world growth

world growth

Thursday, August 28, 2008

China, Iraq reach $3 bln oil service deal

China seems to have excellent relationship with this Iraqi government.

China, Iraq reach $3 bln oil service deal;_ylt=AiDNIMNKGKGl7Q5K09LtsJIDW7oF


SHANGHAI, China - China and Iraq have signed a $3 billion deal revising an earlier agreement for China's biggest oil company to help develop the Ahdab oil field, an official at the Iraq's Oil Ministry said Thursday.

The deal, restoring a project canceled after the 2003 U.S.-led invasion of Iraq, was signed late Wednesday by Chinese officials and Iraqi Oil Minister Hussain al-Shahristani.

"The initial agreement has been signed, and we are waiting to see the approval of both governments," said Sarhad Fatah, a spokesman at the Iraqi Embassy in Beijing.

Fatah would not disclose the value of the deal, but an official at the Oil Ministry in Baghdad confirmed it would be worth $3 billion. He requested anonomity because the agreement hasn't been approved by the cabinet yet.

Major oil companies have been reluctant to commit to deals in Iraq because Baghdad has yet to enact a law to govern the oil industry.

The government of former Iraqi President Saddam Hussein signed a deal in 1997 with China's oil company, government-owned China National Petroleum Corp. It was to take effect once U.N. sanctions on Iraq's oil industry were lifted.

That contract, worth $1.2 billion at the time, gave a subsidiary of the Chinese company concessions to develop the field on a production-sharing basis for 22 years.

A CNPC spokesman, Liu Weijiang, said Thursday that he could not provide any information on the new agreement.

If it is approved, the agreement would be the first Saddam-era oil deal to be honored by the new Iraqi government.

A number of companies say they signed deals with Saddam's regime and demand that those be honored, or the countries involved be given priority on new agreements.

But the Iraqi statement said that some technical services contracts with other big petroleum companies might be postponed.

Iraq's Oil Ministry has consistently denied giving any advantage to companies with which Saddam signed deals, instead insisting that oil and gas fields and exploration blocks will be offered up for bids.

Iraq sits on more than 115 billion barrels of oil, but decades of wars, U.N. sanctions, violence and sabotage have battered its oil industry.

The Ahdab field is located in Shiite-dominated Wasit province, about 100 miles (160 kilometers) southeast of Baghdad. It has been the scene of sporadic attacks since the U.S.-led invasion in 2003.

As security improves, Iraq is trying to bring in foreign companies to help increase crude output from the current 2.5 million barrels a day to 3 million barrels a day by the end of 2008, and 4.5 million barrels a day by the end of 2013.

Monday, August 25, 2008

China considering 370 bln yuan economic stimulus package

With billons of yuan of surplus, the Chinese government should be able to afford this stimulus package, unlike USA.

China considering 370 bln yuan economic stimulus package

BEIJING (XFN-ASIA) - China is considering a 370 bln yuan package of fiscal expenditures and tax cuts to stimulate the economy, the Economic Observer reported, citing a source close to the matter.
The report said said the plan includes 220 bln yuan in government spending and 150 bln worth of tax cuts.
The plan received initial approval from the Central Leading Group on Economic and Financial Affairs, a body under the State Council, but further details will be finalized by the finance ministry and other government departments.
Last week, JP Morgan said in a note to clients that the Chinese government is considering a stimulus package of 200-400 bln yuan in tax cuts and capital and housing market stabilization measures.
As a result, the benchmark Shanghai Composite Index closed up 178.81 points or 7.63 pct at 2,523.28 on Wednesday.

Thursday, August 21, 2008

China's ICBC is world's most profitable bank

Not bad ! Considering couple of years ago people believed Chinese banks were insolvent.

China's ICBC Q2 jumps; world's top-earning bank

Hong Kong

By Kennix Chim and Eadie Chen

HONG KONG/BEIJING, Aug 21 (Reuters) - Industrial & Commercial Bank (other-otc: CBDP.PK - news - people ) of China Ltd (ICBC), the world's biggest bank by market value, posted a 41 percent rise in second-quarter profit, buoyed by widening interest margins and fee income growth.

Despite the strong results, analysts are worried that borrowers in key sectors such as small and mid-sized businesses and real estate risk defaulting as a weakening global economy takes its toll. Non-performing loans at ICBC and other Chinese banks are expected to rise in the second half.

Samuel Chen, banking analyst at JP Morgan, said ICBC's profit growth would slow in the second half.

"The market is concerned about the bank's asset quality, but I think the provisions will be stable in the second half," said Chen, who has an outperform rating on ICBC.

Like most Asian banks, ICBC's subprime-related holdings in the West are small relative to its size, leaving the sector comparatively unscathed by the fallout from the U.S. subprime crisis that has battered western peers.

ICBC, which has a market value of $235 billion, said the nominal value of its Alt-A residential mortgage-backed securities (RMBS), subprime RMBS and structured investment vehicles (SIVs) totalled $1.92 billion, and it had made allowances of $702 million for losses on the value of such holdings.

It said it held bonds related to Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), the troubled U.S. mortgage agencies, totalling $2.7 billion, or a fifth of 1 percent of total assets.

ICBC, in which Goldman Sachs (nyse: GS - news - people ), Allianz (nyse: AZ - news - people ) Group and American Express (nyse: AXP - news - people ) hold stakes, posted April-June earnings of 31.4 billion yuan (4.6 billion), based on Reuters' calculations from its first half earnings, compared with 22.3 billion yuan a year earlier.

Net profit for the first half rose to 64.5 billion yuan ($9.4 billion) from 41 billion yuan, making ICBC the biggest-earning bank globally, ahead of London-based HSBC Holdings , which earned $7.72 billion

That put ICBC ahead of Chairman Jiang Jianqing's target set in June to be the world's most profitable bank in five years.


Tuesday, August 19, 2008

China sells 3 billion US treasury bonds

About time ! A good move I think.

China sells 3 billion US treasury bonds

BEIJING: China, the second largest holder of US treasuries after Japan, has sold three billion dollars of treasury bonds, signalling a plan to look for greener pastures elsewhere, the state media reported. As of June, China held $503.8 billion worth of U S treasury bonds, 3 billion less than in May, the reports quoted a statement issued by the US Department of the Treasury. This is the first time since February that China has cut its holding in the US government finance department, it said.

In the latest Treasury International Capital (TIC) report, China remains the second largest holder of US treasuries by June after Japan, whose holding increased by $5.1 billion in June to $583.8 billion. The UK bought an additional $7.9 billion of bonds to reach $280.4 billion.

Although the TIC data showed China had cut US treasury holdings in June, there is a chance it may turn to other markets for the bonds such as Europe, said professor Ding Zhijie from the University of International Business and Economics. Moreover, the la rge depreciation of the US dollar in June might dash investors confidence and lead to a slash of dollar-denominated assets in the foreign reserves of many countries, the state-run China Daily quoted Ding as saying. Given the expectation of the weakening dollar, measures should be taken to prevent further deduction of dollar assets, Ding suggested. - PTI

Wednesday, August 13, 2008

China's Retail Sales Rise at Fastest Pace Since 1999

Looks like the Chinese consumers are finally opening up their wallets, due to the olympic effect ? This will contribute more toward inflation.

China's Retail Sales Rise at Fastest Pace Since 1999
By Paul Panckhurst and Nipa Piboontanasawat

Aug. 13 (Bloomberg) -- China's retail sales expanded at the fastest pace in at least nine years in July as incomes and prices climbed in the world's fastest-growing major economy.

Sales rose 23.3 percent to 862.9 billion yuan ($126 billion) after gaining 23 percent in June, the statistics bureau said today. That was more than the 22.4 percent median estimate of 19 economists surveyed by Bloomberg News.

The acceleration and a surge in exports last month underscore the strength of China's economy as Japan stands on the brink of a recession and global growth cools. Household electronics sales climbed 18.8 percent, almost twice June's pace, as families bought televisions for the Olympic Games.

``The recent rush of suggestions that China's economy is in trouble must be looking rather shaky,'' said Mark Williams, a London-based economist at Capital Economics Ltd.

The yuan strengthened to 6.8581 against the dollar as of 3:26 p.m. in Shanghai after closing at 6.8632 yesterday. Most Chinese stocks rose as the CSI 300 Index gained 0.52 points to close at 2,444.67.

The retail numbers aren't adjusted for inflation, which cooled to 6.3 percent last month after reaching a 12-year high in February.

Today's data comes two days after figures showing exports climbed 26.9 percent in July, accelerating from 17.2 percent in June, easing concerns that overseas shipments would plummet as the global economy cooled. Japan's economy contracted in the second quarter as exports fell, a report showed today.


Monday, August 11, 2008

The Olympic Economy

The Olympic Economy

Never in the history of sports has so much money been spent in 15 days. The $43 billion official bill for this month's Beijing Games is one-and-a-half times bigger than the previous five Olympics' bills added together. It works out at $2.9 billion per day, or $140 million per event.

And that is just the official spending. Beijing has laid down a lifetime of infrastructure in just three years, including several new metro lines, 37 new stadiums and a rather fabulous new airport terminal. Some $400 million has been spent on information technology alone. Then there are the other, less obvious, costs, including the several hundred temporarily shuttered factories, the tens of thousands of laborers unceremoniously sent home, all the air travel by sports fans and journalists, and a huge security budget. No expense has been spared for the Beijing Olympics. Literally.

Despite all this, for us economists, the Olympics is one big nonevent. We will enjoy the sports -- especially the beach volleyball in Chaoyang Park -- as much as the next spectator. But a couple of weeks of sports, even on this scale, will not boost China's growth or cause the economy to slow when it finishes. Neither will China's stock market take much notice.

To understand why, think about that $43 billion in context. Official investment spending in China in 2007 totaled $1.6 trillion. So assuming Olympic investment spending was spread out over three years, it hardly reaches 1% of annual investment spending. Many of the projects, like the metro, were needed anyway -- and that will remain the case in 2009 and beyond, as more work is done in Beijing and other cities, as well as in the countryside, to build out the railway infrastructure and the suburbs, the new locus of economic growth.


Wednesday, August 6, 2008

China first half fiscal revenue up 33 pct on year earlier

With this much budget surplus, Chinese government should increase the assistance to the poors in the society, who are suffering due to the high inflation.

China H1 fiscal revenue up 33 pct on year earlier

BEIJING, Aug 7 (Reuters) - China's fiscal revenue in the first half of this year grew 33.3 percent from a year earlier to 3.48 trillion yuan ($508.1 billion), the China Securities Journal reported on Thursday.
That is much faster than a projected increase of 14 percent for all of 2008 set out in the the government's budget at the start of the year. Fiscal revenue in 2007 rose 32.4 percent to 5.13 trillion yuan.
Citing figures from the Finance Ministry, the newspaper said China had a surplus of 1.19 trillion in the first six months, with annual fiscal expenditure up only 27.7 percent.

The Chinese-language newspaper cited Pan Xiangdong, an analyst at Everbright Securities, as saying that fiscal policies would play a bigger role in driving economic growth in the second half. He said China should cut individual income tax and consumption tax to boost domestic demand.
China in late July raised the rebates for some textile and garment exporters to 13 percent from 11 percent, as part of efforts to support labour-intensive industries and boost export growth amid a slowing global economy.
However, analysts cited by the newspaper also warned that China would find it different in the second half to expand its budget surplus.
Revenue growth would slow down due to weaker imports and rises in export tax rebates, while rebuilding after the devastating Sichuan earthquake in May and various reforms could increase expenditures, they said. ($1=6.848 Yuan) (Reporting by Langi Chiang; Editing by Kim Coghill)

China's booming economy shows signs of weakening

China's economy has been negatively impacted by the worsen state of the world economy. Hopefully, things will improve as the price of oil drops.

China's booming economy shows signs of weakening

China's economic boom, a bright spot amid global gloom, shows signs of weakening
August 06, 2008

NEW YORK (Associated Press) - Changshu Zhongjiang Import-Export Co., a clothing exporter in Suzhou, west of Shanghai, is accustomed to double-digit annual revenue growth. This year, with its key U.S. export market limping, sales have fallen an alarming 10 percent.

Changshu, with 580 employees, has avoided layoffs but profits will be down as much as 85 percent from their 2005 peak, said Xue Jianfang, the company's vice president.


Textile exports fell 4.2 percent in June from the same month last year, a serious blow to an industry that employs millions of people. Overall export growth in June was 18.2 percent, down from May's 28 percent rate.

Two weeks ago, the Communist Party's ruling Politburo issued an economic plan that switched its stance from just taming prices to a dual mission of "ensuring stable and fast growth and preventing inflation."

Last week, in a first step to help individual industries, the government raised rebates of value-added taxes on textile exports by 2 percentage points to 13 percent. That reversed a decision last year to cut such rebates in hopes of narrowing China's swollen trade surplus and reducing a flood of export revenues that is adding to pressure for prices to rise.

On Wednesday, the government extended support to small businesses by boosting lending limits for local banks by 10 percent.

Also this month, auto consulting company J.D. Power and Associates cut its forecast of China's 2008 auto sales from 6.2 million units to 5.95 million. It said higher gasoline prices were prompting drivers to delay car purchases. That would be a blow to global automakers that are counting on China's fast-growing market to drive sales at a time of slumping demand in the United States and Europe.


Monday, August 4, 2008

Designed in China: Domestically Conceived Chip Market Booms in Nation

China has great potential to become a leader in chip design and manufacturing.
Chinese internal market is big enough to support many companies. Chinese government needs to plan a long term strategy to develop China's semiconductor industry.

Designed in China: Domestically Conceived Chip Market Booms in Nation
August 04, 2008|iSuppli

Although China’s semiconductor purchasing boom is cooling down, the nation’s demand for locally designed chips is heating up, with domestic consumption expected to rise by more than 60 percent from 2007 to 2012, according to iSuppli Corp. By 2012, $42.1 billion worth of Chinese-designed semiconductors will be purchased for use in electronic equipment made in the nation, up 63.4 percent from $25.8 billion in 2007.

The attached figure presents iSuppli’s forecast of purchases of locally designed semiconductors in China. These figures do not account for localized design work by foreign companies operating in China, including those based in Taiwan.

Saturday, August 2, 2008

Chinese Antitrust Law: The New Face of Protectionism?

China has finally implemented its own antitrust law. Companies from USA, EU and Japan will no longer have a free ride in the Chinese market. Watch out ! Microsoft.

Chinese Antitrust Law: The New Face of Protectionism?

China's new Antimonopoly Law goes into effect today. This comprehensive antitrust makeover is celebrated in some quarters as a significant step in China's transition to a market economy. But the new law is also worrisome, for it could be used to protect national corporate champions while keeping foreign corporations out of the Chinese market. And if China follows this course, the options for the rest of the world are grim.

On its face, the new Chinese law is neutral. It subjects both foreign and domestic corporations to antitrust scrutiny. The law purports to promote economic efficiency and advance consumer welfare, which are appropriate goals of antitrust law. But the law also contains several ominous provisions, including a clause subjecting foreign acquisitions of Chinese corporations to a "national security review." The law further defines "national security" to include economic security, opening the door for the Chinese officials to block any foreign transaction that significantly impacts the structure of the Chinese economy or, as some fear, that Chinese authorities simply do not like. An antitrust law that on its face is designed to open markets can be a powerful tool to close them.

As its legislative history suggests, the law reflects the resurgence of protectionist sentiments in China following the increase in foreign acquisitions of Chinese corporations. Some domestic groups favored the law as a tool to control the conduct of state-owned enterprises and to abolish trade barriers among different regions within China. Others saw the new law as an opportunity to challenge foreign multinationals that are increasingly controlling the Chinese economy. Only a track record of enforcement will show which motivations will ultimately prevail.