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.