Rediff:Export growth: China does a better job than India

[Kolaps]

The world economy outlook for 2011-2012 is bad, very bad. Taiwan economy is also grow very slow. I hope next year will be better.

 

[my2cents]

@AADHAAR

If China consumes less than what it produces then that excess is consumed by others. That is obvious. Is it your contention that they do not add much value to the final product because they are processing country. But you are forgetting even Japan and Korea went through the same cycle and ended up adding value through innovation. These two are resources deficient countries and yet they managed to educate their public and increase their per capita income. In China's case they have natural resources and also manpower and hence their tremendous growth. They have enough man power to keep the labor cheap for another couple of decades and will remain world manufacturing hub. Already lot of innovation is happening in China and they manufacture most of their arms and is 5th largest exporter of military hardware.

 

[kawaraj]

Admit @AADHAAR's theory is quite well.

Yet I do believe China has the capability to ship out high value added product if we take a look at the R&D spending and their scientific and tech achievements in space tech etc.

They'd rather not to at this point of time is because in the first place they choose to use their most competitive advantage to gain the most, cheap labors and wonderful supply chain, which is indeed beat most nations in the world. This is in line with basic economic theory.

and secondly they have to feed their huge population most of which are not as educated as the west. China's world factory status perfectly suit for their need.

 

[LiberalAtheist]

India lacks the industry and skilled manpower to create the heavy volume of goods which fuel western consumers. As long as there is the demand for cheap goods China's economy will continue to grow at more than stable rates.

 

[kawaraj]

@AADHAAR
Foxconn's calculation is partly true only that China make more than half of the parts but for some key parts(value added) they need to procure from Japan, core processor etc. I happn to work in the area. Forget about cheap low quality Korean parts.....

What I'd like to add is this "assembly" industry keep alive the massive Chinese supply Chain and small businesses around there, also feed millions workers and in the chain may be more than 10 millions of uneducated labors. A added benefit for China is it also pays taxes on all administrative levels to let them build their infrastructure and improve the livelihood at that level.

 

[AADHAAR]

I feel sometimes the data provided by Chinese is some what exaggerated can you shed some light on that mate.

Here you go, mate.. your guess is quite in line with the global bankers:

China Export Surge Spurs Data Skepticism at Goldman, UBS

China Export Surge Spurs Data Skepticism at Goldman, UBS - Bloomberg

China’s unexpected surge in exports last month renewed concern from analysts at Goldman Sachs Group Inc., UBS AG and Australia & New Zealand Banking Group Ltd. (ANZ) that statistics from the nation can be unreliable.

The 14.1 percent gain from a year earlier was the biggest positive surprise since March 2011, according to data compiled by Bloomberg. The increase didn’t match goods movements through ports and imports by trading partners according to UBS, while Goldman Sachs and Mizuho Securities Asia Ltd. cited a divergence from overseas orders in a manufacturing index.

Smaller trade gains could signal a less robust recovery from a seven-quarter slowdown just as Australian Treasurer Wayne Swan says the economic rebound is a sign of improving global demand. Accurate statistics from the world’s second-biggest economy are increasingly important for domestic and foreign investors and for China’s government, ANZ’s Liu Li-Gang says.

“China’s influence on the global economy has become bigger, so not only Chinese policy makers but also business people and the rest of the world need better data,” said Liu, Hong Kong- based chief Greater China economist, who formerly worked for the World Bank. “Unreliable data could have a negative impact on resource allocation and business planning.”

The Beijing-based customs administration, which reported the December trade figures on Jan. 10, said it couldn’t immediately respond to a faxed request from Bloomberg News for comment on the banks’ skepticism.

China’s economic growth may have recovered to 7.8 percent in the fourth quarter from a year earlier, after sliding to a three-year low of 7.4 percent in the previous period, according to the median estimate in a Bloomberg News survey ahead of the data release on Jan. 18.

Evidence that China’s economy “appears to be stabilizing” is “one cause of optimism” that global demand will improve this year, Swan said in his weekly economic note today. China is Australia’s largest export market.

Li Keqiang, who may succeed Wen Jiabao as premier in March, was quoted in 2007 as saying he watched data on power, rail cargo and loans because gross domestic product numbers were “man-made.” Li’s remarks were in a U.S. diplomatic cable published by WikiLeaks in late 2010.

After China’s statistics bureau reported third-quarter GDP in October, Standard Chartered Plc analysts said the 7.4 percent increase was “too good to be true” when compared with the slowdown in electricity production and the readings of a manufacturing index, while London-based Capital Economics Ltd. said its own analysis indicated expansion of about 6.5 percent.

The median forecast for December exports in a Bloomberg survey of 40 economists was for a 5 percent gain, with the highest estimate at 9.2 percent, after November’s 2.9 percent growth. Goldman Sachs, ranked by Bloomberg as the most accurate forecaster for the indicator, projected a 7 percent rise.

The increase, which was the biggest since May, could indicate exporters’ rush to finish year-end orders and government pressure to report exports before the end of the year to reach the government’s 2012 target of 10 percent growth, Shen Jianguang, Mizuho’s Hong Kong-based chief Asia economist, said in a Jan. 10 note.

“It is possible that local governments may have tried to boost exports data by either making round trips in special trade zones” or by exporting “earlier than otherwise in an attempt to improve the annual exports data,” Goldman Sachs’ Beijing- based economists Yu Song and Yin Zhang wrote the same day.

Rushed shipments and even faked exports to secure tax refunds may have contributed to the stronger growth data, according to Alistair Thornton and Ren Xianfang, Beijing-based analysts at IHS Inc. (IHS)

Raise Suspicions

UBS economists led by Hong Kong-based Wang Tao pointed to a “quite obvious discrepancy” in the growth of China’s exports to Taiwan and South Korea and those economies’ reported imports from China in recent months, even as historically they have tracked each other well.

UBS and ANZ also highlighted a surge in shipments into and out of special trade zones within China that would be classified as imports and exports. “This anomaly has raised some suspicions as to whether some exports have been inflated to take advantage of tax rebates,” the UBS economists wrote on Jan. 10.

Some trading companies are turning to transportation providers like Shenzhen Global Express Logistics Ltd. for help in shipping goods through so-called bonded zones to claim export tax rebates or charge higher import prices for goods without them physically leaving the country.

Shenzhen Global offers customs clearing and other freight services including a “one day tour,” Lin Yongtai, a manager with the company in the city bordering Hong Kong, said in a telephone interview.

Tax Refund

For a fee of 1,000 yuan ($161) per vehicle per day, the company will drive trucks into warehouses in bonded zones, where cargo must clear customs, so that businesses can obtain a refund of value-added tax on the “export” of their products or boost sale prices for goods that carry the cachet of being imported.

“A poor villager can boast he has thousands of yuan of turnover every day, but people later discover he only has one bull -- he takes the bull out every morning and brings it back every evening,” Lin said. “The same applies to some parts of China’s foreign trade.”

Such practices aren’t unknown to the customs administration. In March 2009 it issued a statement that “some local governments and enterprises” were trying to move goods in and out of bonded zones to inflate their export and import numbers and said such shipments would not be included in official data.