world growth

world growth

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.