China Economy - News & Updates

[Neo]

China must focus on consumption, not exports: IMF

TOKYO: An International Monetary Fund official called on China to shift its focus to stimulating domestic demand on Monday, in part by providing more social welfare, in order to cut its reliance on exports.

The Chinese banking system has poured money into heavy industrial investment but shied away from lending to small- and medium-size businesses, said Steven Dunaway, deputy director of the IMF Asia and Pacific Department.

“With the population of 1.3 billion people, China has a huge domestic market. It does not need to rely on exports for economic growth,” he told a symposium in Tokyo. Rapidly growing fixed asset investment has driven the Chinese economy in recent years but the money may have been more efficient going to other areas such as social welfare and education, he argued.

“You have very heavy investment in very capital-intensive industries in a country that has a tremendous amount of surplus labour,” Dunaway said. Calling on China to make structural changes while its economy is strong, Dunaway said that improved public education, healthcare and pension systems should ensure sustained growth.

“This will do a lot in terms of boosting consumption,” by increasing household disposable incomes, he said, adding that China has been reluctant to do so as it lacked a comprehensive plan for public welfare and education.

Soaring investment has also caused overcapacity and the lowering of prices of finished goods, he said. “Banks still have a tendency to lend primarily toward state-owned enterprises and heavy industries so a lot of funding is flowing to very capital-intensive industries and a very little money goes to small-, medium-sized enterprises,” he said. Individual Chinese have high levels of savings but most only have the option to put their money into bank deposits, he said.

“Banks have heavy responsibility in terms of being able to channel those funds. They have not done a very good job of it as illustrated by very large non-performing loans that have been in the banking system,” he said.

http://www.thenews.com.pk/daily_detail.asp?id=40894

 

[Neo]

China wants slower economy

BEIJING: The Chinese economy grew too quickly in 2006 and the government wants the rate to slow this year, a senior economic planning official said on Monday. “Economic development is moving in the expected direction but economic growth in 2006 was a bit too high and we want it to slow to a reasonable growth rate (this year),” Han Yongwen, secretary-general of the National Development and Reform Commission, told a press conference.

http://www.thenews.com.pk/daily_detail.asp?id=40898

 

[Janbaz]

China to spend billions on technology programmes

BEIJING: China plans to spend 30 billion yuan ($3.85 billion; euro2.96 billion) over the next five years on developments including high-speed trains, wind power stations and sea water desalination technology.

About 7.35 billion yuan ($942 million; euro724 million) has already been allocated from the central budget, with the remaining money coming from companies, local governments and institutes, the Ministry of Science and Technology said on its Web site late on Friday.

Even though China’s economy has grown by nearly 10 per cent a year for the past several decades, it is still highly dependent on imported technology with relatively little domestic innovation.

The ministry said there would be 147 science programs, including 50 high-profile projects involving 2-3 megawatt wind power stations, magnetically levitated trains running at 500 kilometers an hour (310 miles per hour) and desalination equipment.

"These programs will try to solve critical science and technology problems that are hampering China’s economic and social development," Wang Xiaofang, director of the ministry’s planning bureau, said on the Web site.

He said the programs were designed to enhance China’s competitiveness in key industries and to enable Chinese companies to develop their own technology.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=42332

 

[Neo]

China eyes policy tools to prevent overheating

ESSEN, Germany: China’s central bank governor Zhou Xiaochuan said on Friday a variety of policy tools would be used to prevent economic overheating with growth surging and inflation on the rise.

“Monetary deposits, exchange rates and interest rate policy, all of these are necessary for economic adjustments,” Zhou said on the sidelines of a meeting of the Group of Seven industrial countries, which China was also invited to attend.

China’s economy, the world’s fourth largest, grew by 10.7 per cent in 2006, its fastest in more than a decade, as investments and exports powered ahead despite a series of government curbs to check the pace of expansion.

But Zhou did not specify a growth target when asked if China was aiming for a more moderate GDP rise this year of 8 per cent, a level the People’s Bank of China stated as a policy goal in its fourth-quarter monetary report issued earlier on Friday.

“We hope to slow down but whether we can get to 8 per cent, I am not certain,” he said. Eight per cent is seen by analysts as the minimum expansion needed to create enough jobs for China’s huge labour pool without causing overheating.

The central bank is also carefully monitoring consumer prices, which rose sharply in December, though it is not overly worried by inflation, he said.

“It’s still not very significant. There might be some seasonal reasons, so we are going to follow statistical data developments very closely,” he said.

China’s inflation jumped to an annual rate of 2.8 per cent in December, the most in almost two years and much higher than market expectations.

This has fuelled belief that the central bank may take tightening steps, potentially including faster yuan appreciation. Zhou, asked whether the yuan had been rising too quickly in recent weeks, said he was generally satisfied with the currency’s appreciation.

“According to our plans and our economic ability, we are increasing our yuan exchange rate flexibility, and I think this is now suitable,” he said. China abandoned a decade-old dollar peg in July 2005.

The yuan, also known as the renminbi, has gained almost 5 per cent against the dollar on top of the 2.1 per cent revaluation that accompanied the de-pegging.

China is under heavy pressure from the United States to do more. Washington and Europe believe the yuan is undervalued, giving China an unfair trade advantage. Chinese officials, however, say the economy needs more time to develop its market mechanisms before the currency can trade freely.

Zhou said he had met briefly with US Treasury Secretary Henry Paulson on Friday at the G7 meeting and would continue discussions later in the evening.

http://www.thenews.com.pk/daily_detail.asp?id=42327

 

[HASEEB66]

with such a huge boom trade surplusand strong economy it will not be any problem for china to import fromm pakistan smething it is willing to do now....ith chinese labour getting expensive their most favourable destination is pakistan and especially gwadar...despit china huge exprt to india of computer chips the chinese have natural and deep happiness of working in pakistan with pakistani businessmen..Mashallah

 

[HASEEB66]

dont forget there are 300 million plus muslims in china MORE THAN 30% of chinese poppulation Mahallah

 

[Neo]

dont forget there are 300 million plus muslims in china MORE THAN 30% of chinese poppulation Mahallah

Dude!
Where did you get this info from?
Chinese muslim population is believed to be arround 30 million!

 

[Neo]

China trade surplus soars 67 per cent

BEIJING: China’s trade surplus broke new records in January with official data on Monday showing a 67 per cent rise from a year ago, giving more fuel to critics calling for a stronger yuan.

The announcement of the January surplus of 15.88 billion dollars, with figures released by the customs bureau, came shortly after a call over the weekend by Group of Seven finance chiefs for China to allow greater flexibility in its currency regime.

China’s biggest trading partners argue an artificially weak yuan gives Chinese exporters an unfair advantage, and Monday’s data showed exports rose 33 per cent year-on-year to $86.62 billion.

Imports, meanwhile, reached $70.74 billion, up 27.5 per cent. “Excess volatility and disorderly movements in exchange rates are undesirable for economic growth,” G7 finance ministers and central bankers said at the close of their two-day meeting in Germany.

“In emerging markets with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur.” Although the surplus in January fell 24 per cent from December, analysts said the month-on-month drop should largely be ignored because the figures were traditionally lower at the start of the year.

More importantly, the surplus was 67.3 per cent higher than the 9.49 billion dollars in January last year. Qian Wang, an economist with J P Morgan Chase Bank based in Hong Kong, said she expected the monthly surplus to average $20 billion in 2007, putting it well above the record annual figure of $177 billion last year.

The 2006 record prompted Commerce Minister Bo Xilai to warn last month that China’s mounting surpluses were becoming more of a problem in relations with its major economic partners. Bo stressed that China had to take new steps to rein in exports or face a trade surplus of about $300 billion, a level that would almost certainly trigger angry protectionist measures and tougher action to ensure a stronger yuan in Washington and Brussels.

The G7 statement was the latest in a barrage of calls for China to allow a sharp appreciation of its currency, demands the Chinese have so far largely ignored. China has instead allowed the yuan to rise by just over six per cent from July 2005 when it was de-linked from its 8.28 yuan peg to the US dollar.

However, China has acknowledged that a large trade surplus is not necessarily good for its own sustained economic growth and plans are afoot to abolish some favourable tax policies for exporters.

The government also intends to reduce exports of high-energy-consuming and low-value-added goods through other non-tax measures. Separately, analysts said the surplus rise in January compared with the same period a year ago was partly due to seasonal factors involving the Chinese Lunar New Year, which in 2007 falls in the month of February instead of January.

“The Spring festival this year is in February and that’s why both exports and imports have increased year-on-year,” said Sun Mingchun, chief economist at Lehman Brothers based in Hong Kong. The holiday fell in January last year, meaning fewer working days.

http://www.thenews.com.pk/daily_detail.asp?id=42527

 

[Neo]

China Mobile to launch 3G services

BEIJING: China Mobile, the country’s largest mobile network operator, plans to roll out third generation (3G) mobile services before the end of October, state media said on Monday.

The company is going to invest more than 15 billion yuan (1.9 billion dollars) to build TD-SCDMA networks in 2007, the Beijing-based Economic Observer reported, citing a plan by China Mobile.

TD-SCDMA, or Time Division-Synchronous Code Division Multiple Access, is a Beijing-backed standard for 3G telecoms services, technology that can transmit images and video at high speeds.

The company will finish the construction of 8,602 TD-SCDMA base stations in eight cities including Beijing, Shanghai and the southern city of Shenzhen before October this year.

It will also complete the procurement of core equipment based on this standard before end-May, it said. Repeated delays following promises to grant all 3G platform licenses has sparked speculation that its home-grown standard is not yet up to snuff.

The government has promised it will issue 3G licenses in time for operations to be launched by the 2008 Olympics in Beijing.

The newspaper cited analysts as saying that China Mobile’s large-scale commercial deployment for this technology indicates that the government has “indirectly” issued the TD-SCDMA license.

Li Yuan, an analyst with China International Capital Corp, said China Mobile is likely to mainly operate the networks based on the home-grown standard after the roll out of 3G services.

Citing separate sources, the newspaper said China Telecom and China Netcom are expected to spend one billion yuan each on expanding their own networks using the same standard in two other second-tier cities.

The standard, which China’s Datang Mobile Communications Equipment is developing with Siemens AG, is competing with the widely used European-led WCDMA standard and the US’s CDMA2000.

http://www.thenews.com.pk/daily_detail.asp?id=42529

 

[Neo]

Chinese economic growth to slow slightly to 9.6pc

BEIJING: China’s blistering economic growth will cool slightly this year but should still expand nearly 10 per cent, driven by exports and investment, the World Bank said on Wednesday.

But the country’s bulging trade imbalance remains a concern as exports continue to outstrip imports, the bank said in its quarterly report on China’s economy.

The World Bank said the economy should grow by 9.6 per cent in 2007, down from last year’s 10.7 per cent growth, its highest rate since 1995. Exports are likely to expand by 19.8 per cent in 2007, while imports are projected to grow 17.5 per cent, it said.

China is under pressure to shift the engine of its economic growth to domestic consumer demand from an over-reliance on exports and investment, which makes the country vulnerable to sudden drop in demand for Chinese goods or a global slowdown. “China’s internal macro challenges remain manageable, but the external imbalance is on the rise. Thus, policy measures that address domestic concerns could ideally also reduce the external imbalance,” said the Washington-based international lender.

But the bank said investment would remain strong “while boosting consumption will remain challenging, particularly in rural areas.” “China’s industry, investment and export-based growth model has become problematic because of trade tensions and environmental and resource constraints,” it said.

Those tensions include a trade surplus _ which hit a record $177.5 billion last year, up 74 per cent from the previous year _ that has strained ties with Washington and other trade partners who say Beijing has not done enough to let its currency appreciate.

China has allowed the yuan to rise gradually against the dollar since cutting a direct link to the dollar 18 months ago and raising the yuan’s value 2.1 per cent. Since then, the yuan has appreciated about 4.3 per cent.

The flood of export revenues is straining Beijing’s ability to keep inflation in check, although the bank said that in the medium term “a significant surge in inflation seems unlikely.”

The government raised interest rates twice last year and imposed curbs on real estate, auto manufacturing and other industries to slow a surge in investment, but the report said a risk of rapid investment growth remained.

http://www.thenews.com.pk/daily_detail.asp?id=42848

 

[Neo]

Thursday, February 15, 2007

China set to slow but imbalances loom: World Bank

BEIJING: Chinese growth is set for a slowdown that is likely to reassure policy makers, but imbalances plaguing the economy are unlikely to go away, the World Bank said on Wednesday.

In its latest quarterly update on the economy, the bank kept its projection for 2007 gross domestic product growth unchanged at 9.6 percent, based on expectations that the pace of exports and investment will moderate from recent peaks. The economy expanded by 10.7 percent last year. Despite a concerted government campaign to tilt the economy away from export and investment-led growth, crucial imbalances would persist, the bank’s Bejing-based economists said.

“Continued productivity growth and a resilient world economy promise only a minor export slowdown,” their report said.

“Domestically, the fundamental drivers of investment remain, and investment is therefore unlikely to slow drastically in 2007,” it added. China was likely to keep running a big current account surplus, setting the stage for further increases in its stockpile of foreign exchange reserves, which now exceed $1 trillion. China faced other challenges, such as boosting consumption as a driver of growth, but the economic outlook was “broadly favourable”, the report said.

Export growth would probably ease to 20 percent, in real terms, this year from 24 percent in 2006.

To cut its record trade surplus more quickly, China would need among other things to push the yuan higher. “Much of the planned reduction in the trade balance will have to come from policies to rebalance the economy, including fiscal and pricing policies and a stronger exchange rate,” the bank said.

More tightening: Rising incomes would continue to propel solid consumption growth, while policy makers would be less concerned than they were a year ago about a potential rebound in investment growth. Although consumer price inflation had picked up recently, medium-term price pressures remained moderate, the bank said. China said on Wednesday that annual inflation had subsided to 2.2 percent in January after a spike to 2.9 percent in December.

http://www.dailytimes.com.pk/default.asp?page=2007\02\15\story_15-2-2007_pg5_22

 

[Janbaz]

Chinese oil companies to set up reserves

BEIJING: China may ask state-owned energy companies to establish oil reserves as a supplement to a national reserve being set up as the Asian giant struggles to fuel future growth, state media said on Thursday.

The requirement is expected to be included in a new Energy Law which could be reviewed by the State Council, or Cabinet, by the end of the year, the China Daily reported. “We are seriously weighing the option of constituting national oil reserves, both at the strategic and commercial level,” Wu Zhonghu, one of the core law drafters, was quoted as saying.

Once implemented, the law will see commercial stocks being added to China’s national strategic oil reserves, which initially are planned at 100 million to 200 million tonnes in four sites. The reserve base in Ningbo in the eastern province of Zhejing has just been put into operation recently and the other three sites in the east and northeast part of the country are due to be completed by 2008, according to previous reports.

Analysts voiced concerns that corporate reserves for strategic purposes could be a huge burden for private companies who are supposed to be in the business of making money. “It’s very costly in terms of working capital and in terms of (price) risk for private companies to hold inventory,” Tony Nunan, a Tokyo-based oil analyst at Mitsubishi’s international petroleum business, told AFP.

In Japan, such rules are placed on private companies because the country is almost 100 per cent dependent on imports, while in the United States companies are not required to do so, he added. “The funding (for) building up the reserves will eventually come from the government and some how, the people,” said Victor Shum, a Singapore-based analyst with Pervin and Gertz.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=43011

 

[Neo]

China's forex reserves

BEIJING: China has artificially held down the accumulation of foreign currency reserves on the books of the central bank by guiding state-owned banks to buy overseas bonds, investment bank Goldman Sachs says.

To shield the banks from currency risk at a time of arising yuan, the People’s Bank of China (PBOC) may have arranged a total of $40-50 billion in currency swaps with Bankof China, China Construction Bank Corp and Industrial and Commercial Bank of China at an implied yuan appreciation rate of 2-3 per cent a year, the bank said.

Goldman’s research is the latest attempt by PBOC-watchers to explain an apparent paradox: given China’s current account surplus last year of about $230-250 billion and foreign direct investment inflows of $63 billion, why did the PBOC’s official reserves rise in 2006 by only $247 billion? On the surface, that would point to “hot money” capital outflows of about $60 billion despite almost universal expectations that the yuan will keep heading higher.

Part of the discrepancy might be due to unannounced use of the central bank’s reserves.

http://www.thenews.com.pk/daily_detail.asp?id=43323

 

[Neo]

China’s GDP to grow 9pc

BEIJING: China’s economic growth will slow to around 9 per cent this year, the official Xinhua news agency on Tuesday cited a government think tank researcher as saying.

The economy will continue to expand some 7 to 8 per cent annually in the coming decade, driven by the real estate and automotive sectors, Xinhua quoted Liu Shijin, deputy director of the State Council’s Development Research Centre, as saying.

The economy grew 10.7 per cent in 2006, according to the lastest official estimate. It was due a slowdown as it had maintained a fast growth rate over the past four years, Liu said.

“The high growth usually finishes in a cycle of every five years,” he was quoted as saying. The report provided no details.

Liu also warned of excessive liquidity and the possibility of a bubble forming in the stock market and in the property sector.

Last week, another government think tank said China’s economic growth was set to slow, adding that Beijing should raise interest rates to curb broad money growth while keeping excess liquidity in check.

Annual GDP growth would probably slow to 10.2 per cent in the first quarter and then to 10 per cent in the second, the State Information Centre said.

 

[Neo]

China becomes net importer of coal

SHANGHAI: China became a net importer of coal in January for the first time, an official said on Monday, as the globe’s largest consumer turned overseas to supply its booming economy.

China imported 4.7 million metric tonnes of coal in January, a rise of 81.1 per cent from a year ago, according to figures from the customs bureau. Coal exports in January fell 20.4 per cent to 3.29 million tonnes, the fourth straight month of year-on-year declines. Increased demand from China’s energy-hungry economy could pressure international coal prices higher, much in the same way the nation of 1.3 billion people has driven oil prices higher.

China became a net oil importer more than 10 years ago and its increased demand has been one of the factors behind higher oil prices over the last few years. To blame for the coal shortage were transportation bottlenecks and a change in tax rebate policy, said Hao Xiangbin an official with the Beijing-based China Coal Transport and Distribution Association.

“China is strong in the productivity but lacks the transportation ability. It’s difficult to transport the coal from mine sites to the coastal areas,” told AFP. “That’s why the coastal area needs to import from foreign countries,” adding that it was the first time that China has had to import more coal than it exports.

Also affecting import patters was the cancellation of tax rebates, Hao said. With coal still fuelling around 70 per cent of China’s electrical generation capacity China had to be more conservative with its resources, warned Hao. “From the long-term perspective China has huge demands for energy, so it had better treasure what it has and stop exporting coal.”

http://www.thenews.com.pk/daily_detail.asp?id=44614