world growth

world growth

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.