Chinese Economics Thread

[AssassinsMace]

Another former British colony with the Brexit attitude.

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Too much pride in their own identity but can't survive alone.

 

[Equation]

Here's an interesting article.

China a potential winner in Britain-EU breakup

BEIJING (AP) — China is a potential winner if Britain and the European Union rework trade deals and look for investors after a British exit.

Beijing faces a blow from weaker European demand for its exports and pressure to hold its yuan steady in turbulent currency markets. But economists and political analysts say if Britain and the EU split, both sides will look to cash-rich Chinese companies that are expanding abroad — with the possible bonus for Beijing of closer political ties.

"One of the benefits China can gain from 'Brexit' is a stronger and closer economic relationship with the U.K. and even with the EU," said Zhang Lihua, director of the Center for China Europe Relations at Tsinghua University in Beijing. "Both the U.K. and the EU need that kind of cooperation with China under the current circumstances."

Chinese leaders urged Britain to stay in the 28-nation EU and have avoided mentioning possible benefits of a split.

On Monday, Premier Li Keqiang, the country's top economic official, said Beijing wants to see a "united and stable" EU and a "stable and prosperous" Britain — a possible reference to concern the vote might inspire separatist sentiment in other EU members or parts of the United Kingdom.

"We are seeing increasing uncertainties in the world economy," Li said in a speech at the World Economic Forum in the eastern city of Tianjin. "We need to jointly handle challenges, strengthen confidence and create a stable international environment."


Europe is China's biggest trading partner, and Chinese investors already see the region as more welcoming than the United States, where some acquisitions have been stymied by security concerns.

Chinese companies own France's Club Med, the makers of Pirelli tires, Volvo cars and Weetabix cereal and football teams Inter Milan of Italy and Aston Villa of Britain. London is the second-biggest center outside mainland China for settling transactions valued in Beijing's yuan.

Britain has technology China needs as the ruling Communist Party tries to evolve beyond low-skilled manufacturing, said Lu Zhengwei, chief economist for Industrial Bank in Shanghai.

"China will benefit from industrial development experience in the U.K.," said Lu. "I do recommend seizing the opportunity to establish China-U.K. free trade to enhance bilateral cooperation between the two countries."

Closer economic ties could lead to warming political relations, Zhang said.

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Chinese Premier Li Keqiang, left, answers a question as founder and Executive Chairman of the World …
"The U.K. and the EU may become more friendly with China politically, but this is not what China tries to seek," he said.

Dealing separately with the two sides also might allow Beijing to reach agreements that might have been blocked previously by the need for Britain and Europe to agree, said Liu Yuanchun, executive dean of the National Academy of Development and Strategy of Renmin University.

"The political gain for China is bigger than the economic gain," Liu said.

Still, China also faces a risk that Britain's departure might leave other EU members free to take more forceful action on trade disputes including steel.

The EU and the United States accuse China of exporting steel at improperly low prices, hurting foreign competitors and threatening thousands of jobs. Washington imposed anti-dumping duties of up to 522 percent but British resistance blocked the EU from imposing higher tariffs.

In the short run, European uncertainty might depress demand for Chinese goods, but trade matters less to China than it did a decade ago. China is the world's biggest trader but exports as a share of the economy declined last year to 22 percent from 2007's 33 percent.

A more serious problem is downward pressure on China's yuan in currency markets, according to economists.

The British pound and the euro currency used by 17 EU countries have sunk relative to the dollar. As currencies of other developing countries also weaken, the Chinese central bank will be forced to decide whether to let the yuan, also called the renminbi, fall with them or stick closer to the dollar.

Last year, the People's Bank of China spent tens of billions of dollars to prop up the yuan after a change in the mechanism used to set its exchange rate allowed it to fall. That fueled expectations that Beijing was weakening the currency to boost exports and prompted investors to move capital out of China.

If the dollar gains against the yuan, "this could set off a renewed bout of fears over renminbi depreciation and a pick-up in capital outflows," Julian Evans-Pritchard and Mark Williams of Capital Economics said in a report.

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[siegecrossbow]

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While the rest of the world frets about the outlook for the Chinese economy, its citizens don’t share those pessimistic views.

The latest Westpac-MNI China consumer sentiment index underlines this point, rising 1.5% to 115.9 in June. It is now 3.2% above the levels of a year ago.

Although below the long-run average of 119.8, a figure above 100 indicates that optimists outnumber pessimists.

Here’s Matthew Hassan, senior economist at Westpac, on the June survey findings:

Most components posted solid improvements in June with downgraded views on the medium term outlook the one offsetting drag. Assessments of ‘family finances vs a year ago’ posted the biggest rise, up 3.4% but coming off a 5.5% fall in May. Consumers’ near term expectations also improved: ‘family finances next 12 months’ up 3.1% and ‘business conditions, next 12 months’ up 2.7%. Views on ‘time to buy a major item’ firmed by 1.4%. The medium term outlook is the main weak spot, ‘business conditions, next 5 years’ down 2.1% in the month. This component remains 6.8% below its long run average and is the only component still down on levels a year ago.

Although not part of the composition of the headline index, Hassan notes that sentiment towards business conditions compared to a year earlier jumped by 5.2%, leaving it at a two-year high.

“This index is not part of the headline composite but is highly correlated with the PMIs and official industrial production,” says Hassan.

Something to consider before the release of major Chinese economic data over the weeks ahead, including Q2 GDP on July 15.

In another positive sign, the survey’s employment indicator jumped 4.4%, leaving it too at a two-year high.

Elsewhere perceptions towards the housing market remained firm, mirroring the recent recovery in house prices across the country.

“The proportion nominating real estate as the ‘wisest place for savings’ rose nearly 2 points to be slightly above its year average and the proportion nominating house purchase as the primary ‘motivation for saving’ posted a smaller 0.6 point gain but was also comfortably above its 2 year average,” notes Hassan.

So what to take from the survey?

Clearly, negative sentiment towards the economy outside of China is not being felt by its own citizens, at least from a holistic perspective.

While markets now have a tendency to dismiss official Chinese data, based on the premise that it cannot be trusted, this is a private sector survey capturing views of those who are experiencing conditions first hand on the ground, not from a desk in New York, London or Sydney.

On that score it appears the economy is anything but imploding.

 

[AssassinsMace]

Brexit proof?

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[ahojunk]

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Source: Xinhua 2016-06-29 18:55:47

BEIJING, June 29 (Xinhua) -- Rapidly growing companies in various sectors in China and other emerging economies are ascending the international arena, according to a report from Boston Consulting Group.

The report released on Monday lists 100 companies that are believed to be the "global challengers," which are the ever-developing corporations edging into the global market with outstanding performance. Of the total, 28, or over one fourth, come from China.

"Chinese companies are the largest block on this list, so by the sheer size of the position, they will have more impact than anyone else," according to Dinesh Khanna, a coauthor and leader of BCG' s Global Advantage practice

Among the listed Chinese companies are Alibaba Group Holding Ltd., Citic Group, Dalian Wanda Group Co., Xiaomi Corp. and China Eastern Airlines Corp.

"We believe these companies represent the next wave of economic growth, " Khanna said.

Companies from emerging economies have occupied over 40 percent of the global market share in industries ranging from household appliances to construction and real estate, the report showed.

"Ten years ago, the global challenger list was dominated by industrial goods and resources companies competing on cost. Today' s many challengers are appealing to the hopes and dreams of middle-class consumers in emerging markets and elsewhere," said Michael Meyer, a coauthor and partner based in Singapore.

Despite economic turbulence in different countries, the revenue and profits of the 100 companies have mainly kept steady. Overall, they have quadrupled their overseas revenue to 944 billion US dollars from 2005 to 2014.

These companies, in their developing process, have also embarked on the purchase of foreign firms in a bid to expand scale, explore new markets or pursue technical enhancement, the report noted.

Founded in 1963, BCG is the world's leading advisor on business strategy with 85 offices in 48 countries.

 

[AndrewS]

China changes how it calculates size of GDP, adding US$130b to size of economy

New calculation includes spending on research and development to better reflect the contribution of innovation to growth, statistics bureau says
...
The adjustment was the result of including spending on research and development into input, a change made to bring calculations in line with international norms as recommended by the United Nations and to better “reflect the contribution to growth from innovation”, the statistics bureau said.
...
A direct effect of the change is an immediate rise in China’s GDP for the past several years. In the last decade, the size of the economy was 1.06 per cent larger per year than previously estimated, the bureau said. In 2015, its size was 1.3 per cent bigger than previously stated.
...
Although China’s economic growth continues to slow, the central government has set a target of a minimum 6.5 per cent growth through 2020 to meet the goal of doubling per capita GDP in this decade.


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[Franklin]

China changes how it calculates size of GDP, adding US$130b to size of economy

New calculation includes spending on research and development to better reflect the contribution of innovation to growth, statistics bureau says
...
The adjustment was the result of including spending on research and development into input, a change made to bring calculations in line with international norms as recommended by the United Nations and to better “reflect the contribution to growth from innovation”, the statistics bureau said.
...
A direct effect of the change is an immediate rise in China’s GDP for the past several years. In the last decade, the size of the economy was 1.06 per cent larger per year than previously estimated, the bureau said. In 2015, its size was 1.3 per cent bigger than previously stated.
...
Although China’s economic growth continues to slow, the central government has set a target of a minimum 6.5 per cent growth through 2020 to meet the goal of doubling per capita GDP in this decade.


Read more

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This is double counting. R&D spending should be part of the cost of doing business just like labor costs. Because R&D costs will be part of the price that people pay for the end product and no one is interested in buying the prototypes. America has set a bad example by including it in its GDP calculation and the rest of the world is following suit.

 

[AndrewS]

This is double counting. R&D spending should be part of the cost of doing business just like labor costs. Because R&D costs will be part of the price that people pay for the end product and no one is interested in buying the prototypes. America has set a bad example by including it in its GDP calculation and the rest of the world is following suit.

Is it a cost of doing business or is it an investment?

The way I look at it, one doesn't need to spend anything on R&D for an existing business or product.
Whereas improving or building a new business is an investment activity, whose benefits are speculative to one degree or another.

Plus the inclusion of R&D as an investment was driven by the adoption of UN SNA 2008 standards, rather than the USA per se.

 

[AssassinsMace]

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Beijing should be scrutinizing this and don't even think of eventually joining TPP. The pro-Brexit crowd didn't want a bunch non-elected bureaucrats in the EU dictating laws to them. TPP with its secret non-elected committee that overrides a country's own sovereignty and judicial system is the same exact thing. Like I said before TPP is all about China. Obama is hoping China wants in hence why China isn't a part of the founding membership that makes up the rules thus China will have to get in under the US's terms. Obama wants to deny China the same consumer power and influence in the world economy that it has enjoyed itself for decades. And China is going to be bigger than the US has ever been. That's what frightens the pro-TPP crowd. China doesn't need TPP. TPP members need China to buy their products. What they don't tell you in the news is when you see Apple or Boeing having China as their largest customer, that has never happened before in history where the US wasn't the largest customer for it's own companies. The list will grow more and more and with that the more power and influence China will have. The advocates for TPP argue China will have a harder time selling their products. Well are they going to whine when China puts up the same trade barriers to their number one customer?

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If any other country were actively working to undermine the US, that would be considered an act of war.

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Look at how the media lies. Half of the hoverboards recalled were from Swagway. If you recall Swagway was the biggest loudmouth claiming their products weren't made in China but made in the US and none of their hoverboards ever exploded into flames.

 

[ahojunk]

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2016-07-04 15:56 | Xinhua | Editor: Gu Liping

The upcoming release of official Chinese economic indicators will show the country maintained stable growth in the second quarter of 2016, UBS predicted in a report on Monday.

The Swiss bank put China's Q2 growth at 6.7 percent year on year, flat with the first quarter.

"Property sales may have moderated further and industrial production growth stabilized. Infrastructure investment likely stayed strong to offset downward pressures from still-weak private investment," it said.

The forecast came less than two weeks ahead of the official release of data including GDP, industrial output, fixed-asset investment (FAT) and retail sales for the past quarter.

UBS believes Q2 will mark a peak of growth momentum in the ongoing mini-cycle, and it forecast moderation during the remainder of 2016.

But it said it expects the government to intensify policy support if necessary to ensure the country meets a full-year growth target of 6.5 percent to 7 percent.

As for June's data, UBS forecast rising FAT, milder consumer price growth, narrowed industrial deflation and falling export growth. New total social financing probably picked up from May, and foreign exchange reserves dropped, it said.