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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)