Chinese Economics Thread

[gjy2105]

China foreign trade growth slows in April

my interpretation of what the Western media means: HAHA GOTCHA!

[escobar]

China CPI growth eases to 3.4% in April

China's consumer price index, a main gauge of inflation, rose 3.4 percent year-on-year in April, the National Bureau of Statistics (NBS) said Friday.

The growth eased slightly from the 3.6-percent rate registered in March. It hit a 20-month low of 3.2 percent in February.

The country's CPI climbed 3.8 percent in the first quarter compared with the previous year. On a monthly basis, CPI edged down 0.1 percent in April, the NBS said.

Food prices, which account for nearly one-third of the weighting in the calculation of China's CPI, increased 7 percent last month from one year earlier.

[escobar]

Nation may miss foreign trade target this year

Continuously weak demand from developed economies has already led some experts to forecast that China may miss its 2012 foreign trade growth target.

But a slowdown may not be an entirely bad thing, they said, because it could spur more companies to undergo technological upgrading and come up with better products and services.

Anbound, a Beijing-based consultancy, said it is highly unlikely that China's foreign trade can grow by the 10 percent that was anticipated earlier this year.

This comment was made prior to the publication of China's April trade data on Thursday, which saw exports grow 4.9 percent year-on-year, reaching $163.25 billion, while imports grew just 0.3 percent, to $144.83 billion.

Both figures are a far cry from the 10 percent mark set for the year.

Although coastal provinces and municipalities are working hard to regain their glory as the nation's champion exporters, their adjustment is obviously painful and taking more time to show results.

In the first quarter of the year, China's export growth was 7.6 percent year-on-year, reaching $430.02 billion, and import growth was 6.9 percent, hitting $429.35 billion.

In April, China's trade with its traditional main partners - the European Union, the United States and Japan - fell to single-digit year-on-year growth, while one year ago, China's trade with all three partners grew by more than 15 percent.

According to Qu Hongbin, HSBC chief economist for China, the eurozone is definitely in the "second dip" of its crisis, and this will have a serious impact on China's export growth.

In the first four months of the year, China-EU trade grew by just 0.3 percent year-on-year.

But, according to Hu Yanni, an analyst with China Securities Co, Europe is not the only cause for concern.

The prolonged sluggish state of the global economy as a whole would put a damper on China's foreign trade.

April's trade data, which showed even less growth than the difficult first three months, may have dashed the hopes of those economists who had forecast that China would recover relatively easily to double-digit trade growth.

In early April, in a survey of 26 research bodies and economists by Caijing.com.cn, a financial information website, most respondents said China's overseas trade would do better in April than in March. In reality, however, the hoped-for improvement did not materialize.

Other economists argued that apart from a few bright spots such as Russia, Brazil and India, China's exporters would have few chances to maintain their business growth unless they become more innovative.

In the first four months, around a dozen provinces saw their export growth fall to single-digit figures, including the traditional trading powerhouses of Guangdong, Shanghai, Zhejiang and Shandong.

Coastal Jiangsu province even registered a 1 percent decline. In Guangdong, the largest exporting province, while its GDP growth slowed to 7.2 percent year-on-year, foreign trade growth trailed far behind at just 3.3 percent.

"But a fall in the growth rate may not necessarily be a bad thing," said Ding Li, a researcher with the Guangdong Academy of Social Sciences.

Maybe, he said, this will be the only way to get companies to seek technological upgrading and new ways of development.

Guangdong leaders' intentions are quite obvious from Nanfang Daily, the province's Party newspaper.

The newspaper is trying to encourage the entire province to emulate Foshan, a manufacturing city in the Pearl River Delta which is famous for making 100 microwave ovens a minute, more than 200 washing machines an hour, over 20,000 refrigerators a day, and 23 million home air conditioners every year.

Foshan's foreign trade volume increased from $11 billion in 2001, when China joined the World Trade Organization, to $50 billion last year. Local companies have no interesting in chasing growth by volume any longer, Nanfang Daily reported.

Instead, they are turning to technology-based, high value-added growth - by clinching large orders from large buyers. The strategy seems to have given the city a competitive edge, as its exports of electrical appliances continued to rise in the first quarter.

The dilemma faced by Guangdong's exporters is the same one that confronts their counterparts across the country.

In the first four months, garment exports totaled slightly less than $40 billion, showing a year-on-year increase of only 1 percent. Textile exports fell 0.3 percent to $28.85 billion, and footwear exports increased 4.2 percent to $12.4 billion.

In contrast, exports of electronic goods and machinery totaled $346.79 billion, showing an increase of 8.5 percent. In this category, machinery exports totaled $115.05 billion, growing by 11 percent.

[escobar]

Chinese economy continues slowing in April

Easing inflation may leave room for ’greater policy loosening’

Newly released economic indicators show that China’s economy continued to slow in April, raising expectations that the government will resort to greater policy easing to help stimulate the GDP.

Quickly cooling industrial production and fixed-asset investment, together with disappointing trade figures, have overtaken inflation as the key concern for Chinese policymakers.

This is driving Beijing to raise concerns about potential downside risks in the coming months, analysts said.

"The pace of economic growth in April may slow to its lowest ebb this year, mainly dragged down by weak exports and the slumping real estate market," said Liu Yuanchun, deputy head with the economics school of Renmin University of China in Beijing.

In April, China’s consumer price index, a main gauge of inflation, eased to 3.4 percent year-on-year from 3.6 percent in March, according to data released by the National Bureau of Statistics on Friday.

Food prices increased 7 percent last month from a year earlier, compared with 7.5 percent in March, as falling pork and fruit prices offset rising vegetable prices.

A research report from the Bank of Communications forecast that the years’ average CPI may decline to 3.3 percent from 5.4 percent in 2011.

Inflationary pressure may ease in the first three quarters, while rebounding slightly in the last quarter of this year, the report said.

"Inflation is set to trend down further, which provides ample room for additional policy easing, including both a quicker pace of fiscal spending and a more supportive credit policy," said Sun Junwei, a Chinese economist with HSBC Holdings.

Meanwhile, the world’s second-largest economy witnessed industrial production growth of 9.3 percent last month — the lowest in three years — while retail sales growth slowed to 14.1 percent year-on-year from 15.2 percent in March.

Electricity production, an indicator of the industrial manufacturing sector, increased at its slowest pace since May 2009, rising 0.7 percent from a year earlier to 371.8 billion kilowatt-hours.

Duncan Freeman, research fellow at the Brussels Institute of Contemporary China Studies, said the slowdown in China’s economy is partly related to its domestic situation and largely connected with the problems in its main markets — the United States and Europe.

“The current economic situation in Europe and in the United States explains broadly the decrease of China’s exports,” Freeman said.

Data published on Thursday showed that both import growth slowed to 0.3 percent in April and export growth to 4.9 percent.

These worse-than-expected economic indicators generated market unease on Friday. The benchmark Shanghai Composite Index fell 0.6 percent to close at 2394, the lowest since April 24.

The slowdown of the global economy even curbed the enthusiasm of some Chinese investors to expand their businesses overseas, said Shong An-An, legal consultant of China Desk of Grant Thornton, based in Netherlands.

While China is encouraging enterprises to go abroad, “we find there is distance between the reality and the goals”, Shong said. “The situation is closely linked to the status quo of economies both in Europe and China.”

Liu Ligang, chief economist in China with the Australia and New Zealand Banking Group, said a main factor for the deteriorating business environment was a continuing tightened monetary policy.

In April, China’s new yuan loans were 681.8 billion yuan ($108 billion), down from 1.01 trillion yuan in March and much less than the predicted 750 billion yuan, the People’s Bank of China said on Friday.

“The central bank may further cut the reserve requirement ratio by 50 basis points in May to inject more liquidity into the market and boost economic growth,” Liu said.

“Amid this gloomy situation, the government may slightly adjust economic policies to speed up GDP growth in the second quarter, said Liu Yuanchun from the Renmin University of China. “It is expected to be higher than the first quarter’s 8.1 percent.”

In addition, Beijing should keep alert to election politics in France and Greece, said Kevin Liu, director of marketing of Exclusive Analysis, a London-based consultancy company.

He said the uncertainties are looming large in Europe mainly because of new French President-elect Francois Hollande’s attitude toward austerity measures and the debates on Greece staying in the eurozone.

“What I suggest is that China stimulate consumption in its domestic economy to gradually replace the market in the US and in Europe,” Freeman said.

[Norfolk]

For those seeking a remedy to infectious optimism or irrational exuberance, might I refer you to the office of Dr. Ambrose Evans-Pritchard:

World edges closer to deflationary slump as money contracts in China, by Ambrose Evans-Pritchard, The Telegraph, 13 May, 2012:

All key indicators of China's money supply are flashing warning signs. The broader measures have slumped to stagnation levels not seen since the late 1990s.

Narrow M1 data for April is the weakest since modern records began. Real M1 deposits – a leading indicator of economic growth six months or so ahead – have contracted since November.

They are shrinking faster that at any time during the 2008-2009 crisis, and faster than in Spain right now, according to Simon Ward at Henderson Global Investors.

If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie.

Much more at the link. A glass of good scotch or cognac will help make taking the medicine a little easier...

[gjy2105]

People have been predicting a hard landing since forever. Since long before the financial crisis, they were claiming it would happen because China's financial sector refused to reform to follow the Western example. In retrospect, it was a brilliant choice not to do so. They always say the hard landing will happen later this year, and then it never comes. Every following year, they repeat their prediction ad infinitum. I'm plenty familiar with Ambrose Evans-Pritchard's work, as well as that typically published about China on The Telegraph. In serious academic and research circles, people like him are known to be nothing more than charlatans. If you just want more anti-China material to masturbate to, feel free to stick with what you know. If you want a serious economic analysis, you can start here: Sustaining China's Economic Growth - YouTube

Presented by the Weatherhead East Asian Institute at Columbia University and the Chazen Institute of International Business at Columbia Business School on Tuesday, April 10, 2012 at Faculty House.

Here's Doctor Nicholas F. Lardy's biography. Biography: Nicholas R. Lardy

Here's an excerpt:

Nicholas R. Lardy is the Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics. He joined the Institute in March 2003 from the Brookings Institution, where he was a senior fellow in the Foreign Policy Studies Program from 1995 until 2003 and served as interim director of Foreign Policy Studies in 2001. Before Brookings, he served at the University of Washington, where he was the director of the Henry M. Jackson School of International Studies from 1991 to 1995. From 1997 through the spring of 2000, he was also the Frederick Frank Adjunct Professor of International Trade and Finance at the Yale University School of Management. He is an expert on Asia, especially the Chinese economy.

Before his directorship, Lardy had been a professor of international studies at the University of Washington since 1985 and an associate professor from 1983 to 1985. He served as chair of the China Program from 1984 to 1989. He was an assistant and associate professor of economics at Yale University from 1975 to 1983.

Lardy is a member of the Council on Foreign Relations and is a member of the editorial boards of the China Quarterly, China Review, and Journal of Contemporary China.

Compared to Dr. Lardy, Dr. Evans-Pritchard is a clown. In fact, if you type "Ambrose Evans-Pritchard" into google search, and let the drop-down box show you popular entries, you'll see "Ambrose Evans-Pritchard worst financial reporter" as number 5 on the list. He is a journalist, not a serious economic analyst, by trade.

For those seeking a remedy to infectious optimism or irrational exuberance, might I refer you to the office of Dr. Ambrose Evans-Pritchard:

World edges closer to deflationary slump as money contracts in China, by Ambrose Evans-Pritchard, The Telegraph, 13 May, 2012:



Much more at the link. A glass of good scotch or cognac will help make taking the medicine a little easier...

[Norfolk]

Sorry, but right now I just have to giggle. Whether or not this or any other warning turns out to occur, sooner or later, there is still considerable instability caused. Certainly the central government authorities seem at least implicitly concerned, lest they would not attempt some of the policies they are trying now. And AEP is no hack, and while he certainly adds colour, he's also been very good following the economic events of the past few years. If you don't care for his views, that's your decision, but don't be insulting about it.

[gjy2105]

If you'll recall, China injected a great deal of liquidity into the system during and after the financial crisis. Some deflation in the money supply this year would only serve to balance the supply out so that it is more in line with what it should be (like at the levels that would be in place if the financial crisis never happened, so that the injection of liquidity was never required). As Ambrose Evans-Pritchard even admits, "If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie."

Underneath all the ravings of a charlatan, that is an implicit acknowledgement that he's inflating the importance of his reporting.

If you were like me, in that you have spent a great deal of time reading serious analysis, published in peer-reviewed professional and academic journals, and the additional published works of those very same types of serious analysts, you would be giggling at the obvious warning signs of him being a charlatan:

"The problem is not scientific. A world slump is preventable if leaders act with enough panache. The hindrance is that the Euro Tower still haunted by Hayekians, and most G10 citizens – and Telegraph readers from my painful experience – view such notions as Weimar debauchery, or plain Devil worship. . .

. . .One can only pray that helicopter drops do not become necessary in the chilly winter of 2012-2013."

Also, it was not my intention to be insulting. If you felt insulted, it's because you implicitly understand that there is a lot of wishful non-thinking going on in these types of doomsday-soothsayers. Many of the serious thinkers that work with the top universities and think tanks in the U.S. explicitly understand that despite the magnitude of the challenges facing China's rise into developed nation status, it is most likely that some of those will go really well, some of those will go less well, some of those will go okay, some of those will go poorly, and some of those will go really poorly. Taking all that into consideration, the serious thinkers in the field generally understand that a soft-landing has already arrived, hence making further predictions of a hard-landing nothing more than continued bluster.

I would more accurately categorize his work as informative entertainment; designed specifically for his brand of ideologues. The wishful non-thinkers and "China's Rise"-deniers certainly appreciate the "work" (very loosely used) published by people like him.

[J-XX]

Seems the china haters are getting very desperate.
They HOPE china collapses, because the west is pretty much economically and financially finished.
Europe is in a depression, Britain is in recession, US is barely growing.

The only thing the west has is to hope for doom on China to ease their heartburn.

Chinese economy is doing fine, 8.1% in Q1 was very good considering every other country is dramatically slowing. India is in a mess financially, their twin deficits are causing a loss of confidence in the Indian rupee, the rupee is collapsing. Brazil is slowing significantly, Russia is doing relatively well considering their strong fiscal position.

Then we come to china, yes china has slowed, but these collapse theories are mental masturbations.
Chinese fiscal revenues are growing, auto sales picked up in April, inflation-adjusted retail sales was good, inflation is coming down, manufacturing for medium and large firms are expanding, non-manufacturing is expanding for all firms(small,medium, large), exports to developing world are growing very fast, industrial production is expanding fast, etc.

China has slowed but the worst is over, the 2nd half should see a rebound.
All these collapse theories are only for nutjobs. Been hearing a china collapse for decades and everyone china has come out of it well.

Remember china is still in an ultra tight policy environment in monetary, housing and automobiles. RRR is close to 20%, interest rates at 3.5%, housing policy is ultra tight with 40% down payment for 1st house, 60% down payment for 2nd housee and can't even buy a 3rd house even with 100% down payment, etc.
And still China is growing at 8.1%.

Now put these same tight monetary, housing and automobile conditions on any other economy and see how they do. They will be lucky if their economies don't collapse immediately.

So let's put things into perspective, I know china bashing is now the trendy thing to do these days, but atleast have some common sense.

[Equation]

It's not so much the Chinese haters per se, but more like the Communist hater who are still stuck in their Cold War mentality and stubbornness.

[gjy2105]

That depends on who you talk to. Some are plain Chinese haters rather than communist haters. To them, mainland Chinese are a combination of two evils; Chinese people under a non-democratic government. I say non-democratic rather than authoritarian. Why? Let's be honest here. If there were a third type of system that was neither democratic nor authoritarian, people would still find a way to demonize it all the same.

[Equation]

That depends on who you talk to. Some are plain Chinese haters rather than communist haters. To them, mainland Chinese are a combination of two evils; Chinese people under a non-democratic government. I say non-democratic rather than authoritarian. Why? Let's be honest here. If there were a third type of system that was neither democratic nor authoritarian, people would still find a way to demonize it all the same.

True, so it's a battle for cultural and historical legitimacy then perhaps for some, not all of course, is their reason for the hate? That's just ridiculous in IMO.

[gjy2105]

True, so it's a battle for cultural and historical legitimacy then perhaps for some, not all of course, is their reason for the hate? That's just ridiculous in IMO.

Ideological battles tend to be ridiculous.

[no_name]

There is only a very thin line between ideology and religion.

[Equation]

There is only a very thin line between ideology and religion.

True, through out history there's always will be those who are in-tolerate of the new or old beliefs due to religion, because man kind still fears death.