world growth

world growth

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.