world growth

world growth

Saturday, December 4, 2010

China's gold imports increase 480%

China's gold import has soared to a record 209 tonnes this year, putting it on track to overtake India [ Images ] as the world's largest consumer of the yellow metal and become a significant force in global bullion prices.

The surge comes at a time when Chinese investors look for insurance against rising inflation and currency appreciation, the Financial Times reported.

China, already the largest bullion miner, imported more than 209 tonnes of gold during the first 10 months of the year, a five-fold increase from an estimate of 45 tonnes last year, paving the way for Beijing to overtake India as the world's largest consumer of gold.

Chairman of the Shanghai Gold Exchange, Shen Xiangrong, said uncertainties about the Chinese and global economies and inflationary expectations had 'made gold, as a hedging tool, very popular'.

China's growing gold consumption came from all factors, including jewellry sales, private investment, as well as industrial and central bank demand. In 2009, gold consumption in China reached 462 tonnes in all sectors.

And China's demand for gold has increased an average of 13 per cent annually over the past five years, making China the world's second largest consumer market for gold after India, the state-run Xinhua news agency reported.

"Investment is really driving demand for gold," said Cai Minggang, at the Beijing Precious Metals Exchange.

"People don't have any better investment options. Look at the stock market, or the property market -- you could make huge losses there," the report quoted Cai as saying.

China has encouraged retail consumption, with an announcement in August of measures to promote and regulate the local gold market, including expanding the number of banks allowed to import bullion.

The rise in Chinese demand could further inflate gold prices.

Bullion hit a nominal all-time high of $1,424.10 a troy ounce last month.

But adjusted for inflation, prices are far from the 1980 peak of $2,300, the Financial Times said.

"The trend is undeniable -- gold demand in China is rising rapidly," said Walter de Wet, of Standard Bank in London.

China surpassed South Africa three years ago as the world's largest gold producer. Chinese total gold demand rose last year to nearly 450 tonnes, up from about 200 tonnes a decade ago, according to the World Gold Council.

Analysts anticipate a further leap this year, putting the country with in a striking distance of India's total gold demand of 612 tonnes in 2009, the paper said.

Thursday, November 11, 2010

China Inflation Jumps To 25-Month High In October

A jump in food costs drove China's inflation to a 25-month high in October despite government efforts to cool living costs, raising the possibility it might impose new controls that could further slow economic growth.

The 4.4 percent inflation rate — due mostly to a 10.1 percent increase for food — was far above the official target of 3 percent and a sharp jump from September's 3.6 percent, official figures showed Thursday. The increases exceeded forecasts by private sector analysts.

While other governments try to shore up shaky growth, Beijing wants to cool inflation and guide China's rapid expansion to a more sustainable level after its stimulus-fueled rebound from the global crisis. It raised interest rates last month and ordered banks on Wednesday to increase reserves in a move to curb lending.

Inflation is so far limited to food but could spread as money from Beijing's stimulus and a flood of bank lending courses through the economy, said William Hess, managing director of China Analytics, a Beijing research firm.

"They're going to have to be very careful about how they manage inflation overall," Hess said. "They don't want it to spread more broadly and contribute to a broader public concern about where prices are heading."

Inflation is especially sensitive in a society where poor families spend up to half their incomes on food. Rising incomes have helped to offset price hikes, but inflation erodes the value of savings and undercuts economic gains that help support the ruling Communist Party's claim to power.

"China needs to do more to keep this year's inflation under the target ceiling," statistics bureau spokesman Sheng Laiyun said at a news conference.

Sheng gave no details but Hess said Beijing might impose price controls if the cost of basic items such as grain continues to rise. Unexpectedly strong inflation also might prompt new interest rate hikes.

China's post-crisis growth peaked at an explosive 11.9 percent in the first quarter of this year. It cooled to 9.6 percent in the three months ended September as Beijing clamped down on a boom in bank lending and real estate investment.

Any moves that further slow growth could affect the United States, Australia and other economies by cutting demand for their exports of iron, machinery and other goods.

The announcement came as leaders of the United States, China and other major economies gathered for the Group of 20 meeting in Seoul, South Korea, aimed at reviving global growth and reducing imbalances in global trade and financial flows.

China's food price inflation has risen steadily this year, increasing from 5.7 percent in June to 8 percent in September.

October wholesale prices rose more strongly than consumer prices, up 5 percent over a year earlier, suggesting producers face pressure to pass on costs to consumers.

Beijing has expressed concern that a weaker dollar and the Federal Reserve's moves to inject money into the U.S. economy to stimulate growth might fuel inflation. That might boost the cost of China's imports of wheat and other commodities.

"As imports of food start to increase, there is a risk that some of that inflation may leak back into the Chinese economy," said Hess.

Also Thursday, the government reported the surge in bank lending eased in October, with total loans of 587.7 billion yuan ($86 billion). That was down from September's 595.5 billion yuan — a figure analysts said was so far above government plans that it might have triggered the Oct. 19 rate hike as a warning to lenders to curb credit.

Growth in factory output and retail sales also eased in October, though both still rose at double-digit rates over a year earlier, the government reported.

Industrial production rose 13.1 percent, down from September's 13.3 percent. Retail sales increased 18.6 percent.

The World Bank said last week China's inflation may stay as high as 3.3 percent through next year.

Monday, October 11, 2010

China earns $1.5 billion from copper trading

China sits on up to $1.5bn in copper profits

By Javier Blas in London

China is sitting on a profit of nearly $1.5bn from a bold trading strategy in copper based on expectations of an emerging markets-led boom.

Beijing’s bet that a “super-cycle” in metals markets would keep copper prices high, despite the financial crisis, has paid off, according to dealers’ calculations. The substantial paper profits come after China’s State Reserves Bureau, the official body in charge of the country’s strategic commodities reserves, mopped up copper surpluses last year when the crisis was at its worst and prices had tumbled.

As demand for metals has recovered, copper markets have tightened dramatically and prices have soared.

Metals traders estimate that the SRB bought between 250,000 and 300,000 tonnes of copper, equal to nearly 2 per cent of global annual production, in early 2009 at a price of less than $3,500 a tonne. The SRB does not disclose its purchases. As copper prices rose last week to a two-year high of $8,349 a tonne, traders and industry executives calculated Beijing’s paper profits to be about $1.2bn-$1.5bn.

Traders and analysts believe China is preparing to cash in on its paper gains soon. Joshua Crumb, metals analyst at Goldman Sachs, said China’s SRB was likely to “prudently sell or lend metal” to keep a “lid on price spikes over the next few quarters”. The gains are a coup for the SRB after big losses in 2005, when an executive working for its trading arm, Liu Qibing, built a short position in copper – or bet on falling prices – equal to between 100,000 and 200,000 tonnes. The losses prompted the SRB to overhaul its trading “to avoid more huge losses on investments”.

CopperChina has never explained, or acknowledged publicly, its buying. But mining executives and traders familiar with the SRB said it had bet that a “super-cycle” of high metals prices, powered by urbanisation and industrialisation of emerging economies, would survive the effects of the financial crisis.

Copper prices have risen to within 6.6 per cent of their all-time high of $8,940 a tonne, set in July 2008, as demand from emerging countries and disappointing mine supplies have tightened the market. Analysts believe prices will reach a fresh all-time high, with banks and consultants forecasting prices of $9,000-$11,000 in 2011. The rise in copper and other base metals prices will dominate this week’s London Metal Exchange Week, the metals and mining industry’s annual gathering. The LME index, a basket tracking lead, aluminium, copper, nickel, tin and zinc prices, last week hit its highest level in two years.

Sunday, September 12, 2010

Historic Taiwan-China trade deal takes effect

Keelung Port in northern Taiwan (August 2010) Trade between China and Taiwan already totals $110bn a year

A trade pact between China and Taiwan, widely seen as the most significant agreement since civil war divided them in 1949, has come into effect.

The Economic Co-operation Framework Agreement (ECFA) cuts tariffs on 539 Taiwanese exports to China and 267 Chinese products entering Taiwan.

The majority of people in Taiwan expect the deal to bring economic benefits.

But opponents fear it will make the island too dependent on China, which still considers it a renegade province.

The deal is seen as the culmination of efforts by Taiwan's President, Ma Ying-jeou, who has vowed to reduce tension.

Last month, the island's parliament approved it without a single dissenting vote, despite protests from hundreds of thousands of people and an ugly scuffle between MPs from the ruling and opposition parties.
'Peace and prosperity'

It is hoped that the ECFA, signed by Chinese and Taiwanese leaders in June, will boost bilateral trade that already totals $110bn (£73bn) a year.

Almost $14bn of Taiwanese goods exported to China will have their tariffs reduced or removed. Chinese exports worth just under $3bn will enjoy lower or zero tariffs.

Beijing agreed to tariff cuts on half as many products to appease opponents to the agreement who said it might lead to Taiwan being flooded by cheap Chinese products, damaging local industries and leading to job losses.

The Taiwanese government has said it believes the ECFA will help create 260,000 jobs and boost economic growth by as much as 1.7%.

"This will not only have a wide-ranging influence on the future development of ties between China and Taiwan," Lo Chih-chiang, a spokesman for President Ma told Taiwan's Central News Agency. "It will also help further consolidate peace and prosperity."
Taiwan exports

China's commerce ministry said it was pleased the ECFA had taken effect.

"We believe the implementation of the pact will further promote exchanges and co-operation in cross-strait trade and help the economies develop together," spokesman Yao Jian said in a statement.

The BBC's Cindy Sui in Taipei says the Chinese and Taiwanese governments are shortly expected to begin negotiations on further trade deals which could allow even greater access to each other's markets.

Analysts believe this trend could help reduce tensions between the two sides, which have yet to sign a peace treaty.

Sunday, August 22, 2010

China begins yuan trade against Malaysian ringgit

SHANGHAI — China began allowing the Malaysian ringgit to trade against its currency in its domestic foreign exchange market on Thursday — another step toward raising the yuan's scope in international trading.

As of Thursday morning, the central bank began setting a "central parity rate" for the yuan and ringgit, much as it does for the U.S. dollar and several other major currencies.

The currencies will be allowed to fluctuate by as much as 5 percent daily above and below the parity rate, which was 0.46204 ringgit per yuan on Thursday.

China's parity rates for foreign exchange are weighted averages of prices — given by banks known as market makers because of their ability to quote both buy and sell rates — excluding highest and lowest offers.

China limits trading of its currency mainly to use in international trade, with market volatility kept in a tight range thanks to daily trading limits. Most of its international trading is done in U.S. dollars.

But Beijing aspires to see the yuan used more widely as an international currency, and to reduce its own exposure to exchange rate volatility stemming from its massive investments in U.S. dollar assets.

Expanding trading to include the ringgit is meant to promote China-Malaysian trade and reduce foreign exchange costs, the China Foreign Exchange Trading Center said in a notice on its Web site.

Allowing broader trading for the yuan is also expected to improve market liquidity, it said.

Apart from the U.S. dollar and ringgit, the yuan also trades against the euro, Japanese yen, Hong Kong dollar and British pound.

Sunday, August 8, 2010

China invests $40 bln in Iran oil and gas

TEHRAN — Iran's main economic partner China has invested around 40 billion dollars in the Islamic republic's oil and gas sector, a senior Iranian official said on Saturday.

Deputy Oil Minister Hossein Noqrehkar Shirazi also said that Tehran's oil exports to China fell by 30 percent in the first six months of 2010 compared with the corresponding period last year.

"The volume (of Chinese investment) in upstream projects is 29 billion dollars," Noqrehkar Shirazi told Mehr news agency, adding that Beijing had signed contracts worth another 10 billion dollars in petrochemicals, refineries and oil and gas pipeline projects.

He said China has also put forward proposals to participate in building seven new refineries in Iran.

Iran, OPEC's second largest oil exporter, has a dilapidated refining sector, forcing it to import petroleum products such as gasoline to meet domestic needs.

Noqrehkar Shirazi said that Chinese imports of Iranian oil fell in the first half of the year.

"Although Iran is still among top 10 oil exporters to China, it is the only country which in the first six months of 2010 has seen its exports to China falling," he said.

"The volume of oil exports to China in the first six months of this year decreased to less than 9.02 million tonnes or 66.12 million barrels. This shows a 30 percent decrease" over the first half of 2009, he added.

In recent years, China has filled the gaps in Iran's energy sector left by Western firms forced out by international sanctions.

In 2009, China became Iran's premier trading partner, with bilateral trade worth 21.2 billion dollars against 14.4 billion dollars three years earlier.

Commercial ties between the two countries were almost non-existent 15 years ago, amounting to just 400 million dollars.

According to official data, Western sanctions opened the way for Chinese companies, which last year directly supplied Iran with 13 percent (7.9 billion dollars) of its imports.

Iranian estimates also suggest that an equivalent amount was imported indirectly through the United Arab Emirates in 2009.

China backed the fourth set of UN sanctions against Iran over its contested nuclear programme, but Beijing has consistently urged the world powers to resolve the crisis diplomatically.

On Friday, it also opposed the latest unilateral sanctions on Iran imposed by the European Union.

Saturday, July 24, 2010

China South Locomotive wins 4 billion yuan contract in Malaysia

-- China South Locomotive and Rolling Stock Corp. (CSR) Saturday announced one its subsidiaries had secured a 4-billion-yuan (591.9 million U.S. dollars) contract to supply rail vehicles in Malaysia.

The contract agreed by CSR Zhuzhou Electric Locomotive Co. and the Transport Ministry of Malaysia requires the vehicles to be delivered by May 2012, said Dai Binggang, senior manager of the company.

The vehicles, with a top operational speed at 140 km per hour, would replace existing inter-urban vehicles on the south-to-north rail in Kuala Lumpur, and reduce operating costs by 15 percent a year, said Xu Zongxiang, general manager of the company.

Both Dai and Xu refused to give the number of vehicles to be supplied.

CSR is China's biggest maker of rail vehicles, and its first-quarter net profit surged 84.55 percent year on year to hit 355 million yuan.

Tuesday, July 20, 2010

EU-China Trade In Facts And Figures

China in the world

* China has now become the biggest exporter in the global economy ahead of Germany and the US. China accounts for about 11 % of world trade in goods.
* China is the first major economy to rebound effectively from the crisis. In the first part of 2010, China’s growth rates compare with levels before the crisis. China is on track to overtake Japan and become the world's second largest national economy in 2010.
* More than half of China's exports are currently produced by foreign invested enterprises (processing trade). Neighbouring Asian companies in Japan, Taiwan, Hong-Kong and South Korea play a major role in this process. The role of European enterprises in China’sprocessing trade regime is limited, but the majority of finished consumer goods is exported to the EU.

EU-China trade

* Bilateral trade in goods was €296 billion and €31 billion in services in 2009.
* Europe's imports from China grew by 16.5% on average per year during 2004-2008. This growth rate reversed in 2009 with a 13% drop recorded due to the crisis. Nevertheless, the EU still imported €215 billion worth of goods in 2009 from China. China thus remains Europe's biggest source of manufactured imports.
* China is Europe's fastest growing export market. Europe exported €81.7 billion worth of goods to China in 2009 - up by 4% compared to 2008.
* Exports from the EU to China grew by approximately 60% or €30 billion between 2005 and 2009. Through better market access, European exporters should be well placed to sell more of their quality products on the rapidly expanding Chinese consumer market.
* Europe runs a surplus on trade in services with China of €5.0 billion in 2009 (up from €4.9 billion in 2008). This is about 27 times smaller than its trade deficit for goods.
* Europe's total trade deficit (including services) in 2009 was €128 billion euros. The trade deficit is focussed in office and telecom equipment, textiles, and iron and steel. The trade deficit reflects a huge shift within the economies of Asia to focus production in China. Althoughimports from China have surged, to the detriment of developing Asia and notably Japan, Asia's share of total EU imports has remained rather stable over the last decade. But the deficit still reflects the considerable problems EU businesses have accessing the Chinese market.

EU-China investment

* European companies invested €5.3 billion in China in 2009 (up from €4.7 billion in 2008). This is about 2-3% of overall European foreign direct investment.
* China invested €0.3 billion in 2009 (compared to a net disinvestment of €1.8 billion in Europe in 2008).

Wednesday, July 14, 2010

China and Argentina sign $10 billion railway deals

BEIJING - China and Argentina signed railway deals totaling $10 billion on Tuesday, amid efforts by Beijing to forge stronger commercial ties with Latin America.

Twelve agreements were reached between the two countries during Argentine President Cristina Fernandez de Kirchner's five-day visit to China. Six deals were inked at noon, witnessed by Kirchner and Chinese Vice-Premier Hui Liangyu. The rest of the agreements were signed later in the day following talks between Kirchner and her Chinese counterpart Hu Jintao.

The 10 railway projects - ranging from two to five years - include the purchase of Chinese railway technology and investments in Argentina's rail line electrification projects, Argentine Transport Minister Juan Pablo Schiavi told AFP.

Other deals cover areas like infrastructure, fishery, energy, and plant quarantine.

The two countries agreed to collaborate in light rail and subway construction in Argentina. China will also provide export credit to Argentina for purchases of locomotives.

At least three contracts focus on a $2.5 billion rail renovation project in Argentina's capital Buenos Aires. It requires the Argentine government to purchase materials and technologies for improving railway networks from two Chinese companies: China Northern Railway (CNR) and China Southern Railway (CSR).

During the talks, Hu and Kirchner also expressed wishes to push forward stronger trade ties.

China has become an increasingly important global player in the rail sector as its railway-related exports have been rising fast in the past years.

CSR, one of China's two major railway equipment manufacturers, said it signed contracts to export products worth $1.2 billion in 2009 alone, compared to less than $59 million in 2001.

"The exported products are high-end and more developed countries are on our client list," said a source from the corporation, who required anonymity.

CSR, which provides 70 percent of China's bullet trains in operation, is now exploring the markets of developed countries. Last year, it started exporting rapid transit vehicles and freight wagons to Singapore and Australia.

Analysts also expect high-speed railway related technologies and equipment to be the highlight of China's rail export in the future.

Yang Hao, professor in railway transport with Beijing Jiaotong University, said that compared to countries like Germany, France and Japan, China may not be able to excel in a single technology, but its advantage lies in "assembly" - absorbing advanced single technologies and bringing them together in one railway project.

To that effect, the Ministry of Railways has introduced high-speed train technologies from France, Germany and Japan in the past years, while making its own innovations.

"Absorbing others' strong points adds to China's competitiveness in the sector, in addition to other advantages such as lower construction cost and a shorter construction period," he said.

In China, it usually takes three to four years to build a high-speed railway. At least 10,000 km of high-speed rail line is now under construction.

As a newcomer in the high-speed railway market, China still has to learn to better meet the needs of potential clients, Yang said.

Earlier reports said the ministry wants to export China's high-speed railway technology to North America, Europe and Latin America.

Wang Zhiguo, vice-minister of railways, said in March that China's State-owned companies are already building high-speed lines in Turkey and Venezuela. Many countries, including the United States, Russia, Brazil and Saudi Arabia, have also expressed interest.

Tuesday, June 22, 2010

Chinese currency policy may negatively affect Japan

Many countries, including the US, have welcomed the Chinese government’s decision to make it’s currency policy more flexible. However, with the complicated intertwining of the economies of China and Japan, the impact of the new policy could be harmful to the island country.

Many companies from Japan have manufacturing locations in China where they produce a variety of goods sold both in Japan and to export to other countries. A higher yuan could hurt some of these companies as the costs of raw materials and labor will rise. This could really hurt some of the companies, such as Toyota, who are already dealing with labor issues in their coastal factories.

There are some businesses in Japan who would benefit from a stronger yuan, on the other hand. The biggest to benefit would be those producing heavy equipment for the construction industry, which is very strong in China right now. These companies would see increased profits from the trade.

Japan imports more than $125 billion in Chinese goods annually, particularly apparel and food stuffs. At the same time, China imports $112 billion in goods from Japan and those numbers are getting closer every year.

Economists say that trade with China is a major factor in the recovery Japan has been experiencing and that it shows no sign of slowing down. While some things that are being exported to China from Japan may get some price increases it may help the Japanese economy with the deflation they have been fighting.

Another result of the stronger yuan could help Japan in a different direction and that is with tourism. There has been a rising interest in Chinese tourists as they find it relatively inexpensive to vacation in Japan. There has been so much demand that last month, Japan made it easier for the Chinese to get visas.

Monday, June 14, 2010

China records $19 billion trade surplus in May

Exports surprise, driving trade surplus

China recorded its largest trade surplus this year in May, as exports grew more than expected.

The trade surplus rose sharply to $19.53 billion in May from $1.68 billion in April when the country returned to a trade surplus after seeing a deficit of $7.24 billion for the first time in 70 months.

The country's exports went up 48.5 percent year-on-year to $131.76 billion in May, with the growth rate 18.1 percentage points higher than the previous month, the General Administration of Customs (GAC) announced Thursday.

The May exports reading was the highest since October 2008. The growth rate figure also hit a new high since March 2007.

The previous median estimate for exports by the market was 32 percent, as analysts are concerned the European sovereign debt crisis is likely to have an impact on China's exports to its largest trading partner, the European Union (EU).

However, exports to the EU jumped from $22.3 billion in April to $25.9 billion in May, according to the GAC. The bilateral trade between China and the EU totaled $177.49 billion, an increase of 37.4 percent over last year.

Likewise, exports to other major developed economies all saw an increase in May.

Exports to the US went up from 19.15 percent year-on-year in April to 44.3 percent in May, and those to Japan jumped by 37.1 percent in May.

Exports to the Association of Southeast Asian Nations rose 48 percent last month.

"Stronger-than-expected demand recovery in major developed economies seemed to be the main driver," Wang Tao, head of China Economic Research at USSecurities, said in a research note distributed Thursday.

The imports jumped 48.3 percent to $112.23 billion last month, with the growth rate slightly lower compared to April. Lu Zhengwei, a senior economist at Industrial Bank, attributed the slowing growth of imports to weakening domestic demand.

Imports are expected to grow much stronger than exports this year, as the sharply widening trade surplus was driven largely by surging growth seen in steel, copper and zinc exports, which won't be sustainable through the year, economists Sun Mingchun and Sun Chi at Nomura Securities said in a note.

They expected China's trade surplus to narrow to $70 billion this year from $196 billion in 2009.

However, Wang believes export growth, though expected to slow from the third quarter onwards, will "continue to outpace imports in volume for the rest of the year, leading to a sizable trade surplus for 2010."

Monday, June 7, 2010

Australia-China trade to top $85 billion

SYDNEY — Australia's two-way trade with China is set to top 100 billion dollars (85 billion US) this year, Foreign Minister Stephen Smith said Friday as he welcomed further investment from the Asian giant.

China is Australia's largest trading partner and in 2009 became the country's biggest export market as it snaps up raw materials such as iron ore needed for its rapid industrialisation.

Smith said last year may have been a defining moment in Australia's economic relations with China, with two-way trade reaching 85 billion dollars, almost 17 percent of total trade.

"Thirty years ago our two-way trade in goods and services with China was under one billion dollars, three percent of Australia's total trade," he told a conference in Perth.

"This year two-way trade may well reach the 100 billion dollar mark."

The foreign minister said Chinese investment in Australia was also expanding, and the government of centre-left Labor Prime Minister Kevin Rudd was open to more.

"Australia maintains, as it has for many years, a consistent, open and welcoming stance towards foreign investment, whether from China or elsewhere," Smith told a Committee for Economic Development of Australia symposium.

"Since the government came to office in December 2007, Australia has approved around 60 billion dollars of Chinese investment, including investment in Australian business and real estate."

Australia's vast resources sector is the subject of intense commercial interest to fast-growing China, with a particular appetite for its deposits of iron ore and coking coal -- key ingredients for steelmaking.

In 2009 tensions flared over the arrest of Rio Tinto executive and Australian passport holder Stern Hu in Shanghai and a visit to Australia by exiled Uighur leader Rebiya Kadeer.

However, trade with China helped Australia ride out the global slowdown as the only advanced economy not to enter recession.

Wednesday, May 19, 2010

China to buy 7 Brazil firms for $1.72 billion

RIO DE JANEIRO, - China's state-run electricity grid firm has agreed to buy seven Brazilian transmission companies from Plena Transmissoras for 3.1 billion reais ($1.72 billion), local media reported on Tuesday.

Plena, controlled by a group of Spanish energy firms, will sell seven of its 12 transmission divisions to State Grid Corp of China, according to the business daily Valor Economico, which cited a Plena official.

The deal, which is subject to regulatory approval, includes the transfer of 1.3 billion reais ($722 million) in Plena debt to the Chinese company, which will receive access to 3,000 kilometers (1,864 miles) of transmission lines in Brazil.

Plena, controlled by Spanish firms Elecnor (ENOR.MC), Isolux and Cobra, previously rejected buyout offers from Cemig (CMIG3.SA), run by Brazil's state of Minas Gerais, and Colombia's ISA group, Valor said.

The vast majority of Brazil's transmission companies are run by the Brazilian government.

Wednesday, May 12, 2010

Greece debt crisis lows China's exports to Europe

European debt crisis and the consequent sovereign credit risk of developed economies and a new round of global financial market turmoil have limited direct impact on China, but indirect effects can not be ignored.

Overall, China's holdings of Greek government bonds and the Greek financial institution's assets are limited, which means that even if Greece defaults on its debt, the direct impact on China is limited. But if the Greek debt crisis can not be effectively checked, and then spread to Portugal and Spain and other euro zone countries, then China will face bigger risks.

The EU is currently China's largest export market, once the fragile EU economic recovery was again drawn into the plight of this debt crisis, China's export situation will become even more complicated.

According to Chinese statistics, in 2009 bilateral trade volume between Europe and China reached 364.1 billion U.S. dollars, accounting for 16.5% of China's total global trade. China's exports to Europe reached 236.28 billion U.S. dollars, accounting for 19.7% of China's total exports. Affected by the economic crisis last year, China's exports to Europe plummeted by 19.4%, and this year because of the Greek debt crisis, the prospects of China's exports to Europe becomes uncertain.

Affected by the debt crisis, the euro fell against the dollar to 14-month low. The recent sharp rise in the renminbi exchange rate against the euro makes the situation of China's exports to Europe more and more severe.

In addition, some analysts have pointed out that the European economic outlook is not promising, a large number of hot money may turn to flow into emerging markets like China, and this will aggravate the pressure of RMB appreciation and the risk of economic overheating in China.

Saturday, May 1, 2010

Baidu profit doubled after Google's China exit, stock jumps $90

NEW YORK -- Shares of Chinese search company Baidu leapt by nearly $90 Thursday after the company reported that its profit more than doubled following rival Google's exit from the search business in China.

Baidu's (BIDU) stock climbed 14%, or $88.49, to $709.87 a share. The stock has risen more than 80% since Google first announced in January that it might end its search business in China. Shares of Google (GOOG, Fortune 500), meanwhile, have fallen 12% over the same time period.

Google moved its servers out of the country and stopped censoring its search results in China on March 22. Chinese authorities have responded by blocking access to to certain search results for users within the country's borders.

During the scuffle with China, Google lost a significant share of the Chinese Internet search market, much to Baidu's benefit. Many Chinese Web sites that had been using Google's search engine switched to Baidu's engine during the quarter.

Google's market share in China fell to 31%, down from 35.6% in the previous three months, according to online traffic analyst Analysys. Meanwhile, Baidu's share rose to 64% in the first quarter, up from 58.4% in the fourth quarter.

Still, Baidu's results surprised even the most bullish analysts.

Late Wednesday, the Chinese search giant reported first-quarter net income of $70.4 million, or $2.02 a share, up 165% from a year earlier. Revenue rose 60% to $189.6 million.

According to a Thomson Reuters poll, Wall Street expected earnings of $1.52 per share on revenue of $180 million.

The company, which raised its sales outlook, said it still has plenty of room to grow.
0:00 /1:15New Google tone in unwelcoming China

"For the rest of the year, we will aggressively expand our research and development and sales teams to drive improvements in technology and monetization," Jennifer Li, Baidu's chief financial officer, said in a prepared statement.

Some analysts think that Baidu's strong quarter and recent stock movement had more to do with Google's exit from the China search market than Baidu's fundamentals.

"Not much has changed except that Baidu's biggest competitor has left," said Daniel Ruby, research director at Chitika Inc., an online advertising network. "It's free and easy for Baidu now -- who's really left there to challenge it?"

But Ruby also said that Baidu has tremendous growth potential independent of its competition.

"No one has really found the key to monetizing search in China," he said. "You've got to expect that Baidu will find better ways to monetize the incredible market share that they have. So I don't think this growth is temporary."

Saturday, April 24, 2010

113 Chinese companies in the latest Forbes Global 2000 list

The latest Forbes Global 2000 list includes 113 companies from Mainland China, 49 companies from Hong Kong, 39 companies from Taiwan, and 18 companies from Singapore.

The World's Leading Companies

The Forbes Global 2000 are the biggest, most powerful listed companies in the world. These global giants usually reorder themselves at a glacial pace, but sometimes--as with the volatile financial sector of late--with more abruptness.

Extreme vagaries of business or poor performance can take them off the list entirely. In any case, our composite ranking is the best snapshot of just how these titans compare. As we show, the corporate dominance of the developed nations is steadily receding. With respect not just to size but to what investors care most about, see our Global High Performers, an elite list of companies that set the pace in their respective industries.

Forbes' ranking of the world's biggest companies departs from lopsided lists based on a single metric, like sales. Instead we use an equal weighting of sales, profits, assets and market value to rank companies according to size. This year's list reveals the dynamism of global business. The rankings span 62 countries, with the U.S. (515 members) and Japan (210 members) still dominating the list, but with a combined 33 fewer entries.

This year, the following countries gained the most ground: mainland China (113 members), India (56 members) and Canada (62 members). Even Oman and Lebanon are now Global 2000 members. Also gaining a significant presence on our list this year are corporations from Ireland, South Africa and Sweden.

In total the Global 2000 companies now account for $30 trillion in revenues, $1.4 trillion in profits, $124 trillion in assets and $31 trillion in market value. All metrics are down from last year, except for market value, which rose 61%.

An analysis of the Global 2000 shows that despite the turmoil in the financial sector, banks still dominate, with 308 companies in the 2000 lineup, thanks in large measure to their asset totals. The oil and gas industry, with 115 companies, scores high in sales, profits and stock-market value, yet these sectors were not the leaders in growth over the past year. Insurance companies (up 27%) led all sectors in sales growth, while the leaders in profit growth were drugs and biotech firms (up 20%).

Monday, April 19, 2010

China to lend Venezuela $20 billion for oil exploration

Beijing Pledges $20 Billion to Venezuela

Venezuela and China inked a substantial deal on April 17, though Chinese President Hu Jintao (L) canceled his visit due to an earthquake in China.
Beijing and Caracas underscored their burgeoning ties over the weekend with $20 billion in Chinese financing, largely for Venezuela’s energy sector. The series of accords signed includes plans for a joint venture for exploration in the oil-rich Orinoco belt and secures Venezuelan oil for energy-hungry China. “This is a larger scope, a super heavy fund. China needs energy security and we’re here to provide them with all the oil they need,” said Venezuelan President Hugo Chávez in televised remarks. “China is going to give financing to Venezuela, to the Venezuelan people, to the Bolivarian Revolution…over the long-term and in large volume.” The funds could help salve the Andean country’s battered economy and infrastructure.

Chinese President Hu Jintao missed the signing ceremony after he cut short his Latin American tour in the wake of an earthquake back home that claimed roughly 2,000 lives. But his unforeseen absence made the financial pledge no less substantial. At the heart of the new deal is a $16.3 billion joint venture between Petróleos de Venezuela (PDVSA) and China National Petroleum Corp (CNPC) to develop the Junin-4 block of the Orinoco oil belt. (View a map.) The venture gives PDVSA 60 percent of shares compared to 40 percent for CNPC in a pact that remains valid for 25 years. A PDVSA statement forecast that the Junin-4 block’s production would reach 50,000 barrels a day by 2012 and hit 400,000 by 2015.

Chávez indicated that agreements—signed by energy and finance ministers as well as development bank officials from each country—would also draw funds for Venezuelan infrastructure projects, although details had yet to be released. Moreover, the loan comes on top of an earlier $12 billion bilateral investment fund.

The deals mark increasingly warm ties between the two countries. Chinese official statistics put bilateral trade volume at $7.15 billion in 2009, up from less than half a billion in 2002. China tripled imports of Venezuelan oil between 2005 and 2008 and launched Venezuela’s first satellite in 2008. Last month, Beijing delivered four of 18 Chinese military planes—replete with air-to-ground missiles—purchased by Caracas. Still, The New York Times notes that the energy ties between the two countries remain blurred, given that Venezuela reports exports of 460,000 barrels of oil a day to China but Beijing places the figure closer to 132,000. Also, Venezuela has declared several oil-industry accords with foreign partners in the past decade, though few have come to fruition.

Should Beijing make good on its cash pledges to Caracas, the loans may soften blows to Venezuela’s economy. Last week, Chávez renewed for another 60 days an ongoing electricity emergency, which has led to power rationing. Venezuela’s economy shrank by 3.3 percent last year and 5.8 percent in the fourth quarter. The Central Bank reported that inflation ran at 26.2 percent last month and Venezuela devalued its currency in January.

The closer bilateral relations reflect warming ties between China and Latin America. A new report by the UN Economic Commission for Latin America and the Caribbean finds that China will likely overtake the European Union as Latin America’s second largest export market by 2015.

Sunday, April 11, 2010

China records first trade deficit in 6 years

BEIJING - China reported its first monthly trade deficit in six years in March, mainly due to surging import volumes and rising commodity prices.

Exports surpassed $112 billion (S$156 billion) in March, up 24 per cent year on year, while imports increased by 66 per cent to more than $119 billion, resulting in a trade deficit of over $7.2 billion, according to figures released by the General Administration of Customs (GAC) on Saturday.

Combining exports and imports, the country's foreign trade rose nearly 43 per cent year-on-year to $231 billion, GAC figures show.

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Regionally, China's trade surplus with the United States and the European Union dropped 3.5 and 13.1 per cent year-on-year respectively, but its deficit with Japan more than tripled from the same month last year.

The Association of Southeast Asian Nations' (ASEAN) trade surplus with China skyrocketed to $2.7 billion from $300 million last year, buoyed by the ASEAN-China Free Trade Area established on Jan 1.

"The deficit stemmed mainly from the fast growth of imports by China amid its efforts to increase imports against the backdrop of the global economic downturn," the GAC said in a report.

In March, spurred by domestic investment demand, the surging import of raw materials such as oil, iron ore and copper pulled up total imports by 15.3 per cent. Vehicle imports during the period of $3.2 billion, a 240-per cent rise year-on-year, also increased the deficit, according to the GAC.

The report also said shrinking exports of labor-intensive products contributed to the historic deficit as well.

Huang Guohua, director of the statistical analysis department of GAC, predicted the trade balance would return to normal after seasonal factors fade away and the effects of foreign investment and trade take over.

Yao Jian, spokesman of the Ministry of Commerce, insisted that maintaining the trade balance is the best scenario for the nation, adding that the continuous improvement of the trade balance has created a stable environment for the yuan.

The rising pressure on the yuan would not be soothed, however, by the temporary and unsustainable deficit in March, said Dong.

In the first quarter, China's trade surplus declined to nearly $14.5 billion, a slump of 76 per cent year-on-year, while the imports and exports rose 44 per cent to $617 billion.

Monday, April 5, 2010

Will China raise interest rates?

CHINA’S inflation rate rose to 2.7% in February from 1.5% in January, prompting many to anticipate an interest hike soon by The People’s Bank of China (PBC). This has dampened investor sentiment somewhat. In many countries, maintaining price stability is often the primary if not the sole mandate of the central bank.

In China, the responsibilities of the PBC are not that straight-forward. For example, while conducting monetary policy to maintain stable economic development is listed as one of its main functions, ensuring that the renminbi’s exchange rate is at a reasonable level is also an important responsibility of the PBC. Hence, before deciding whether to raise the interest rate, the PBC needs to take many issues into consideration, not just the inflation rate.

Figure 1 shows China’s inflation rate as measured by the consumer price index and the change in the benchmark one-year lending rate. When China raised interest rates in July 1995, the inflation rate had already fallen substantially from the peak in 1994. Then, as disinflation turned into deflation, the interest rates were cut many times from 1997 to 1999. When inflationary pressures returned in 2002, the PBC let the inflation rate rise above 5% before deciding to raise interest rates at the end of September 2004. By then, the inflation rate had already turned down.

Then, the PBC raised interest rates two times in 2006 when the inflation rate was a mild 1.2%-1.3%. As inflationary pressures accelerated, the PBC raised rates aggressively in 2007. Then, when inflation rate was still above 4% in September 2008, the PBC began the first of five consecutive rate cuts over the course of four months. This shows that inflation is not the only factor that determines the change in interest rates.

Negative real interest rate is another commonly cited reason in support of an imminent increase in benchmark interest rates. The one-year fixed deposit rate currently stands at 2.25%. With a 2.7% inflation rate, savers are receiving negative real deposit rates. Negative deposit rate is undesirable because it discourages savings and drives up inflationary pressures.

Figure 2 plots the change in the one-year lending rate against the difference between the one-year fixed deposit rate and inflation rate. From 1995 to 2009, there were three periods when negative deposit rate occurred for a prolonged period, i.e. in 1995, 2003-2005, and 2007-2008. In all the three times, the one-year lending rate was raised.

In the first time, the lending rate was raised more than one year after negative deposit rate first occurred. In the second time, the lending rate was raised 11 months after negative deposit rate first occurred. In the third time, the lending rate was raised before negative deposit rate occurred. However, the one-year lending rate was lowered in September 2008 even when it was still in a negative deposit rate environment.

The first two instances suggest that the PBC would definitely raise interest rates if there is a sustained period of negative deposit rate, but not immediately after negative deposit rate occurred. The third instance showed that the PBC raised and lowered interest rates for reasons other than negative deposit rate. This again shows other factors were at play as well.

Figure 3 plots the change in the one-year lending rate against China’s quarterly real GDP growth. It shows that the one-year lending rate was raised after China’s economy registered above 9% growth for an extended time period, as indicated in 1995, 2004, 2006 and 2007. In 1996, although real GDP growth remained above 9%, interest rates were lowered in response to falling inflation rate.

Apart from showing that the PBC does not rely on a single variable to determine its interest rate policy, the three figures above also suggest that the PBC is less hesitant in lowering interest rates than hiking them. The PBC would lower interest rates once economic growth is threatened.

In contrast, when it comes to raising interest rates, the PBC has been more careful. For example, after China’s economy had recovered from the Internet bubble bust and inflation was rearing its ugly head towards the end of 2003, the PBC waited until the economy had fully recovered from SARS before raising interest rates.

The quantum of changes during interest rate hikes has usually been smaller than when interest rates were cut. It would appear that when conducting its monetary policy, the PBC places the highest priority on economic growth ahead of containing inflation.

China’s economy surged 10.7% in the fourth quarter 2009. A similarly spectacular performance is expected for the first quarter 2010, due partly to a low base effect. As the low base effects taper off, economic growth is expected to grow at a more moderate pace.

i Capital is of the opinion that three things must first take place before the PBC will raise interest rates.

One, economic growth must grow at a self-sustaining pace, creating sufficient employment opportunities. Two, property prices continue to surge unabated despite selective tightening measures being introduced to cool the property market.

Three, the inflation rate shows no sign of easing in the months ahead, especially in the second half of the year, indicating embedded inflationary pressures. Hence, i Capital expects the PBC to wait a while before making its next move.

Thursday, March 25, 2010

China signs $40 billion LNG deal with Australia

Energy-hungry China has signed a landmark $40 billion deal to buy liquefied natural gas (LNG) from Australia for 20 years that Chinese officials say would put the strained relations between Beijing and Canberra back on track.

Under the deal, the China National Offshore Oil Corporation, will buy 3.6 million tonnes of LNG per year from British gas producer BG Group's Curtis LNG facility in Queensland in Australia, official China Daily reported on Thursday.

It is the world's first purchase agreement for supply of LNG from coal seam gas, and marks the first sale of LNG from coal seam gas to China, it quoted CNOOC as saying in a statement.

It is one of Australia's biggest single company-to-company LNG contract.

The deal is worth about $40 billion based on a crude oil price of $70 per barrel, BG chief executive Frank Chapman said after the signing ceremony.

The multi-billion-dollar deal suggests that Sino-Australian commercial ties have been largely unaffected by other tensions such as the Rio Tinto case, said analysts.

The deal was announced even as a Chinese court in Shanghai on Wednesday concluded its three-day trial of four of Australian company's Rio Tinto executives, under trial for bribery and industrial espionage.

The four, including Australian national Stern Hu and his three Chinese colleagues -- Liu Caikui, Ge Minqiang and Wang Yong -- were charged with taking bribes of more than 86 million yuan ($12.6 million) and stealing commercial secrets.

All four pleaded guilty to bribery charges on the first day of the trial although they disputed the specifics of the charges.

The guilty plea came as a surprise to many as Rio Tinto had earlier defended the innocence of its four employees, claiming that they "had done nothing wrong".

The detention of the four, angered Australia and affected its relations during the past few months.

But the two appeared to have warmed up to commercial ties again with Rio Tinto signing a deal last week with China's state-backed metals group CHINALCO to develop a massive iron ore mine in West Africa.

Under the deal CHINALCO will pay $0.85 billion for 47 per cent of the Simandou project in Guinea.

"Energy collaboration will be increasingly important in Sino-Australia commercial ties. The two countries, which have vital roles to play in global energy security, will undoubtedly strengthen cooperation in the area," said Huo Jianguo, researcher at the Trade Research Institute affiliated to the ministry of commerce.

"Resources are the backbone of Australia's trading relationship with China. One-third of Australia's mineral exports go to China, and China is our second-largest trading partner for LNG," the daily quoted Australian resources and energy minister Martin Ferguson. "Australia's trading relationship with China is healthy and mutually beneficial," said Ferguson, adding that his country is committed to strengthening that relationship.

More than $26 billion of Chinese investment was approved in the Australian resources sector in 2008 and 2009, he said.

Under the latest agreement, CNOOC will acquire a 5 per cent equity interest in the reserves and resources of certain BG Group tenements in the Surat Basin in Queensland. CNOOC will become a 10 per cent equity investor in the first of the two liquefaction trains, which will form the first phase of the Curtis project.

BG Group and CNOOC will also build two LNG ships in China.

Use of natural gas fits well with China's efforts to build an environment-friendly economy, said Liu Qi, deputy head of the National Energy Administration.

China will see more natural gas imports as domestic production cannot keep pace with the rapidly rising consumption, Liu said.

Natural gas accounted for around 3 per cent of the country's total energy consumption last year in China and the government plans to raise the proportion to 5 per cent this year.

Tuesday, March 16, 2010

Taiwan needs China trade pact to survive

TAIPEI — Taiwan President Ma Ying-jeou on Tuesday defended a proposed controversial trade agreement with China, saying the self-ruled island faced isolation without it.

Taiwan's China-friendly administration hopes the pact, the Economic Cooperation Framework Agreement, could spur growth and boost employment by easing barriers.

But the opposition Democratic Progressive Party, which favours independence from China, strongly opposes the deal, which it says would demote Taiwan to the status of a local government in future talks with the mainland.

Taiwan and China split in 1949 after a civil war but Beijing still sees the island as part of its territory awaiting reunification, by force if necessary.

"Without the agreement, Taiwan, already politically isolated in the international community, would be isolated economically," Ma said while addressing a gathering of the American Chamber of Commerce in Taipei.

He said Taiwan's industries and businesses would be unable to compete with their competitors overseas which are free of tariffs.

"The agreement is very important to Taiwan's survival," Ma said.

Taiwan and China held their first round of formal talks in late January in Beijing to decide on an agenda for the pact and other procedural issues.

Premier Wu Den-yih said Tuesday he expects the second round of talks to be held in Taipei on March 23.

Monday, March 8, 2010

China invests $1-billion into a copper venture with Canadian company

China is again turning to Canada to satisfy its voracious appetite for raw materials, striking a $1-billion deal with copper producer Quadra Mining Ltd. for its assets in Chile and a stake in the Vancouver-based company.

The joint-venture deal gives China a new copper source amid worries of a shortage in the country, while mid-tier producer Quadra receives the financing it needs to build projects and make future acquisitions.

The deal is the latest in a growing list of state-owned Chinese firms that have bought pieces of Canadian resources companies.

“We bring to the table expertise. They bring to the table money,” Quadra chief executive officer Paul Blythe said in an interview Monday. “It changes what we can and can't do.”

Quadra's deal is a memorandum of understanding with State Grid International Development Ltd., a division of State Grid Corp. of China, the country's largest utility company and one of the world's largest copper customers. The deal is expected to be made official in May and close next fall.

It's the first time State Grid has invested in a copper producer. The metal will be used to help develop power grids, and comes as China's market is expected to see a shortage of copper this year despite a massive restocking in 2009.

“We believe China's massive, import-dependent metals industry needs far more copper than most in the market realize,” UBS said in a recent report.

State Grid will put $900-million (U.S.) into the joint venture as projects are built, and pay about $152-million (Canadian) for 10 per cent of Quadra's shares.

The $900-million total is the value placed on Quadra's two projects in Chile, the Franke Mine and the Sierra Gorda project under development.

Sierra Gorda is estimated to cost more than $2-billion to build, though a feasibility study has yet to be completed. Production is expected by 2013 and has been forecast to be between 250 million and 400 million pounds of copper annually over 25 years.

The deal sees Quadra supervise the day-to-day operations, while State Grid takes the lead on financing, aiming for a 60/40 debt-to-equity ratio, or roughly $1.2-billion in debt and $800-million in equity. Each partner would own half the joint venture and split production proceeds.

The agreement is “a positive and helps resolve funding issues related to the Sierra Project,” according to BMO Nesbitt Burns Inc., which values Franke at $488-million and Sierra Gorda at $244-million.

Mr. Blythe announced the joint-venture deal while in Toronto for the annual Prospectors & Developers Association conference; coincidentally, that is where the two sides starting talking about such a deal a year ago.

Quadra also negotiated with other companies in China, as well as Japan and South Korea, before signing on with State Grid.

As part of the deal, State Grid has agreed not to further increase its stake in Quadra. Quadra's other major shareholder is Swiss-based SIA Funds AG, which also has a stake worth about 10 per cent.

Quadra and State Grid will also look for other copper assets through their joint venture, starting with operations in Chile, which is home to about 35 per cent of the world's copper production.

Quadra's other assets include the Robinson copper and gold mine in Nevada, the Carlota copper mine in Arizona and the Malmbjerg molybdenum development project in Greenland.

Monday, March 1, 2010

China surpasses Japan as the 2nd largest world economy

CHINA surpassed Japan as the second largest economy in the world in the fourth quarter of 2009.

Although Japan’s gross domestic product (GDP) for 2009 at US$5 trillion was higher than that of China at US$4.9 trillion, from the fourth quarter, China produced more goods and services (i.e. enjoyed higher GDP) than did Japan.

It still has some way to go before catching up with the United States, which had a GDP of US$14.5 trillion in 2009.

If China can grow 4% faster than the US annually, it is likely to surpass the US economy in 25-30 years. This could be sooner if the undervalued renminbi is revalued upwards.


On a purchasing power parity (PPP) basis, which assumes similar cost for identical products and services in different countries, China overtook Japan in 2001 (see chart) and could overtake the US by 2020.

As per the International Monetary Fund, China’s GDP per capita in 2009 at only US$3,566 was still significantly lower than that of Japan (US$39,573) and the US (US$46,443).

Growing from a low base was the easy part; the challenge is to sustain growth when China becomes a middle income nation.

China has a few advantages that will help it sustain growth. First, it has a strong pro-growth government that can implement its plans.

In the past, such plans like the Great Leap Forward and the Cultural Revolution were socio-economic disasters but under the collective leadership structure, policies are more measured.

A strong government has enabled China to quickly modernise its infrastructure (unlike India) and enhance its strong position in certain sectors like renewable energy, steel and manufactured exports.

Second, China has a very large domestic market that enables domestic producers to achieve economies of scale and attract foreign direct investments and technology into the country.

Third, China has made good strides in education and research and development. According to Unesco, China’s share of global researchers rose to 20.1% from only 14% in 2002 (see table on the previous page).


China also faces immense challenges. There is, firstly, an over-reliance on investments and exports to boost the economy while private consumption as a percentage of GDP remains low.

In the longer term, China will require a basic social net that will encourage Chinese to save less for future medical and other bills.

China’s strong one-party rule may be suitable for leading a country from a low to middle income nation but to make the leap to a high income nation requires a focus on innovation and a liberal environment that retains and attracts talent (like the US).

Taiwan and South Korea have made the transition from autocratic governments to democratic governments.

The challenge is for China to maintain stability and yet sufficiently relax its grip on its people to allow this transition.

Another challenge lies in how an emerging China interacts with the US and the Western world. Both sides will have to resolve tensions from differing world views and competition for natural resources and markets.

In the longer term, China faces a demographic time bomb due to its one child policy. China’s rapidly aging population is expected to peak at 1.45 billion in 2030 according to a UN study.

By then, China could suffer from what Japan is suffering now, a stagnant economy and a declining population that represents a strain on its healthcare and social welfare system.

China was the world’s richest nation until 1850, a position that was toppled by an inept government in the last days of the Manchu dynasty and unfair treaties imposed after the Opium War in 1842, aimed at reducing British trade deficit with China by selling opium to the Chinese in exchange for Chinese goods.

Barring major military conflicts (unlikely in the nuclear age) and major policy blunders, China is likely to resume its position as the world’s richest nation, a position it held for almost 2,000 years since the days of the Han Dynasty (206 BC–AD 220) which rivalled the Roman Empire.

The nature of the world will change as an emerging China interacts with a declining but still powerful West.

Western liberal democratic traditions focused on individual rights will square off with Eastern collectivist paradigm putting society above the individual.

Inter-Asian trade and relations will strengthen China’s influence in Asia and position the renminbi as the de facto trading currency for the Asian bloc.

Failure of China and the West in accommodating each other could lead to trade war and even a new cold war, an outcome that can be avoided if more moderate voices that value an open diverse world can prevail over xenophobic ultra-nationalistic/religious voices.

In this new global reality, Malaysia will find it increasingly difficult to compete in manufacturing. Malaysia has to fight tooth and nail to retain and attract talent and boost services (like tourism). This means crafting an attractive liberal environment for its citizens and foreign talent.

Sunday, February 21, 2010

Nigeria-China trade reaches $6.5 billon in 2009

Mr Rong Yansong, China’s Economic and Commercial Counsellor in Nigeria, says that the trade volume between China and Nigeria hit $6.5 billion in 2009. Yansong said this on Friday at a news conference in Kaduna. He said that the Chinese Embassy specified the amount in the trade statistics it compiled during the trade review for the year.

The counsellor was in Kaduna, ahead of the 31st Kaduna International Trade Fair, which opens on Saturday. Yansong said that the accumulated investment of Chinese enterprises in Nigeria also amounted to $7.24 billion during the year.

He said that various Chinese enterprises were involved in petroleum, iron and steel, manufacturing, agriculture, fishery, pharmaceuticals and transportation projects. He commended the Federal Government and the Kaduna State Government for supporting Chinese enterprises that started business in the country in the early 1980s. Yansong stressed that the trade fair would create another avenue for the two countries to further consolidate their trade relations through bilateral talks, seminars and agreements and other business activities.

He said that six Chinese companies had concluded plans to invest in cities’ development, infrastructure, water supply, agriculture and hydro-based power projects in the state.

Yansong said that trade delegations from China would hold talks with the Kaduna Chamber of Commerce, Mines and Agriculture (KADCCIMA), organisers of the fair, on the development of small and medium-scale enterprises.

“My office will collaborate with KADCCIMA and hold seminars to introduce investment projects for the benefit of both countries. My office will also provide more training opportunities for the Chamber to improve the capacity of its personnel and enhance its local content in future fairs,” he said.

Yansong said that the delegations would also meet with the state government to discuss other areas of cooperation. Meanwhile, preparations have been concluded for trade exhibitions at the 31st Kaduna International Trade Fair, which opened on Saturday.

Wednesday, February 17, 2010

China's economic growth benefits Japan

China's economic rise has silver lining for Japan

TOKYO — China is on the verge of unseating Japan as the world's number two economy, but student Shi Minfei is one reason why Beijing's rapid growth is not all bad news for its deflation-hit neighbour.

With Japan's consumers keeping a tight hold on their purse strings, leaving the country as reliant as ever on exports, Chinese tourists like Shi are a rare example of good news for the country's long-suffering retailers.

The 20-year-old engineering student from Shanghai said she had splurged about 300,000 yen (3,300 dollars) on clothing, bags, shoes and cosmetics during her visit to Japan.

"I'm going mostly to shopping malls," Shi said as she hopped aboard a tour bus in downtown Tokyo, adding that the Japanese capital still has an edge over Shanghai when it comes to splashing cash.

Another visitor, a 42-year-old housewife from Beijing, said she had spent 200,000 yen on "Gundam" combat robot toys for her 12-year-old son, out of a shopping budget for the trip of up to 500,000 yen.

It is a welcome boost for a Japanese economy that has suffered two decades of malaise after its stock market and real estate bubble burst in the early 1990s, ushering in years of deflation and sluggish economic growth.

Japan narrowly retained its title as the world's number two economy in 2009 ahead of China, extending a recovery from a brutal recession with a robust fourth-quarter performance, data showed Monday.

But surging China came close to unseating its neighbour from the position it has held for more than 40 years, after the Japanese economy contracted at the fastest pace on record last year, battered by a plunge in exports.

Average income per person in urban China was less than 3,000 dollars in 2009, still a far cry from nearly 48,000 dollars for a Japanese salaried worker, official figures show.

Even if Japan kept its number two rank last year, economists say it is inevitable it will soon be overtaken by China, which has a population of more than 1.3 billion and an economy that grew a blistering 8.7 percent last year.

While its relegation in the global economic rankings would be a blow to Japan's prestige, its economy might be in an even worse state if it were not for the boom in China, now its biggest trading partner and top export market.

With markets in Japan, North America and Europe in the doldrums, Japan's top carmakers and other manufacturers are increasingly relying on emerging economies including China.

Many Japanese manufacturers have opened factories in China, taking advantage of the lower labour costs and faster economic growth there. The flipside is that they face increasing competition from Chinese firms in overseas markets.

"As its population is ageing, we cannot expect Japan's domestic demand to recover," said Hiromichi Shirakawa, chief Japan economist at Credit Suisse.

"Japan has to rely on exports to limit the speed of its economic decline. Japan's outlook would be much darker if it weren't for China," he said.

Japan's government has taken notice and started issuing visas to individual Chinese tourists last July as demand for non-group travel increases.

Foreign visitor numbers to Japan last year plunged 18.7 percent from the previous year -- the fastest decline in nearly four decades -- to 6.79 million due to the global recession, a strong yen and the swine flu scare.

But arrivals from mainland China edged up 0.6 percent to a record one million.

It is no wonder that travel agencies are competing to woo Chinese tourists with sight-seeing trips that include beauty treatment and healthcare.

Nippon Travel Agency is offering a one-week tour for two for about one million yen (11,000 dollars), including stays at upscale hotels and cancer check-ups at a hospital with cutting-edge equipment, a company spokesman said.

Even remote places such as Abashiri in Hokkaido, 1,000 kilometres (620 miles) north of Tokyo, are seeing an influx of visitors, after the city was chosen as a filming location for a hit movie released in China last year.

And one day Japan's Chinese neighbours may snap up more than its bags, shoes and tourist trinkets.

"The time will come within the coming decade that Chinese companies will buy Japanese companies or that Chinese funds will buy Japanese properties. It could pose a question of whether Japanese can accept it emotionally," said Shirakawa.

Monday, February 8, 2010

China overtakes EU as Iran’s top trade partner

China has overtaken the European Union to become Iran’s largest trading partner, according to a new analysis of the commercial ties between the two countries.

The growing business links between Beijing and Tehran underline China’s reluctance to agree to any further economic sanctions on Iran as western countries escalate their campaign to contain the country’s nuclear ambitions.

The announcement by Mahmoud Ahmadi-Nejad, the Iranian president, that Iran will start enriching uranium to 20 per cent purity – a step closer to the 90 per cent required to build nuclear weapons – has given renewed impetus to western calls for the United Nations Security Council to impose more sanctions.

The Iranian atomic energy authority announced on Monday that further enrichment would begin on Tuesday.

While Russia has softened its opposition to placing more pressure on the Iranian economy, China has not done the same.

Official figures say the EU remains Tehran’s largest commercial partner, with trade totalling $35bn in 2008, compared with $29bn with China.

But this number disguises the fact that much of Iran’s trade with the United Arab Emirates consists of goods channelled to or from China. Majid-Reza Hariri, deputy head of the Iran-China Chamber of Commerce, said that transhipments to China accounted for more than half of Tehran’s $15bn (€10.9bn, £9.6bn) trade with the UAE.

When this is taken into account, China’s trade with Iran totals at least $36.5bn, which could be more than with the entire EU bloc. No definite conclusion is possible because it is unclear how much of Iran’s trade with Europe is channelled via the UAE.

Iran imports consumer goods and machinery from China and exports oil, gas, and petrochemicals.

Today, China depends on Iran for 11 per cent of its energy needs, according to the chamber.

In the past, China has allowed the passage of three UN resolutions imposing sanctions on Iran. But the country’s ambassador emphasised the need for talks.

“Our approach is that dialogue and negotiations always produce better results,” said Xie Xiaoyan, the Chinese ambassador to Tehran. “Sanctions will not produce the results set up [by the west], no matter how crippling.”

However, some analysts believe this stance may change. Yin Gang, a Middle East expert at the Chinese Academy of Social Sciences, said: “China is extremely cautious in dealing with Iran, even over trade and energy.

“China would not keep a very close relationship with Iran because this could damage its relationships with lots of other countries.”

If China were to prevent the Security Council from passing UN sanctions, the US and the EU would retain the option of imposing their own unilateral measures. The question is whether Iran’s links with China would cushion the blow.

Already, American and EU energy companies have withheld investment in Iran’s vital oil and gas industries. China has sought to fill the gap by signing multi-billion-dollar agreements to develop oil and gas fields.

But hardly any of these projects have gone on stream. A senior Iranian oil official has publicly complained about the poor quality of Chinese-made equipment.

A western diplomat in Tehran said: “If the international community is united, sanctions will be more effective, but nevertheless China is not the complete answer to Iran’s problems.”

Saturday, January 30, 2010

China will revalue yuan when stimulus packages end

DAVOS, Switzerland — China will look at revaluing its currency when global partners begin to withdraw their stimulus packages, a top Chinese central banker said Saturday.

However, Zhu Min, deputy governor of China's central bank said revaluation would not fix world trade imbalances.

He told the World Economic Forum in Davos that China is trying to raise domestic consumption, but warned it would take time to get thrifty Chinese to spend more.

Zhu said Beijing had maintained a stable yuan exchange rate through the financial and economic crises as it is "a stimulus package" on its own.

The move was "good for China and also good for the world," he reiterated, although he also indicated that a revaluation could be upcoming.

He said Beijing is committed to the Group of 20 Pittsburgh summit agreement that countries will coordinate exit strategies from their massive stimulus packages adopted to combat the global downturn.

"If global (partners are) ready to do exit strategy, China is ready ... including various issues -- liquidity issue, exchange issue," he told the forum.

China has been under fire for keeping the yuan weak against the dollar. Critics say this keeps Chinese exports artificially cheap and has fueled a massive trade surplus with the West. China's trade surplus reached 196.1 billion dollars in 2009.

Zhu said a stronger yuan would not solve trade imbalances. "Exchange rate is an issue within this rebalancing issue. Exchange rate will not be able to change the whole thing," he said.

Zhu said Beijing recognises the need to wean itself from dependence on exports.

"The crisis tells us that a purely export model is not sustainable and we're working on it," he said. "Things have improved, but it takes time."

"I'm still an old fashioned person. If the glass is OK, I'm not going to throw it away to buy a crystal one even if my income increases. I'll still use it," he said.

IMF chief Dominique Strauss-Kahn also noted that it is "very difficult to shift this growth model" from export-led to a more domestic-led one.

With US consumers buying less amid the crisis and China spending on a stimulus and trying to get Chinese to buy more, the problem of trade imbalances is "looking a little better than before crisis," Strauss-Kahn said.

But he warned that Chinese consumers are far from able to offset lower US consumption.

In a separate session, Standard Chartered bank's group chief executive Peter Sands said there was no quick fix to China's currency dilemma.

"I think there (are) a lot of simplistic things said about the renminbi. Some seem to believe that if it were revalued, all the macroeconomic imbalances will disappear instantly. That's just wrong. It's far too simplistic," he said.

He pointed out that the value of Asian economies has increased, and that "value is going to be reflected in the way Asian currencies are valued relative to the western" currencies.

"I believe that over time, the renminbi and other Asian currencies will get more valuable and managing that in an orderly way is important to reconciling some of the macro-economic imbalances in the world," he added.

French President Nicolas Sarkozy and billionaire financier George Soros made prominent calls during the Davos meeting for China to allow its currency to appreciate.

In a keynote speech on the first day of the forum, Sarkozy made a veiled attack against China, saying festering trade imbalances were harming economic recovery.

"Exchange rate instability and the under-valuation of certain currencies militate against fair trade and honest competition," he said.

Saturday, January 16, 2010

China Overcomes US and Becomes Brazil's Number One Trade Partner

Brazilian Ministry of Development, Industry and Foreign Trade's just released final, revised report on Brazil's international commerce in 2009 shows that in 2009, Brazil's trade with the United States totaled US$ 35.9 billion (exports: $15.7 billion; imports: $20.2 billion).

But, for the first time, trade with China was more: a total of US$ 36.1 billion (exports: US$ 20.2 billion; imports: US$ 15.9 billion). The difference was only $200 million, but that does not make it any less a historical moment.

In other economic news, the president of the Central Bank, Henrique Meirelles, reports that Brazil has now met its inflation targets for the sixth consecutive year.

He was able to make that affirmation after the government statistical bureau (IBGE) released its Broad Consumer Price Index (IPCA) for the year of 2009. The result was inflation of 4.31%. The government target was 4.5%.

Meirelles said the real significance of having inflation under control was that it created a "foreseeable" economy where investments would increase naturally. He pointed out that average GDP growth over the past few years has been 5% (almost double recent growth, which, of course, was down due to the international financial crisis).

Brazil's Central Bank (Fed) president added that wage earners benefited from controlled inflation and the job market showed a vigorous variation of employment levels.

Meirelles concluded by saying that Brazil begins the 21st century with international respect and the perspective of sustained growth over a long period that will be characterized by a substantial reduction in social inequality.

Sunday, January 10, 2010

China overtakes Germany to become the biggest exporter

New trade figures show that China has overtaken Germany to become the world's top exporter.

According to data released by China's customs agency Sunday, Chinese exports surged by 17.7 per cent in December, compared to the same month in the previous year.

Exports for the last month of 2009 were $130.7 billion, raising the total for the year to $1.23 trillion, ahead of the $1.20 trillion forecast for Germany.

Last year wasn't easy for China's exporters as the global economic slowdown cut demand for the country's goods.

Every month since late 2008, the government has reported export figures lower than they had been a year earlier. Then in the last few weeks of 2009, the trend reversed.

China's gross domestic product expanded 8.9 per cent in the third quarter of 2009, up from 7.9 per cent in the second quarter and 6.1 per cent in the first, buoyed by $603 billion in stimulus spending.

China surpassed the United States as the biggest auto market in 2009 and is on track to soon replace Japan as the world's second-largest economy. China passed Germany as the third-largest economy in 2007.

Sunday, January 3, 2010

China economy to grow 9.5 percent in 2010-thinktank

- China's economy is likely to grow 9.5 percent in 2010, topping last year's expected figure, as real estate investment buoys growth and inflation remains mild, a leading state thinktank said in a report published on Friday.

The State Council Development Research Centre said China's economy would remain robust, as market-driven investment picked up while government-led stimulus spending slowed.

"In 2010 the external (economic) environment will remain quite grim, but it will not deteriorate any further," said the Centre's report, which was published in the Chinese-language China Economic Times.

"Against a backdrop of ample production and supplies, we forecast that in 2010 there will not be marked inflation," it said, adding that the CPI inflation index was likely to stay less than 3 percent for 2010.

The report adds to recent signs that Chinese officials and many experts are guardedly confident the country's economy can maintain momentum in 2010, surmounting worries about inflation, investment policy and a heady housing market.

The country's 4 trillion yuan stimulus package, complemented by a record surge in bank lending, propelled the economy to 8.9 percent year-on-year growth in the third quarter of 2009.

While the government stimulus spending will fall off this year, investment in real estate could grow by 30 to 40 percent compared with 2009, and "become a main force driving investment growth," said the new report, written by Zhang Liqun, a macro-economist in the Centre, which advises the government.

China's manufacturing sector steamed ahead in December with rises in new orders and output driving the purchasing managers' index (PMI) to 56.6 in December from 55.2 in the previous month, pushing the key indicator to a 20-month high.

Last Sunday, Premier Wen Jiabao gave a cautious outlook for the nation's economy in 2010, saying it was too early to wind down government stimulus spending but that officials needed to be vigilant about surging property prices and incipient inflation.

Some cities in China have seen residential property prices rise by about a third this year, and real estate investment in China accelerated in November, up 17.8 percent for the first 11 months of 2009 compared with the same months in 2008.

Zhang said investment in real estate would remain strong, even as growing supply of new housing cooled price rises, especially from later in 2010.