world growth

world growth

Tuesday, December 27, 2011

China cuts 2012 rare earth export quota by 27pc

CHINA unveiled an initial cut of 27 per cent in its quota for rare-earth exports for next year, but said its full-year 2012 limits for the key materials used to make everything from defence systems to turbines to iPhones would likely be unchanged amid weakened demand.

China controls about 95 per cent of global rare-earth supply and has been reducing its export quotas to secure greater control over prices, leading to a surge in prices over the past two years. Demand has eased significantly this year in the face of higher prices as mining companies outside China look to tap new sources and companies find ways to reduce their use of the metals.

The Commerce Ministry said Tuesday exporters will be allowed to sell 10,546 tons of rare earth metals in the first half of 2012. That amount will be split among 11 companies.

The ministry said Chinese exports of rare earths totaled 14,750 tons for the first 11 months of 2011. It gave no figure for the full-year in 2011.

China's export restrictions have strained relations with the United States, the European Union, Japan and governments that have called on Beijing to remove its curbs and make its intentions clear.

Despite production and export restraints, rare earth metals prices have tumbled as U.S. and European economic troubles stifled demand.

Rare earths are 17 chemical elements including cerium, dysprosium and lanthanum that are used to manufacture flat-screen televisions, batteries for electric cars and wind turbines. They are also used in some high-tech weapons systems.

Sunday, December 18, 2011

China's International Trade Development since 1980

China has changed so much since opening up its economy in 1980, now China is the number one exporter in the world.

After the founding of the People's Republic of China (PRC) in 1949, China adhered to the principle of independence and self-reliance, and gradually carried out economic and trade exchanges with foreign countries. However, hindered by the international political environment at that time and the country's planned economic system, China's foreign trade development was relatively slow.

In 1978 China entered the new period of reform and opening up. Devoting major efforts to the development of foreign trade became an important approach to accelerate modernization, shake off backwardness, promote the growth of the economy, and improve comprehensive national strength. Over the past 30 years or so, seizing the opportunity of the world economy's long-term prosperity and the deepening economic globalization, China has opened wider to the outside world, attracted and utilized foreign investment, introduced advanced technology, transformed and upgraded domestic industries, and achieved rapid development in foreign trade through all-round participation in the international division of labor and competition.

China's total trade volume in goods ranks high globally.

In 1978 the total value of China's imports and exports was only $20.6 billion, ranking 32nd in world trade and accounting for less than 1 percent of the world's total. In 2010 the total value of China's import and export reached $2.974 trillion, 144 times as much as that in 1978, averaging an annual growth of 16.8 percent. In 2010 the total value of China's exports was $1.5778 trillion, showing a 17.2 percent annual growth on average, and the total value of its imports was $1.3962 trillion, showing a 16.4 percent annual growth on average. In 2010, the total volumes of China's export and import accounted for 10.4 percent and 9.1 percent of the world's total, respectively. By the end of 2010 China had been the world's largest exporter and second-largest importer for two consecutive years.

The structure of China's trade in goods has fundamentally changed.

China's export commodity structure shifted from primary products dominated to manufactured goods dominated in the 1980s, and from mainly light industrial and textile products to mainly mechanical and electronic products in the 1990s. In the new century, China's exports of high-tech products, led by electronics and information technology commodities, has been increasingly expanding. In addition to state-owned enterprises, foreign-invested enterprises and private enterprises also engage in foreign trade, and their total value of imports and exports has each exceeded that of the state-owned enterprises. From the 1980s to the early 21st century, China's processing trade flourished, accounting for half of the country's foreign trade volume. Throughout China's foreign trade development, foreign-invested enterprises and processing trade have played very significant roles.

China has formed an all-round and diversified import and export market.

Since the adoption of the reform and opening up policy, China has been promoting foreign trade on all fronts, and established trade relations with the vast majority of the world's countries and regions. China's trade partners have increased from a small number of countries and regions in 1978 to 231 countries and regions now. The European Union (EU), the United States, the Association of Southeast Asian Nations (ASEAN), Japan, and the other BRIC countries have become China's major trade partners. In this new century China's trade with newly emerging markets and developing countries has maintained a sustained and relatively rapid growth. In China's total trade in goods from 2005 to 2010 the proportion of trade with ASEAN increased from 9.2 percent to 9.8 percent, with other BRIC countries from 4.9 percent to 6.9 percent, with Latin America from 3.5 percent to 6.2 percent, and with Africa from 2.8 percent to 4.3 percent.

China's international competitiveness in services trade has been enhanced.

With its WTO entry, China's trade in services entered a new stage of development. With its scale rapidly enlarged and its pattern gradually optimized, China's trade in services now ranks among the top in the world. China's trade in tourism, transport and other fields has maintained a steady growth momentum. China's cross-border services in construction, communications, insurance, finance, computers and information, royalties and license fees, consultation and related fields, as well as service outsourcing, have been growing rapidly. From 2001 to 2010 China's total services trade value (excluding government services) witnessed a more-than-five-fold growth from $71.9 billion to $362.4 billion. China's proportion in world services trade exports rose from 2.4 percent to 4.6 percent, worth $170.2 billion in 2010, and jumped from the 12th place in the world to the 4th; China's proportion in world services trade imports increased from 2.6 percent to 5.5 percent, worth $192.2 billion in 2010, moving from the 10th place in the world to the 3rd.

China's foreign trade development has greatly pushed forward the country's modernization drive. China has grown into an open economy. Participation in the international division of labor and competition, introduction of advanced technology, equipment and management methods, and utilization of foreign direct investment have greatly promoted China's technological progress and industrial upgrading, and also improved the management and market competitiveness of its enterprises. The rapid growth of processing trade has brought into play China's comparative advantage of an abundant labor force, and accelerated the country's industrialization and urbanization. Foreign trade has directly contributed to the employment of over 80 million Chinese people, more than 60 percent of whom are from rural areas, and employees' income and living standards have been remarkably improved. Foreign trade, domestic investment and domestic consumption have become the three major engines propelling China's economic growth.

The historic progress in China's foreign trade has been closely connected with the changes in the international and domestic situations. Starting in the 1980s, peace and development became the theme of the times. With the acceleration of economic globalization, the flow and allocation of capital, technology, products, markets, resources, labor force and similar elements became more dynamic around the world. Scientific and technological progress, led by information and communications technology, has greatly improved production efficiency; international industrial transfer has continuously deepened and developed. Economic globalization, scientific and technological progress, international industrial transfer and strengthened cooperation between countries have provided historic opportunities for China's integration into the world economy. The Chinese government, conforming to the trend of the times and taking economic construction as the central task, has implemented the reform and opening up policy, developed economic and technological cooperation with other countries, vigorously and rationally utilized foreign investment, brought its comparative advantage into full play, promoted the deepening of the division of labor in the international industrial chain, and provided favorable conditions for its own foreign trade development. During this process foreign enterprises, and multinational corporations in particular, have obtained abundant opportunities to invest in China, added value to their capital, technology, management experience, marketing channels and other elements, and shared the fruits of China's rapid economic growth. China's foreign trade development has benefitted greatly from its reform and opening up, from economic globalization, and from taking the path of cooperation and mutual benefit. China cannot develop in isolation from the rest of the world, and global prosperity and stability cannot be maintained without China's participation.

China remains a developing country. Compared with other world trade powers, China's export industry remains at the low end of the global industrial chain. China's resource and energy inputs and environmental cost are relatively high, while the international competitiveness of enterprises and the risk-resistance of some industries are relatively weak. China's transformation from a large trading country to a strong trading power will be a comparatively long-term process requiring arduous efforts.

Saturday, December 10, 2011

China Investment Corp Has About 60% of Assets in U.S.

China apparently has much more confident in U.S. than in Europe.

China Investment Corp., the nation’s sovereign wealth fund, has about 60 percent of its assets in the U.S., which has many investment opportunities and a good legal system, Jin Liqun told CNBC in an interview yesterday.

Jin, chairman of CIC’s supervisory board, said that much of the rest of the fund’s assets are in Europe, other nations in Asia and Canada, with investments in resources, real estate and “open-market transactions.”

The fund needs to take a “serious look” at the financial industry in the U.S. and Europe to see if it’s ready for “serious discussions” about investment, Jin told the financial news channel.

China Investment managed $409.6 billion at the end of 2010, making it the world’s fifth-largest national fund, according to Sovereign Wealth Fund Institute. CIC’s international investments returned 12 percent last year, compared with the MSCI World Index’s 9.6 percent gain, according to the fund’s annual report.

“The European debt crisis can hardly get solved in the near term and banks there are likely to suffer further losses” from potential write-downs in debt holdings, said Lu Zhiming, a Shanghai-based analyst at Bank of Communications Co. “The timing doesn’t look right yet for investments.”

China’s central bank plans to create a new investment vehicle to manage $300 billion in foreign reserves, Reuters reported yesterday, citing two unidentified people familiar with the matter. The vehicle will run two funds that pursue “more aggressive” investments in the U.S. and Europe markets to generate higher returns, the report said.

Regarding aid for Europe, Jin said that China is still a developing, low-income nation; that its “hard-won” financial reserves are important for the nation’s economy; and that it’s not the job of CIC or any Chinese companies, state-owned or private, to rescue any country in distress.

Still, China would be willing to help with a “credible, convincing” program in Europe, he said.

“China would be willing to invest in, for instance, infrastructure in European countries” and can take equity stakes in companies that need capital, Jin said.
Economic Growth

Jin also said that China can maintain an economic growth rate of about 8 percent for “a decade or two” and that some investors’ concerns that the banking system is fragile are unwarranted.

China’s banks have loaned about 6 trillion yuan ($947 billion) of assets to homeowners and roughly the same amount to developers, Jin said. With requirements for mortgages including minimum 60 percent down payments, stress tests show that banks can deal with the bursting of any bubbles, he said.

The U.S. passing a yuan-manipulation bill would be a “recipe for disaster,” and an artificially high yuan would boost exports from other nations, rather than push production back to the U.S., Jin said.

Thursday, December 1, 2011

China factory sector shrinks first time since 2009

China's manufacturing is definitely slowing down.

China's factory sector shrank in November in the face of weakening demand both at home and abroad, two surveys showed on Thursday, underlining the central bank's move to cut bank reserve requirements to shore up the economy.

The official and HSBC purchasing managers' indexes are likely to feed worries that the global economy is on a slippery slope as the euro zone is marred by its debt crisis, reinforcing expectations that China will ease policy further.

The official PMI released by the China Federation of Logistics and Purchasing (CFLP) fell to 49 in November from October's 50.4, suggesting activity among big manufacturers shrank in November for the first time in nearly three years, or since the global financial crisis.

The reading was below the median forecast of 50 in a Reuters poll. That level demarcates expansion from contraction.

"The November PMI dropped further to below the boom-bust line of 50... indicates that the economic growth pace would continue to moderate in the future," Zhang Liqun, a researcher with the Development Research Centre of the State Council, wrote in the CFLP statement.

The CFLP said the sub-index for new orders fell to 47.8 in November from 50.5 in October, while the sub-index for new export orders dipped to 45.6 in November from October's 48.6. Both sets of figures suggest the domestic and overseas new order books are shrinking.

Meanwhile, the HSBC China PMI dropped to a 32-month low of 47.7 in November from October's 51. A sub-index for new orders skidded to a 32-month low of 45 from 52.6 in October.

"The November PMI final reading points to a sharp deterioration in business conditions across the Chinese manufacturing sector," said Qu Hongbin, China economist at HSBC.

In one bright sign though, new export orders in the HSBC survey, geared more to smaller and private-sector factories, was comfortably above 50, suggesting growth.

China's economic expansion has been slowing all this year as Europe and the United States -- China's top two export markets -- have struggled to recover from the global financial crisis in 2008-2009.

In addition to global headwinds, China's once red-hot real estate sector is slowing down as home prices and sales fall.

China's central bank cut the reserve requirement ratio for its commercial lenders on Wednesday for the first time in nearly three years to ease credit strains and shore up an economy running at its weakest pace since 2009.

The reserve cut, effective Dec 5, reduces the ratio for the biggest banks to 21 percent from a record high 21.5 percent, freeing up funds that could be used for lending to cash-strapped small firms. Analysts said they expect further cuts in bank reserves.


The positive side of the surveys was that inflationary pressures in China could ease further, creating more room for the central bank to relax policy to support growth.

"We can see that the central bank is actually increasing the magnitude of policy easing, although it is still early to call it a comprehensive loosening," said Zhang Zhiwei, chief China economist at Nomura.

The prices sub-index of the official PMI fell to 44.4 from October's 46.2.

China's annual consumer inflation dipped to 5.5 percent in October from September's 6.1 percent, pulling back further from July's three-year peak of 6.5 percent.

The National Development and Reform Commission, the country's top economic planning agency, forecast that inflation will fall below 5 percent before the end of this year as food price pressures ease, the Economic Daily reported on Nov 14.

The HSBC PMI for November came in lower than its flash number released late in November and based on 90 percent of responses.

Then flash reading of 48 implied annual industrial output growth of 11-12 percent, HSBC said, a pace not seen since 2009 when China was pulling out of the global crisis.

Factory output, which accounts for 40 percent of gross domestic product, hit its weakest pace in a year in October, even though expansion in the first 10 months of 2011 averaged 14.1 percent.

Tuesday, November 22, 2011

World Bank: China's Economy to Grow 9.1% in 2011

The World Bank raised its 2011 growth forecast for China’s economy to 9.1% from 9% in its East Asia and Pacific Economic Update released on Tuesday, but said China would face growing risks, especially from the euro zone crisis.

The bank reckoned a soft landing of China’s economy is achievable through appropriate loose monetary policy and industrial stimulus.

China’s economy would slow down dramatically after 2012 and the central government should accelerate the transformation of its economic structural adjustment to reduce excessive dependence on the real estate and manufacturing sectors, the bank suggested.

The new update lowered expectations for economic growth in Asia as it believes the deluge in Thailand has substantially hit local manufacturers and slowing demand in developed markets will also hurt Asia’s exports growth.

China’s economic growth is expected to slow to 8.4% in 2012, the report said.

The report noted a significant slowdown in China’s economic growth compared with a year earlier was mainly due to sluggish overseas market demand and monetary tightening policy.

There will be more room for the Chinese government to adjust current economic policies with retreating consumer price gains, the bank said.

Wednesday, November 9, 2011

China Gold Demand will hit 400 Tonnes in 2011, most in the world

Chinese comsumers are buying gold in huge quantities.

The gold consumption is estimated to hit 400 tonnes this year, a surge from 270 tonnes in 2010

China's gold output may exceed 350 tonnes and consumption reach 400 tonnes this year, according to the head of China Gold Association.

The output in the first nine months of the year hit 259 tonnes, up 4.32 percent from a year ago, said Sun Zhaoxue, also the president of China National Gold Group Corp., at the China Mining Congress and Expo 2011 that concluded Tuesday in the northern coastal city of Tianjin.

"I'm optimistic about the prospect of China's gold industry. The output is estimated to reach 400 tonnes in the next few years and there is potential for further increase," Sun said.

The consumption, however, is estimated to hit 400 tonnes this year, a surge from 270 tonnes in 2010, Sun said. The purchase of gold bars is expected to nearly double to 270 tonnes amid safe-haven buying, he added.

China has a proven gold reserve of 6,327.4 tonnes, making its the largest gold reserve holder second only to South Africa, he said.

Sunday, October 30, 2011

China makes Supercomputer of One Petaflop with Low Power comsumption

Surprise! China has built a supercomputer using homegrown chips, an unexpected announcement this past week that showcases the country's determination toward lessening its dependence on foreign-grown CPUs.

According to an article in the New York Times this Friday, the Sunway BlueLight MPP supercomputer resides in the National Supercomputer Center in eastern China. Installed this past September, the system houses a total of 8,700 ShenWei SW1600 processors that feature 16 cores apiece. Combined with an advanced water-cooling system – the specific details of which are currently unknown – the supercomputer is expected to reach a total processing power of around one petaflop. But more importantly, it can allegedly do so using only a megawatt of power.

While the system's specs are likely enough to place it in the top-20 ranking of the world's fastest supercomputers, the Sunway BlueLight MPP's power draw is raising a few more eyebrows. For starters, it's all of one-fourth that of China's previous chart-topping supercomputer, the Tianhe-1A.

Debuted last year, the 2.5-petaflop Tianhe-1A – the world's fastest supercomputer at the time of its unveiling – ate up 4.04 megawatts of power. And the system itself was built on chips from both Intel and Nvidia, a far contrast from China's current CPU load-out in the Sunway BlueLight MPP.

The fastest U.S. supercomputer at the moment – Jaguar – eats up about seven megawatts to output roughly 1.7 petaflops of processing performance.

China's new system is but one more volley in the ongoing international race to hit an exaflop, or one thousand petaflops, at some point within the next decade. To do so, however, will likely require a massive energy output – right now, approximately the same amount of power as that which is generated by a medium-sized nuclear power plant, said the New York Times' John Markoff.

That's what makes the combination of power-savings, cooling, and petaflop performance so intriguing at the moment, as it's the key formula that the world's various supercomputer manufacturers will need to master in order to reach their exaflop targets – representing a thousand trillion calculations per second, we note.

China's goal is to be able to deploy an exaflop-class system, using China-built chips, by 2020. The U.S. is hoping to reach an exaflop by 2019 through upgrades to its Jaguar – soon-to-be "Titan" – supercomputer, and Europe expects to reach its exaflop goal within a similar timeframe.

Thursday, October 20, 2011

China to step up ASEAN yuan trade settlement

One more step to make yuan an international currency.

BEIJING (Reuters) - China plans to sign an agreement with the 10-member Association of South East Asian Nations (ASEAN) to settle trade in yuan, said two independent sources, another step in China's long campaign to make its currency one widely used beyond its borders.

The framework agreement with ASEAN -- which as a block is China's third-biggest trading partner -- will pave the way for banks in China and the ASEAN countries to start exchanging yuan for ASEAN currencies, said the sources, both of whom have direct knowledge of the planned agreement.

"This will lay the foundation for the yuan to become a regional currency," the first source told Reuters, requesting anonymity because he was not authorized to speak to reporters.

China, the world's second-biggest economy, is keen to give the yuan a bigger international role and diversify its foreign exchange reserves -- the world's largest stockpile -- which rose by $4.2 billion in the third quarter to $3.2 trillion.

Once the deal is signed, China would then negotiate individually with ASEAN member countries and sign currency swap agreements, said the sources, allowing non-Chinese companies to settle their yuan-denominated transactions with banks in their own countries, rather than doing so through Hong Kong.

China already has swap agreements with three of the ASEAN countries: Indonesia, Malaysia and Singapore. Thailand could be the next to establish a swap line, one source said.

It was not clear when the China-ASEAN agreement would be signed, but the sources said that the date would likely be late this year or early next year.

The People's Bank of China, or central bank, and the Commerce Ministry, which regulates trade, declined immediate comment when reached by telephone.


In 2009, China launched a pilot program allowing companies in some provinces to settle imports and exports in yuan, meaning that Chinese companies can in principle use renminbi for their transactions with counterparties in any country.

The program, which was also trialed between ASEAN and Yunnan and Guangxi in south China in 2009, has since been expanded nationwide.

But the latest deal would formalize the arrangement and possibly offer more support to firms and banks in ASEAN countries to conduct commerce in renminbi.

Renminbi, or people's currency, is another name for the yuan.

Since then, yuan-denominated trade has swelled -- it accounted for 8.9 percent, or 957.57 billion yuan, of China's total trade volume in the first half of 2011.

Except for companies in the handful of countries that have swap agreements with China, however, trade must be settled through banks in Hong Kong, adding cost and risk to the transactions.

By setting the stage for more swap deals to be signed, the agreement should mean a steady rise in the use of the yuan around the region.

"China-ASEAN trade will not be settled in yuan overnight. Trade can still be conducted in U.S. dollars. This is just the beginning," said the first source.

The agreement between China and its neighbors could also add momentum to China's effort to promote the renminbi as a global reserve currency. Since China runs a trade deficit with the ASEAN countries, at least some of those countries will accumulate yuan.

"This will mean ASEAN central banks will hold yuan as part of their foreign exchange reserves," the second source said.

China is ASEAN's biggest trading partner. Bilaterial trade rose 26.4 percent in the first nine months of 2011 to $267 billion with an $18.9 billion surplus in favor of the bloc, Chinese customs data shows.

A China-ASEAN Free Trade Agreement came into effect in January 2010. Trade between China and ASEAN nations would grow by 20-30 percent over the next three years, said Wang Rujun, a Chinese economist.

ASEAN, ranging from resource-rich Indonesia to impoverished Laos and financial center Singapore, is planning a union by 2015 to become a single market and production base to compete with rising Asian powerhouses China and India.

Home to 600 million people and a combined GDP of $2 trillion, the region is angling for foreign investment.

China is keen to boost ties with ASEAN economies it relies on for its supply of commodities such as natural gas and crude palm oil to buoy the Chinese economy.

"It makes sense to me because trade settlement within the region is easier to be promoted compared to the internationalization of the yuan," said Zhang Zhiwei, an economist at Nomura.

"Intra-regional trade is picking up as a share of China's trade. It makes sense for policymakers to push for a regionalization of the RMB," the economist said.

Tuesday, October 11, 2011

China to Tax on Oil, Gas Resources Nationwide to Reduce Consumption

This should have been done long time ago.
Natural resources belong to all Chinese citizens.
The tax collected should benefit all, not just a few.

China will extend a value-based tax on sales of oil and natural gas nationwide starting next month to help save energy in the world’s fastest-growing major economy and boost local government revenues to develop inland provinces.

The oil and gas tax, ranging from 5 to 10 percent of sales, will be levied on both domestic producers and joint ventures with overseas companies, the Ministry of Finance said in a statement today. China will impose a value-based tax on other commodities when the time is right, it said.

China, which currently levies the tax based on volume, rolled out a 5 percent tax on oil and gas sales in Xinjiang on a trial basis in June last year to help fund development of the western province. The new regulation may crimp the earnings of companies including PetroChina Co. and China Petroleum & Chemical Corp. (600028), known as Sinopec.

“The tax change will slash our earnings forecast for PetroChina and Sinopec by 2 percent in 2011 and 11 percent in 2012,” Anna Yu, a Hong Kong-based energy analyst with ICBC International Research Ltd., said by telephone.

PetroChina fell 1.7 percent to close at HK$9.02 in Hong Kong trading, while Sinopec declined 1 percent to HK$7.09. The benchmark Hang Seng Index gained 2.4 percent.

Cnooc Ltd. (883), China’s biggest offshore energy explorer, advanced 3.9 percent to HK$13.72, the highest since Sept. 16. Ventures with overseas partners account for 31 percent of the company’s projects, according to ICBC’s Yu.

“The impact on Cnooc should be non-material given the tax is replacing royalties that offshore explorers currently pay,” she said.
Funds for Development

The government is planning 23 projects in West China at a cost of 682.2 billion yuan ($107 billion), the National Development and Reform Commission, the country’s top economic planner, said last year. The projects include the construction of roads and railways, wind farms and a nuclear power plant.

“China will likely apply a 5 percent tax rate nationwide in the short term as they did in the western regions,” said Qiu Xiaofeng, an analyst at Beijing-based Galaxy Securities Co. “A 10 percent rate would be too heavy for oil and gas producers.”

China Shenhua Energy Co., the country’s biggest coal producer, was unchanged at HK$31, while China Coal Energy Co. surged 6.9 percent to HK$8.17.

“Tax levies on coal mining are still volume-based and Chinese listed coal miners currently pay taxes within today’s range,” Helen Lau, a Hong Kong-based analyst at UOB Kay Hian Ltd., said by telephone. “We don’t expect the government to change the tax to a value-based one in the short term as they did to oil and gas.”
Coal, Metals

On a volume basis, China will levy a tax of 8 to 20 yuan on every metric ton of coking coal sold and 0.3 to 5 yuan a ton for other coal grades starting next month, the government said yesterday, without stating current tax rates.

The tax on coking coal is 8 yuan a ton at present and 0.3 to 5 yuan a ton for other coal grades, according to ICBC’s Yu.

Starting in November, the levy on iron ore sales will be 2 to 30 yuan a ton, the tax on rare-earth minerals 0.4 to 60 yuan a ton, and the rate on nonferrous metal ore 0.4 to 30 yuan a ton, according to the government.

Saturday, October 1, 2011

China’s online population hits 500-million

China’s online population, the largest in the world, has topped the half-billion mark, reports the state-run Xinhua news agency.

The agency quoted Wang Chen, chief of the information office of China’s state council as saying that more than 15-million people had gone online since the release of the last figures were released in July.

The continuing growth of China’s internet population and the rising use of online tools to criticise authorities has seen an increasing concern in Beijing about the internet’s potential as a tool for generating unrest.

The government blocks any content it considers politically sensitive in a vast system which has come to be known as the “Great Firewall of China”.

It has struggled to keep up the same stringent levels of control, however, over the increasingly popular microblogging platforms, or weibos.

The country has some 300-million microbloggers. The largest platform, Sina Weibo accounts for the majority of that number with around 200-million users.

The concern around the weibo’s first arose following a train crash in July, which killed 40 people. Sina Weibo users sent millions of messages criticising the government’s response to the crash.

The scale of the response saw various media outlets venturing to join in the criticism of the government. Even Communist Party mouthpiece, the People’s Daily urged the government to engage more with the public through the weibos.

Authorities responded by urging the weibos to take action against anyone found to be using the platform to “spread false rumours”.

Sina Weibo also received a visit from Beijing’s Communist Party chief Liu Qi, in which he said internet companies should “ensure the authenticity of information… to create a healthy online media atmosphere”

In the wake of this visit the microblogging platform began suspending the accounts of any users deemed to be spreading “false reports”.

The weibo platform allows for the rapid spread of information in a country where the media is tightly controlled by the communist authorities.

Authorities recently set up accounts on the weibos for around 5 000 of the country’s law enforcement officials.

It stated that the officers’ would be tasked with “ensuring social openness and dispelling misunderstandings” on the weibos.

Of China’s 500-million internet users, 130-million live in rural areas.

Friday, September 23, 2011

China Economy growth rate in 2011, estimate to be 9.5%

China’s economy will indeed slow this year, but not by much and not enough to warrant fears of a hard landing.

According to the International Monetary Fund, the Chinese economy will growth a healthy 9.5% in 2011, down from 10.3% growth in 2010. That forecast suggests a relative failure of the central government to slow growth to the 7% it had targeted earlier this year. If the government is serious about slowing the economy in an effort to curb inflation and burst any sectoral bubbles, it might have to consider raising interest rates again, something the market expects to end soon.

Calls for a more flexible forex policy, letting the yuan float against the U.S. dollar, are unlikely. The yuan has been appreciating on average of 5.5% annually to about 6.5 yuan to the dollar.

The IMF warned that the overall global economy was on hair trigger alert, mostly due to the European sovereign debt crisis and the continuing need for monetary stimulus to keep the U.S. out of a recession.

The IMF predicted China’s output would slow next year to 9%.

Asia Pacific is expected to see a growth rate of 6.2% overall in 2011 and 6.6% in 2012, the IMF said Wednesday.

China would continue to outpace other economies but the average economic growth of 9% to 9.5% during 2011-2012 was less than the average of about 10.5% between 2000 and 2007. A combination of weaker international demand for made in China goods and domestic policies have cut into growth.

Wednesday, September 14, 2011

China buying gold to diversify foreign holdings

U.S. still has the largest gold reserve in the world, it will takes years for China to reach U.S. level.

According to a recently released WikiLeaks cable, China is shifting some of its massive foreign holdings into gold and away from the U.S. dollar, undermining the dollar's role as the world's reserve currency.

"They [the U.S. and Europe] intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the US dollar or Euro," the 2009 cable states, quoting Chinese Radio International. "China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold."

Entitled "China increases its gold reserves in order to kill two birds with one stone," the cable is taken together with recent policy announcements from Chinese banking officials. The news may indicate moves by China to eventually replace the US dollar as the world's reserve currency.

European business officials have announced that China plans to make its currency, the yuan, fully convertible for trading on international markets by 2015. Zhou Xiaochuan, governor of China's central bank, said the offshore market for the yuan is "developing faster than we had imagined." The yuan currently can't be easily converted into other currencies, because of government restrictions.

China's gold holdings are small compared to other major economies. It has 1,054 tons, the sixth-largest reserves in the world, according to data from the World Gold Council.

Buying gold and allowing the yuan to be traded freely would definitely weaken the U.S. dollar's dominance as the international reserve currency. The move would force the U.S. government to borrow money and to run perpetual trade and budget deficits.

"The U.S. is used to having the position of having the key reserve currency, but others are eager to replace it," Josh Aizenman, a professor of economics at the University of California and president of the International Economics and Finance Society says.

As a reserve currency, the U.S. dollar is the default for international transactions. Being a reserve currency allows the US to borrow at low interest rates, as central banks around the world are eager to buy US government debt.

"Any country that can finance its expenditures by printing money or selling bonds is essentially getting a free lunch," Aizenman told Al Jazeera.

Monday, September 5, 2011

China's double-edged trade with Latin America

China has in recent years become Brazil's largest trading partner, overtaking the United States, and in 2010 was the largest investor in the South American nation, pumping in some $30 billion.

For China, Brazil is an important source of raw materials -- oil, iron ore and soybeans account for 80 percent of Chinese imports and 90 percent of its investments in the largest Latin American economy.

Soy from Argentina, copper from Chile, iron ore from Brazil: China's seemingly insatiable appetite for Latin America's raw materials is credited with fueling blistering economic growth for both.

China's rise in bilateral trade with Latin America is the greatest of any region in the world -- an astonishing 18-fold increase over the past decade, thanks mostly exports of raw materials from the region.

But experts are warning the increasingly closely tethered economic ties to China may not be entirely to Latin America's benefit, and may even hamper its long-term aspirations of becoming a major exporter of manufactured goods.

Part of the reason for this is China's insistence on buying almost exclusively unprocessed raw materials from the region while refusing to purchase more sophisticated "value added" exports.

"It's essentially one commodity per country and this is quite remarkable," said Mauricio Cardenas, director of the Latin America program for the Brookings Institution think tank in Washington.

There are also risks, like one flagged recently by the Nomura economic analysis firm, which raised the concern in a recent statement that the economic boom in countries like Brazil stems from overdependence on its exports to China.

"We think Brazil's much vaunted 'new middle class' is a direct result of Chinese commodity demand," the company wrote recently in its analysis.

Another economist who specializes in economies of the region put it even more bluntly, pointing out that when it comes to export of value-added goods from Latin America, China must be viewed more as a fierce competitor than likely market.

"I don't think that with China, India, and the rest of Asia in the game, the region stands any chance of becoming a major exporter of manufacturing goods," said Mauricio Mesquita, senior economist at the Inter American Development Bank (IADB)

"I think this window is closed with a very few exceptions," he said.

And experts raise another concern -- that the seemingly bountiful resources that Latin America has been exporting to the Asian behemoth could start running out by mid-decade.

But the export of manufactured products, which most economists say is the cornerstone of healthy economic development for emerging countries, is beginning to stagnate.

Companies in the region are themselves to blame in part for making the mistake of many other developed and industrializing economies in sending many of its manufacturing jobs in China, as Brazil did in the case of giant aircraft manufacturer Embraer.

Over the years, the manufacturing sector in Brazil has declined by three percent as a share of the country's gross national product (GNP) while other countries in the region, such as Colombia, have seen a two percent drop.

Experts said it is unlikely that there will be a reversal in that trendline anytime soon.

"The long-term trend for Brazilian employment is not manufacturing. The only place is services," said Gary Hufbauer of the Washington-based Peterson Institute for International Economics.

A report by Mauricio Cardenas his colleague Adriana Kluger for Brookings reached the same conclusion.

"The region has to be prepared to find alternative sources of trade and growth," Cardenas and Kluger wrote.

The United States has been watching China's growing economic prowess in Latin America with some concern, especially after China last year supplanted the United States as the top trading partner with several South American nations, and vies to be a major investor in the region.

"Its activities in Latin America are increasing slowly over time. They start from a very low base but they have been progressively growing in recent years," said David Helvey, an Asia expert at the Pentagon said at a US congressional hearing in April.

"I think most of their activities in Latin America (are) motivated primarily by commercial and economic interests, where they are seeking to expand access to trade for resources and secure access to markets" for their manufactured goods," he said.

US exports to Latin America have dropped from 55 percent of the region's total imports in 2000 to 32 percent of the region's imports in 2009, according to UN figures, which found that the share of US investment in the region also has dropped significantly.

Tuesday, August 23, 2011

China becomes world's largest market for PC

China surpassed the U.S. in the second quarter to become the world’s largest market for personal computers. The shift reflects both a slowdown in demand in the U.S. market and continued growth in Chinese PC sales.

According to new data from International Data Corp., about 18.5 million units worth $11.9 billion shipped in China in the second quarter, compared with 17.7 million units worth $11.7 billion in the U.S. China now was 22% of the global market, compared with the U.S. at 21%. IDC still expects the U.S. to remain the largest market in 2011 overall, with an expected 73.5 million units, versus 72.4 million in China.

In 2012, IDC says, China should surge past the U.S., with expected shipments of 85.2 million units in China, versus 76.6 million in the U.S.

Note that totals do not include the tablet market.

IDC analyst for Greater China Kitty Fok said in a statement that China’s current five-year plan “should help large enterprises in various infrastructure verticals to continue to move along, not to mention … the ongoing efforts to increase consumer penetration in lower-tier cities.”

Thursday, August 11, 2011

China’s Yuan finally passes 6.40 exchange rate per Dollar

The yuan strengthened beyond 6.4 per dollar for the first time in 17 years, supported by the Federal Reserve’s pledge to keep interest rates at a record low and signs China will use currency gains to help rein in inflation.

The currency rose 0.37 percent to close at 6.3945 in Shanghai, its biggest jump in nine months, according to the China Foreign Exchange Trade System. It touched 6.3895, the strongest level since the country unified official and market exchange rates at the end of 1993. The central bank’s reference rate was boosted 0.27 percent to 6.3991.

The International Monetary Fund said last month a stronger yuan would help stabilize the global economy, as well as aid government efforts to tame inflation and rebalance the nation’s growth toward domestic demand and away from exports. Data this week showed record overseas sales helped drive China’s trade surplus to a two-year high in July and consumer prices rose the most in three years.

“The inflation and trade data, together with the Fed’s policy to maintain extremely low interest rates, have fueled faster appreciation,” said Banny Lam, an economist at CCB International Securities in Hong Kong. “Strong economic growth, supported by the latest export figures, also provides investors with confidence to buy the yuan in these turbulent times.”

U.S. Criticism

The yuan is the sole gainer this month among Asia’s 10 most-used currencies excluding the yen, having advanced 0.7 percent versus the dollar as a Standard & Poor’s downgrade of the U.S. credit rating and a rout in global equities prompted investors to pull back from riskier assets. The MSCI Emerging Markets Index of shares dropped 14 percent since July.

The Fed said on Aug. 9 it would maintain its record-low policy rate of zero to 0.25 percent at least through mid-2013 to revive a recovery it described as “considerably slower” than anticipated. The Federal Open Market Committee is “prepared to employ” additional tools to bolster the economy, said the monetary authority, which bought $2.3 trillion of debt since December 2008 during two rounds of so-called quantitative easing.

The U.S. will likely announce a third round of asset purchases, which would spur global inflation and boost the flow of “hot money” to China, the Beijing-based National Development and Reform Commission said yesterday. Kenneth Rogoff, a Harvard University economist, a day earlier also forecast the Fed will pump more dollars into the financial system.

Increased supply contributed to the dollar being the worst performer of 16 major global currencies since quantitative easing began. Australia’s dollar, the Swiss franc and Brazil’s real were the three best performers, climbing 44 percent or more versus the greenback since 2008. The yuan gained 6.7 percent.
Forwards Jump

In Hong Kong’s offshore market, the yuan gained 0.38 percent today to 6.3875 per dollar. Twelve-month non-deliverable forwards rose 0.96 percent to 6.2940, the biggest gain since June 2010, based on data compiled by Bloomberg. The premium to the onshore exchange rate widened to 1.6 percent from a two-year low of 0.4 percent on Aug. 9, the largest two-day jump since December 2008.

China may adjust its foreign-exchange policy to place less emphasis on the yuan’s value versus the dollar, the Economic Information Daily reported today, citing Pan Zhengyan, a researcher with the Shanghai Academy of Social Sciences.
Treasury Holdings

The People’s Bank of China buys dollars to limit currency gains as capital flows into the country, a policy that’s made it the biggest foreign holder of Treasuries. Faster appreciation may stem purchases of U.S. government debt as the Fed’s loose monetary policy weighs on the dollar.

China’s $3.2 trillion of reserves are the world’s largest and compare with a combined $1.1 trillion for Brazil, India and Russia. Policy makers should urgently assess the risks from being the main investor in U.S. debt and accelerate diversification of the reserves, the Financial News reported today, citing Xia Bin, a central bank adviser.

“The strong rebound in the trade surplus, together with less willingness to accumulate more foreign-exchange reserves given the structural weakness of the U.S. dollar, are likely behind the recent rapid pace of yuan appreciation,” said Chang Jian, an economist at Barclays Capital in Hong Kong, who formerly worked for the World Bank. She predicts the currency will appreciate at a rate of 5 percent to 7 percent a year.

China’s overseas sales rose 20 percent from a year earlier to $175.1 billion in July, exceeding imports by $31.5 billion, the customs bureau reported yesterday. U.S. officials including Treasury Secretary Timothy F. Geithner and New York Senator Charles Schumer say China keeps the yuan undervalued to gain an unfair trade advantage.
Trading Band

After keeping the exchange rate stable for a decade, China allowed its currency to strengthen 21 percent from July 2005 to July 2008, including an initial, single-day gain of 2 percent. Appreciation was then halted for almost two years to help exporters weather a global recession and the currency has advanced 6.3 percent against the dollar since controls were loosened on June 19, 2010.

A return to a fixed exchange rate is unlikely as “the economy is more resilient than it was three years ago,” according to Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. Faster appreciation “may signal China’s intention to widen the yuan trading band,” he said.

The yuan is currently allowed to trade up to 0.5 percent on either side of the daily reference rate set by the central bank. The band was last expanded on May 18, 2007, from 0.3 percent.

Sunday, July 31, 2011

Chinese yuan predicted to rise 4 percent over coming year

Yuan will rise steadily in this decade.

- The Chinese yuan will rise 4 percent against the dollar in the coming 12 months, making it the strongest performer among the BRIC country currencies, according to the latest Reuters poll.

As the Chinese economy expands with rising foreign exchange reserves, the yuan, also known as the renminbi, is set to extend an uninterrupted rise since it was de-pegged from the dollar just over a year ago.

A poll of 36 strategists and analysts, taken mostly before the People's Bank of China (PBOC) raised interest rates for the third time this year on Wednesday, showed the yuan trading at 6.40 in three months, 6.30 in six and 6.20 in 12 months.

That compares with 6.45, 6.38, and 6.24 in the previous quarterly BRIC FX poll.

BRIC countries have emerged as important players in the global economy, providing a ballast when developed economies plunged in the wake of the global financial crisis.

But that prominence has attracted a flood of investment from abroad in recent years, making national currencies expensive and threatening export markets.

"The (Chinese) currency is on a clear medium-term appreciation trend," said Robert Minikin, a senior foreign exchange strategist at Standard Chartered in Hong Kong.

He added that China may widen the trading band between the yuan and the dollar in the onshore market soon, in an effort to make the exchange rate more flexible and market-based.

But China, the world's largest exporter, is unlikely to conduct another "one-off" revaluation or allow sharp appreciation in the yuan.

Lu Zhengwei, chief economist for Industrial Bank in Shanghai, said using a rise in the yuan to fight imported inflation could backfire as it might encourage speculative capital inflows and push up prices further.

The PBOC raised the benchmark lending and deposit rates by 25 basis points each on Wednesday in an effort to tame rampant inflation despite clear signs growth is easing.

China's central bank is set to raise rates once more this year, according to a snap Reuters poll on Thursday.


The Brazilian real has been the hottest currency of the four in recent months, having jumped more than 6 percent since the beginning of the year to reach a 12-year high of1.552 per dollar on July 4.

The Reuters poll found the real was expected to remain broadly unchanged at 1.57 by the end of July, then slip to 1. 60 in six months. In 12 months it will fall to 1.63, nearly 4 percent weaker than current levels.

However, that is a stronger outlook compared with the April BRIC FX poll. A $600 billion U.S. Treasury bond purchase program, known as QE2,has flooded world markets with capital and caused the dollar to weaken. The program ended on June 30.

Some of that money has been invested in Brazil, where the 12.25 percent benchmark rate and a growing economy offer much better returns than near zero interest rates in the United States and some other developed economies. Estimates for the real are based on how quickly investors and economists expect the liquidity injected into the financial system from QE2 to be drained and how fast U.S. interest rates will rise.

The latest consensus shows U.S. rates won't rise until well into next year but not everyone is convinced.

"I think we can start seeing ... a pick-up in U.S. rates in three to six months," said Andre Ferreira, a partner at Futura Corretora, a Sao Paulo currency brokerage which expects the real to weaken to 1.65 by the end of the year.

Those who disagree on the value of the real, agree on where responsibility for changes lie. "The market is totally focused on U.S. liquidity and interest rates," said Diego Donadio, currency and interest-rate strategist at the Sao Paulo unit of BNP Paribas.

"We don't expect the U.S. to raise rates and reduce liquidity until sometime in 2012 and until that happens there is little that can happen to cause the real to seriously weaken." Donadio expects the real to strengthen marginally to 1.55 in 12 months. Few fear government threats to take measures to weaken the currency. President Dilma Rousseff faces rising political pressure to prevent the real's gains from undermining the competitiveness of Brazilian manufactured goods in export markets.

The strong real has flooded the country with imports and slowed export growth for most products except oil, iron ore , soybeans and other commodities and low-value goods.

A government source told Reuters on Wednesday that Brazil is considering new measures to weaken the real. [ID:nN1E7650T 5] But previous efforts in April to slow the flow of speculative capital to Brazil were shrugged off and the real was driven to new highs.

Foreign bets the real will gain further have also risen to new records, spurred in part by an increase in investment from Japan, where rates are also low and growth sluggish.

The poll found the partially convertible rupee would rise by around 1.0 percent against the dollar in the coming year, helped by strong foreign fund inflows into the domestic share market.

The Indian rupee is seen trading at 44.50 against the dollar in one month, 45 in three and 44 in 12 months. These medians are almost unchanged from a poll taken three months ago.

The dollar is also likely to be under pressure in coming months which is seen helping the rupee, traders said. On Thursday, the rupee was trading around 44.40 to the dollar.

"We expect the current slowdown in the global economy to be a temporary soft patch," said Sonal Varma, an economist with Nomura in Mumbai.

"Strong goods exports, rising software exports, strong remittances and rising foreign direct investment and external commercial borrowing inflows should all help the rupee gain over the next 12 months."

The Russian rouble is expected to appreciate slightly against the dollar in the near term before returning to present levels of around 28.2 this time next year.

Against the euro, the rouble is set to rise by more than 2 percent in the next 12 months to 39.22.

Russia's central bank bought $3.23 billion and 0.54 billion euros ($772.4 million) in June in its forex intervention s, aimed at curbing volatility, central bank data showed on Thursday.

Saturday, July 16, 2011

Iran and China sign $4 billion in deals

Hard to believe that China and Iran will reach $40 billion in trade in 2011.

TEHERAN — Iran and China on Saturday signed a series of agreements worth $4 billion (€2.8 billion) for infrastructure projects as part of a broader bid to boost trade volume between the two nations, Iranian state media reported.

As part of a $500 million (€354 million) deal, China agreed to provide Iran with 60 energy recovery incinerators, which are to be installed within a year in major cities and in Iran’s northern tourism hub along the Caspian sea.

The bilateral agreements span cooperation in water, mining, energy and industrial sectors. China also pledged to boosts its imports of Iranian mineral products, state TV reported.

“China is now the leading economic partner of Iran and there are plans for increasing last year’s trade volume of $30 billion to $100 billion in the future,” Iranian vice-president Mohammad Javad Mohammadi-Zadeh told state television.

The agreements were signed during a visit by He Guoqiang, a senior executive of the Chinese Communist Party, who heads a delegation visiting Iran. He was received by Iranian President Mahmoud Ahmadinejad.

“Bilateral trade will reach $40 billion (€28 billion) this year,” the Chinese ambassador to Teheran told IRNA recently.

China and Iran have become major economic partners in recent years, partly thanks to the withdrawal of Western companies in line with sanctions against the Islamic republic over its contentious nuclear drive.
Currency changes

Meanwhile, Iran’s central bank is asking citizens their opinions on new names for the country’s currency. Visitors to the bank’s website can choose from several names, including rial — the current name — toman, parsi and derik.

In the online survey, the bank also asks respondents how many zeros should be removed from the currency. The government has proposed lopping off four zeros. The biggest Iranian banknote is 100,000 rials, which is equivalent to around $9.

The poll results will be taken into consideration when the government draws up a draft on changes to the currency. The proposal will be submitted to parliament. Iran’s government has approved removing zeros from the currency, apparently as a result of inflation, which is officially about 14 per cent.§ion=business

Tuesday, July 5, 2011

China revises income tax threshold to 3500 yuan

China's top legislature on Thursday adopted an amendment to the country's individual income tax law. The amendment raises the monthly tax exemption threshold from 2,000 yuan ($307.7) to 3,500 yuan ($538.5).

The adjusted threshold is 500 yuan greater than the amount originally proposed in a previous draft of the amendment, which was submitted to the National People's Congress (NPC) Standing Committee on Monday for its second reading.

The new exemption threshold was agreed upon after the legislature held two meetings on Tuesday and Wednesday to listen to its members' opinions. It was during these meetings that the NPC's Law Committee proposed raising the threshold to 3,500 yuan.

The amendment was "necessary and timely" and will reduce tax burdens for people with low incomes, as well as help to adjust the distribution of income, according to the committee's proposal.

The previous law stated that individuals who earn less than 2,000 yuan ($307.7) per month are not required to pay income taxes. The draft amendment, submitted for its first reading on April 20, proposed raising the threshold to 3,000 yuan per month.

Many of the nation's citizens previously voiced their dissatisfaction with the 3,000-yuan threshold, appealing to lawmakers to reconsider the amendment.

Before the NPC Standing Committee started its second reading on Monday, the legislature publicized suggestions and opinions solicited from online taxpayers, hoping to acquire useful ideas for lawmakers to consider in their reading of the draft amendment.

Of the 82,707 citizens who commented on the draft amendment, about 83 percent suggested raising the threshold to 3,500 yuan, while 62 percent favored raising it even higher.

Thursday, June 23, 2011

China, Russia Agree To Use Yuan, Ruble In Bilateral Trade

BEIJING (MNI) - China and Russia have signed an agreement to use the yuan or ruble in their bilateral foreign trade.

The People's Bank of China said in a statement that it has agreed with the Central Bank of Russia that companies from the two countries can choose to use the Chinese yuan, Russian ruble or any freely-convertible currency to settle foreign trade.

Foreign trade on China's border with Russia is already informally conducted in yuan or rubles.

Beijing is pushing trade settlement in yuan as part of its efforts to internationalize the currency.

Sino-Russian trade rose 34% y/y to $16.08 billion during the first quarter of this year, according to Chinese customs data.

The two governments agreed last November to allow their currencies to trade against each other in the Chinese spot market.

Sunday, June 12, 2011

China inflation may top 6 percent in June

BEIJING, Jun (Reuters) - China's inflation rate may accelerate to more than 6 percent year-on-year in June, which could bring the full-year consumer price index for 2011 to as high as 5 percent, a government researcher said in remarks reported on Sunday.

Zhang Zhuoyuan, an economist at the Chinese Academy of Social Sciences, a top government think tank in Beijing, said taming inflation would remain the priority in coming months. He called for faster steps to push real interest rates into positive territory and douse price pressures.

The People's Bank of China has raised interest rates twice in 2011 and many analysts believe it may raise them again soon in an effort to control inflation.

"It will be very difficult for China to cap its annual inflation within 4 percent and the full-year CPI is likely to reach 5 percent," Zhang was quoted as saying by the state radio.

Beijing has set an annual inflation ceiling at 4 percent this year, but prices keep rising stubbornly and many economists have said it will be tough to achieve the goal.

Zhang said his inflation forecast for June also reflected the relatively low ase of comparison of a year earlier.

He attributed the persistent inflationary pressure mainly to an excessive supply of money and credit over a long time, when Beijing rolled out a massive stimulus plan to shield the economy from the financial crisis.

The increases of other input costs for enterprises, such as rising prices of labor and raw materials, will also make this round of inflation last for a while, he added.

According to a Reuters poll of 22 economists, China's consumer price index (CPI) in May may have accelerated to 5.4 percent from 5.3 percent in April.

The National Bureau of Statistics is scheduled to publish monthly economic indicators, including the consumer price index, for May on June 14.

Monday, May 23, 2011

China, Japan and Korea move closer on FTA

Japan, China and South Korea are set to move quickly to decide on a framework for a trilateral free trade agreement, after Chinese Premier Wen Jiabao expressed a positive view on the proposal.

At a trilateral summit meeting in Tokyo that finished Sunday, Prime Minister Naoto Kan, South Korean President Lee Myung Bak and Wen agreed to finish a joint study on the FTA within this year--one year earlier than initially planned.

Completion of the study will pave the way for formal FTA negotiations to begin.

After the meeting, Wen told reporters he would be keen to start the negotiations next year.

Lee said during a meeting with leaders of economic organizations Sunday that negotiations could start next year if the three nations proceed wisely.

The three countries, whose combined gross domestic product accounts for 20 percent of the global total, began joint research into a trilateral FTA in May last year.

An academic, industrial and government research group set up by the three nations is currently assessing the likely effects of and problems related to the trilateral FTA.

Previous research conducted by the private sector estimated such a pact would push up Japan's GDP by 0.3 percent.

Japan and South Korea, with an eye on China's massive and expanding markets, have been keen to discuss the FTA, but China--which tries to protect its domestic industries by placing high tariffs on imports--was previously thought to be unenthusiastic about the idea.

Wen's positive remarks Sunday therefore came as a surprise to Japanese and South Korean officials, sources said.

Sunday's developments follows Japan's postponement of its decision on whether to join talks on the Trans-Pacific Partnership, a multilateral FTA between Brunei, Chile, New Zealand and Singapore that other nations--including Australia, Malaysia, Peru, the United States and Vietnam--are currently in negotiations to join.

China is believed to have some concerns about Japan participating in the TPP, which could turn out to have the United States at its core, sources said.

"[Wen's remarks are] a test to see whether Japan will choose the TPP or East Asia," a source close to the Japanese government said.

However, looking ahead, it is not clear if Wen's attitude will be reflected in China's policy, as a reshuffle of that nation's leadership is expected next year.

In South Korea, meanwhile, voices in industrial circles have objected to forming an FTA that includes Japan, as South Korea is on the losing side of a more than 2 trillion yen trade imbalance between the two countries.

Japan, on the domestic front, will have to conduct agricultural reforms before it is able to join either FTA.

Although all three nations realize there are gains to be made from starting negotiations, there are plenty of twists and turns they have yet to navigate.

Saturday, May 7, 2011

1st yuan shares to trade outside China make debut

The first yuan-denominated shares to trade outside of mainland China made their debut in Hong Kong Friday in a landmark initial public offering as Beijing seeks to broaden the use of its currency.

Units in Hui Xian Real Estate Investment Trust fell to 5.1 yuan shortly after trading began from the offer price of 5.24 yuan, which was at the bottom end of the proposed issue price range.

The initial public offering raised 10.48 billion yuan ($1.6 billion).

Investor interest in financial products is surging because of the growing strength of the yuan, also known as the renminbi.

Hui Xian's sole asset is the Oriental Plaza, a complex in Beijing controlled by billionaire Li Ka-shing, Hong Kong's richest man. Two billion units in the trust, or 40 percent, were sold to investors.

The remaining 60 percent of the trust will be owned by six companies, including Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd., both controlled by Li, and Bank of China Ltd.

Oriental Plaza consists of a shopping mall, office and apartment towers and the Grand Hyatt Beijing hotel.

Investors and other companies looking to launch their own yuan stock offerings will be keenly watching the results.

Beijing is promoting Hong Kong as a platform for yuan-based international banking. Hong Kong is a former British colony that was handed back to China in 1997, but maintains its own political and financial systems and currency, the Hong Kong dollar.

Hong Kong banks started handling yuan in 2004 and now offer services including deposits, credit cards and trade financing that allows foreign companies to pay Chinese business partners in yuan.

Saturday, April 9, 2011

American export to China soars

As China Grows, So Does Its Appetite for American-Made Products


SHANGHAI — America’s huge trade deficit with China has raised concerns about American competitiveness and jobs moving overseas. But a new study offers a glimmer of hope to Americans: Last year, American exports to China soared 32 percent to a record $91.9 billion.

A study by a trade group called the U.S.- China Business Council says China is now the world’s fastest-growing destination for American exports.

While United States exports to the rest of the world have grown 55 percent over the past decade, American exports to China have jumped 468 percent.

Most of those exports have come from California, Washington and Texas, which have shipped huge quantities of microchips, computer components and aircraft. But states that produce grain, chemicals and transportation equipment have also benefited.

The trend seems like good news for the White House. Last year, President Obama announced a new initiative that aims to double American exports by 2014. A major focus of that effort is China, now the world’s second-largest importer behind the United States.

Don Brasher, who runs Global Trade Information Services, which is based in South Carolina, expects China to pass the United States next year to become the world’s biggest importer. (For comparison’s sake, in 2010, the United States imported about $1.9 trillion worth of goods while China imported $1.4 trillion worth.)

And while much of what China imports is used to make goods that are then re-exported, like the Apple iPhone, Mr. Brasher says a growing share of what China imports from the United States, including cotton and grain as well as aircraft and automobiles, is staying in China.

“You know all those BMW X5 S.U.V.’s that are in China? They’re being imported from the U.S.,” Mr. Brasher said in a telephone interview Thursday. “They’re being made by a BMW factory in South Carolina.”

But analysts say they don’t expect the United States trade gap with China to shrink any time soon. Last year, China’s trade surplus with the United States was between $180 billion or $250 billion, according to various calculations.

Still, the combination of a weakening American dollar and China’s growing economic clout is likely to bode well for American exports. With China short of water and arable land, exports of crops to China jumped to $13.8 billion last year.

China is hungry for other resources as well, like recyclable metals and paper. Just ask New York. Last year, the state’s biggest export to China was “waste and scrap” — about $1 billion worth, according to the U.S.-China Business Council.

Tuesday, March 15, 2011

China displaces the United States as the world's largest manufacturer

WASHINGTON — China topped the United States as the world's largest manufacturer for the first time last year, according to a study Monday by economic research firm IHS Global Insight.

China accounted for 19.8 percent of global manufacturing in 2010, compared with 19.4 percent for the US -- $1.995 trillion worth, compared with $1.952 trillion, according to IHS.

But by measures of productivity, China remained far behind the United States, with US manufacturing workers generating more than eight times the value per person than China's.

"In other words, the US manufacturing sector is producing roughly the same amount of output in 2010 with 11.5 million workers as opposed to its Chinese counterpart with around 100 million workers," IHS said.

Japan remained a distant third last year, generating $1.027 trillion by manufacturing, followed by Germany, with $618 billion.

But the most telling indicators were the pace of growth: over 2008-2010, China's manufacturing sector grew at a pace of 20.2 percent per year, while the United States grew at 1.8 percent and Japan at 4.25 percent.

Germany and fifth-ranked South Korea both contracted, and sixth-ranked India grew at 7.3 percent annually.

IHS pointed out that at one-third of the total economy, China's manufacturing sector is far larger as a portion of output than any other country. In the United States, by comparison, the share is just 13 percent of all production; in the other top-ranked countries, it is 15-20 percent.

Wednesday, March 9, 2011

China may become a net importer of rare earth metals

China may become a net importer of some rare earth elements by 2015, based on the growth in clean technology, one rare earths developer said Wednesday.

China currently produces 97% of rare earth metals, which are used in clean technology projects such as hybrid and electric vehicles, solar panels and wind turbines.

"We are watching their production curve," said Jim Sims, director of public affairs at U.S.-based Molycorp.

Sims spoke at a session about rare metals and the electric car at the Prospectors & Developers Association of Canada's conference in Toronto.

Their production might not be as much as believed, he said, adding that in the first half of 2011, China's export quota will continue its seven-year downward trend. Sims quoted the results of a survey conducted by, which said 59% of respondents believe the Asian country will turn into a net importer. Further, Sims said that senior Chinese officials have reportedly said "pointedly" that they are not ruling that out.

Sims noted that China has huge growth in the wind turbine sector and even with the growth of car sales in China, production and use of electric bikes are growing swiftly, too.

Hybrid and electric vehicles come to mind when discussing clean technology and rare metals, and Sims noted that about 12 kilograms of various rare metals are used in these vehicles.

Projecting demand for these vehicles and other clean-technology devices is difficult in part because of how quickly some will depend on supply of the various metals used, said Gareth Hatch, founding principal of Technology Metals Research.

Hatch said in December, the U.S. Department of Energy released a 166-page research paper called "Critical Materials Strategy" which in part estimated the impact of market share and material intensity – how much used for a particular technology - for several rare earth metals. The DOE looked at the potential impact of high and low market penetration.

The DOE reviewed several technology types from advanced batteries, thin-film semiconductors – which are mostly used in solar panels – and phosphors, which are used in LCD and plasma displays and newer light bulbs.

Hatch said the DOE looked at what the supply of 14 various metals would be by 2015 and by 2020. The most critical metal, in terms of high use in clean energy and supply, in the next five years is dysprosium. Others include europium, indium, neodymium, terbium and yttrium. In the short term, lithium is not considered critical based on the projected use and supply, but in the next 5-10 years, it moves into the "near-critical" stage.

Prices for rare earth metals have risen as attention to these elements grows and Hatch said as reality sets in, prices might sort themselves out. "I'm not an economist … but as sources of supply readily available come on stream, we could see a reduction in the price of some. I don't believe they'll fall back to their historical lows because of demand. There are a handful of metals whose price I don't see changing," he said, suggesting that dysprosium and terbium might be two of those.

Tuesday, March 1, 2011

Sanctions helping China do business with Iran

With Iran penalised by sanctions over its foreign and nuclear policies, China profits. In a few years, it has increased its trade with the Islamic Republic tenfold, with oil topping the list. Beijing has close trading relationships with many dictatorial regimes.

Beijing (AsiaNews/Agencies) – Sino-Iranian trade jumped tenfold in ten years, going from US$ 2.5 billion in 2000 to US$ 29.3 billion last year. Iran is now China’s second trading partner after the European Union. This was made possible by sanctions against Iran, which have created more opportunities for trade with China.

“China’s economic ties with Iran have to some extent been made easier by Western divestment,” said An Baojun, a researcher at the Chinese Academy of International Trade and Economic Co-operation.

Many democracies have in fact curtailed or ceased trading with Iran to protest against Tehran’s policies, especially its nuclear programme. Although the Iranians claim the latter is for peaceful purposes, they have failed to live up to their obligations in terms of controls and inspections. This has given Chinese companies an opportunity to fill the gap left by Western firms.

For example, the China National Offshore Oil Corp reached a lucrative deal to develop the North Pars gas fields. SINOPEC gained a 51 per cent stake in developing Iran’s Yadavaran oil field, and Iran agreed to supply China with 150,000 barrels of oil a day for 25 years at market price.

More recently, Japan's unilateral sanctions, passed in September, banned financial activity with 15 designated Iranian banks that could contribute to nuclear activities.

In September, South Korea temporarily closed 102 companies believed to be helping Iran’s nuclear programme, including the Seoul branch of Bank Mellat, an Iranian bank that handles about 70 per cent of South Korean exports to Iran.

Since international sanctions affect primarily weapons or nuclear-related matters, most of bilateral trade between China and Iran is not covered. Thus, Western disengagement has benefitted the mainland immensely.

Trade is expected to hit US$ 50 billion by 2015, said Asadollah Asgaroladi, chairman of the Sino-Iranian Chamber of Commerce, during a meeting in Beijing last month.

Already, China is the largest importer of Iranian goods—last year, the volume was US$ 18.2 billion (US$ 13 billion in oil and mineral fuel).

What is more, “An estimated 30 per cent to 40 per cent of trade with Iran is channelled through its neighbours,” An told the South China Morning Post, countries like the United Arab Emirates.

In June, the UN Security Council issued more sanctions against Iran with the support of China. The United States, EU, Japan and Australia followed with even harsher sanctions. Yet, Beijing continued to boost trade with Iran, selling nuclear technology for example.

Under the present circumstances, Ahmadinejad said, the world needed a “new, humanitarian and fair order which could be defined and established with the help of Iran and China.”

For China, this means mutual respect for independence, national sovereignty and non-interference in the domestic affairs of other nations. Hence, Beijing is prepared to trade with any dictatorship ostracised by democratic states, from Sudan to Zimbabwe and Angola.

Chinese companies are present everywhere, developing energy resources and building infrastructures in countries like Libya, where 36,000 Chinese worked until forced to flee by a popular uprising with major losses for Chinese firms.

Tuesday, February 22, 2011

Taiwan 2010 growth at 24-year high, due to China

TAIPEI — Taiwan said Thursday its economy grew 10.82 percent in 2010, its fastest rate for 24 years, fuelled by rapid expansion in the island's main trading partner China.

The data from the Directorate General of Budget, Accounting and Statistics is a slight improvement on the 10.47 percent growth initially announced last month and represents the strongest growth since 1986.

The directorate also revised growth in the final quarter of 2010 upwards to 6.92 percent from the previous estimate of 6.48 percent.

Economic expansion of 10.3 percent in the Chinese economy, now the world's second-largest, stoked mainland demand for Taiwanese-made products.

"China played a role in bringing about last year's stellar growth," said Antony Chang, an economist at Taipei's Shih Chien University.

"Increased demand from the mainland helped offset lost momentum from the United States and Europe."

The finance ministry said earlier that exports jumped 34.8 percent to $274.64 billion last year, with those to China and Kong Kong hitting a record $114.75 billion, or 41.8 percent of the overall figure.

The 2010 growth was made possible by the export sector's 25.59 percent increase, the highest since 1986 when it surged by 28.23 percent over the previous year, said Shih Su-mei, the head of the directorate.

"The export sector benefited from the continued filing of orders from multinational technology companies that have been continuously launching of consumer electronic products," she told reporters.

Also contributing to the better-than-expected economic performance was an active private sector, where investment soared 32.79 percent last year, the highest since 1965, Shih said.

However, the directorate said it expects Taiwan's economy to grow 4.92 percent in 2011, slightly slower than its initial 5.03 percent estimate.

"As the comparison base of last year becomes higher, we decided to lower the forecast figure for 2011," said Tsai Hung-kun, another official at the directorate.

In June last year, Taiwan and China signed the Economic Cooperation Framework Agreement, or ECFA, which is expected to help keep up economic momentum on the island in 2011.

"The positive influence of ECFA was just on the horizon last year, but its impact will become apparent this year," said Chang, the university economist.

"However, with Taiwan increasingly relying on the Chinese mainland for continued growth, political risk will increase as well."

The sweeping trade pact will contribute 0.4 percentage points of economic growth this year, the directorate said, citing figures from the island's top economic planning body the Council for Economic Planning and Development.

GDP per capita is forecast to hit a new high of $20,783 in 2011 while the consumer price index will rise a moderate 2.0 percent year-on-year, largely driven by rising food and energy prices.

Saturday, February 5, 2011

China's economy US$7.5 trillion including underground economy at the end of 2010

China ended 2010 with $6.1 trillion GDP regular exchange economy.

China has more underground economy than the US. The underground economy is estimated to add about 9.3 trillion yuan or another 25%.

This is USD7.5 trillion at the end of 2010.

China should have 8-10% GDP growth in 2011, 5% inflation and 4-10% currency appreciation. The bottom of the range for 2011 is 8.8 trillion and the top is 9.52 trillion based on the ranges I described for growth, inflation and currency and the inclusion of the underground economy.

Financial risk and the urban underclass

The UK Telegraph writes about problems with China's economy and the property bubble and risks for a financial crisis

In Beijing's vast network of unused air defence bunkers, as many as a million people live in small, windowless rooms that rent for $45 to $76 a month, which is as much as many of the city's army of migrant laborers can afford. The small ones [6ft by 9ft] are 300 yuan [$45] the big ones [15ft by 6ft] are 500 yuan [$76].

Urban and GDP Growth
A census going on now in China and data will start to be released in about April/May should have a better set of numbers.

A lot of the GDP growth is from the urbanization. People in the cities are 3 times richer than the rural people. By moving 1-2% of the population to the cities each year, over a few years they are fully absorbed into the urban economy. This provides an extra 3-6% boost to the GDP growth. It is a series of people get moved up over time to urban levels.

China is creating the next level of urbanization with integration of many cities with five levels of infrastructure The one city effect from this integration provides an extra 1-2% per year of GDP growth for that region and seems to result in an extra 20% in overall GDP enhancement over 10-20 years.

China is also integrating cities in the south.

On a purchasing power parity (PPP) basis (new Penn World 7.0 statistics) China has a bigger economy than the US as of 2010. The PPP numbers suggest that China's currency is about 40-50% undervalued relative to the US dollar.

China is shifting to promote the domestic economy over exports.

China is less dependent on exports than most people think (per the Economist magazine)

Including the underground economy, China would be passing the US economy in 2015.

Sunday, January 23, 2011

China economy to grow 9.8% in 2011

BEIJING — A Chinese government think tank has forecast the nation's economy will grow around 9.8 percent this year, with inflation likely to come in at 3.7 percent, state media reported Sunday.

Experts at the Chinese Academy of Sciences also predicted that gross domestic product would rev up in the latter part of the year, and would be driven largely by domestic consumption, the official China News Service said.

The consumer price index (CPI), the main gauge of inflation, would likely be highest in the first quarter of the year due to rising commodity prices and salaries, and would then drop for the remainder of 2011, the report added.

China's economy grew 10.3 percent in 2010, marking the fastest annual pace since the onset of the global crisis, and the CPI rose 3.3 percent, exceeding the government's full-year target of three percent as food costs soared.

Unlike other countries struggling to spur growth, Beijing has been trying to slow its economy and stem a flood of liquidity that is fanning inflation and driving up property prices.

The central bank has raised interest rates twice since October, and has also increased the amount of money banks must keep in reserve, in a bid to curb lending.

Sunday, January 2, 2011

China Africa trade reaches $100 billion in 2010

BEIJING (AP) — China will boost further its already expanding economic ties with Africa, which reached a record two-way volume of more than $100 billion this year, the government said Thursday.

Chinese demand for oil, gas, iron ore and other raw materials for its rapidly growing economy has spurred trade and investments in Africa in recent years.

A central government report released Thursday said that in the first 11 months of this year, China-Africa trade volume reached $114.81 billion, a 43.5 percent year-on-year increase. That follows a decline in 2009 due to the global financial crisis.

That growth is likely to gain traction in the coming years as the "economic and trade cooperation is bright" between the two sides, said the "China-Africa Economic and Trade Cooperation" report.

"As economic globalization progresses, the economic and trade cooperation between China and Africa will definitely gain momentum to reach a larger scale, broader scope and higher level," it said.

Beijing is encouraging Chinese companies, flush with cash from the country's economic boom, to invest in Africa in an effort to diversify an economy driven by exports and investment. China's investment in Africa has largely targeted oil, gas and mining but is expanding to manufacturing, real estate, infrastructure and other sectors.

But the influx of Chinese investors has brought about tensions and criticism over control of Africa's resources, worries about unfair business tactics and complaints that local communities get too little of the economic rewards.

In October, two Chinese mine bosses in Zambia were charged with attempted murder after shooting miners during a pay dispute. Chinese companies have invested nearly $3 billion in Zambia, a major copper producer, according to the Zambian government.

While the report did not address local disputes, it defended China's presence in Africa, saying China abides by equality, mutual benefit and balanced trade and economic cooperation with African countries.

Some experts said Africa's openness to Chinese investment is partially because its trade does not come with criticism of human rights records and other political issues.

"African countries also like that Chinese are less critical of their internal political affairs and there's less bureaucracy so projects and deals are executed a lot faster," said He Wenping, director of African studies at the Institute of West Asian and African Studies in Beijing.

In 2009, China's direct investment in Africa reached $9.33 billion with the majority directed at mining followed by manufacturing, the report said, a jump from $490 million in 2003.