Chinese Economics Thread

[Jura The idiot]

now I read
German media: China may be a better incubator for innovation
2018-03-30 21:02 GMT+8

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China’s 7,500 incubators have witnessed the birth of over 220,000 small and medium-sized enterprises over the past decade, which makes the nation a promising land for innovation compared to any other countries, China Radio International said Friday citing German D-group.

In the article translated as "Dear Founder: do not go to the Valley to start a business. Go to China!", the German media outlet wrote that China has become the center of start-up companies, entrepreneurial accelerators and business incubators. Of the 232 large unicorn companies, startups valued at over 1 billion US dollars, 62 are from China, while Germany has only 4.

The Chinese government increasingly values the image of an innovative country since 2013 with the goal to become an "innovation nation" by 2020. In October 2017, a report at the 19th National Congress of the Communist Party of China stressed that innovation was the primary driving force behind development. The country has set the goal to become an international leader in innovation by 2030, and a world powerhouse in scientific and technological innovation by 2050.

Twitter user TrendSlam commented that research revealed UK lagged behind China and US in terms of innovation. The results were published as part of KPMG's 2018 Global Technology Innovation Report.

Cities like Hangzhou in south China’s Zhejiang Province have specific projects that fund start-up companies, providing entrepreneurs with venues, funding, and consulting services. Hangzhou is also one of the key fintech centers in China.

Marc Lussy, Senior Advisor at a Zurich based fintech incubator F10, tweeted that he was "visiting Hangzhou Innovation Town. They have a strong focus on fintech. Hangzhou wants to become the center of fintech in China. Note they call it innovation town, not park."

 

[supercat]

China to start paying for oil in yuan as early as this year: report
Pilot program may come in second half of 2018

Beijing is forging ahead in its efforts to internationalize the yuan, with sources saying this week that China may begin paying for crude oil with the local unit as early as this year.

Regulators have informally requested that financial institutions lay the groundwork for pricing the country’s crude imports in yuan,

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, citing three financial industry sources.

“Being the biggest buyer of oil, it’s only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market,” one of the people briefed on the matter by Chinese authorities was quoted as saying.

One source said the plan may start with purchases from Russia and Angola, though they were not able to offer further details. Russia and Angola are seen as natural allies in the quest to internationalize the yuan, both keen on dethroning the greenback.

Officials at several Chinese state oil company were unaware of the plans, according to the report, which sources said were still at an early stage.

 

[texx1]

IMO, this development played a bigger role than simple trade imbalance when it comes to initiating US-China trade war. Petro-yuan won't displace petrodollar any time soon. But it will chip away US dollar's dominance in oil little by little. With that comes far reaching consequences for US.

 

[Jura The idiot]

Monday at 6:59 PM

now I read
China Focus: China launches crude oil futures trading
Xinhua| 2018-03-26 16:36:46

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now
China Focus: China's crude oil futures active in first week trading
Xinhua| 2018-03-30 23:04:24

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The price of the main contract of China's crude oil futures settled at 420.3 yuan (76 U.S. dollars) on Friday, 4.3 yuan higher than its listed benchmark price at 416 yuan per barrel.

On Friday, the Shanghai International Energy Exchange (INE) recorded a total of 58,824 transactions of 15 listed crude oil futures contracts, 16,448 more than the first trading day level on Monday.

China launched trading of crude oil futures contracts on Monday in its steady moves to further open up the financial sector.

As the first futures contracts listed on the Chinese mainland to overseas investors, the trading volume gradually increased during the first week with a total of 278,234 transactions, worth 115.92 billion yuan, changing hands by the end of the week.

By Friday, INE had registered over 20,000 trading accounts, among which 25 percent were institutional accounts, and the rest were held by individuals.

"Individual investors made considerable liquidity and showed skills in risk management," said Sun Yonggang, analyst with Chaos Ternary Futures Co., Ltd.

A total of 23 overseas agencies have registered with the INE to provide brokerage services for overseas investors. Analysts said that the futures have shown its price-discovery function and connection with the international market, as the prices of the main contract SC1809 were mostly between the prices of London and New York crude oil markets this week.

On Thursday, the West Texas Intermediate (WTI) for May delivery posted at 64.94 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery closed at 70.27 U.S. dollars a barrel on the London ICE Futures Exchange. While, INE's main contract closed at 409.7 yuan (about 65 U.S. dollars).

After the U.S. Energy Information Administration released the latest inventory data Wednesday, which rose more than expected, the pricing of INE contracts fell on Thursday, said Xiang Chao, analyst with Yongan Futures Co. Ltd.

The financial market showed concerns about trade friction between China and the U.S., causing crude oil prices to move up and down frequently, said Xiao Wei, analyst with CCB futures.

He predicted that with the improvement of liquidity and investors' structure, the market expectation will be better reflected through the Shanghai crude oil futures.

According to China Securities Journal, the INE prices will be the valuation benchmark of physical deliveries made by Shell to China International United Petroleum & Chemicals Co., Ltd. from September.

 

[Jura The idiot]

now I read
Economic Watch: China's manufacturing activity picks up amid solid economic expansion
Xinhua| 2018-03-31 16:41:56

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China's manufacturing sector expanded at a fast pace in March as the country's economy continued to grow steadily, official data showed Saturday.

The country's manufacturing purchasing managers' index (PMI) came in at 51.5 this month, the strongest level this year, according to the National Bureau of Statistics (NBS).

A reading above 50 indicates expansion, while a reading below 50 reflects contraction. In February, China's manufacturing PMI stood at 50.3.

The NBS data showed the non-manufacturing sector also accelerated the pace of growth as its PMI was 54.6 in March, up from 54.4 last month.

The composite PMI, which combines the performance of both manufacturing and non-manufacturing sectors, went up to 54 this month from 52.9 in February.

The rise in March PMI indicated more stable economic growth, as well as steady market demand, robust manufacturing and business activities, and good expectations, said Zhang Liqun, researcher with the State Council's Development Research Center.

The pick-up in manufacturing expansion came as factories resumed production after the Spring Festival holiday, with sub-indices for production and new orders both rising to 53.1 and 53.3, respectively, according to NBS senior statistician Zhao Qinghe.

Small enterprises witnessed a particularly strong increase in manufacturing activities, as the PMI for small manufacturers jumped to 50.1 in March from 44.8 last month, NBS data shows.

Zhao also attributed the faster expansion to stronger foreign trade, better industrial structure, and increased business purchasing activities.

Sectors like equipment, high-tech and consumer goods manufacturing recorded higher PMI than the overall manufacturing PMI level in March, indicating progress in bringing in new growth engines.

For non-manufacturing industries, the service sector, which accounts for more than half of the country's GDP, reported healthy expansion with the business activity index standing at 53.6, well above the boom-bust line of 50, NBS data showed.

Construction business picked up in March due to warmer weather and further progress in infrastructure construction. Its business activity index rose to 60.7 from 57.5 in February.

Both service and construction firms remained positive on the market outlook in March as the business outlook index stayed above 60 this month, an optimistic range, for the 11th month in a row.

Beijing-based investment bank CICC said despite factors like an unfavorable working day effect from a late Chinese Lunar New Year, March manufacturing PMI came in "more resilient than expected," indicating relatively robust cyclical momentum in the first quarter.

"Looking forward, we expect the industrial enterprise profitability to continue to improve and manufacturing investment growth to be on the mend throughout 2018," said the CICC in a research note.

Chen Zhongtao, an analyst with China Logistics Information Center, said a good start in the first quarter will lay a solid foundation for future growth, who expects China's economic performance to remain sound and stable in the second quarter.

The NBS is scheduled to release key economic data of China for the first quarter on April 17.

China expects economic expansion to be around 6.5 percent this year, unchanged from 2017.

 

[manqiangrexue]

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China gets richer provinces to help revive rust belt economies
Guangdong among affluent areas that will become economic partners to struggling ‘old industrial bases’ in nation’s northeast

PUBLISHED : Friday, 30 March, 2018, 12:16pm
UPDATED : Friday, 30 March, 2018, 10:41pm

China’s manufacturing hubs of Jiangsu, Zhejiang and Guangdong will work with the rust belt northeast provinces of Liaoning, Jilin and Heilongjiang to help rejuvenate their economies, the country’s state planner said on Friday.

THIS WEEK IN ASIA
In detailed implementation plans published on its website, the National Development and Reform Commission called on eastern China’s Jiangsu in the prosperous Yangtze River Delta to boost cooperation and share resources with struggling Liaoning as part of China’s latest efforts to revive the struggling “old industrial bases” of the northeast.

Meanwhile, Zhejiang will take on Jilin province as an economic partner and Guangdong will provide support to Heilongjiang.

Separate plans were also published to establish partnerships between Beijing and Liaoning’s capital, Shenyang, and between Shanghai and the Liaoning port of Dalian. Tianjin will also team up with Changchun, the capital of Jilin.

Zhejiang and Jilin will work to establish government, business and social cooperation mechanisms over the next two years and will “make significant improvements in the degree of economic integration”.

Liaoning and Jiangsu will also build joint industrial estates and encourage the use of cross-regional public-private partnerships and the establishment of investment funds, the commission said.

Liaoning’s gross domestic product rose 4.2 per cent last year, one of the lowest rates in the country, and lagging the nationwide growth rate of 6.9 per cent.

The smaller economies of Jilin and Heilongjiang grew 5.3 per cent and 6.4 per cent, respectively.

Liaoning was also mired in a data falsification scandal involving years of inflated fixed asset investment numbers. It reported a 2.5 per cent decline in GDP in 2016.

China said last year that it would create cross-regional cooperation mechanisms allowing richer provinces in the east and southeast to provide expertise and resources to partner regions in the northeast.

The northeastern provinces, dominated by giant state-owned enterprises and heavy industries like steel and mining, were once the mainstay of China’s economy, but they have struggled to keep up with the rapidly growing hi-tech manufacturing regions on the eastern and southeastern coast.

The region’s workforce is also declining in numbers and also ageing rapidly, and a “rejuvenation” programme launched in 2003 and involving billions of yuan in infrastructure investment has failed to arrest the decline, with analysts saying it has failed to stimulate the private economy.

 

[Jura The idiot]

now I read
Risk from China's external debt under control: forex regulator
Xinhua| 2018-03-31 20:02:37

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Financial risk from China's external debt is controllable overall, despite continuously rising, the foreign exchange regulator said.

All major indicators of the external debt remain within international safety standards, the State Administration of Foreign Exchange (SAFE) said on its website.

At the end of 2017, the outstanding external debt stood at 1.71 trillion U.S. dollars, an increase of 294.8 billion dollars from one year earlier.

That translated to a debt ratio, or outstanding external debt to GDP ratio, of 14 percent, and the ratio of short-term external debt to foreign exchange reserves was 35 percent, according to the SAFE.

The SAFE attributed the rising external debt to stable economic growth, increasing two-way movement of the yuan exchange rate and the government's policies to facilitate cross-border financing.

It said the country will continue to improve the macro-prudential management policy that focuses on banks and short-term capital flow, preventing risk while better serving the real economy.

 

[taxiya]

IMO, this development played a bigger role than simple trade imbalance when it comes to initiating US-China trade war. Petro-yuan won't displace petrodollar any time soon. But it will chip away US dollar's dominance in oil little by little. With that comes far reaching consequences for US.

Although I don't see the relation between "Yuan for Oil" and the trade war, I agree with your last sentence. In fact, I think that consequence is much more bigger than the trade war. For one example, when in the future China buys oil from Iran or anyone under US sanction with Yuan, US would be kept in the dark and has nowhere to put its pressure. That is only one of the many new possibilities that this new development creates.

 

[N00813]

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China cuts tax rates for chipmakers amid trade tensions
Reuters

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Tianhan Chen | Cpressphoto | Getty Images
The skyline of the city of Beijing, China on March 25, 2016.
China's finance ministry said on Friday it has introduced new tax breaks and exemptions for firms making semiconductors, seeking to limit dependence on foreign chips amid trade tensions with the United States over technology transfers.

The move comes as the United States is considering imposing tariffs on $50 billion worth of Chinese exports, citing discriminatory trade practices in high-tech sectors, including semiconductors.

Chipmakers will be exempt from corporate taxes for two to five years followed by partial deductions, the ministry said in a notice posted on its website on Friday.


The exemptions cover a range of products, from very basic to cutting-edge chips.

The new rules are effective from Jan. 1, 2018.

China relies heavily on foreign semiconductors, which make up one of its largest import categories by value. It is seeking to overtake foreign rivals and become a top semiconductor producer by 2030, according to its own roadmap.

China's ambitions have riled overseas regulators however, who have blocked several acquisition attempts by Chinese firms looking to speed up development through technology transfers.

U.S. President Donald Trump's administration is requesting China purchase more semiconductors from the United States as part of a plan to avoid proposed tariffs and a potential trade war, Reuters reported on Tuesday.

[Hmm... didn't the Obama administration forbid China from buying "more semiconductors"? All of the low-end chips that China wants to buy, they already have, and the top-end ones are forbidden from sale by US law. Something Trump may change? probably not -- me]

According to Friday's notice, companies producing high-end chips using 65 nanometre technology or smaller with an investment of over 15 billion yuan ($2.39 billion) will be exempt from corporate taxes for five years. Companies producing chips using 130 nanometre technology or smaller will be tax exempt for two years.

 

[texx1]

Although I don't see the relation between "Yuan for Oil" and the trade war, I agree with your last sentence. In fact, I think that consequence is much more bigger than the trade war. For one example, when in the future China buys oil from Iran or anyone under US sanction with Yuan, US would be kept in the dark and has nowhere to put its pressure. That is only one of the many new possibilities that this new development creates.

Petro-dollar paradigm plays a key role for US to maintain its economic viability despite its unsustainable deficit. When small nations like Iraq under Saddam and Libya under Gaddafi tried to disturb the petro dollar paradigm, they were swiftly stopped with military means. Military means can't be used to stop China without incurring politically unviable amount of losses. Economical means like trade war is used instead.

For Yuan's continuing internationalization to succeed, confidence in yuan must also continue to solidified which is largely dependent on the success and growth of Chinese economy. Chinese economy is currently modernising to the higher value chain with focus on high tech manufacturing as mapped out by Made in China 2025 Strategy. Many trump's proposed tariffs are targeting these developing industries probably in hopes of stopping and more likely delaying their maturing. Denting the critical transformation of Chinese industries could very well slow the growth of Chinese economy which would have a knock-on effort on the confidence in yuan. In doing so, US prolongs the viability of petro-dollar which allows US government to maintain its growing deficits without the corresponding economical/political pains.