world growth

world growth

Wednesday, December 31, 2008

China to benefit from the end of textile quota systems

China will surely benefit greatly from the end of textile quota system.
China's textile industry is one of the most competitive industries in the world, due to the large scale and cheaper labor cost, expect to see even more made in China clothing and shoes in stores.

New world for China textile exports as quota systems end

BEIJING, Dec. 31 (Xinhua) -- The sun set Wednesday on a quota and license system that governed China's textile trade for decades.

As the United States-China and European Union-China agreements on textiles and clothing expired with the old year, the Ministry of Commerce terminated supervision over quotas on 21 categories of textile exports to the United States and licenses on eight categories to the European Union.

Textile companies might see Thursday -- the first day of 2009 -- as the beginning of an unfettered era of free trade, but the outlook is clouded by weakening demand and rising protectionism amid the financial crisis.

There are few signs that shipments by the world's largest textile exporter will soar.

"With global demand slumping, the expirations will not bring about a repeat of the sharp increase in textile and clothing imports from China that occurred in early 2005," said Sun Huaibin, spokesman for the China National Textile and Apparel Council.

He said that worries about such an increase and its damage to the U.S. market were "groundless."

He said slackening demand resulted in a persistent low rate of quota usage this year.

Quota prices fell from a peak of nearly 20 U.S. dollars to less than 2 U.S. dollars within a year, said Liu Min, a trader with Shanghai Mai Si Ke Te International Trading Co. Ltd.

"Our exports declined more than 60 percent compared with last year. I heard many textile companies cut exports to the lowest level in recent years. Some even failed to use up the quotas acquired before the third quarter," said Chen Shubin, general manager of Foshan Qiaoli Textile Import and Export Co. Ltd. in Guangdong Province.

Analyst said shrinking orders in the fourth quarter and dim prospects for next year would mean a "tight" year for textile makers. Textile companies' top challenges would be to secure their market share and tailor production to the domestic market.

Pessimistic forecasters expect exports to continue slumping in the first quarter of 2009. If demand continues to shrink, small and mid-sized companies would barely survive.

Sun said although the financial crisis had diluted the stimulus from the quota expirations, textile makers should not lose confidence because they could retain global market share with cheap, good-quality products.

In November, China's textile exports dropped 3.8 percent year-on-year to less than 5 billion U.S. dollars. Garment exports rose 6.1 percent to 10.4 billion U.S. dollars.

From January to November, textile exports rose 18.1 percent to 60.4 billion U.S. dollars and garment shipments grew 3.1 percent to 108.7 billion U.S. dollars.

China did not change the export tax rebate rate for textiles and clothing in its latest round of tax rebate adjustment, announced on Tuesday, after it had raised the rate twice to 14 percent.

"It showed the government wanted companies to cope with the crisis by adjustments such as internal industrial upgrades and product structure alteration," said Zhao Yumin, a researcher with the Commerce Ministry.

She said the recent economic stimulus plans had hardly touched on the textile industry, where profits were being squeezed by several factors: stricter environmental requirements, new labor laws, rising land and power costs and a stronger local currency.

The U.S. textile industry remained unhappy about the expirations and wanted the U.S. government to be prepared to act if there was a surge of imports.

Many domestic companies said they cannot tell what the future holds.

Sun said when the new U.S. president takes office, he might not take action with a view to avoiding trade friction.

However, if the U.S. economy remains weak and protectionism rises, the United States might use quotas or licenses to curb imports from China.

Zhao said governments must guard against rising protectionism amid a global economic downturn. If the U.S. government moves to protect its textile industry, which has been largely transferred to other countries, both Chinese exporters and U.S. consumers will pay.

"It is also possible that the United States will use its status as the world's largest textile importer to keep China from getting a big market share and thus support other economies," she said.

In early 2005, a surge in Chinese textile and clothing exports to the United States coincided with the expiration of an international quota system. The United States responded by imposing emergency "safeguard" curbs.

Later in 2005, Washington and Beijing negotiated a broad pact that re-established 21 quotas covering 34 categories of textiles and clothing through the end of 2008. It was that agreement that ended on Wednesday.

Saturday, December 27, 2008

China to allow Yuan trade with certain countries

This may be an important start, a start of Chinese Yuan as a global currency.

China to try using yuan as settlement currency in some foreign deals: report

BEIJING (AFP) — China will use the yuan in transactions with neighbouring economies on a trial basis, state media said Thursday, calling it a potential first step to making it an international currency.

The government will allow the yuan to be used in settlements between the Pearl and Yangtze river delta regions -- both major industrial areas -- and Hong Kong and Macau, the China Daily reported.

Similarly, southwest China's Yunnan province and Guangxi Zhuang region in the south will be permitted to use the yuan in settling trade with members of the Association of Southeast Asian Nations.

The initiative emerged from a meeting Wednesday of the State Council, or cabinet, but no details were available on when it would be implemented, according to the paper.

"The move will... increase the yuan's acceptance in Asia, which will help it become an international currency in the long run," Zhao Xijun, a finance professor at the People's University in Beijing, told the paper.

The vast majority of China's foreign trade deals are currently settled either in euros or US dollars.

In 2007, China's trade with Hong Kong, Macau and the 10 ASEAN nations equalled nearly 403 billion dollars, about 20 percent of the country's overall foreign trade, the paper said.

"The yuan settlement trial between China and neighbouring regions and countries is an important step for China towards internationalising its currency," said Lu Zhengwei, a Shanghai-based economist with Industrial Bank.

"But it's still in the infancy stage, and China will need to take other measures to facilitate its development such as maintaining a stable exchange rate between the dollar and the yuan," he told AFP.

Central bank governor Zhou Xiaochuan warned earlier this month that settlements using the US dollar would be problematic if the dollar's value fluctuated drastically.

There has been growing pressure over the past year within China to make the yuan an international currency, but the government has so far been cautious as it would require making it fully convertible, the paper said.

The yuan is not yet convertible on the capital account, meaning funds cannot freely enter the country for purposes such as investment in stock or real estate.

The Chinese government is concerned that liberalising this type of fund flow would make the economy more vulnerable during times of regional or global turmoil.

Monday, December 22, 2008

China FX reserves see first fall in years

BEIJING, Dec 22 (Reuters) - China's foreign exchange reserves have fallen for the first time since late 2003 as a result of the global financial crisis, an official with the State Administration of Foreign Exchange (SAFE) said.

China's foreign exchange reserves stood at $1.906 trillion at the end of September.

"(The) foreign exchange reserves have already fallen for the first time since December 2003," Cai Qiusheng, an official with SAFE's capital account management department, told a forum on Saturday.

"Calculated on a month-on-month basis, their highest level was over $1.9 trillion, but they are now definitely lower than that figure," Cai said, according to a transcript of the remarks published on the web portal

Cai did not give a specific timeframe for the fall in reserves or a figure for where they now stand.

In the third quarter, the last period for which forex reserve figures are available, they increased by less than the sum of the country's trade surplus and foreign direct investment inflows during that period -- a very rough benchmark for gauging whether the country has witnessed capital inflows or outflows. (Reporting by Jason Subler; Editing by Nick Macfie)

Wednesday, December 17, 2008

China confirms new gas reserve find

This is considered a major gas field, with enough supply for 50 years of stable nature gas production.

China confirms new gas reserve find

URUMQI(Xinhua) -- China National Mineral Resource Committee disclosed Sunday that it found a major gas field with a proven reserve of 100 billion cubic meters in northern Xinjiang.

It is the first reserve of this size ever discovered around the Junggar basin, according to Chen Xinfa, general manager of Xinjiang Oilfield Company, a subsidiary of China National Petroleum Corporation.

"Klameli gas field is also our company's first complete gas field ever found. Its exploitation will alleviate the gas shortage in northern Xinjiang," said Chen.

Kuang Lichun, deputy general manager of Xinjiang Oilfield Company, which is in charge of prospecting, admitted the reserve, about 250 km away from Karamay city, was actually found in 2006. The positive results obtained from a test well occurred in September of 2006.

He failed to give a reason for why there was a two year delay in disclosing the finding.

More test wells have been sunk since the finding. The Klameli gas field will produce 3.38 billion cubic meters of gas this year alone, of which, only 20 percent will be sold to cities of Urumqi and Sihezi, according to Kuang. The rest of the gas is for the company's own use.

Junggar Basin is said to have 2.5 trillion cubic meters of gas in reserve. Xinjiang Oil Company, which is responsible for exploiting oil and gas reserves there, planned to boost its annual gas production to 5 billion cubic meters by 2010. This output will double by 2015.

Saturday, December 13, 2008

China imports, exports rose 20.9% through November

China releases trade data of the first 11 months.
China definitely cannot keep trade growth at this rate in
the coming months.

China imports, exports rose 20.9% through November

From January to November 2008, China's accumulated imports and exports totaled $2.38 trillion, an increase of 20.9 percent compared with the same period last year. Exports reached $1.32 trillion, up 19.3 percent, and imports totaled $1.06 trillion, up 22.8 percent, year over year. An accumulated trade surplus of $ $255.95 billion was registered, up 6.9 percent year over year, the General Customs Administration of China announced on December 10.

According to the administration, imports and exports in November totaled $189.89 billion, down 9 percent year over year. Exports reached $114.99 billion, down 2.2 percent, and imports dropped 17.9 percent to $74.9 billion year over year.

General trade reached $1.15 trillion, up 31.1% year over year. Imports totaled $536.98 billion, up 39.2%, and the growth rate was 12.1 percentage points higher than the same period last year. Processing trade reached $981.28 billion, up 9.8% year over year. Imports reached $354.72 billion, up 6.2%, and exports reached $536.98 billion, up 11.9%.

In the first 11 months of the year, imports and exports by state-owned enterprise grew quickly to reach $571.37 billion, up 27.6%. The growth rate was 8.8 percentage points higher than the same period last year. Imports and exports by foreign-invested enterprises reached $1.31 trillion, up 15.4%, and collective-owned, private and other types of enterprises made up $495.44 billion, up 29.3%.

1) European Union: Bilateral trade reached $392.94 billion, up 22% year over year.

2) United States: Bilateral trade reached$307.82 billion, up 11.6% year over year.

3) Japan: Bilateral trade reached $246.23 billion, up 15.2% year over year.

India ranked 10th among China's top 10 trade partners, with a bilateral trade value of $48.38 billion, up 41.6% year over year. The major increase gives India the highest growth rate among all of China's trade partners.

Wednesday, December 10, 2008

China's exports fall for first time in 7 years

Things are looking dire. China really needs to get its domestic consumption up to replace the loss in exports.

China's exports fall for first time in 7 years


BEIJING (AP) — China's trade growth collapsed in November as global consumer demand plunged, adding to pressure on Beijing to reverse a worsening economic slump and avert heavy job losses, data showed Wednesday.

November's exports fell 2.2 percent from the year-earlier period, the first decline in seven years, the government reported. That was down sharply from October's export growth of 19.1 percent and well below analysts' forecasts of a 13 to 15 percent rise. Imports fell by 17.9 percent, pushing China's trade surplus to a new high of $40.1 billion.

The decline adds to mounting signs that China's downturn is worsening in areas from manufacturing to real estate to auto sales. Beijing has launched a massive stimulus package to boost growth, but it could be months before the effects are felt and its impact is unclear.

"The economy has almost ground to a halt. Job losses will be very significant, and the risk of social unrest is rising," said JP Morgan economist Frank F.X. Gong. "They urgently need to stimulate growth to generate jobs and keep society stable."

Moody's Investors Service warned that the 4 trillion yuan ($586 billion) stimulus, with a focus on higher spending on highways and other construction projects, will not be enough to make up for the loss in trade.

"China is facing its most serious economic downturn in two decades," the rating agency said in a report. The stimulus package, while large, "will not be able to offset fully the negative effects from the contraction in global trade."

Chinese exporters have been hammered by a drop in foreign demand, leading to factory closures and layoffs. Communist leaders have warned that more job losses might fuel unrest and are pressing employers to minimize cutbacks. Export industries employ millions of migrant workers, and the government says they have begun streaming back to their hometowns, where large groups of jobless workers could fuel political tensions.

There have been scattered labor protests in recent months in Guangdong province in the southeast, the heart of China's export-driven manufacturing industry.

President Hu Jintao and other Chinese leaders ended a three-day economic planning meeting Wednesday with a pledge to make supporting exports a priority. But the government did not immediately release details of possible new initiatives.

"The difficulties for our nation's economy are increasing, and downward pressure on the economy is growing," said a statement issued after the meeting.

China's economy is expected to grow by about 9 percent this year but forecasters expect that to weaken in 2009. The World Bank has cut its 2009 growth forecast from 9.2 percent to 7.5 percent, its lowest since 1990.

JP Morgan's Gong said the economy might not grow at all from the final quarter of this year to the first quarter of 2009.

"China's exports might not show any growth, and might continue to decline into early 2009," he said.

Outside economists say the stimulus could add at most 2 percentage points to China's growth rate. The chief of the country's planning agency has issued a lower forecast, putting the increase in growth at 1 percentage point.

Beijing usually issues monthly customs data in the morning, but took the unusual step of delaying Wednesday's announcement until late afternoon, possibly waiting for financial markets to close to avoid dragging down Chinese stock prices.

China's trade slowdown is a setback for foreign exporters that hoped it might help to support global growth as the United States weakened.

On Wednesday, Beijing told China's airlines to cancel or postpone aircraft purchases due to weak travel demand, a move that could hurt Chicago-based Boeing Co. and Toulouse, France-based Airbus Industrie. The aviation regulator told carriers it will not approve any new aircraft for operation until at least 2010.

November's exports fell to $114.9 billion, while imports dropped to $91.3 billion, the customs agency reported.

It was the first fall in exports since June 2001, according to the official Xinhua News Agency.

In a more encouraging sign, the government also reported Wednesday that wholesale inflation fell to 2 percent in November, a decline from October's 6.6 percent rate as prices of oil and raw materials eased.

That should give Beijing more room to spend heavily to boost growth without the danger that injecting more money into the economy will fuel inflation.

Beijing declared inflation its top priority earlier this year but its focus has shifted quickly in recent months to reviving slowing economic growth.

The decline in producer price inflation suggests consumer inflation, due to be reported Thursday, also fell in November following a yearlong government effort to contain a surge in politically volatile food costs. The government ended its anti-inflation effort Dec. 1 by lifting food price controls imposed earlier in the year.

Monday, December 8, 2008

Official: China wants to put $10B in Brazil oil

I think this is a smart move. China needs to diversify its oil import. Also, it's good time to make oil deals as the price of oil just dropped below $40 per barrel.

Official: China wants to put $10B in Brazil oil


BRASILIA, Brazil (AP) — China wants to loan Brazil's state oil company $10 billion to help develop massive new oil fields in deep water off the coast of Rio de Janeiro, Brazil's top energy official said in comments published Monday.

Mines and Energy Minister Edison Lobao also told the Folha de S. Paulo newspaper that the United Arab Emirates has offered to finance field development, but he did not specify a price tag.

Lobao said Chinese officials contacted his ministry to propose a loan and Petrobras then negotiated directly with the Chinese. He gave no details on the status of talks, and any deal would have to be approved by his ministry.

Petrobras, in an e-mailed statement to The Associated Press, didn't confirm a China deal, but said the company has historically searched for "varied sources of financing" and that recent deals will be included in its new investment plan, expected in the coming weeks.

Lobao told the privately run Agencia Estado news agency other countries also wanted to participate: "It's not just China. It's a range of opportunities that Petrobras has."

Lobao said the ministry has talked with a Japanese consortium, Canadian banks and various foreign oil service companies who want to invest in or work on offshore finds. He offered no other details.

Brazil also is ready to tap its foreign reserves to offer a credit line for exploration by Petroleo Brasileiro SA if needed, he added. Lobao's ministry confirmed the comments, but a spokesman did so only on condition of anonymity in keeping with department policy.

Lobao spoke as many Brazilian companies are being cut off from international credit, which has tightened in the global financial crisis. The minister and other top government officials have repeatedly said the crisis will not effect the exploration of the offshore oil reserves, which could hold up to 80 billion barrels of oil.

Petrobras says it has discovered 50 billion to 80 billion barrels of reserves over the past year and is gearing up to spend hundreds of billions of dollars during the next 30 years to extract the light crude.

Lobao said investment would not be hurt as long as oil prices stay above $30 per barrel. But other officials have put the price from $35 to $60 a barrel for deep-water exploration to remain viable.

Light, sweet crude for January delivery was up $2.89 to $43.70 a barrel in electronic trading Monday on the New York Mercantile Exchange.

Petrobras' American depository shares were up 7.8 percent Monday in New York, or $1.40 to $19.34.

AP Business Writer Alan Clendenning contributed from Sao Paulo and AP writer Bradley Brooks contributed from Rio de Janeiro.

Thursday, December 4, 2008

China to consume 5.1 million tonnes copper in 2009

By Pav Jordan

SANTIAGO, Dec 4 (Reuters) - A global economic crisis is tempering China's ravenous hunger for copper as exports suffer amid slumping demand abroad, a top China analyst said Thursday.

Shiela Ju, deputy manager for the international department of China's state-owned Antaike research group, said copper consumption would be about 4.85 million tonnes this year, and would grow to only 5.1 million tonnes in 2009.

"The export products will be impacted seriously this year and next year," she told copper market players in the Chilean capital Santiago.

Ju said at the copper industry event that China would consume 5.4 million tonnes of the metal in 2010.

The rate of consumption growth would slow over the next two years to between 5 and 6 percent, also because of a high base of comparison with previous years, she projected.

Ju said demand has been hit in areas like production of air conditioners and refrigerators, but was still growing in the power infrastructure sector.

"The power sector is still a beacon light," for demand, Ju said. "Copper uses in manufacturing have been declining."

She said that since October, when copper prices were chopped in half as global panic spread over a U.S. credit crisis, Chinese smelters have reduced production on soft demand.


China is the world's largest copper consumer and Chile is the world's largest producer of the red metal and the two countries are trying to extend business and cultural ties in the name of more copper trade.

"Chile is rich in copper resources, but so far the Chinese copper companies have not moved much in copper mining in Chile," Ju told Reuters on the sidelines of the event hosted by Chile's state copper commission Cochilco.

China recently relinquished its right to buy a large stake in a major, state-owned Chilean copper mine amid protests from Codelco unions, but the market expects a compensation deal soon.

"I guess one of the reasons is that the Chinese companies are not familiar with the policies here, but now Antaike, my company, is trying to help Chinese companies to know more," said Ju.

China consumes about 25 percent of the world's copper, and a third of that comes from Chile. (Reporting by Pav Jordan; Editing by John Picinich)

Tuesday, December 2, 2008

Spending plans by China provinces

Spending plans by China provinces

BEIJING, Dec 2 (Reuters) - Yunnan's intention to spend heavily to buy base metals is just one example of the ambitious spending proposals that China's 31 provinces, regions and municipalities have rushed out in recent weeks.

Local governments have treated Beijing's Nov. 9 announcement of a 4 trillion yuan ($586 billion) economic stimulus package as a green light to dust off plans for investments that until then had been blocked by planners who were nervous about creating unwanted capacity.

Here is a partial list of provincial and municipal spending plans drawn from official websites and media. There is no guarantee they will be approved, let alone financed and executed.

BEIJING: The city government plans to spend 120-150 billion yuan in the next two years, catalysing 1 trillion yuan of overall investment.

GANSU: 16.5 billion yuan on road improvements in 2009.

GUANGDONG: Total investments worth more than 2.3 trillion yuan over 5 years.
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GUIZHOU: 120 billion yuan on expressways alone through 2010.

HAINAN: The island province has listed major investments worth 207 billion yuan in total.

HEBEI: 559 key investment projects with a total price tag of 588.9 billion yuan.

HEILONGJIANG: 200 major investment projects are on the drawing board for coming years with a total price tag of 657.1 billion yuan.

HENAN: Total investments of 1 trillion yuan in 2009.

HUBEI: Total investments of 1.5-2.0 trillion yuan in 2009 and 2010, part of a plan to spend 8 trillion yuan through 2012.

HUNAN: Investments of 700 billion yuan in 2009

JIANGSU: 300 billion yuan in government-sponsored projects that will generate total investment of 1.2 trillion yuan in 2009 and 2.5 trillion yuan in 2010.

JIANGXI: 163 new projects totalling 300 billion yuan.

JILIN: 400 billion yuan in infrastructure projects in coming years.

LIAONING: 1.3 trillion yuan in fixed-asset investment in 2009.

SHANDONG: 240 key investment projects totalling 800 billion

SHANGHAI: 500 billion yuan by the end of 2010, with most of the money to be spent on affordable housing.

SHANXI: 650 billion yuan in investments by the end of 2010

SICHUAN: 800 billion yuan by the end of 2010, catalysing total investment of 3 trillion yuan in the quake-stricken province.

TIANJIN: An additional 100 billion yuan this year.

YUNNAN: Plans to complete investments of 1 trillion yuan in 2009 and 2010.

ZHEJIANG: Government spending of 350 billion yuan, catalysing total investment of 1 trillion yuan. (Reporting by Zhou Xin; Editing by Alan Wheatley)

Sunday, November 30, 2008

China GDP May Expand 10% in 2009, State Analyst Says

China GDP May Expand 10% in 2009, State Analyst Says

By Wang Ying

Nov. 30 (Bloomberg) -- China’s economy may grow 10 percent next year as the “huge” potential of domestic consumption and investments counters the impact of a global slowdown, a State Council researcher said.

The “vast development potential” of the world’s most- populous nation will ensure a fast rate of expansion in 2009, said Zhang Liqun, a researcher with the Cabinet’s Development Research Center, according to the official Xinhua News Agency. “Domestic enterprises need to accelerate the pace in upgrading their business structures to better cope with a severe world economic situation.”

China last week cut its benchmark interest rate by the most in 11 years and has unveiled a 4 trillion yuan ($586 billion) stimulus plan to protect the economy from a global recession. Zhang’s optimism isn’t shared by the World Bank, which on Nov. 25 said the Chinese economy is expected to expand next year at the slowest pace in almost two decades.

“We expect growth more likely to be at a rate of between 8 percent and 9 percent,” Fan Jianping, chief economist at China’s State Information Center, said by phone from Beijing today. “The stimulus package could contribute 1 to 2 percentage points, but the overall trend will be a down arrow.”

Consumer prices in China may increase by 3 percent in 2009, compared with 7 percent in the first nine months of this year, Zhang said in the Xinhua report.

Global Recession

China’s central bank lowered its key lending rate by 108 basis points to “ensure sufficient liquidity in the banking system and to promote steady loan growth so that monetary policy can play an active role in supporting economic growth,” the People’s Bank of China said last week. A basis point is 0.01 percentage point.

China can help cushion the global recession by stoking its own expansion, President Hu Jintao told Group of 20 nation leaders in Washington on Nov. 15.

The World Bank cut its forecast for China’s economic growth next year to 7.5 percent from 9.2 percent previously. The Organization for Economic Cooperation and Development also lowered its forecast.

China’s economy grew 9 percent, the weakest pace in five years, in the third quarter, slowing from 11.9 percent last year. The slowdown is deepening, after export orders fell last month to the lowest level since 2005 and property price slid.

The country’s cabinet said Nov. 26 it was studying extra measures to help struggling companies in the steel, auto, petrochemical and textile industries; to increase key commodity reserves; and to expand insurance for the jobless.

“The government probably has little choice if it is to follow through on its ambitious plan to revive the economy,” said Mark Williams, an economist at Capital Economics in London. “Beijing has at least signaled its willingness to use fiscal policy to support demand, but so far it has not been convincingly delivered.”

Friday, November 28, 2008

China looks at buying metals for reserves-sources

I think this is an excellent move given the current low price of the commodities.

China looks at buying metals for reserves-sources

By Polly Yam

HONG KONG, Nov 28 (Reuters) - China is looking at buying base metals as state or commercial reserves to take advantage of the lowest prices for years and bolster weak demand, industry sources said on Friday.

They said Beijing may be considering at least two proposals -- one for all base metals and another just for copper and aluminium. The metals could be purchased by the State Reserve Bureau (SRB) or commercial entities controlled by the government.

"The proposal was for all base metals," an analyst at a state research unit said, without giving details.

But a senior executive at a large aluminium smelter said the Ministry of Industry and Information Technology had proposed the government increase state copper and aluminium reserves. He did not provide proposed tonnages or timing.

A sales manager at an aluminium smelter said he had heard that the proposal advocated the government use 20-30 billion yuan ($2.93 billion-$4.39 billion) to buy up base metals for its reserves.

If it goes ahead with purchases, the world's top consumer of copper and aluminium could end up importing more refined copper and nickel and cutting into domestic stocks of aluminium, lead, zinc and tin.

Prices of base metals have slumped since July on weakening demand, with the losses accelerating over the past few weeks due to the global economic crisis and China's own slowdown, forcing metals smelters to slow production and cut jobs.

Beijing, keen to help strengthen smelters as it looks to bolster the economy, is changing a long-established policy of restricting expansion in the resource-intensive metals industry.

China's cabinet, the State Council, is planning to step up purchases of important materials and resources for its state and commercial reserves, the government said in a statement this week, without specifying. [ID:nLQ36359]

"I think there is a good chance that the SRB will buy copper, given the current price ratios between the LME and Shanghai, and low domestic stocks," said Liang Zhigang, analyst at Minmetals StarFutures in Shenzhen.

He said the SRB might buy at least 400,000 tonnes, about one month's consumption in China, as the first step, if the government approved the stock-building plan.

That amount of copper would cost China $1.464 billion at Friday's prices.

Industry sources said they had not seen signs of SRB buying copper in the domestic market, while aluminium reserve purchases could come soon.

The buying of aluminium reserves may have been approved by the government, which would benefit Chinalco, the parent of Aluminum Corp of China Ltd (2600.HK: Quote, Profile, Research, Stock Buzz)(601600.SS: Quote, Profile, Research, Stock Buzz), China's top producer, industry sources said on Friday.

The government might ask state-owned investment arms to buy up to 1 million tonnes of aluminium from state-owned smelters between December and June next year in stages, a smelter source said.

Analysts and industry sources said purchases could push up copper prices, while aluminium prices could have a short-lived rise, given the huge stocks in the domestic market and China's persistent surplus.

China's merchants and smelters, including state-owned Chinalco, held a total of more than 1 million tonnes of aluminium at warehouses and smelters' yards, about one month's output.

Saturday, November 22, 2008

Economy, not rights, rules the new China-US world

BEIJING (AP) — As a dangerous confrontation flared between China and Taiwan in 1996, Bill Clinton deployed the Seventh Fleet to deter the two rivals from going to war. Five years later, when a U.S. spy plane collided with a Chinese fighter, George W. Bush faced a prolonged international crisis. Meanwhile, human rights and democracy in China were a perennial hot-button issue.

Now it's Barack Obama's turn to deal with the China challenge, and this time, it's all about the money. As the global financial system teeters, China, with its $1.9 trillion in foreign reserves and slowing but still strong economy, offers a potential lifeline.

The crisis that Obama is inheriting has pushed aside the old points of contention and underscored how profoundly the power equation between Washington and Beijing has changed.

China now owns over half-a-trillion dollars in U.S. government bonds, more than any other country, and Washington needs Beijing to continue buying them to help finance the national debt and the $700 billion financial industry bailout.

And while China's economy is heavily dependent on exports to the U.S., it is also a growing market for U.S. products, making trade retaliation — long a threat wielded solely by Washington — more of a two-way street.

"The power shift in China-U.S. relations is making them more interdependent," said Cheng Xiaohe, an international relations scholar at Beijing's Renmin University. "This next president will need to exercise greater caution."

When Clinton first ran for the White House, he made human rights an issue, accusing then President George Bush of "coddling" the communist dictatorship. But during his presidency, the administration moved to uncouple human rights from trade privileges — a milestone in normalizing ties between the two powers.

During Bush's presidency, as Chinese exports boomed, China's currency regime and trade surplus hit $163.3 billion in 2007, becoming an increasingly fractious political issues, even as the question of human rights was moving to the fringes of the public agenda.

In the Barack Obama-John McCain race, human rights figured early when Tibetan unrest flared and Obama called on Bush to boycott the Beijing Olympics. But the issue soon faded from his talking points, and when relations with China briefly resurfaced, the context was purely economic.

During the campaign, Obama described China as "neither our enemy nor our friend; they're competitors." He called for broad cooperation with Beijing while repeating the accusation that the trade surplus was stoked by a Chinese currency kept artificially cheap.

The currency has been an especially hot topic in Congress and could arise again as an irritant in relations. On Thursday, a congressional advisory panel recommended Congress enact legislation to pressure Beijing into forcing up the value of the yuan, thereby making Chinese imports more expensive.

China is a veto-holding permanent member of the U.N. Security Council and there are many other reasons why Washington needs Beijing's help — to maintain detente in the Taiwan Strait, strip North Korea of its nukes, and pressure Iran into cooperating with nuclear inspections.

Throw in the economy, and many expect Obama to take a mild approach toward Beijing on issues of human rights, freedom of speech and Tibet.

That would be a mistake, argues Wei Jingsheng, the internationally renowned pro-democracy dissident whose imprisonment and exile came to define the difficulties of the U.S.-China relationship in the 1980s and 1990s.

Wei, who now lives in Washington, D.C., maintains that the root of the economic crisis lies in the trade imbalance with China, and that China's industrial might is built on underpaid, badly treated workers. China gets away with it because Western business doesn't want human rights getting in the way of profits, he says.

In an interview with The Associated Press, Wei rejected the idea of China as the West's economic lifeline, saying China would have a hard time saving its own economy and anyway wouldn't mind seeing the West failing.

"This expectation of China to save the West is only a dream," he said. "But why is this dream fanned up so much? Because the big businesses in the West are pumping up this idea; they do not want to see Western governments take severe measures against the Chinese government."

He recalled the days when Western governments and media were focused on Chinese human rights abuses — "It is really because of their effort that people like me survived" — and urged Obama to renew the pressure by establishing a link between trade privileges and workers' rights.

"It would be like killing two birds with one stone — reducing the trade deficit while boosting rights for Chinese workers," he said.

But Chinese scholars at government-backed research bodies sound confident that no radical changes in the relationship will happen under Obama.

"Although we'll see some disputes around issues like trade, human rights and climate change, the general framework will be stable," said Jin Canrong, an expert on the U.S. at Renmin University. "This is mature bilateral relations between two big powers."

Associated Press writer Carley Petesch in New York contributed to this report.

Tuesday, November 18, 2008

China tops Japan as No. 1 holder of U.S. Treasury debt

China tops Japan as No. 1 holder of U.S. Treasury debt

Like nearly everyone else, the Chinese wanted the security of holding short-term U.S. Treasury bills in September as markets worldwide crumbled.

With China’s purchases of T-bills that month, the country surpassed Japan to become the No. 1 owner of U.S. Treasury debt, according to government data reported today on foreign investment in U.S. securities.

The September numbers overall confirm that foreigners still regard the U.S. as the best haven in times of international financial crisis.

Foreign purchases of long-term U.S. securities, including stocks and bonds, totaled $66.2 billion in September, up from $21 billion in August and $18.4 billion in July, Treasury data show.

As the global credit crisis worsened, slamming stocks, commodities and other markets, many investors put safety of principal above all other considerations. That pushed them into short-term U.S. Treasuries.

China increased its Treasury investments by $43.6 billion in September, lifting the total to $585 billion and taking the No. 1 spot among all foreign holders.

Japan, by contrast, reduced its Treasury holdings by $12.8 billion, to $573.2 billion.

China’s Treasury purchases in September were focused on T-bills, such as three- and six-month issues. The Chinese boosted their T-bill holdings by $39.4 billion in the month.

Any capital inflow to the U.S. helps us finance our budget deficit, but the Treasury’s great need in the next year will be to line up buyers -- including foreigners -- for longer-term notes and bonds.

The U.S. may have to issue as much as $2 trillion in debt over the next four quarters to pay for the financial-system bailout, the war efforts in Iraq and Afghanistan and economic stimulus programs, as I noted in my weekend column in The Times, here.

The problem with huge cash inflows into short-term Treasury issues is that the money could flow out as easily as it flowed in, as T-bills mature in the next year, notes George Goncalves, Treasury strategist at Morgan Stanley in New York.

Saturday, November 15, 2008

At economic summit, China carries the big stick

From LA Times.

By Don Lee
Reporting from Shanghai -- As global leaders gather today for an economic summit in Washington, no one may feel the spotlight's glare as much as Chinese President Hu Jintao.

In the weeks leading up to this meeting of leaders of the Group of 20 developed and emerging countries, there have been repeated calls from different corners of the world for China to step up and take a bigger role in addressing the global financial crisis.

Beijing responded Sunday with a $586-billion economic stimulus package that includes infrastructure spending and other measures to bolster domestic demand. And on Friday, Chinese officials confirmed they had offered $500 million in aid to financially teetering Pakistan, calling it "an urgent agreement based on the two countries' long-term friendly relations."

But there will probably be expectations for China to do more, given that it holds the biggest stockpile of foreign exchange reserves in the world, nearly $2 trillion worth, and that it looks to be one of the few major economies to show significant growth in the near term.

In particular, British Prime Minister Gordon Brown has urged China as well as oil-rich Saudi Arabia to boost the resources of the International Monetary Fund.

Japan, which holds the second-largest cache of foreign reserves, around $1 trillion, is expected during the summit to pledge $100 billion in loans to the IMF, according to Japanese media. Though his nation's own economy is ailing, reports suggest Prime Minister Taro Aso is trying to assert leadership in dealing with the worst global downturn in decades.

"Japan's move will exert a certain pressure on China," said Zhang Shenjun, deputy dean of Beijing Normal University's Institute of Political Science and International Studies.

He said China hadn't been happy with the IMF, in particular the way nations' voting rights are assigned, and would likely press for changes in the American-dominated organization before committing to add to its coffers.

A Chinese Foreign Ministry spokesman declined to comment.

Zhang said Beijing currently had its hands full trying to maintain its own development and growth, which it viewed as doing its part to bring stability to the shaky global economy. Its rapid growth in recent years has spurred a boom in commodities and opened new opportunities for multinational firms.

On Friday, a senior Chinese official, adding details to a fiscal stimulus plan that has been likened to America's New Deal, said a "large part" of the two-year, $586-billion package was new money and the central government would account for about $173 billion of the total investments. The rest would be supplied by local sources, according to the official New China News Agency.

China can afford the spending because it has been running a fiscal surplus and has a cushion in its foreign reserves exceeding $1.9 trillion as of Sept. 30, up from $819 billion at the end of 2005. The booming growth has come mostly from the nation's trade surplus and inflows of foreign investment.

Just how Beijing should use its large reserves has been a subject of much discussion both within and outside China. But analysts point out that the money already has been invested -- more than half in U.S. Treasury issues and other American bonds and much of the rest in euro-denominated assets -- and it isn't so easy or practical to transfer hundreds of billions, or even tens of billions, of dollars, at least not without causing serious disruption to the currency market, which wouldn't be in China's self-interest either.

As such, analysts say some people's worries of China dumping massive amounts of dollars have little basis.

"The U.S. and EU debt markets are the only places big and liquid enough to absorb them," said Stephen Green, an analyst at Standard Chartered Bank in Shanghai, writing in a research report this week. At the same time, he said, China also isn't likely to make a public commitment to buying future U.S. Treasuries, as some have called it to do to help "save" the U.S.

"There's no domestic support for that," he said.

Xu Aijun, 30, who owns a small home-decorations business in Shanghai, seems to convey the feelings of many ordinary Chinese citizens.

"Our country was affected by the credit crisis too, and we need investment domestically to support the economy and create jobs," he said as he considered Hu's visit to Washington. "I think that's where we should use our foreign reserves."

Tao Wang, an economist at UBS Securities in Beijing, says it should be remembered that China is already helping the global financial situation by holding on to U.S. Treasury debt. "If it sells it, interest rates would go up and the dollar would collapse," she said.

During the summit, the heads of the Group of 20, which accounts for about 90% of the world's economic output, also are expected to take up global coordination of tighter regulations on financial institutions, increased support for banks and fiscal stimulus efforts.

Chinese officials haven't tipped their hand on what Hu and his delegation will be supporting as far as calls for greater accountability and transparency of financial firms. Analysts say the Chinese could also push for assurances from developed countries to limit protectionist legislation.

At a news conference Thursday, China's Foreign Ministry spokesman, Qin Gang, talked mostly in generalities, saying there was a need to carry out "reform to replace the existing international finance system with a fair, just, inclusive and orderly one" that would help developing countries in particular.

As in prior world summits, China is expected to coalesce with other emerging countries such as India and Brazil. And, increasingly, those around the table will be keenly waiting to hear what China has to say.,0,2905523.story

Tuesday, November 11, 2008

China reports record trade surplus

What's going on here ?

China reports record trade surplus

Beijing, Nov 11 (Xinhua) China announced Tuesday a trade surplus of $35.2 billion in October, despite economic slowdown.

It hit another historic monthly high as the figure gained for the fourth consecutive month since July. The aggregate foreign trade rose 17.6 percent from the same period last year to $221.4 billion in October, according to the China Customs website.

Though exports growth further slowed down to 19.2 percent from 21.5 percent in September, it rose further because of sharply declining imports.

Affected by the global economic slowdown, China’s imports growth dropped from 33.7 percent in July gradually to 15.6 percent in October.

China’s exports reached $128.3 billion, while its imports registered $93.1 billion in October.

Sunday, November 9, 2008

China announces $586 billion stimulus plan

That's a big stimulus package.

China announces $586 billion stimulus plan

BEIJING – China unveiled a $586 billion stimulus package Sunday in its biggest move to inoculate the world's fourth-largest economy against the global financial crisis.

The Cabinet approved a plan to invest the money in infrastructure and social welfare by the end of 2010, a statement on the government's Web site said.

Some of the money will come from the private sector. The statement did not say how much of the spending is on new projects and how much is for ventures already in the pipeline that will be speeded up.

China's export-driven economy is starting to feel the pinch of weakening U.S. and European economies, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion.

Economic growth slowed to 9 percent in the third quarter, the lowest level in five years and a sharp decline from last year's 11.9 percent.

That is considered dangerously slow for a government that needs to create jobs for millions of new workers who enter the economy every year and to satisfy a public that has come to expect steadily rising incomes.

Exports have been growing at an annual rate of more than 20 percent but analysts expect that may fall as low as zero in coming months as global demand weakens.

The International Monetary Fund has urged governments to adopt economic stimulus packages and, in some cases, to cut interest rates further, to counteract the slowdown.

China joins other major economies such as the U.S., Japan and Germany which have already introduced their own stimulus plans.

The U.S. allocated $168 billion earlier this year for tax rebates to individuals and tax breaks for businesses. Germany set aside $29 billion for tax breaks on new cars and credit assistance for companies. Japan allotted $275 billion for loans to small- and mid-sized businesses and discounts on highway tolls among other measures.

On Wednesday, finance officials from the G-20 group of major wealthy and developing nations convene in Washington to discuss a strategy for strengthening the global economy. Chinese President Hu Jintao is expected to attend.

China's statement said the Cabinet, at a meeting chaired by Premier Wen Jiabao, had "decided to adopt active fiscal policy and moderately easy monetary policies."

The statement said the spending would focus on 10 areas. They included picking up the pace of spending on low-cost housing — an urgent need in many parts of the country — as well as increased spending on rural infrastructure.

Money will also be poured into new railways, roads and airports. Spending on health and education will be increased, as well as on environmental protection and technology.

Spending on rebuilding disaster areas, such as Sichuan province where 70,000 people were killed and millions left homeless by a massive earthquake in May, will also be accelerated. That includes $2.93 billion planned for next year that will be moved up to the fourth quarter of this year.

The statement said rural and urban incomes would be increased.

Credit limits for commercial banks will also be removed to channel more lending to priority projects and rural development, it said.

Reform of the value-added tax system will cut taxes by $17.5 billion for enterprises, the statement said.

Saturday, November 8, 2008

Hu, Obama discuss China-US relations

Hope US-China relationship will have a smooth transition to the Obama administration.

US and China need to cooperate to solve the world's financial problems.

Hu, Obama discuss China-US relations

BEIJING (AFP) — China and the United States should "accommodate each other's concerns," Chinese President Hu Jintao told US President-elect Barack Obama Saturday in a telephone conversation, state media reported.

Hu and Obama spoke on a range of issues including the current global financial turmoil, Xinhua news agency reported early Sunday, in what is thought to be the pair's first conversation since Obama's election victory.

"Hu pointed out that since the establishment of diplomatic relations between the two countries 30 years ago, bilateral relations have generally kept developing despite setbacks," the report said.

The report did not say how long they spoke for.

"China and the United States should respect each other and accommodate each other's concerns, and appropriately settle sensitive issues between the two countries, particularly the Taiwan issue," Xinhua quoted Hu as saying.

China on Thursday urged Obama to oppose independence for Taiwan, saying that the proper handling of the issue was key to good relations between Beijing and Washington.

During Saturday's phone conversation, Obama, who defeated his Republican rival John McCain in Tuesday's election, said China was a "great" nation, the report quoted the Democrat as saying.

"In today's international arena, US-China relations are relations of vital importance. The development of US-China relations is not only in the interest of both nations, but also benefits the world," it quoted Obama as saying.

The Xinhua report said the pair also discussed other "major international issues of common concern," including security and climate change.

"As the largest developing nation and the largest developed nation, China and the United States share extensive common interests on issues related to world peace and development," the report quoted Hu as telling Obama.

Hu also told Obama the international community needed to work together to help overcome the global financial problems and "launch necessary reforms of the global financial system," the report said.

The Chinese president reportedly thanked Obama during their conversation for recognising the importance of China-US relations during presidential campaigning.

Obama criticised Chinese trade policies during his campaign, but not in particularly strident terms.

Analysts say they expect relations between China and Obama's administration to be generally smooth due largely to Washington's need for cooperation on the global financial crisis from an increasingly powerful Beijing.

China's Communist leaders are widely viewed as favouring Republican presidents over Democrats due to the perception that the latter's ties to American unions make them more vocal about trade practices that impact on US jobs.

Hu, who will head to a summit in the United States in mid-November to discuss the global financial crisis, had previously congratulated Obama on his election victory in a written message.

Monday, November 3, 2008

G.E. Orders Jets Made by China

reported by NYtimes, hope this will be a new beginning of China's aircraft industry

G.E. Orders Jets Made by China

The Commercial Aircraft Corporation of China won its first overseas regional-jet order, worth about $750 million, from General Electric as China aims to challenge the dominance of Boeing and Airbus in the aviation market.

G.E., which is in the aircraft leasing business, will sign a contract for up to 25 ARJ21-700s at the Zhuhai air show on Tuesday, Zhang Qingwei, chairman of the airplane maker, said. The planes, China’s first regional jet, cost about $30 million each, said Chen Jin, the general manager for marketing and sales. The order is for five aircraft, with options for 20 more, said Dan Whitney, a G.E. spokesman.
“It demonstrates our ability and commitment to continue to invest in emerging markets where we see solid growth potential,” Mr. Whitney said. G.E. is the world’s largest aircraft-engine maker.

Saturday, November 1, 2008

China adopts flexible monetary policy to boost economy, cope with crisis

BEIJING, Oct. 31 (Xinhua) -- China's decision to cut interest rates on Thursday is part of its flexible monetary policy to cope with the world financial crisis and boost domestic economy, a central bank spokesman said on Friday.

Li Chao, spokesman of the People's Bank of China (PBOC) explained the government's cut in interest rates for the second time in one month.

On Wednesday, the PBOC announced to cut interest rates by 0.27 percentage points as of Oct. 30 to spur economic growth. The benchmark one-year deposit rate dropped to 3.60 percent from 3.87percent, while the benchmark one-year lending rate fall from 6.93 percent to 6.66 percent.

The previous cut was on Oct. 8, when the PBOC announced a lowering of deposit and lending rates by 0.27 percentage points and decided to cut the reserve-requirement ratio by 0.5 percentage points from Oct. 15.

Li said the move was in response to a spreading and worsening world financial crisis. "The severe crisis was beyond most people's expectations."

He said: "China's economy relies highly on external markets. It is very necessary for the country to adjust economic policy, including monetary policy, in a timely and flexible manner to reduce the negative impact to a minimum."

"Recently, China's exports have weakened as a result of weak world demand. Domestic export-oriented enterprises, especially those coastal based companies, face difficulties," he added.

The country's export value in the first three quarters was 1.07trillion dollars -- up 22.3 percent -- the growth rate was 4.8 percentage points lower, official figure showed.

"Meanwhile, the nation's inflation pressure has been eased," he said, adding the latest interest rate cut aims at maintaining the energy of China's economic growth.

China's gross domestic product (GDP) grew to 20.16 trillion yuan (2.96 trillion U.S. dollars) in the first three quarters of this year, up 9.9 percent from the same period of last year. The growth rate was 2.3 percentage points lower than the same period last year.

Consumer price index (CPI), the main gauge of inflation, rose 4.6 percent in September over the same period last year, off from the 12-year high of 8.7 percent in February.

When asked the reason why the government only reduced interest rates and left the reserve-requirement ratio unchanged in the latest move, Li said this is because liquidity of the country's bank is adequate.

Li said to cope with the international financial crisis and maintain sound and relatively fast national economic growth, the central bank has removed mandatory restriction on the commercial banks' loan plan.

He said that China has confidence that it can resist the world financial crisis, as the country has great potential in expanding its domestic demand, and the financial system is stable.

He called for cooperation between countries worldwide to cope with the crisis, and to carry out international financial system reform.

Friday, October 31, 2008

China may allow local govts to issue bonds

This is going to be a major policy change.

China may allow local govts to issue bonds

BEIJING (XFN-ASIA) - The finance ministry is drafting a plan to allow local governments to issue bonds, a practice currently not allowed under Chinese law, the 21st Century Business Herald reported.

The report cited sources close to the matter as saying that the plan has been submitted to the State Council for approval.

In addition, the report said an office in charge of local government debt management has been established at the ministry's budget management department, the report said.

China is likely to set a high threshold for local governments to issue bonds, and only provincial-level governments may be allowed to do so in the early stages, the report added.

No further details were given.

Tuesday, October 28, 2008

Russia, China sign landmark oil pipeline deal

MOSCOW (AFP) — Russia and China on Tuesday signed a long-awaited deal to build an oil pipeline from Siberia to China after talks between Prime Minister Wen Jiabao and Russian counterpart Vladimir Putin.

The leaders watched as Chinese state energy major CNPC and Russian state pipeline monopoly Transneft signed the deal to build the pipeline from the Siberian town of Skovorodino to the Chinese border.

The pipeline agreed on Tuesday would have a capacity of 15 million tons of oil per year and would be a branch of the main East Siberia-Pacific Ocean trunk pipeline, which is still under construction, officials said.

"We should deepen cooperation in the energy sphere. Long-term cooperation will help economic development and stability on world markets," Wen said at the opening of a Russia-China business conference with Putin in Moscow.

Even after lengthy negotiations on energy ties between the two neighbours, Russia is still only the fifth-largest exporter of crude oil to energy-hungry China, despite being the world's number two producer after Saudi Arabia.

Amid lower energy prices, analysts say China is now seizing its chance.

"We have to aim for real results. We've discussed this for many years but the results do not correspond to what they should be for two neighbouring powers," Zhang Guobao, China's top energy official, told the conference.

"We need to build oil and gas pipelines, increase downstream and upstream cooperation and increase cooperation in the nuclear sphere," said Zhang, head of China's State Energy Bureau, speaking through a Russian interpreter.

The length of the pipeline to the Chinese border would be around 70 kilometres (44 miles). The pipeline is then planned to link into the Chinese pipeline network to reach the oil hub of Daqing in northern China.

Russian newspapers on Tuesday also reported that talks were underway for a multi-billion dollar credit from the Chinese government to Transneft and Russian state-run oil company Rosneft that would help boost energy exports.

The Vedomosti daily quoted Sergei Sanakoyev, a government expert, saying Moscow and Beijing had agreed a contract to supply China with 15 million tons of oil per year in exchange for up to 25 billion dollars (20 billion euros).

But Vedomosti also quoted an official saying there was no deal yet.

"The question of credits for Rosneft and Trasneft was discussed into the evening." If no agreement is reached on Tuesday "then the signing of the deal on oil supplies could be delayed," the official was quoted as saying.

The Kommersant daily quoted a source close to the management of Rosneft saying on Monday: "There is no final agreement but we are oriented on these parameters. We have the whole night ahead to find an agreement."

Rosneft, Russia's biggest oil producer, has been hit by the financial crisis because of a slide in Moscow's stock markets and its massive exposure to foreign loans that it has used to expand the company in recent years.

During his visit, Wen also said that Russia and China could help boost global economic stability through greater cooperation.

"Russia and China are growing economies with major influence in the world... They can help strengthen the world economy," Wen told investors in Moscow.

"We should strengthen ties, look together at anti-crisis measures and coordinate macroeconomic policy," he added.

Sunday, October 19, 2008

GDP grows 9.9% in first three quarters

China's economy grew 9.9 percent year on year in the first three quarters of this year, according to official figures released on Monday, showing a trend of slowdown amid the current global financial crisis.

The growth rate was 2.3 percentage points lower than the same period of last year, or 0.5 percentage points lower than the first quarter of this year, the National Bureau of Statistics (NBS) said on Monday.

In the third quarter, the growth rate slowed down to 9%, the lowest in five years.

The consumer price index (CPI), the main gauge of inflation, rose 4.6 percent in September over the same period last year.

Fixed assets investment, one of the three major propellers of the Chinese economy, totaled 11.6246 trillion yuan ($1.66 trillion) in the first three quarters, up 27.0 percent over the same period last year, according to the bureau.

The growth rate was 0.7 percentage points higher than the first half of this year, or 1.3 percentage points higher than the year-earlier level.

The State Council said on Sunday China's economy can weather the effects of the global financial turmoil, but growth will decline as the expansion of business profits and public revenues slows.

In a statement at the end of an executive meeting led by Premier Wen Jiabao, it said the turmoil and economic instability will have a "gradual" effect on the country.

It said China's economic growth will slow along with corporate profits and public revenues, and as capital markets continue to fluctuate.

"Unfavorable international factors and the serious natural disasters at home have not changed the basic growth situation of our country's economy," said the statement posted on a government Web site. "Our country's economic growth has the ability and vigor to resist risks."

China must "adopt flexible and cautious macroeconomic policies" to maintain stable growth, the statement said.

The council said that in the fourth quarter, China should focus on developing the rural economy, while striving to control inflation.

The government should also help local small and medium enterprises to grow by encouraging financial institutions to provide more loans to them, the statement said.

Monday, October 13, 2008

China posts another record trade surplus despite global slowdown

by Robert J. Saiget

BEIJING (AFP) - China said Monday its trade surplus hit a monthly all-time high of 29.3 billion dollars in September despite slowing global demand brought on by the financial crisis.

Exports in September reached 136.4 billion dollars, up 21.5 percent over the same month last year, while imports during the period were 107.1 billion dollars, up by 21.3 percent, the General Administration of Customs said.

The previous monthly surplus record was 28.7 billion dollars in August.

China's trade surplus for the first nine months of the year reached 180.9 billion dollars, down 2.6 percent year-on-year, the administration said on its website.

Despite the unexpectedly high trade surplus for September, China's exporters would not be able to avoid the global economic downtown that has been exacerbated by the crisis embroiling financial markets, analysts said.

"September's new record high surplus was mainly a reason of slowing import growth, due to the pullback of international raw materials prices," Ma Qing, Beijing-based economist with CEB Monitor Group, told AFP.

"We are holding a cautious attitude to the outlook of China's import and exports. We expect both to fall further in the future because Sino-US trade will definitely go down with the slowing US economy, while Europe is expected to experience economic meltdown."

Ma said he did not expect China's peaking export performance to greatly bolster China's GDP growth in the first three quarters of 2008, which is scheduled to be announced next week.

Ma said he expected GDP growth in the second half of 2008 to weigh in at 8.8 percent, down from 11.9 percent growth last year and 10.1 percent in the second quarter of 2008.

Stephen Green, chief China economist at Standard Charter, called China's export growth in September "extraordinary," but added that it would not be long before the global economic turn down caught up with the export juggernaut.

"There will be impacts. It's just a matter of time before Chinese exporters get hit over the head again," Green told AFP.

"There are lags with Europe in recession now, the US in recession, the effects are filtering out to the rest of the world."

According to the customs administration, China's exports for the first three quarters of the year hit 1.074 trillion dollars, up 22.3 percent over the same period in 2007.

Imports during the period increased by 29 percent to 893.1 billion dollars.

Meanwhile, China's crude oil imports in the first nine months of the year rose 8.8 percent year-on-year to 140 million metric tonnes, or an average of about 3.75 million barrels a day, the customs administration said.

The data indicated China's crude oil imports for September set a monthly record, according to Dow Jones Newswires.

Previous figures from the customs bureau showed China imported 119.98 million tons of crude in the first eight months of this year.

This means China's crude oil imports in September totaled around 20 million tons, equivalent to 4.89 million barrels per day, Dow Jones said.

In the first nine months of the year, automobile imports rose 40.3 percent year-on-year to 310,000 units, the customs bureau added.

Sunday, October 12, 2008

China's communists approve key land reforms

by Robert J. Saiget

BEIJING (AFP) - China's ruling Communist Party approved a major economic reform plan Sunday that will allow farmers to trade and mortgage their land rights and help bolster the nation's food security.

The move is part of a wider package of reforms aimed at reducing a gaping rural-urban income gap that has expanded during 30 years of capitalist market policies.

The package was approved at an annual meeting here chaired by President Hu Jintao of up to 500 members of the party's central and disciplinary committees and other key officials, according to a statement carried by Xinhua news agency.

The communique did not give specific details about the reforms. Beijing-based academic Russel Leigh Moses said policies approved by the party are traditionally placed before the National People's Congress, China's parliament, for approval at its annual session the following March.

"I don't think we will see anything specific until the NPC next year when they start to set out the legal framework and when we will be able to see more of the internal debate over the programme," Moses told AFP.

But in the final statement, meeting participants called for an end to rural poverty, improved food security, and the doubling of China's per capita rural income of 4,140 yuan (591 dollars) by 2020.

"The issues facing agriculture, rural areas and farmers are linked to the overall task of development facing our party and state," the communique said.

"We must solidify and strengthen the status of agriculture and place as top priorities the running of the nation and resolving once and for all the basic problem of food for hundreds of millions."

China must adopt a "cautious and flexible macro-economic policy" to address the ongoing international financial crisis, the communique said.

"We must depend on ourselves... add impetus to expanding domestic demand, especially consumer demand, and maintain a stable economy and stable financial and capital markets," it said.

Under the reforms, farmers would be able to trade, rent and mortgage their land use rights for profit in a land transaction market, Dang Guoying, a rural scholar at the Chinese Academy of Social Sciences, told the China Daily newspaper.

"The move will speed up the country's urbanisation by bringing more farmers to the cities with the big farm contractors promoting modern farming in rural areas," it quoted Dang as saying.

Building large-scale industrial farms is seen as key to China's long-held policy of remaining self-sufficient in grain production and being able to feed its population of 1.3 billion people, state press say.

Most of China's farm plots are small and held individually at a time when hundreds of millions of farmers are leaving the land to seek better lives in the nation's quickly developing urban centres.

According to China's constitution all land is owned by the state, so the reforms under discussion are not expected to result in private ownership of land.

Although farmers have been leasing their land rights for years in many places, the party communique clearly acknowledged that many rural dwellers have been left behind in China's economic boom.

The rural focus of the ruling party meeting is also a nod to this year's 30th anniversary of China's opening and reform policies, which began in 1978 with policies returning collectivised farmlands back to individual farmers.

The 1978 reforms ended decades of China's disastrous experimentation with Maoist-style collectivisation that left the nation impoverished and backward.

While the market reforms have led to spectacular economic growth in the world's most populous nation, the income gap between China's 800 million or so farmers and the increasingly prosperous urban areas has also become a huge headache for policymakers.

The communique said both the Communist party and government needed to find new policies capable of stimulating the economy in a way similar to that seen in 1978.

"Only when the party places priority on resolving problems facing agriculture, rural areas and farmers... can we continue to develop rural productivity and maintain the comprehensive development of the rural economy," it said.

Wednesday, October 8, 2008

China Exports to U.S. `Small Beer' for Economy

By Lee J. Miller

Oct. 7 (Bloomberg) -- A U.S. recession won't ``drag China down with it,'' because only 7 percent of China's economic output is generated by exports to America, with half of those being consumer goods, according to TD Securities Ltd.

``History shows very little in the way of a correlation between U.S. consumer spending and Chinese gross domestic product,'' said Stephen Koukoulas, head of global foreign exchange and fixed-income strategy at TD Securities in London.

``The start of the U.S. consumer boom in about 1995 coincided with a major slowing in Chinese gross domestic product,'' he said by telephone. During the U.S.'s recession in 2001, GDP in China ``took off'' even while America's personal consumption growth slowed to 2 percent from about 5 percent.

The CHART OF THE DAY shows China's annualized GDP growth and U.S. personal consumption in constant dollars. Though there has been a decline in both U.S. spending and China's economic growth the past year, there is little or no correlation in most periods.

In the extreme, ``catastrophic'' case of a 10 percent drop in demand from the U.S. for consumer goods, China's GDP would be trimmed by about 0.3 percentage points, Koukoulas said, calling the amount ``small beer.''

China's economy is slowing, ``but this is in direct response to the series of policy tightenings through 2007 and early 2008,'' he said. ``Massive urban infrastructure development and gradual easing of interest rates or regulations should enable China to skate through the current episode with GDP bottoming at about 8 percent.''

Tuesday, October 7, 2008

UBS lowers China 2009 GDP growth forecast to 8 percent

BEIJING (Reuters) - UBS on Monday lowered its forecast for China's gross domestic product growth in 2009 to 8.0 percent from 8.8 percent, citing a much weaker global growth outlook and forecasts of a deeper and longer U.S. recession.
It is the second time in less than three months that UBS has lowered its forecast for Chinese GDP growth next year.
The bank's China economist, Tao Wang, also lowered her forecast for GDP growth this year to 9.6 percent from 10 percent.
"We expect growth of exports and real estate investments to slow significantly in the coming months, but think that the government's counter-cyclical fiscal and monetary policy measures could help stimulate domestic demand and partially offset the negative external shock," Wang said in a report.
Wang added that she expected annual consumer inflation to drop to 4 percent by the end of the year and to average 2.6 percent in 2009.
Inflation eased to 4.9 percent in August from a decade-high 8.7 percent in February and is expected to cool further, giving policy makers more leeway to support growth.
The revision is the first to be issued since a Reuters poll on Chinese growth conducted in late September. The median forecast of economists was for the economy to grow 9.9 percent this year, slowing to 9.0 percent in 2009.
UBS on Sunday lowered its forecast for global growth to 2.2 percent from 2.8 percent.

Sunday, October 5, 2008

China must step up spending

Judged from a western perspective, China has an enviable problem. After expanding by 12 per cent in 2007, the Chinese economy will grow more slowly in the coming year, perhaps by around 8 per cent. A moderate reduction in growth would hardly spell disaster. But for all the talk of de-coupling, the Chinese economy still depends on how the US, Europe and Japan fare.

The longer the financial turmoil lasts in the US and Europe, the more severe will be any economic downturn. Credit markets are gummed up, curtailing company investment and consumer spending. Lower imports over the coming months look certain.

With more than a third of its exports going to the US and Europe, China will be affected. Low-cost exports may not collapse, but anecdotal evidence suggests that exporters are already feeling the pinch. A looming recession in Japan makes switching exports to other high-income markets a remote option.

It seems unlikely that the Chinese consumer – accounting for only about a third of Chinese output – could fill the gap left by a major drop in export demand.

Incentives for a substantial consumer spending spree are meagre. Share prices have fallen nearly 60 per cent over the past year and local property markets are now taking a dive. Wage growth has moderated. While retail sales measures suggested strong growth over summer, individual industries sagged. Car sales fell as much as 6 per cent in August.

But China’s leaders have the means to step in. Thanks to dwindling global demand, commodity prices have fallen from their peaks, and inflation in China eased to 4.9 per cent in August from 8.7 per cent in February. Looser monetary policy followed: the People’s Bank of China cut rates for the first time in six years in September in an effort to encourage spending.

Government spending should also be revved up. Public debt is small and Beijing is running a budget surplus. To stimulate growth, the government could increase investment in infrastructure. But expanding social safety nets would have a much bigger effect on consumption: by improving health care provisions and reforming the pension system, consumers would feel less need for individual saving.

The widening gap between rich and poor is resulting in social tensions. A sharply slowing economy is the last thing China’s leaders need. If they are committed to changing the focus of the economy from exports to domestic consumption, now is certainly the right the time to do it.

Friday, September 26, 2008

China, Venezuela step up energy cooperation

Venezuela can provide much petroleum that China needs to keep its economy going.

China, Venezuela step up energy cooperation

BEIJING (AFP) — China and Venezuela signed several energy agreements in Beijing on Wednesday that will allow the South American country to export half a million barrels of oil a day to the Asian giant from 2009.

The agreements are part of a three-day visit by Venezuelan President Hugo Chavez to China that began on Tuesday, aimed at developing cooperation with Beijing, which it calls a "strategic ally."

Venezuela, the fifth exporter of crude oil in the world, currently only represents 4 percent of Chinese imports of the product.

"Currently, we have 364,000 oil barrels a day and by 2009 we will get to 500,000," said Venezuela's energy minister Rafael Ramirez, after 12 accords were signed in the presence of Chavez and Chinese President Hu Jintao.

The agreements include the delivery of fuel oil to China by national Venezuelan oil company PDVSA and the construction of a refinery in Venezuela to process crude oil from the oil-rich region of Orenoque.

The two countries also agreed to build four tankers, he said, and signed a deal to double the capital in a joint investment fund, created two years ago, from 6 billion to 12 billion dollars a year.

"China will bring four billion and we will bring two billion, it is a fund that is mainly used for investment in Venezuela in infrastructure, electricity, education, agricultural and rail projects," said Haiman El Troudi, Venezuela's minister for forward planning.

"In return, we provide crude oil, fuel oil and oil to China as payment," he said.

Chavez was due to travel to Russia on Thursday, then France and Portugal as part of an international tour that has already taken him to Cuba.

Wednesday, September 17, 2008

In Asia, the Bloom Is Off the U.S. Rose


Mr. Simpfendorfer and other economists cautioned that if the July pattern endured, it could quickly become a problem for the United States. Surprisingly, so far, China’s central bank has actually emerged as a big winner from the American turmoil. Its bond holdings of government-sponsored enterprises, estimated by credit rating agencies at $340 billion, rose in value by billions of dollars in a single day when the Bush administration made explicit the government guarantee of Fannie Mae and Freddie Mac bonds, causing their interest rate spreads compared to Treasury bonds to narrow by 5 to 35 basis points within hours.

The exact amount of China’s gain cannot be calculated without knowing the maturity and composition of its holdings of these bonds, which Chinese officials have not released, according to specialists in fixed-income securities.

Beijing officials regulate international capital flows so tightly that the central bank dominates China’s overseas investments. It holds more than 90 percent of all Chinese-owned bonds from Fannie Mae and Freddie Mac, for example.

“The average person on the street in China has no channel to invest in the U.S.,” said Jing Ulrich, the chairwoman of China equities at JPMorgan.

But most private investors elsewhere in the region have considerably more freedom to park their assets in whatever country they please, Mr. Lee, of the Hendale Group, said, and they are very interested these days in assets in Asia.

Monday, September 15, 2008

China cuts interest rate

China's central bank has cut interest rates for the first time in six years amid growing turmoil in global financial markets.

The key lending rate will fall to 7.2% from 7.47% with effect from Tuesday, while the amount of cash most banks must keep in reserve was cut by 1%.

The surprise move comes as US bank Lehman Brothers files for creditor protection and world shares tumble.

With inflation cooling, China is keen to maintain stable economic growth.

"We all knew that there would be monetary policy relaxation in China, but we didn't expect the move would be so quick," said Gao Huiqing, an economist at the State Information Centre, a government think tank.

All but the biggest banks will be allowed to reduce the proportion of deposits held in reserve from 25 September - the first time the central bank has cut reserve requirements since November 1999.

Pro-growth stance

Recent figures have shown that Chinese economic growth has slowed this year as a result of constrained demand for its goods from overseas markets.

The economy grew at an annual rate of 10.1% in the three months to June, down from 10.6% in the previous quarter and below the 11.9% seen for the whole of 2007.

Rising food prices helped to crimp growth as did the increasing cost of credit with six increases in interest rates last year aimed at bringing spiralling inflation under control.

Grain and pork shortages had pushed consumer prices to 11-year highs earlier this year, but government measures have helped to bring this figure down to 4.9% in August - a 14-month low.

This enabled Beijing to cut interest rates to boost consumer spending and offset a decline in demand for exports as the global economy slows.

Wednesday, September 10, 2008

China inflation drops as trade surplus hits record high

Latest economic figures look pretty good, though Chinese investers are still hurt from the abysmal performance of the stock market.

China inflation drops as trade surplus hits record high

BEIJING (AFP) — Inflation in China fell for a fourth straight month in August while the trade surplus hit a record high, data said Wednesday, with analysts blaming weakening domestic demand.

The figures have pushed the case for Beijing to boost growth, economists said, following months of efforts by policymakers to slow down the world's fourth largest economy and rein in inflation.

"The policy priority has already changed... More concerns are probably on growth now," said Huang Yiping, a Hong Kong-based economist with Citigroup.

"The government will probably continue to relax some of its policies in the short term," he said, citing possible measures such as tax cuts and loosening credit controls.

The data showed the year-on-year increase in the consumer price index dropped to 4.9 percent in August, the fourth consecutive month of slowing inflation, which is far below February's near 12-year high of 8.7 percent.

The news came as it was also announced that the trade surplus for last month hit an all-time high of 28.7 billion dollars -- beating its record of 27.1 billion dollars in October last year..

Growth slowed to 10.1 percent in the second quarter of this year against a backdrop of cooling global expansion. The economy expanded by 11.9 percent in the whole of 2007.

And Wednesday's data suggested the third quarter could see that trend continue.

"The overall slowdown of the Chinese economy has become a trend," said Wang Xiaoguang, an economist with the National Development and Reform Commission, China's top economic planner, according to the state-run Xinhua news agency.

"The downturn (in the consumer price index) might reverse in the future, but the possibility is slim," he was quoted as saying.

Food prices, the main driver of inflation since last year, were up 10.3 percent in August from a year earlier. In July, food inflation had been 14.4 percent.

This could partly be reflected in better food supply, but Stephen Green, a Shanghai-based economist with Standard Chartered, said in a research note that "we see a wealth of evidence" that consumption growth had indeed slowed.

The evidence included sluggish car sales, falling revenues at major electronics retailers and weakening enthusiasm for buying homes, he said.

Less vibrant domestic demand was also seen as a main factor behind the massive trade surplus.

The August surplus was caused by an abrupt slowdown in imports rather than any particular pickup in exports, observers argued.

"Import growth declined rather steeply while exports posted just normal growth," said Feng Yuming, a Shanghai-based economist with Oriental Securities.

China's exports last month increased 21.1 percent from a year earlier to 134.9 billion dollars, according to customs data. In July, exports had increased 26.9 percent.

Meanwhile, August imports were up 23.1 percent to 106.2 billion dollars, customs said, marking a steep decline from 33.7 percent growth the month before.

"Soft imports growth and the reacceleration and pickup in trade surplus growth in August could be an indication of weakening domestic demand," Goldman Sachs said in a research note.

Bucking the trend of a general slowdown, foreign companies have poured money into the Chinese economy this year, according to other data released Wednesday.

Foreign direct investment into China rose 41.6 percent in the first eight months of the year compared with the same period last year, Beijing said.

Overseas companies invested 67.7 billion dollars in the period from January to August, the commerce ministry said in a brief statement on its website.

However, the flood of foreign money was a drop in the ocean of much larger domestic spending on investment, official data suggested.

While investments in fixed assets -- a key measure of spending on productive capacity -- were up 27.4 percent in the first eight months of the year, foreign funds earmarked for such investments increased by a mere 6.0 percent.