Wednesday, July 30, 2008
China Casts Its Lot With Developing Nations
By Andrew Batson
China's willingness to let the latest round of global trade talks collapse is a sign of how the emerging giant's ties with other developing nations are growing in importance.
But China's late-hour emergence as a swing factor was a surprise -- and not only because it departed from its usual low-key negotiating style. Its support for India's position effectively negated a chance to expand markets for Chinese exporters in favor of building political ties with other lower-income countries.
"The Chinese leadership has tried to adopt a strategy to sacrifice economic interests to win the goodwill of developing countries," says Henry Gao, a former WTO official who now teaches trade law at Singapore Management University.
As the world's second-largest exporter after Germany, China has little in common with the smaller developing countries that struggle to break into rich-country markets. With an average nonfarm tariff of 9%, China's market is also relatively open: India's average rate, by contrast, is more than 16%.
In that respect, China's interests are closer to the wealthy countries who were trying to bring down tariff barriers in developing nations. Publicly, however, China has cast its lot with the developing countries. The state-run Xinhua news agency blamed "selfish and short-sighted actions" by rich countries for the collapse.
China's trade negotiator said the country is ready to bolster trade ties with willing partners outside the WTO process. "On the basis of equality and reciprocity, China is ready to further intensify the bilateral trade and economic cooperation," Commerce Minister Chen Deming said in Geneva, expressing particular interest in ties with the so-called least-developed countries.
China's trade with other emerging markets -- from Asian neighbors like Indonesia and Malaysia to the Persian Gulf and Africa -- has been booming, even as its exports to the U.S. have slowed sharply this year. China has been particularly active in developing economic ties with Africa, with its companies building infrastructure projects there and striking large mining deals.
Some of those relationships have come under fire by Western critics, most notably in the case of China's ties with Sudan and Myanmar. But they highlight how China seems to be looking for future growth outside the U.S. and Europe. And that gives China less incentive to participate in WTO negotiations that are still dominated by those big powers.
"There's not so much for them to gain" because the U.S. and European Union markets are largely open already, says Matthew McConkey, director of Asian trade for the law firm Mayer Brown JSM in Beijing. "I don't know what the carrot is for them in this situation."
The biggest trade issue for China these days is the rising number of "safeguards" and antidumping measures used by rich countries to block imports of some products from China. But the global trade talks never seriously discussed eliminating those measures, which are politically important to many governments. So it could be difficult for negotiators to come home with an agreement that would make a material difference to a country that exported $1.22 trillion of goods last year.
Still, some Chinese scholars say a big trading country like China would be one of the largest beneficiaries from a WTO deal that led to a further freeing-up of global trade.
"For the long term, we still hope that there can be a unified global trade framework," says Mei Xinyu, a scholar at the Chinese Academy of International Trade and Economic Cooperation, a government think tank in Beijing. "China is large country that exports to almost every country in the world and imports from everywhere as well. Any bilateral or regional agreement cannot substitute for a true global trade arrangement."
Tuesday, July 29, 2008
China to Slow Yuan Gains for Growth, Researcher Says (Update1)
By Belinda Cao and Judy Chen
July 29 (Bloomberg) -- China will slow the pace of the yuan's gains as the government seeks to bolster economic growth, said Li Daokui, a researcher at Tsinghua University who attended a meeting hosted by President Hu Jintao last week.
``Fast yuan gains attracted inflows of speculative funds, which not only fuel inflation but also may exit on a large scale some day, threatening economic stability,'' said Beijing-based Li, head of the China and World Economic Research Center at the university. ``That goes against the central government's goal of stable growth set in the recent Politburo meeting.''
The Politburo's concern that a global slowdown will undermine China's boom prompted the biggest policy change in five years, according to Donald Straszheim, vice chairman of Roth Capital Partners, a U.S. investment bank specializing in emerging markets. The central bank is likely to stop tightening monetary policy after six interest-rate increases since the start of 2007, Los Angeles-based Straszheim said.
China's Politburo, the Communist Party's top decision- making body, said in a meeting July 25 that maintaining ``steady'' growth and fighting inflation were the top priorities.
``Beijing is increasingly fearful that growth will slow to a level which will not create sufficient new jobs to fuel the rapid rise in living standards the country now enjoys,'' Straszheim, former chief economist of Merrill Lynch & Co. said in a note to clients. ``This is striking because inflation is still too high.''
The yuan gained 0.21 percent to 6.8264 per dollar in Shanghai as of 1:05 p.m. today, after yesterday posting the biggest drop since a dollar peg ended in 2005, according to the China Foreign Exchange Trade System.
Friday, July 25, 2008
When people across China and elsewhere in the world are waiting eagerly but joyously in the sweltering heat of this mid-summer for the incoming 2008 Beijing Olympic Games, a "mid-year-test" report card of Chinese economy is presented to us: China's GDP is up 10.4 percent in the first half of 2008, ranking the first among all the nations worldwide; the country's CPI rises by 7.9 percent in the first half year, and its GDP overtakes CPI. And what merits special attention is that the GDP growth rate is 1.8 percentage points lower year-on-year.
Moreover, the export growth rate, one component part of the "troika" (herely vividly refers GDP, CPI and export growth), drops 5.7 percent in the first six months of 2008, the first time ever since China's entry into the World Trade Organization (WTO) in December 2001. This seems to be somewhat grief amid our joy or good fortune.
Thursday, July 24, 2008
China's growth rate may dip to 9.9%
Economic growth in China is expected to hit 9.9 percent this year and 9.7 percent in 2009 while in emerging East Asia it will moderate to 7.6 percent in 2008 and 2009 from 9 percent in 2007 due to a global economic slowdown, sharp rise in food and energy prices and volatile financial markets, said a report by the Asian Development Bank (ADB).
The region's growth outlook is vulnerable to a higher-than-expected spike in inflation, protracted slowdown in the US and any further tremors in global financial markets, said the July issue of the Asia Economic Monitor (AEM).
Another ADB report in April forecasted that China's economy would expand by 10 percent this year and 9.8 percent the next.
The worse-than-expected US economy has exacerbated global worries that the economic slowdown across the globe may continue following the revelations that government-sponsored Fannie Mae and Freddie Mac are in serious trouble. This will have an impact on the Chinese economy.
"The US economy is gloomier than people expected and it will take more time for it to recover," said Zhuang Jian, an economist from ADB in Beijing.
But he said even if China's economic growth slowed to 9.9 percent this year, it would be a "fairly good" rate.
The AEM report said the region's policymakers were caught in the pincer grip of slowing growth and rising inflation.
It warns that inflation will continue to pose a serious challenge to policymakers across the region, including China. Inflation is expected to rise to 6.3 percent for the region, more than double the rate of the past 10-year average. The core inflation, a measure of price increases that excludes food and energy costs, is rising in the region, a sign that a more broad-based second-round price effect may be under way, it said.
China has seen its consumer inflation drop to 7.1 percent in June from the peak of 8.7 percent in February. But analysts said the possible energy price liberalization may make inflation rebound in the coming months.
"Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price and wage spiral, unleashing more inflation," said Lee Jong-wha, head of ADB's office of regional economic integration.
Growth in ASEAN member economies is expected to ease by 1 percentage point to 5.5 percent in 2008, according to the semi-annual AEM.
Monday, July 21, 2008
China increasing sophistication of exports
By TIFFANY AUMANN • Advocate Reporter • July 20, 2008
NEWARK -- Twenty years ago, China was known for making toys, shoes and clothing.
Today, the world's largest nation can make just about anything that any other nation can. There's one key reason for the quick catchup: Competition.
Songhua Lin, assistant professor of economics at Denison University, said international partnerships have been an effective way to inject dollars and knowledge into the Chinese economy.
"In order to make it better, you have to introduce competition, and that's coming from abroad," Lin said.
During the past couple decades, exports from China gradually have increased in sophistication.
In the 1980s, exports largely were raw materials. By the late '80s and early '90s, toys, shoes and clothing were flowing out of China.
Increasingly complex products, such as computers and auto parts, have been made in China in the past decade. According to the National Bureau of Economic Research, virtually no product is made by the United States, European Union or Japan that also is not made in China.
China now is the United States' second-largest trading partner, representing about 12 percent of all trade in 2007, according to the United States Census Bureau. Canada, at 18 percent, was the biggest.
China began to emerge as a world trading power after 1978, when its government began a series of economic reforms designed to lead it away from a socialist command economy and toward a market-driven one. Since 1991, the Chinese economy has grown at a rate of 10 percent per year. In 2001, China became a member of the World Trade Organization and was granted normal trading relations with the United States.
In 2007, the American trade deficit with China was $256 billion, about double what it was in 2003 and eight times what it was in 1995 -- $34 billion.
The National Bureau of Economic Research reports the share of China's exports produced by state-owned firms declined from 67 percent in 1995 to 40 percent in 2005. Foreign-invested firms produced a greater share of exports, from 32 percent to 58 percent during the same time period.
Privately owned Chinese firms represent a small portion of exports but had increased their share to about 18 percent in 2005.
Monday, July 14, 2008
Too much forex is not a good thing, especially with the rapidly devaluation of US dollar.
China's forex reserves climb past 1.8 trillion dollars: central bank
BEIJING (AFP) — China said Monday its foreign exchange reserves had surpassed 1.8 trillion dollars but slower growth in June suggested the flow of potentially dangerous "hot money" into the country may be easing.
China's forex reserves, already the world's largest, rose to 1.8088 trillion dollars at the end of June.
The figure was up 35.7 percent from a year earlier and more than 18 percent higher against the end of 2007, according to data posted on the website of the People's Bank of China.
But the year-on-year growth eased from the 39.9 percent recorded in the first quarter of this year, and the increase of 11.9 billion dollars in June was far lower than in recent months.
Saturday, July 12, 2008
China says June trade surplus $21.3B
By JOE McDONALD
BEIJING (AP) — China's trade surplus fell 20 percent in June as export growth plunged, the government said Thursday, and analysts said Beijing might try to help struggling exporters by slowing the rise of its currency in defiance of pressure from trading partners.
The June trade gap was still China's biggest so far this year at $21.3 billion, the General Administration of Customs reported. Exports totaled $121.5 billion, up 18.2 percent compared with June 2007 — a sharp drop from May's 28 percent growth rate, according to the agency. Imports surged 23.7 percent to $100.1 billion.
Thursday, July 10, 2008
China's economy to become world's biggest in 2035: study
WASHINGTON (AFP) — China's economy will overtake that of the United States by 2035 and be twice its size by midcentury, a study released Tuesday by a US research organization concluded.
The report by economist Albert Keidel of the Carnegie Endowment for International Peace said China's rapid growth is driven by domestic demand more than exports, which will be sustainable over the coming decades.
"China's economic performance clearly is no flash in the pan," Keidel writes.
"Its growth this decade has averaged more than 10 percent a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation."
Keidel, who has worked as a World Bank economist and US Treasury official, said the rise of China to the world's biggest economy will happen regardless of the method of calculation.
Under current market-based estimates, China's gross domestic product is about three trillion dollars compared to 14 trillion for the United States.
Based on a more controversial purchasing power parity (PPP) measure used by the World Bank and others to correct low labor-cost distortions, he said China's GDP is roughly half of that of the United States.
"Despite this low starting point, if China's expansion is anywhere near as fast as the earlier expansion of other East Asian modernizers at a comparable stage of development, the power of compound growth rates means that China's economy will be larger than America's by midcentury -- no matter how it is converted to dollars," Keidel wrote.
"Indeed, PPP valuation distinctions will diminish and eventually disappear."
Keidel's calculations suggest that using the PPP method, China will catch up with the United States as an economic power by 2020, with an equivalent GDP of 18 trillion dollars.
Based on the more commonly accepted market method, the turning point will come by 2035. By 2050, he estimated Chinese GDP at some 82 trillion dollars compared with 44 trillion for the United States.
Friday, July 4, 2008
China to increase grain output
Meeting demand in China will be difficult if demand continues to grow
China's cabinet has approved a plan to ensure grain production keeps pace with strong domestic demand and overcomes challenges such as climate change.
China aims to reach and maintain annual grain output of 500 million tonnes by 2010, and to increase output to more than 540 million tonnes a year by 2020.
Harsh weather and the development of arable land are hurting grain output.
Despite this, the government said China would be self-sufficient in the future and could meet rising consumer demands.
In order to achieve its goals, China has set out a "red line" defining 120 million hectares (296 million acres) of land as a necessary minimum to ensure at least 95% self-sufficiency in grain supply.