Chinese Economics Thread

Yesterday my Dutch newspaper had an article about a meeting In Amsterdam of Dutch companies to consider how to attract highly qualified Chinese for their growing R&D establishments in China while they are decreasing the sizes of their R&D establishments in Europe and the US . They want to design the products to be made in China in the same country. The problem is that young Chinese scientists and engineers prefer to work for Chinese companies. Western companies have the reputation that they have a glass ceiling. People already working for them to a large extend plan to leave for a Chines company within the next five years.
Ten or even five years ago the situation was different.

Now where are all the China bear that predicting the sky will fall not too long ago . The OEDC come up with much rosy prediction of Chinese economy

Beijing has weathered financial crisis better than many other economies, says OECD report



23 March

BEIJING — China’s economy will expand by 8.5 per cent this year and 8.9 per cent in the next, putting it on track to overtake the United States as the world’s biggest economy in 2016 after accounting for price differences, the Organisation for Economic Co-operation and Development (OECD) said yesterday.

The assessment, in the OECD’s new Economic Survey of China unveiled in Beijing, was one of the most upbeat of China’s prospects by a major multilateral institution. China’s own official growth target for this year is 7.5 per cent and 7 per cent on average in the five-year plan that runs to 2015.

The 161-page survey, the first such report from the Paris-based OECD since 2010, was particularly optimistic about the outlook for investment spending in the world’s No 2 economy.

The survey pointed to substantial deficits in rail and road capacity relative to other major economies at similar stages of development, as well as to sub-standard housing as offering scope for more profitable spending on infrastructure.

“The level of investment in the private sector is well-founded by the rates of return, and in infrastructure, we still think there are tremendous needs,” Mr Richard Herd, head of the OECD’s China desk, said at a media conference.

China’s growth slowed to a 13-year low of 7.8 per cent last year, with weak demand in the European Union and the US — the two biggest export customers — the main drag.

But “recent OECD simulations suggest that China could maintain high, though gradually easing, growth during the current decade, averaging 8 per cent in per capita terms”, the report said.

“China has weathered the global economic and financial crisis of the past five years better than virtually any OECD country and better than many other emerging economies. It is well placed to enjoy a fourth decade of rapid catch-up and improving living standards,” it added.

When assessed in purchasing power parity (PPP) terms, which factor in cost of living differences and exchange rates between countries, China’s economy will become as large as that of the US by around 2016, the OECD forecast.

China’s gross domestic product in PPP terms was about US$12.4 trillion last year, compared to the US GDP of US$15.7 trillion.

Mr Herd said official economic data so far in the first quarter of this year supported the OECD’s above-consensus growth call, with domestic consumption — key to Beijing’s rebalancing strategy to wean the economy off exports and investment — faring well with wages ticking higher and inflation subdued.

The OECD highlighted risks to its outlook, including a weak global economy, high housing prices, social inequalities and an ageing population. But it noted that China had made strides in reducing its dependence on external demand, with domestic consumption a bigger driver of growth than investment since 2011.

Also yesterday, the International Monetary Fund’s (IMF) top adviser for China, Mr Markus Rodlauer, said he was confident its economy would stay on a “growth path of around 8 per cent” with “no real major short-term risks”. The IMF in January forecast China’s economy to grow 8.2 per cent this year and 8.5 per cent in 2014. AGENCIES

Once again china´s export data seems unreliable. According to hong kong data, china´s exports to hong kong declined 18% while chinese mainland data reported that exports to hong kong rose 35,6%. Even with diferent methods, its a huge discrepancy.

Don't know about this case, but based on a new report by the Federal Reserve Bank of San Francisco at frbsf.org (can't post link,post count too low)

"On the Reliability of Chinese Output Figures

Some commentators have questioned whether China’s economy slowed more in 2012 than official gross domestic product figures indicate. However, the 2012 reported output and industrial production figures are consistent both with alternative Chinese indicators of the country’s economic activity, such as electricity production, and trade volume measures reported by non-Chinese sources. These alternative domestic and foreign sources provide no evidence that China’s economic growth was slower than official data indicate."

kroko said:

Once again china´s export data seems unreliable. According to hong kong data, china´s exports to hong kong declined 18% while chinese mainland data reported that exports to hong kong rose 35,6%. Even with diferent methods, its a huge discrepancy.

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You just got there?

China Data Exports to US-Exported to the US only
China Data Exports to Hongkong-everything export to Hongkong

US Data Imports from China-everything is made in China-including from Hongkong and China

Hongkong Data Imports from China-Imported from China subtract Re-exported to the US and the rest of the world

Games Keep Going On!

kroko said:

Once again china´s export data seems unreliable. According to hong kong data, china´s exports to hong kong declined 18% while chinese mainland data reported that exports to hong kong rose 35,6%. Even with diferent methods, its a huge discrepancy.

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Typical of western media If you don't like the message shoot the messenger Hongkong people have a hangup. For long time they think they are better than the mainlander but now the table has turn and Mainlander are richer. So the constant sour grape Read this article

Maybe China's GDP Data Isn't Fake After All


Or at least not as fake as some observers have accused it of being.
Naomi Rovnick Mar 26 2013, 3:31 PM ET

Chinese economic data is often questioned by skeptics who believe government statisticians massage the numbers to make the Communist Party look like it's doing a good job at bringing prosperity to its many citizens. Figures like GDP growth have been called " too important a number politically to be reliable " and, more plainly, "a fake figure." Li Keqiang, China's new premier, called GDP figures "'man-made' and therefore unreliable," according to a U.S. diplomatic cable released by Wikileaks.

But a new report by the Federal Reserve Bank of San Francisco calls this received wisdom into question. Its authors find that Chinese GDP numbers do tend to reflect data provided by more independent sources -- namely the exports and imports of China's trading partners, which are immune from any Beijing manipulation.

The Fed study first studied trade with China and its biggest trading partners: the U.S., the EU and Japan. It then compared Chinese growth and production statistics with figures from other trading partners around the world. As this chart shows, Chinese economic figures and the international data were broadly aligned, both in terms of the "trio" and the rest of the world.

China's GDP data broadly matches data from its trading partners. Federal Reserve Bank of San Francisco

"We find no evidence that China's slowdown in 2012 was greater than officially reported," the Fed authors concluded.

Research that only examines one economic measure should be treated with caution. There are still big reasons to be skeptical, as evidence abounds that local governments and Beijing statisticians employ a number of tricks to keep growth looking good.

Last year, Chinese provinces collectively reported economic output that was significantly larger (paywall) in aggregate than the official figure statisticians produced for the country as a whole-- 57.6 trillion RMB vs. 51.9 trillion RMB, respectively. This led to jokes in the Chinese and Hong Kong media that China had a "missing province" somewhere that was obviously doing very well.

Meanwhile, Standard Chartered economist Stephen Green has said that China's official GDP figures were boosted by government statisticians underestimating inflation, which results in an overestimate of actual growth. And the New York Times recently discovered that some Chinese power plant managers were inflating output figures to hide the extent of a big slowdown in usage from the central government.

The study's authors themselves offer only a qualified judgment as to the truthfulness of Chinese GDP. Rather than offering a whole-hearted exculpation, they conclude: "We find no evidence that recently reported Chinese GDP figures are less reliable than usual."

kroko said:

Once again china´s export data seems unreliable. According to hong kong data, china´s exports to hong kong declined 18% while chinese mainland data reported that exports to hong kong rose 35,6%. Even with diferent methods, its a huge discrepancy.

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Chinese data is alot more reliable than American or Indian data. America cooks the books the worst (many analysts have exposed this). American inflation is understated thus GDP is significantly overstated. Britain cooks the books too with GDP overstated due to the GDP deflator being understated. India has also been caught cooking the books. No way the Indian economy is growing with a massive currency collapse and inflation sky high. Indian economy is shrinking.

Chinese economy is alot bigger due to the renminbi being undervalued. If you look at electricity consumption and energy consumption, China is the biggest in both.

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As rising labor costs push manufacturing of T-shirts, jeans and the like out of China, the country has been able to offset that loss by grabbing the high end.

And nowhere is that on better display than the San Francisco-Oakland Bay Bridge.

When the switch is flipped each night for the span's two-year artistic light show, the electricity flows through sophisticated power devices made by Gary Hua's factory not far from Shanghai.

In the six years since it was founded, his company has grown to 1,000 employees, who last year made three million power-supply units for high-efficiency light-emitting diodes. The company, Inventronics Inc., expects to double production this year and export more than half that output.

With labor costs increasing in China, the country is now shifting its manufacturing focus to high-tech exports such as computers and sophisticated power devices. Shaun Rein of China Markets Research tells the WSJ’s Jake Lee how Western countries are reacting.

Inventronics exemplifies China's shift toward producing the higher-end products that are fueling the country's export growth. China has been increasing exports in industries as varied as computers, car parts, high-technology lamps and optical-surgical equipment, according to a Wall Street Journal analysis of Chinese, European Union and U.S. trade data.

HSBC economists estimate that China's share of global exports increased to 11% last year, from 9% before the 2008 financial crisis and around 5% at the turn of the millennium. China's exports rose 8% last year while global trade expanded just 1.6%, according to the Netherlands Bureau for Economic Policy Analysis.

Chinese employment in higher-value industries such as electrical- and communications-equipment production has jumped since 2008 and now exceeds employment in textiles, garments and leather making, says Royal Bank of Scotland RBS.LN -0.42% economist Louis Kuijs.

High-tech goods are more valuable and are a bigger market than clothes. Over the past two years, Chinese exports to the U.S. of high-tech electronics, auto parts and optical devices rose 24%, to $129 billion, while exports of clothes and footwear rose just 5% to $47 billion. That has caused China's share of the U.S. trade deficit to expand $20 billion last year to a record $315 billion, according to a U.S. government analysis.

A chunk of what is marked "Made in China" is made up of parts and design that originated elsewhere, making trade data a little fuzzy. The chips in Inventronics' LED drivers are from the U.S., for example.

But China's exports contain a rising percentage of materials that were made in the country, according to the World Trade Organization and the Organization for Economic Cooperation and Development. In 2009, the latest year for which figures are available, 28% of the value of Chinese exports came from foreign producers. In 2005, the figure was 36%.

Mr. Hua, 48 years old, was educated in the U.S. and spent a decade there, starting an electrical-parts company. He returned to China in 1999 and came out of an early retirement in 2007 to create Inventronics.

He based the company in Hangzhou, about 110 miles from Shanghai, to tap a base of highly trained engineers and put the company's factory near its suppliers. That helps Inventronics develop new products rapidly and adapt them to customers' often narrow specifications.

"That's one of the key advantages of being located in China," Mr. Gua says.

A skilled labor force, a large domestic market and networks of suppliers have become important factors that rising wages or a stronger currency, which makes exports less cost-competitive overseas, won't snuff out quickly. And China's growing consumer market means that if higher costs make exports less profitable, manufacturers can sell more products at home.

China also benefits by comparison from rising labor and material costs in Southeast Asia and Latin America, says Mr. Kuijs, of RBS. Indonesia, Malaysia and Thailand, for example, have ordered double-digit increases in their minimum wages, tracking similar increases in China.

Talaris, which makes cash-sorting machines used by banks, last year moved production from Sweden to China, where the company employs 1,000 workers at peak production. The move has cut the cost to make each machine by more than 25% as quality has improved, the Hampshire, U.K., company says. The company's sorters and dispensers scan thousands of bills a minute while checking for counterfeits and recording serial numbers.

"You have a concentration of suppliers getting stronger and stronger and more competitive," says Talaris Chief Executive Paul Adams. Talaris considered locating its factory in Taiwan, South Korea or Southeast Asia, but China had the advantage of a web of parts suppliers that would compete with each other and keep prices low, he says.

Around 90% of the value of a Talaris cash sorter is produced within China. The sorter's high-tech sensors, which account for 10% of the cost, are made in Japan. But diodes, capacitors, steel and plastic pieces are produced in southern China's technology metropolis of Shenzhen for quick shipping 930 miles to Talaris's assembly and research-and-development facility in Shanghai.

"Labor was only a small component of decision making," Mr. Adams says. He estimates that parts account for 80% of each machine's cost, with the rest coming from labor and overhead.

Businesspeople outside China complain that Beijing gives unfair advantages to its companies through subsidies, cheap financing and by letting its currency rise more slowly than market forces would dictate.

And some people say that as China grabs a greater share of global trade, it isn't gaining ground as quickly as in the past. Earnings growth in China is slowing, indicating there will be less money in the future to invest.

"When China exhausts its ability to waste domestic savings, people won't be as impressed by China's size," says Diana Choyleva, a China economist for Lombard Street Research.

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Just How Big Is China? Bigger Than You Think



By now, everyone knows that China is the world’s No. 2 economy and growing. Its GDP is around $7.5 trillion compared to the real No. 1, the U.S., at over $15 trillion. But that is changing. Just as each passing year seems to go faster than the next, China’s position on the world’s stage moves at break-neck speeds.

Just how big is China? It is way bigger than you think.

Within three years, the Organisation of Economic Cooperation and Development believes that China’s economy will surpass that of the United States. That means that by the time President Barack Obama is no longer in the White House, the new president will be the first since World War II to not govern the most powerful economy on Earth. Most estimates had China’s economy toppling that of the United States by 2020.



By The Time Obama Leaves Office, U.S. No Longer No. 1 Kenneth RapozaKenneth Rapoza Contributor

Where Your Summer Tourists Will Come From Kenneth RapozaKenneth Rapoza Contributor

Last year, China beat Germany and the U.S. to become the world’s biggest tourist source market. More middle-class Chinese are hightailing it out of their country. They are going luxury goods shopping in Europe and shaking hands with Goofy in Disney World. They spent over $102 billion last year, up from $73 billion in 2011, according to the United Nations World Tourism Organization. And they did this at a time when their economic growth is slowing due to a slowdown in Europe and a shift in domestic economic policy.

Surprisingly, or not, China doesn’t need to grow at 10% to be in the big time. A slower 7.5% is just fine.

China has tons of problems. It’s got the worst smog in the world. It’s currently battling another round of bird flu, a new strain that’s already claimed the lives of four people in a week. Over 16,000 diseased pigs were dumped in Shanghai rivers in March, possibly causing the outbreak of bird flu in the first place. In China, the phrase “Don’t drink the water!” needs to be heeded carefully. Decades of waste poured from factories and cities into China’s rivers have turned many of them into open sewers, according to the World Wildlife Fund. About 40% of the water in the country’s river systems is unfit for human consumption. China produces a new coal-fired power station every week, and will be the world’s biggest emitter of carbon-dioxide by 2030. Air, water and rising income inequality are now serious social problems for Beijing.

This is what you get for growing so big, so fast. China’s economy has been on steroids for over 10 years.

According to the latest research from the United Nations, China has further outpaced its competitors in world manufacturing, generating $2.9 trillion in output annually versus $2.43 trillion from the U.S., the world’s second-largest manufacturing economy.

Over the last two years, China’s manufacturing sector has made strong gains, while the U.S. has been on Fed life support.

“In 2011, China’s manufacturing output surged by 23% while manufacturing output in the U.S. only increased by 2.8%,” the American Enterprise Institute‘s Mark Perry said in his Carpe Diem blog on Friday. “That brought China’s manufacturing output last year to more than $2.9 trillion, which was almost half a trillion dollars (and 20%) more manufacturing output than the $2.43 trillion of manufacturing output that was produced in the U.S. last year.”

In 2012, U.S. manufacturing slipped to 1.7% growth, according to the Federal Reserve. Sure, U.S. manufacturing is getting bigger. But China’s manufacturing is getting humongous.

China drives Asia, and Made in China drives the cheap, consumer culture in America. Buy sneakers or a shirt, a piece of furniture or a Barbie Doll, and it probably has Made in China stamped on it. Even as U.S. manufacturing is on the upswing, it is no match for big China.

The U.S. imports from Asia rose 22% in February. Most of it comes from China, of course. In fact, the U.S. imported $32.7 billion worth of goods from China in February, according to the U.S. Census Bureau’s Foreign Trade division, making it once again the leading country in which the U.S. conducts its foreign trade. Canada came in second with $25.7 billion, but that is mostly due to oil. Even as China moves its way up to the No. 3 trading partner with the U.S., trailing NAFTA partners Canada and Mexico, the trade deficit between the U.S. and China keeps getting bigger.

In 2012, the U.S. registered its biggest trade deficit ever with China at $315 billion, up from a record $295 billion in 2011 and another record of $273 billion in 2010. Yes, China keeps breaking records.

As it does so, it needs to modernize its environmental and worker safety standards, presenting a myriad of opportunities for companies who can help them get there. Despite all these challenges on the ground, China manufacturing is booming. It is moving out of its old traditional sectors and into newer, value-added, and high-tech ones. This is no longer a Happy Meal economy. According to Hong Kong-based quality control inspection consultancy, AsiaInspection, manufacturing growth in China’s food industry is up 212%. It’s up 36% in beauty and skin care products and 42% in mechanical goods manufacturing. Those kind of numbers are hard to find in any other country on earth, even in India, which has almost as many people as China.

This January, Walmart made headlines when it committed to invest $50 billion in “Made in America” products over the next 10 years. To put that into perspective, Walmart’s 2012 global sales revenue was $443.9 billion, according to the multinationals 2012 Annual Report. Assuming Walmart invested $5 billion a year in the U.S., that would equate to less than 1% of Walmart’s 2012 sales invested in America manufacturing. .

AsiaInspection figures released on Friday suggested that manufacturing outsourcing from the West continues unabated. There was a 15% increase in factory inspections requested from North American customers alone in the first quarter.

China is expanding while the U.S. — as dynamic as it is — is struggling to survive beyond Fed stimulus programs, as was witnessed by Friday’s payroll report.

According to the U.S. China Business Council’s October 2012 survey of mulitnationals doing business in China, the majority of companies plan to continue expanding operations there, with some now looking beyond the east coast super cities like Shanghai to central and western provinces for new markets.

Remember the old saying “will it play in Peoria”? That is now becoming “will it sell in Shanghai.”

As a testament to China’s bigness, Disney’s Iron Man 3 will first be showing in a China movie theater. Disney’s even invested in making a slightly different version, just for the Chinese market.

This is the new world.

It might not be pretty, with all those dead pigs and dead rivers floating around. China will have to do something about it or risk increasing environmental hazards that eventually lead to health crises in this aging population of 1.3 billion. Time and sheer numbers are on China’s side. It’s not too late for them to clean up what has to be cleaned up, and become even bigger. Indeed, everyone on the planet is now fully expecting it.

A look at where China cities figure in world real estate pricing trends.

Emerging Economies in 2013

Panelists talked about emerging economies such as China and India in comparison to the U.S. New York University professor and author of White Man’s Burden William Easterly debated economist Dambisa Moyo, author of New York Times bestseller Winner Take All. Professor Easterly argued China is on a decline and that countries cannot have continued growth without a democratic system. Ms. Moyo disagreed with him, saying 2013 is about emerging economies, since they have no debt holding them back and many produce their own goods. The Economist's Zanny Minton Beddoes moderated. This was part of The Economist's “World in 2013 Festival,” held at the NYU Skirball Center for the Performing Arts.