate growth by loosening credit, Chinese automakers should have an easier time getting loans, he said.

"Most of these companies are not short of money," Luo said.

Lee is a Times staff writer.

 

[crobato]

China to overhaul battered dairy industry
By TINI TRAN, Associated Press Writer Tini Tran, Associated Press Writer
Thu Nov 20, 4:58 am ET

BEIJING – China announced a complete overhaul of its dairy industry Thursday to improve safety at every step — from cow breeding to milk sales — saying its worst food quality scandal in years had revealed "major problems" in quality control.

Changes will be made within the next year in production, purchasing, processing and sales, the official Xinhua News Agency reported.

"The crisis has put China's dairy industry in peril and exposed major problems existing in the quality control and supervision of the industry," it quoted an official at China's top economic planning body, the National Development and Reform Commission, as saying.

Milk and milk products tainted with melamine, an industrial chemical, have been blamed in the deaths of at least three infants and have sickened more than 50,000 others. The government has detained dozens of people in the scandal, but there have been no court cases so far.

The State Council, China's Cabinet, said the Health Ministry will issue new quality and safety standards for dairy products, while the Agriculture Ministry will draft inspection standards for melamine and other toxins in animal feed. The flow and delivery of dairy products will also be tracked, it said in a statement.

The breadth and speed of the proposed changes echo actions taken last year, when a slew of Chinese exports — from toothpaste to toys — were found to contain high levels of potentially deadly chemicals.

After an initial unwillingness to acknowledge problems, authorities threw themselves into a campaign to protect export industries and bolster the country's reputation as the world's manufacturing base.

The government formed a Cabinet-level panel to oversee product quality and food safety, implemented a national food recall system, and announced increased random inspections, closures of unlicensed manufacturers and restaurants, and large-scale seizures of substandard goods.

Chinese officials also signed an agreement with the U.S. Food and Drug Administration on improving cooperation in drug safety.

Results have been mixed, largely because it is extremely difficult to regulate the country's numerous producers and suppliers, many of which are small and illegally operated.

The dairy scandal highlighted the widespread practice of adding melamine, often used in manufacturing plastics, to watered-down milk to fool protein tests. Investigations also discovered it was being added to animal feed after finding melamine-spiked eggs.

Melamine poses little danger in small amounts but larger doses can cause kidney stones and renal failure.

The government plans to tighten regulation of milk collection stations, where dairy farmers sell their raw milk, the National Development and Reform Commission said.

By the end of next year, all milk stations will be required to meet hygiene, testing, operational and personnel standards, it said.