world growth

world growth

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.