Sunday, June 29, 2008
Wednesday, June 25, 2008
Higher Gas Prices Will Help the Chinese Economy
Reason #1: Gas prices are not nearly as important to the typical Chinese citizen, who doesn't even own a vehicle, let alone drive a gas-guzzling SUV. Most people walk, ride a bike or scooter that gets 100 MPG, or use public transportation (buses, rail, or subway) to get around.
The first mention of bicycles in China was in 1860, when a European official wrote of seeing a velocipede, an early version of the bicycle, newly-arrived from Paris. Nowadays, China is known as the world's bicycle kingdom.
The result is that transportation costs are a very minor monthly expense for Chinese consumers. In other words, higher fuel costs are not hitting disposable incomes in China like here in the U.S. The most recent retail sales numbers in China showed a 21% jump in May compared to the same period 12 months ago!
Reason #2: Gas is still cheap in China. Prices are still under those in the free market. Even after this increase, a gallon of gas costs about $3. That's 25% less than what we pay in the U.S. The result is that Beijing is still subsidizing the cost of fuel across China ... just not as much as before.
Reason #3: The last price hike did not slow China's economy. There seems to be no correlation between higher fuel prices and an economic slowdown in China. The NDRC raised fuel prices by 10% last November when oil was $90 a barrel but the Chinese economy didn't miss a beat. China's GDP grew by 11.9% in 2007 and the World Bank just upped its 2008 forecast to 9.8%. All statistics indicate that China is still growing like a weed.
Look, China consumed an average 7.86 million barrels of oil per day in 2007 — 9.3% of the world's total. Meanwhile, the United States went through 20.7 million barrels of oil per day or 24% of the world total last year.
So if any economy is going to suffer from rising oil prices, it's the U.S., not China.
If anything, I think the Chinese economy is actually going to improve because of this price increase!
Friday, June 20, 2008
inflation is still high.
China Food-Price Inflation Slows to 19.9%
By Kevin Hamlin and Nipa Piboontanasawat
June 12 (Bloomberg) -- China's food inflation slowed last month after vegetable supplies recovered from blizzards in January and February and farmers reared more pigs.
The increase of 19.9 percent from a year earlier compared with a 22.1 percent gain in April, the statistics bureau said today. Non-food inflation cooled to 1.7 percent from 1.8 percent.
Overall consumer-price growth slowed to 7.7 percent from the almost 12-year high of 8.5 percent in April, the bureau said, confirming a number disclosed by government officials. The pace is faster than the central bank's target of 4.8 percent for the year, suggesting that it may allow more appreciation of the yuan to cool import costs.
Wednesday, June 18, 2008
By John Simpson BBC News, Mount Toromocho
A look inside some of the Chinese mining operations in Peru
At 15,000 feet (4,600m), Mount Toromocho, 86 miles (138km) from Lima, is comparable to any mountain in Europe. It gets its name from its shape - The Bull With No Horns. And it is composed almost entirely of copper ore: two billion tonnes of it. It could become the most productive copper mine anywhere on earth. Now it belongs, in effect, to China. When open-cast mining begins, in three or four years, a Chinese mining company, Chinalco, will send the copper back home to be turned into electrical wire. The plan is to use it to carry out the electrification of the whole of China. Bargain The Peruvian government is happy with the $3bn (£1.53bn) that Chinalco will invest in the Toromocho mines. The Chinese will be even happier.
They have got themselves a bargain. The copper Chinalco extracts from Toromocho will cost something like US$410 (£210) per ton. Today, the price for copper on the London Metal Exchange was $8,255 (£4,220) - 20 times more. Chinalco stands to make a 2,000% profit on its investment.
Monday, June 16, 2008
Booming, China Faults U.S. Policy on the Economy
A steel factory in Kunming. China’s economy has generally maintained strong growth while the American economy has stagnated.
The Americans scolded the Chinese on mismanaging their economy, from state subsidies to foreign investment regulations to the valuation of their currency. Your economic system, the Americans strongly implied, should look a lot more like ours.
But in recent weeks, the fingers have been wagging in the other direction. Senior Chinese officials are publicly and loudly rebuking the Americans on their handling of the economy and defending their own more assertive style of regulation.
Chinese officials seem to be galled by the apparent hypocrisy of Americans telling them what to do while the American economy is at best stagnant. China, on the other hand, has maintained its feverish growth.
Some officials are promoting a Chinese style of economic management that they suggest serves developing countries better than the American model, in much the same way they argue that they are in no hurry to copy American-style multiparty democracy.
Saturday, June 14, 2008
Alone, RMB's appreciation against U.S. dollar will not change the trade imbalance between the two countries.
Japanese Lessons for China’s Currency
The question of how much China’s currency should appreciate to rebalance its trade has become a global hot-button issue. But the answers have been all over the map, with some finding that the yuan is not undervalued at all, while others argue that it should appreciate against the dollar by more than 30%.
Clearly, there must be major differences in the macroeconomic models used to produce such a wide range of estimates. But the one thing about which everyone seems to agree is the theoretically and empirically unjustified assumption that an equilibrium exchange rate actually exists.
The theoretical problem is simple: a country’s trade balance depends on a lot more than the value of its currency in the foreign exchange markets. Interest rates, employment, aggregate demand, and technological and institutional innovation all play a role. As the economist Joan Robinson pointed out in 1947, just about any exchange rate will be the equilibrium value for some combination of these other variables. The equilibrium exchange rate, she famously argued, is a chimera.
Not surprisingly, the empirical evidence that trade imbalances can be resolved through exchange rate changes alone is unconvincing. In the case of China, the most useful precedent is probably that of Japan in the period from the end of the Bretton Woods fixed exchange-rate regime in August, 1971, to the collapse of its “bubble economy” in 1990. During that period, the yen’s value more than doubled against the dollar, rising from its original fixed rate of 360 to 144 at the end of 1989. Yet, even as Japan’s exports became much more expensive in dollar terms and its imports much cheaper in yen, its trade surplus rose from $6 billion in 1971 to $80 billion in 1989.
Wednesday, June 11, 2008
China's economy to grow about 10 percent in 2008: report
SHANGHAI (AFP) — China's economy is likely to grow about 10 percent in 2008 despite the global slowdown, and the government expects to rein in inflation, state media reported Tuesday, citing a senior economist.
Growth will be slower than last year's 11.9 percent, but China's fundamentals remain strong, the National Bureau of Statistics' chief economist Yao Jingyuan was quoted as saying by the official China Securities Journal.
Monday, June 9, 2008
A Black Market Grows In Rice
Shu-Ching Jean Chen, 05.01.08
HONG KONG -
With grain prices surging and major producers restricting exports, a lucrative illicit trade in rice and flour has emerged in Asia.
The biggest opportunities may be in China, the world’s largest rice producer, where grain prices are among the lowest in the world due to a combination of domestic subsidies and export curbs.
Reports of rice smuggling have surfaced this week in areas all along China's sprawling borders, from Yunan province next to Vietnam, to northwest Xinjiang, which borders the central Asian states of Kazakhstan and Kyrgyzstan, all the way to Guangdong, a prosperous southern Chinese province that sources 60% of its rice from elsewhere in the country. Smuggled Chinese rice has turned up in Hong Kong and Macau, where prices are in line with international rates and there has been panic buying. So far, Chinese customs officials have described the incidents as isolated, but increasingly the authorities are worried about the potential for an expansion of smuggling should price gaps widen further.
Smuggling is occurring across Asia due to price disparities between major grain-producing countries, where domestic prices are being kept artificially low, and the region’s major importers.
In the case of China, the root cause of smuggling is obvious: Prevailing international rice prices are as much as four times higher than in China; the price of wheat, more than twice as high.
China accounts for nearly a third of total world rice output.
There's no reason for China to worry that the smuggling will take food out of the mouths of its citizens. Four consecutive years of ample grain harvests have not only allowed China to meet its self-sufficiency goal of satisfying more than 90% of domestic demand, but also to build up massive reserves.
The real estate market in both U.S. will get worse before it can get better.
The numbers look good, but real estate is in trouble in China
By Langi Chiang Reuters
Published: June 9, 2008
BEIJING: A credit crunch, dwindling transactions and falling prices in some hot markets are adding up to trouble for the Chinese real estate industry.
Although official figures show investment in property rose 32 percent in the first four months from a year earlier, developers are worried as bank loans dry up and the cost of tapping other sources of funds rises.
Falling home sales are a particular threat to developers, who typically rely heavily on cash from the sale of unfinished projects to pay for operations and expand.
"Our strategy now is to safeguard our cash flow," Yang Junfang, deputy head of strategic investment for Xinyuan Real Estate, said at a property forum last week. "We're taking a more conservative view of the future."
The situation is making bank regulators and analysts nervous that a new crop of bad property loans is on the way.
"It's one of our biggest concerns, but we don't see a manifestation of that in the quality of loan portfolios yet," said Charlene Chu at Fitch Ratings in Beijing.
The number of residential transactions in Beijing fell 13.7 percent in April from March and was down 56.4 percent from a year earlier, according to the China Index Academy, which is affiliated with SouFun.com, a leading real estate Web site.
Liu Juan and her husband have been trying in vain to sell their Beijing apartment and move into a larger one. Prospective buyers have come to look at the apartment over the past two months, but no one has made an offer.
"Everyone seems to be looking instead of buying right now," she said.
China does not publish data on nationwide sales. But it compiles a property outlook index on the state of the market. The index has been falling since reaching a peak in November.
"Some cities have seen significant falls in real estate transactions, especially since the end of 2007, which poses risks to the short-term operations of listed firms that cannot be overlooked," the China Index Academy survey reported.
The survey showed that the liabilities of locally listed Chinese developers reached 76.5 percent of their assets at the end of last year, up from 69.1 percent at the end of 2006. The 70 percent mark is seen as a warning level.
And while average property prices in 70 cities were up 10.1 percent in April from a year earlier, prices have declined on a monthly basis in the prosperous Pearl River Delta region of southern China, especially in Shenzhen.
Sunday, June 8, 2008
IMO, the current economic woes across the world is mainly caused massive devaluation of U.S. dollar. U.S. government needs to cut back on the deficit and stop printing money. Not much China can do.
Expectations low for US-China economic talks
By MARTIN CRUTSINGER
WASHINGTON (AP) — A global credit crisis and record oil prices will be competing with traditional trade and currency issues when top officials from the United States and China gather in Annapolis, Md., later this month.
However, there is little expectation the fourth round of these high-level discussions will produce any major breakthroughs....
Oil prices took their biggest single-day leap ever on Friday, jumping by nearly $11 to $138.54 per barrel, an increase that helped drag down the Dow Jones industrial average by nearly 400 points as investors grew more worried about the fate of the U.S. economy.
Those fears were heightened by a report earlier in the day that the U.S. unemployment rate jumped one-half percentage point in May to 5.5 percent, the biggest increase in 22 years.
The administration would like to ease worries about employment in the United States by getting China to allow its currency, the yuan, to rise more quickly in value against the dollar. U.S. manufacturers contend that the Chinese have gained unfair trade advantages by keeping the yuan undervalued, making Chinese goods cheaper for American consumers and American products more expensive in China.
The yuan has risen almost 20 percent against the dollar since the Chinese revamped their currency system in July 2005. Critics say that is less than half of the distance it needs to go to erase an unfair trade advantage they contend has contributed to the loss of more than 3 million U.S. manufacturing jobs since 2001....
Saturday, June 7, 2008
China's trade surplus to shrink for first time in five years: govt
BEIJING (AFP) — China's trade surplus is likely to shrink in 2008 for the first time in five years as exports slow due mainly to the rising local currency and the US economic slowdown, the government said Thursday.
China's trade surplus hit 58 billion dollars in the first four months of the year, down 7.9 percent from the same period in 2007.
The surplus had surged to a record 262.2 billion dollars last year, up 47.7 percent from 2006. Last year's figure was a 10-fold rise from 2003, when the surplus first started to expand dramatically.
The yuan has risen steadily from 8.3 to the US dollar about three years ago to roughly 6.9 currently since China loosened its peg to the greenback.
Full article at : http://afp.google.com/article/ALeqM5jX41-t9OFMlNliwD4IkMK68SXlOg