world growth

world growth

Monday, July 27, 2009

Merrill Lynch raises China's GDP growth to 8.7% for 2009

Looks like China's growth will accelerate in the second half of 2009

NEW YORK (MarketWatch) -- Bank of America Merrill Lynch Monday raised its forecast for this year's China economic growth rate to 8.7% from 8.0%. Recent economic data "convinced the market that China's recovery is real," said Merrill economist Ting Lu in a note. Merrill expects China's economy to grow 9.2% in the third quarter and 11.3% in the fourth quarter. It also raised next year's growth rate to 10.1% from 9.6%. Earlier this month, China reported its economy increased by 7.9% in the second quarter.

Tuesday, July 21, 2009

China's stock market 2nd largest in the world, surpassing Japan

A man operates a stock trading terminal at a securities exchange firm in Shanghai. The Shanghai Composite Index rose 1.4 percent this month, sending the value of China's domestic stock market to $3.21 trillion.

China overtook Japan as the world's second-largest stock market by value for the first time in 18 months.

This month's change was attributed to government stimulus spending and record bank lending that boosted share prices this year.

The Shanghai Composite Index rose 1.4 percent this month, sending the value of China's domestic stock market to $3.21 trillion, compared with Japan's $3.20 trillion, according to data compiled by Bloomberg.

The Shanghai index has gained 75 percent this year, the best-performing major market, against a 7 percent advance in the Nikkei 225 Stock Average.

The US has the biggest equities market worth $10.8 trillion.

"China is just entering its stride and is still very much in a growth phase, while Japan is already a developed economy," said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion.

China last surpassed Japan in stock market capitalization from Jan 4 to Jan 24, 2008, data compiled by Bloomberg show.

The Shanghai Composite tripled in the two years leading to its record on Oct 16, 2007, before tumbling 72 percent to its trough the following November.

A government-led 4 trillion yuan stimulus package and record bank lending have shielded the Chinese economy against a plunge in exports.

Foreign-exchange reserves topped $2 trillion for the first time, while its money supply rose a record 28.5 percent in June, the central bank said on July 15.

The economy expanded 7.9 percent in the second quarter, the statistics bureau said in Beijing, more than the 7.8 percent median estimate from 20 economists surveyed by Bloomberg News.

New loans rose fivefold in June from a year earlier to 1.53 trillion yuan, increasing concern that attempts to revive the world's third-largest economy will lead to bad debts and asset bubbles.

Rapid credit growth poses risks for lenders and the financial system, Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said on July 7.

BNP Paribas Securities (Asia) Ltd last month cut its rating on China to "neutral" from "overweight", citing valuations.

Stocks on the benchmark index are trading at 33.2 times earnings. That's almost triple the 12.9 multiple on Nov 4, when the measure dropped to its lowest since the financial crisis.

Earnings per share declined 7 percent last year and will probably remain "flat" this year, the brokerage said.

Some Chinese shares have soared by "1,000 percent from the bottom, so they're pricing in a very strong rebound in earnings", he said.

In Japan, nagging deflation and an aging population have sapped strength from what was once the world's largest market by capitalization.

During the 1990s, Japan spent 135 trillion yen on 10 economic stimulus plans and lowered interest rates to zero, none of which succeeded in promoting sustainable growth.

Japan's economy shrank at a 14.2 percent annual rate in the first quarter, the most since data began in 1955.

The country's gross domestic output will shrink 3.4 percent in the year ending March 2010, the central bank predicted.

The contraction coincided with a drop to a more-than 25-year low by the Topix index.

"Japan has two main problems. The enormous public debt handicaps the government's ability to spend additional money to boost the economy, and we are too reliant on exports," said Takashi Kamiya, chief economist at T&D Asset Management Co in Tokyo, which helps oversee some $16 billion.

Chinese companies account for four of the 10 biggest companies when measured by market value, according to Bloomberg data.

Toyota Motor Corp is the top-ranked Japanese company, at 25th, worth about one-third the capitalization of PetroChina Co, ranked No 1.

Wednesday, July 15, 2009

43 Chinese companies are in Fortune 500 list

China's Great March up the Fortune 500 List

Financial crisis or no financial crisis, companies in Greater China are moving up in the world. The just released Fortune 500 list for 2009 says so, with Chinese companies taking 43 places, 8 more than last year’s 35, and rankings are also rising.

Shagang Group, a steel company, is the only private Chinese company to make the list. The other China new listings are all state-owned enterprises. Lenovo, which ranked 499th on last year’s list, failed to make the cut this year.

Chinese company rankings have benefited from RMB’s appreciation against other main currencies over the last year. A comparatively stable domestic market has also supported these companies.

Sinopec, with $20.7815 billion in annual sales, moved up this year to 9th from 16th, taking the Chinese honors, while PetroChina climbed from 25th to 13th. Both benefited from last year’s high oil prices.

The Industrial and Commercial Bank of China, with income of about $15.95 billion, was China’s earningest company. China Construction Bank, the Bank of China, and the Agricultural Bank of China are also among the 50 most profitable companies.

Steel companies have seen the most dramatic rise among the Chinese Fortune 500 companies. Baosteel, with $35.5166 billion in 2008 sales, lifted its ranking 39 notches this year to 220th, and has been on the list for the past five years, while Heibei Steel Group and Shagang Group rank 375th and 444th, respectively. The world recession has had its effect on China’s steel industry, but it has also served as a gateway onto the Fortune 500 list. As China’s economic stimulus has boosted steel demand, China has become the world’s only safe haven for the industry. China’s steel production has hit new highs in the recent months as most of the rest of the world’s other steel companies are still cutting production by 20% to 30%. Even at last year’s end, the industry’s most difficult time, Chinese steel makers’ production was cut by only 10% at most.

Other companies entering the list for the first time include Citic Group, China Unicom, Huaneng Group, and Aviation Industry Corporation of China.

China Unicom made the list as a result of the restructuring of China’s telecoms industry. Its operations income last year grew 70.4% over the previous year, one of the highest growth totals among all enterprises.

China’s three telecom operators all enjoyed good performance last year. China Mobile, with $65.015 billion in sales ranks 99th, 49 places above last year’s ranking. China Telecom also moved up from 288th last year to 263rd.

Lenovo, which ranked 499th last year, is the only Chinese company to be dropped from the club this year. During its fiscal 2008, ending March 31, the company’s losses reached over $200 million, the highest in the company’s history. Other PC companies also saw losses. Taiwan-based Asus dropped from 363rd last year to 436th.

Aviation Industry Corporation of China is the only Chinese military enterprise on the list, and ranks 426th, with annual sales of $21.738 billion and a net profit of $568 million. It ranks 11th in the world’s aviation industry.

Saturday, July 11, 2009

China is the top trade partner in Latin America, overtakes US

RIO DE JANEIRO, Brazil — All but invisible in Latin America a decade ago, China now is building cars in Uruguay, donating a soccer stadium to Costa Rica and lending $10 billion to Brazil's biggest oil company.It's supplanted the United States to become the biggest trading partner with Brazil, South America's biggest economy.
China has moved aggressively to fill a vacuum left by the United States in recent years, as the U.S. focused on wars in Afghanistan and Iraq and the global economic crisis sapped its economy."China is rising while the U.S. is declining in Latin America," Riordan Roett, a professor of international relations at Johns Hopkins University, said by telephone while visiting Sao Paulo. "China is all over this region. They are following a state-driven policy to expand their peaceful presence."

China is beefing up its embassies throughout Latin America, opening Confucian centers to expand Chinese culture, sending high-level trade delegations throughout the region and opening the door for ordinary Chinese to visit Machu Picchu, Rio and
other tourism hot spots.Aiping Yuan came to Rio de Janeiro from Beijing in 1997 on a lark, fell in love with the city and decided to stay. She studied Portuguese, and when Brazilian President Luiz Inacio Lula da Silva made his first visit to China in 2004, she opened a small school in Rio to teach Mandarin.She began with six students and today has 300, including senior executives at Petrobras, the country's biggest oil company, and Vale do Rio Doce, the biggest mineral producer. Both have growing business with China."Chinese is the language of the future for Brazil," Yuan said with a big smile.China has forged a strategic alliance with Brazil that's allowed the two countries to partner with India and Russia in the so-called BRIC grouping, which is demanding a greater voice in global political and economic affairs. Indeed, China is making inroads with developing countries worldwide.
Beijing's main interest in Latin America has been guaranteeing access to the region's raw materials — principally oil, iron ore, soybeans and copper — to fuel its continued rapid growth. For many countries, there's a downside in the China trade,
through which cheap imports have displaced local textiles.
China's growing role has alarmed policymakers in Washington. However, China has been careful not to establish a military presence in the region, since doing so would antagonize Washington. The U.S. has considered Latin America to be in its sphere of influence since the Monroe Doctrine of 1823.
China "treats (Hugo) Chavez as they do (Alvaro) Uribe and Lula," said Alexandre Barbosa, a consultant to the Sao Paulo-based consulting firm Prospectiva, referring to the presidents of Venezuela, Colombia and Brazil, respectively. "They're interested in business."

And what a voracious interest in business they've shown. Trade between Latin America and China rocketed from $10 billion in 2000 to $140 billion in 2008. China is buying zinc from Peru, copper from Chile and iron ore from Brazil. It's shipping
electronic equipment to Brazil, buses to Cuba, clothes to Mexico and cars to Peru.
Peruvian President Alan Garcia is trying to position his country as a major commercial hub for China in South America. He's hoping to capitalize not only on Peru's ports in the center of South America but also on a shared history: Thousands of Chinese emigrated to Peru in the 19th and early 20th centuries to do manual labor. These immigrants have left a legacy of the so-called "chifa" restaurants, which offer Chinese food throughout Peru.
Today, China's biggest appetite is for Peru's plentiful minerals.
Two Chinese companies are moving forward with major mining projects in Peru while companies from other countries are suspending or canceling theirs, said John Youle, the executive president of ConsultAndes, a Lima-based firm.China generally has been investing little money in Latin America, however. This has prompted criticism that it's simply tapping into the region's vast raw minerals, just as colonial powers did for centuries.Although China has become a major player over the past decade, trade between the United States and Latin America still dwarfs China's trade with Latin America.
Beyond trade, China suddenly is rivaling the World Bank and the Inter-American Development Bank as a major lender to Latin America, at a time when China is flush with cash and many companies can't get access to bank loans.
Petrobras is borrowing $10 billion from China, to be paid off by shipping 150,000 barrels of crude per day to China this year and 200,000 barrels per day for the next nine years, said Erico Monte, a Petrobras spokesman.Ecuador is borrowing $1 billion from China to finance investments by its state oil company and another $1.7 billion to build what would be the country's largest hydropower dam.
Venezuela is buying high-tech oil-drilling platforms from China and is sending some 380,000 barrels of oil there per day as Chavez diversifies Venezuelan exports away from the United States, his chief nemesis.
"But China has shown little enthusiasm in becoming entangled in Chavez's larger goal of counterbalancing U.S. influence in the hemisphere," Dan Erikson, a Latin American expert at the Inter-American Dialogue, a nonpartisan research center on Western Hemisphere affairs, wrote recently.Erikson said China was especially attractive to Latin American leaders because of its no-questions-asked foreign policy."The United States talks about the need for a battle against corruption, the need for transparency and improved human rights," Erikson told McClatchy. "China is less ideological in its approach to Latin America than the U.S. is."
Still, China uses its aid as a strategic tool to get countries to shift their diplomatic ties from Taiwan to the communist nation.
After Costa Rica became the first Central American country to establish ties with China, the communist country bought $300
million in Costa Rican bonds. More important to average Costa Ricans, China is spending $74 million to build a new national
soccer stadium in San Jose. It's scheduled to open in 2011.
Not everyone in Latin America welcomes China's growing presence.
Chinese companies are taking business away from Mexican firms that exported clothes to the United States.
Peruvians have tried to block the expansion of a Chinese mining project near the border with Ecuador that they say would pollute local rivers.
China has angered Brazilian companies by taking their place as the biggest exporter of clothing and textiles to Argentina.
Whether it's seen as a friendly uncle or a ruthless competitor, China's continued expansion in Latin America seems inevitable.
EBX is expanding its port in Rio de Janeiro state to handle Brazil's iron ore exports to China and has signed an agreement with China's Wuhan Iron and Steel to build a mammoth steel plant next to the port.
In May, Lula made his third trip to China, spotlighting the fact that China has become Brazil's biggest trade partner.The development surprised Rodrigo Maciel, the executive secretary of the Brazil-China Business Council, based in Rio."We weren't expecting China to pass the U.S. as China's biggest trading partner until 2011 or 2012," Maciel said.

Monday, July 6, 2009

China Begins Pilot Program to Settle Trade in Yuan (Renminbi)

(from New York Times)

SHANGHAI — China has officially opened a pilot program to allow companies to settle imports and exports in renminbi in selected regions, marking a major step toward eventually internationalizing the Chinese currency.

Three pairs of Shanghai companies with their Hong Kong and Indonesian counterparts signed contracts on Monday to be the first to settle business deals in the Chinese currency. Executives said the move would save costs and avoid exchange rate risks.

Bank of China and Bank of Communications were the first lenders to clear transactions in renminbi, considered a lucrative business given China’s expanding economy and huge presence in international trade.

Hong Kong also kicked off the long-awaited yuan settlement program on Monday.

HSBC said it completed its first renminbi trade settlement with Shanghai and its first cross-border credit transaction.

“Trade settlement in yuan will make it more convenient for both Chinese and foreign firms who conduct China-related exports and imports,” said Xu Weimin, chairman of Shanghai Silk Group, who sold goods to China Products Holdings, a Hong Kong company, in one of the contracts signed on Monday.

“It will help both of them save costs,” Mr. Xu told Reuters on the sidelines of a ceremony to mark the start of renminbi settlements. “For Chinese companies, it also has the function to avert exchange rate risks.”

Caught off guard and partly lacking the skills to hedge against foreign exchange volatility, many small Chinese exporters have closed after China revalued the renminbi by 2.1 percent against the dollar in July 2005. The renminbi has appreciated by a further 19 percent against the dollar since then.

In announcing the renminbi settlement program in April, Beijing said it would initially be confined to certain areas, including Hong Kong and Macau, outside mainland China, and to Shanghai and China’s key export province of Guangdong in the south.

The program would also be used between the Association of South East Asian Nations and Yunnan and Guangxi regions in southern China before it is launched elsewhere.

Although the total amount in the first batch of deals signed on Monday was small, less than 14 million renminbi, or $2 million, state media said around 400 Chinese companies had already won approval to conduct renminbi business and predicted that the program would have huge potential.