world growth

world growth

Saturday, June 17, 2017

China deal set to boost US dairy exports, result of Xi-Trump summit

More beef and milk products are coming to China from US.

China is already the world's largest dairy importer, with 1.4 billion population (world's largest, India is 2nd with 1.3 billion) and growing.
The agreement will benefit more than 200 US dairy exporters while paving the way for new opportunities in China, the US Dairy Export Council said
China and the US signed a memorandum of understanding on Thursday that will increase American dairy exports to China, a major US dairy industry association said, in a deal that shows new progress in the two sides’ ongoing negotiations towards a larger upcoming trade agreement.
The memorandum will benefit thousands of US dairy exporters in the short term and pave the way for additional US entrants in the future, according to a statement released by the US Dairy Export Council, an industry group representing more than 120 American dairy companies.
The statement added that this action creates new, good opportunities for dairy farmers (in Midwest states such as Wisconsin) and processors and the milk, cheese, infant formula and ingredients they produce.
"This deal marks a significant opportunity for the US dairy industry," said Tom Vilsack, president and CEO of USDEC.
Deal on US beef exports to China could be in place by early June, says US Agriculture Department. The US and China have been engaging in direct trade talks in what they have called a 100-day plan to reduce a bilateral trade deficit and expand market access in each other's economies since US President Donald Trump met his Chinese counterpart President Xi Jinping in early April at Mar-a-Largo.Under initial results announced on May 12, US beef, natural gas and certain financial services will be allowed into China by July 16 when the two nations are expected to finalise a deal during high-level talks in Washington. The discussions will be co-chaired from the US side by US Treasury Secretary Mnuchin (a Goldman Sachs banker) and Commerce Secretary Wilbur Ross.
Beijing, US reach trade deal to boost American imports to China in wake of Xi-Trump summitAfter the 100-day plan, the two sides intend to enter another "one-year cycle" of negotiations, Mnuchin said during a US-China Business Council meeting in early June, indicating there are more specific trade disputes to solve.

Saturday, May 27, 2017

Moody's downgrades China's Credit Rating to AAA-

It is a major economic news.

China's credit rating has been downgraded for the first time in almost three decades (first time since 1989) by Moody's, as the rating agency warned the country's government debt would go up despite upcoming ambitious reforms.

Moody's said the world's second largest economy was likely to see a significant rise in debt in the coming years as China's leaders stimulate the economy to prevent a sudden slowdown.

It downgraded China's rating by one level to A1, from Aa3 , keeping it within investment grade territory.

Market reaction to the downgrade was very delayed, and came as China's finance ministry said Moody's assessment of the Chinese economy underestimated its ability to enact reforms.

In a statement, Moody's said it expected the country's financial strength to "erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows".

It said: "While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt", as well as potential new costs.

Moody's said China's ageing population, a slowdown in productivity growth and state-led investment were likely to weigh on output in the medium term, which was likely to slow to close to 5 percent over the next five years, from 6.7 percent in 2016.

It said maintaining healthy levels of growth would require more fiscal stimulus as the economy attempts to shift towards growth led by consumer spending and service spending.

It warned that a series of reforms designed to guide China's transition "would not fully offset the rise in economic and financial risk".

Friday, April 1, 2016

China Factory Indicators go up, is the economy pick up ?

April 1, 2016

The "significant pickup" indicators contradict most forcasts.

BEIJING-Two key gauges of Chinese factory output registered a pickup in March on signs that policies aimed at boosting growth were having some impact.

China’s official manufacturing purchasing managers index increased to 50.2 last month month from 49.0 in February, according to the National Bureau of Statistics. This is the first time in eight months the figure has been at or above 50, the level dividing expansion from contraction. A separate indicator, the private Caixin manufacturing PMI, rose to 49.7 in March from 48.0 in February. The statistics agency also said the official nonmanufacturing PMI rose to 53.8 in March from 52.7 in February.

China's stock market had major crash and correction last year (2015). Shanghai's real estate market is still going up.

Economists said optimism in March among manufacturers was boosted by greater stability in the yuan after a volatile start to 2016, a boost in Chinese stock markets and signaling at China’s annual legislative session earlier in the month that growth will remain a priority.

Policy pronouncements included a higher target for the nation’s fiscal deficit this year, set at 3% of gross domestic product compared with last year’s 2.3%. And China cut required bank reserves in late February by 0.5 percentage point to 17%, releasing an estimated $108 billion into the financial system.

But economists cautioned that the world’s second-largest economy continues to battle deeply entrenched problems that could take years to work through.

“It’s quite a significant pickup,” said OCBC Bank economist Dongming Xie. “But it doesn’t mean we’re going back to a very bullish sentiment. Challenges remain, such as overcapacity and high debt, that you can’t solve in one or two days.”

Official subindexes tracking production, new orders, import prices and new export orders all improved, suggesting the pickup is relatively broad-based, economists said.

“We suspect this reflects a pick-up in state-led infrastructure spending, although a more buoyant property market may also have played a role,” said Julian Evans-Pritchard, an economist with Capital Economics, in a research note. He said he saw the improved sentiment as a sign recent stimulus measures are gaining more traction.

Zhao Qinghe, an economist with the statistics bureau, said the outlook for both large and small companies improved modestly, although the large companies’ sentiment moved into expansion territory last month while that of their smaller counterparts remained in contraction. “However, companies are still facing many difficulties in their operations,” he said, including funding shortfalls, weak demand and rising costs.

The March PMI results follow other signs of tepid improvement in the Chinese economy. Prices rose 22% year on year in China’s largest real-estate markets in February, according to a private survey, compared with a 19% rise in January even as many smaller property markets continue to struggle. And industrial profits in China rose 4.8% in February from a year earlier, their first increase in a year and a half.

The Shanghai Composite Index was slightly lower in morning trading after the results were posted.

Saturday, September 6, 2014

Russia's Business With China Poised To Grow As Politics Strain Ties With The West

China and Russia officials last month celebrated an oil pipeline agreement that will boost trade between the two sides by billions of dollars in the coming years.  Against a backdrop of political tension between Russia and the West, what’s ahead for business ties between the two in the future? I exchanged this week with  Marlen Kruzhkov,  a Russian-speaking partner with New York-based Gusrae Kaplan Nusbaum.  Kruzhkov advises Russian and other ex-Soviet Union clients on international law.  In today’s unsteady world, it seems certain that business between China and Russia is poised to rise. Kruzhkov holds degrees from Boston University and Northwestern.  Excerpts follow.

Q. How is tension between Russia and the West affecting Russian capital flows into Asia?  In particular, are there signs of growing business partnership between Russia and China?

A. Russia and China have had a very substantial trading partnership for many years, and the next few years will see even more expansion. Since 2010, China has been Russia’s largest trading partner, surpassing Germany but not the EU.  This relationship is for the most part the same as all of China’s trade relationships, namely, China imports raw materials and oil from Russia and exports manufactured products to Russia.

Given political overtones elsewhere, there is no question that Russia is seeking to increase its trade relationship with China.  Just last month Russia and China finally reached agreement on a price for oil exports to China after nearly a decade of fruitless negotiations, and last month Russia broke ground on a new Siberian oil pipeline to China.

Russia continues to expand financially with China, and if it cannot go to the West, it will stay in the East.  We work with many Russian and Ukrainians who are also moving assets into Asia as they seek to further diversify their portfolios – expect that trend to continue.

Q. Who are some of the key Russian companies and individuals involved?

A. For the most part, this attempt to strengthen Russia-China trade is led by government sectors.  Almost all of the increased trade is in the oil sector which is heavily under Kremlin influence.  Thus, the biggest companies tend to be large oil companies: Rosneft, Lukoil, Surgutneftegaz, Gazprom Neft and Tatneft. As much of the oil is planned to go to China via pipeline, the state-owned monopoly for pipelines, Transneft and its subsidiary, Transnefteproduct, are also involved.  All the individuals who are in charge of these companies (along with the Kremlin) are involved.

One of the few things that Russians and Ukrainians can agree on right now is that China – and Asia as a whole – offer great financial opportunities at this time. When President Putin makes a public proclamation as he did on May 20, 2014 in Shanghai — “A Russian-Chinese Investment Committee has been set up to continue efforts to expand mutual investment,” one must believe that Russian money will follow Mr. Putin to China.  Notably, too, the Russian Minister of Economic Development Alexei Ulyukaev recently prepared a list of 57 state-affiliated businesses seeking to attract Chinese investments. The ministry is trying to attract more than $7 billion of Chinese investments in a wide range of industries.  Russian state bank Vnesheconombank (VEB) recently launched a Hong Kong subsidiary to encourage cross-border investments, and encourage more Russian exports into China. Russian aluminum company Rusal (in 2010) became the first Russian company to trade in Hong Kong, and it shouldn’t be a surprise if more Russian companies are soon listed on the Hong Kong Stock Exchange.

Q. Is there any sort of U.S. role as a conduit for Russia-Asia financial and business flows?

A. The U.S. is probably the largest conduit for Russia-China financial flows because all petro transactions must be made in dollars.  It is therefore impossible for Russia-China to trade oil without U.S. participation. Approximately 75% of Russia-China oil transactions are denominated in U.S. dollars.  Just this month, in order to lessen this need for the U.S. involvement (and the potential leverage such A need offers the U.S.), Russia and China signed a currency swap agreement in order to allow for greater trade between them of their domestic currencies.

That being said, both the Chinese and Russian sides have great interest in ensuring that portions of their respective profits are squared away in the U.S. as neither side really fully believes in a rosy future for their respective countries and economies.  The stability and rule of law of the U.S. is hard to ignore.

Q.  What’s the outlook for Russia-China business cooperation in the next 3-5 years?

A. The outlook is good in that China has a voracious appetite for raw materials and oil while Russia is rich in these products.  From China’s standpoint, dealing with Russia has the added benefit of dealing with a geographically closer and more stable region than the Middle East.  From Russia’s standpoint, China offers a large customer that is not only less judgmental of Russia but provides a nice counterbalance to the West.

Ultimately, though, there is a real cap on this trade in that China wants nothing but raw materials from Russia and cannot really provide the things that Russia needs which are currently provided by the West, such as sophisticated oil refining equipment or luxury goods amongst others.  Ultimately, for the average person, there is no question that trade with China is less beneficial than trade with the EU and U.S.

Sunday, June 15, 2014

China to open a carbon market to fight climate change

Good for the economy and good for the environment !

A senior official in China’s planning ministry announced the country would launch a national carbon market starting in 2018, based on the six regional carbon markets it launched this year as pilot programs.

China is the world’s largest emitter of greenhouse gases, just ahead of America, and setting a national cap-and-trade market would not only help slow its exponential emissions growth while directing funding toward clean energy, but it could finally make an international climate agreement go from dream to reality.

Toward The World’s Largest Carbon Market

If China were to launch a national carbon market, the world would lose its largest excuse for failing to pass international climate legislation. National cap-and-trade legislation died in the U.S. Senate in 2009 largely on concerns doing so would hamstring the U.S. economically compared to China.

Since then, the two nations, as well as the larger developed-versus-developing nations divide, have stumbled over the issue of who gets to emit while growing in every UN climate conference. But establishing a national Chinese cap-and-trade system would literally change the game and could lead to a truly global carbon market.

The seven regional pilot programs, announced in 2011, cover China’s most industrialized (and thus biggest-emitting) regions. To date, the six launched markets (the final market will start operations later this year) cover 1,115 million tonnes of carbon dioxide annually – that means combined, they’re second only to the European Union’s carbon market. In time, China intends to reduce carbon intensity 17% from 2010 to 2015, and up to 45% by 2020 compared to 2005.

“Carbon Pricing Policies Are Here To Stay”

Obviously, reducing emissions from the world’s largest polluter is a big deal, but China’s action becomes even clearer if we consider the global state of carbon markets. Earlier this week, the World Bank reported more than 60 carbon pricing systems are either in operation or in development across the world.

The cumulative value of these markets is roughly $30 billion, and China’s pilot market launches headlined a total of nine new markets opening since 2013. Combine China’s cap-and-trade action with new carbon markets in France and Mexico, and a potential linked carbon market spanning the North American West Coast, and the cause for optimism is clear.

“It is clear that carbon pricing policies are here to stay – the widespread use of these policies in all corners of the globe is striking,” said Alyssa Gilbert, lead author of the World Bank report. “The diversity of approaches will help policymakers learn what works and what doesn’t.”

Is America About To Follow Suit?

But back to why all this is relevant for U.S. emissions reduction action. America’s already home to two of the largest and best-functioning carbon markets, in California and the Northeast U.S., and  observers note the pending power plant emissions rules will likely strengthen these regional markets. U.S. can teach China how to properly set up a carbon market.

If the Obama Administration carries through and allows states to use existing emissions-reduction systems to meet their requirements instead of developing their own systems, other states would have a blueprint to work against and existing markets would be bolstered by new allowance revenue.

Under this scenario, it’s not far-fetched to see new regional markets develop and link to existing markets, expanding the cap-and-trade footprint and creating a wider footprint that can balance any price ebbs and flows – just as in the California-to-Quebec market connection that started this year. In both California and the Northeast U.S., carbon markets have pumped millions into state coffers and clean energy development, while lowering emissions and keeping economies strong.

That all means Members of Congress from fossil fuel-dependent states, who have killed previous attempts at national carbon markets, would lose their two biggest arguments against nation carbon policy – that we’d lose economic competitiveness to China, and that we’d kill our local economies in the process.

Armed with momentum in the U.S. and China, as well as a framework to move forward on additional international market linkages, the world may finally be able to reach a global climate agreement this September at the U.N.’s Climate Summit.

Sunday, May 4, 2014

China To Have World's Largest Economy This Year (2014)

(Hard to believe at the turn of the century (2000), China's economy was only about one quarter of Japan's economy, even less compared to USA.

Thought for an average Chinese citizen, this GDP figure is meaningless.)

The United States has had the world’s largest economy for more than 140 years, but according to new numbers from a World Bank project, that run will likely come to an end this year.

The World Bank’s International Comparison Project (ICP) just released comparison GDP estimates for the world’s economies for 2011, and found that China’s economy had caught up so close to the U.S. its economy is likely to surpass the U.S.’s this year.

The OECD estimated China would become the world’s largest economy in 2016; Chinese government pegged 2019 as the year it would happen. The Center for Economics and Business Research put it as far off as 2028.

Like many estimates of GDP, the ICP data adjusts the numbers for “purchasing power parity”. Because exchange rates fluctuate constantly, measuring the actual  GDP can be misleading. PPP adjusts the numbers to reflect what people in a given economy can actually afford.

In updating its numbers, the ICP found it had underestimated the purchasing power of people in developing countries. Once it adjusted the numbers for the higher purchasing power, it found China’s economy to be 87 per cent as large as the U.S.’s in 2011.

Given that China is expected to grow 24 per cent between 2011 and 2014, and the U.S. economy is expected to grow about 7.5 per cent, that would mean China will overtake the U.S. this year.

The U.S. has had the world’s largest economy since 1872, when it overtook the Great Britain during the industrial revolution.

“The figures revolutionize the picture of the world’s economic landscape, boosting the importance of large middle-income countries,” it states.

“The findings will intensify arguments about control over global international organizations such as the World Bank and IMF, which are increasingly out of line with the balance of global economic power.”

There's one group that seems utterly unhappy about these numbers, and that's the Chinese government. The country's National Bureau of Statistics rejected the World Bank report, despite having taken part in the study.

The bureau “expressed reservations” about the study’s methodology and “did not agree to publish the headline results for China,” AP reports.

China may fear added pressure to sign on to trade or climate agreements if it's seen as the world's largest economy, AP speculates.

India ranked as the world’s third-largest economy, up from tenth place the last time the ICP issued its report, in 2005.

Thursday, April 10, 2014

China imports, exports fell in March

A sign of slowing down ?

 Chinese exports and imports fell sharply in March, data showed Thursday, as officials noted that the world’s second-largest economy faces headwinds from tougher regional competition and “friction” with trade partners.
The figures are potentially another cause for concern about the the economy, which has shown signs of weakness recently with a string of disappointing indicators on trade, industrial output and consumer spending.

Imports slumped 11.3 percent year-on-year to $162.4 billion while exports fell 6.6 percent to $170.1 billion, the General Administration of Customs announced, resulting in a surplus of $7.7 billion. China recorded a surprise deficit of $884 million in March last year.

The results confounded market expectations, which had been for growth of 4.2 percent in exports and 2.8 percent in imports, according to the median forecasts in a survey of 16 economists by Dow Jones Newswires.

China recorded an unexpected trade deficit of almost $23 billion in February, which authorities blamed on the Chinese New Year holiday season. That result was China’s first monthly deficit in 11 months.

“Currently our foreign trade indeed is having some difficulties,” Customs spokesman Zheng Yuesheng said in a statement.

“China’s foreign trade has seen its competitive advantages in traditional trade being eclipsed due to negative factors including rising competition posed by neighbouring countries and regions and increasing trade friction with major trade partners.”

But Zheng urged calm, saying the setback will be “temporary and short-lived” and adding: “We cannot jump to the conclusion that our foreign trade is having a recession.”

- Import growth to stay weak -

For the first three months of 2014, China recorded a trade surplus of $16.7 billion — down sharply from $43.1 billion the year before — as exports fell 3.4 percent to $491.3 billion and imports rose 1.6 percent to $474.6 billion, the figures showed.

Analysts cautioned that the latest trade figures continued to be affected by fake reporting of exports seen early last year.

“We believe that China’s trade growth in the first few months would be distorted as the export over-invoicing activities last year have inflated the base for comparison,” ANZ Bank economists Liu Li-Gang and Zhou Hao said in a research note.

Import growth, however, was expected to remain a problem.

“At first glance, the weakness appears to be broad based, with both imports for processing and re-export and imports for domestic use contracting year-on-year,” Julian Evans-Pritchard, China economist at Capital Economics, said in a note.

Growth in imports was expected to “remain relatively weak as slowing investment spending is likely to weigh on imports of commodities and capital goods”, he added.

“As a result, China’s trade surplus is likely to rebound further over the coming year.”

Premier Li Keqiang on Thursday expressed confidence authorities can steer the economy through any troubles.

“With all the principles established and policy options at our disposal, we can handle all possible risks and challenges,” Li said, according to the state-run Xinhua news agency.

But despite those tools, Li also discounted any expectations for significant pump-priming even after some limited measures were announced last week.

“We will not resort to short-term stimulus policies just because of temporary economic fluctuations and we will pay more attention to sound development in the medium and long run,” he said. His comments came at the annual Boao Forum for Asia, a gathering of Chinese and international political and business leaders on the southern island of Hainan.

Li last week chaired a meeting of the State Council, China’s cabinet, where steps including extending tax breaks for small businesses and support measures for poor urban districts were announced in what analysts saw as a “mini stimulus”.

China’s leadership says it wants to make private demand the key driver for the country’s economic growth, moving away from over-reliance on huge and often wasteful investment projects.

Though expecting such a transformation to cause slower growth, they see that as healthier and more sustainable in the long run.