Chinese Economics Thread

China’s 7,500 incubators have witnessed the birth of over 220,000 small and medium-sized enterprises over the past decade, which makes the nation a promising land for innovation compared to any other countries, China Radio International said Friday citing German D-group.

In the article translated as "Dear Founder: do not go to the Valley to start a business. Go to China!", the German media outlet wrote that China has become the center of start-up companies, entrepreneurial accelerators and business incubators. Of the 232 large unicorn companies, startups valued at over 1 billion US dollars, 62 are from China, while Germany has only 4.

The Chinese government increasingly values the image of an innovative country since 2013 with the goal to become an "innovation nation" by 2020. In October 2017, a report at the 19th National Congress of the Communist Party of China stressed that innovation was the primary driving force behind development. The country has set the goal to become an international leader in innovation by 2030, and a world powerhouse in scientific and technological innovation by 2050.

Twitter user TrendSlam commented that research revealed UK lagged behind China and US in terms of innovation. The results were published as part of KPMG's 2018 Global Technology Innovation Report.

Cities like Hangzhou in south China’s Zhejiang Province have specific projects that fund start-up companies, providing entrepreneurs with venues, funding, and consulting services. Hangzhou is also one of the key fintech centers in China.

Marc Lussy, Senior Advisor at a Zurich based fintech incubator F10, tweeted that he was "visiting Hangzhou Innovation Town. They have a strong focus on fintech. Hangzhou wants to become the center of fintech in China. Note they call it innovation town, not park."

Click to expand...

China to start paying for oil in yuan as early as this year: report
Pilot program may come in second half of 2018

Beijing is forging ahead in its efforts to internationalize the yuan, with sources saying this week that China may begin paying for crude oil with the local unit as early as this year.

Regulators have informally requested that financial institutions lay the groundwork for pricing the country’s crude imports in yuan,

Please, Log in or Register to view URLs content!

, citing three financial industry sources.

“Being the biggest buyer of oil, it’s only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market,” one of the people briefed on the matter by Chinese authorities was quoted as saying.

One source said the plan may start with purchases from Russia and Angola, though they were not able to offer further details. Russia and Angola are seen as natural allies in the quest to internationalize the yuan, both keen on dethroning the greenback.

Officials at several Chinese state oil company were unaware of the plans, according to the report, which sources said were still at an early stage.

Click to expand...

Jura said:

now I read
China Focus: China launches crude oil futures trading
Xinhua| 2018-03-26 16:36:46

Please, Log in or Register to view URLs content!

Click to expand...

The price of the main contract of China's crude oil futures settled at 420.3 yuan (76 U.S. dollars) on Friday, 4.3 yuan higher than its listed benchmark price at 416 yuan per barrel.

On Friday, the Shanghai International Energy Exchange (INE) recorded a total of 58,824 transactions of 15 listed crude oil futures contracts, 16,448 more than the first trading day level on Monday.

China launched trading of crude oil futures contracts on Monday in its steady moves to further open up the financial sector.

As the first futures contracts listed on the Chinese mainland to overseas investors, the trading volume gradually increased during the first week with a total of 278,234 transactions, worth 115.92 billion yuan, changing hands by the end of the week.

By Friday, INE had registered over 20,000 trading accounts, among which 25 percent were institutional accounts, and the rest were held by individuals.

"Individual investors made considerable liquidity and showed skills in risk management," said Sun Yonggang, analyst with Chaos Ternary Futures Co., Ltd.

A total of 23 overseas agencies have registered with the INE to provide brokerage services for overseas investors. Analysts said that the futures have shown its price-discovery function and connection with the international market, as the prices of the main contract SC1809 were mostly between the prices of London and New York crude oil markets this week.

On Thursday, the West Texas Intermediate (WTI) for May delivery posted at 64.94 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery closed at 70.27 U.S. dollars a barrel on the London ICE Futures Exchange. While, INE's main contract closed at 409.7 yuan (about 65 U.S. dollars).

After the U.S. Energy Information Administration released the latest inventory data Wednesday, which rose more than expected, the pricing of INE contracts fell on Thursday, said Xiang Chao, analyst with Yongan Futures Co. Ltd.

The financial market showed concerns about trade friction between China and the U.S., causing crude oil prices to move up and down frequently, said Xiao Wei, analyst with CCB futures.

He predicted that with the improvement of liquidity and investors' structure, the market expectation will be better reflected through the Shanghai crude oil futures.

According to China Securities Journal, the INE prices will be the valuation benchmark of physical deliveries made by Shell to China International United Petroleum & Chemicals Co., Ltd. from September.

Click to expand...

China's manufacturing sector expanded at a fast pace in March as the country's economy continued to grow steadily, official data showed Saturday.

The country's manufacturing purchasing managers' index (PMI) came in at 51.5 this month, the strongest level this year, according to the National Bureau of Statistics (NBS).

A reading above 50 indicates expansion, while a reading below 50 reflects contraction. In February, China's manufacturing PMI stood at 50.3.

The NBS data showed the non-manufacturing sector also accelerated the pace of growth as its PMI was 54.6 in March, up from 54.4 last month.

The composite PMI, which combines the performance of both manufacturing and non-manufacturing sectors, went up to 54 this month from 52.9 in February.

The rise in March PMI indicated more stable economic growth, as well as steady market demand, robust manufacturing and business activities, and good expectations, said Zhang Liqun, researcher with the State Council's Development Research Center.

The pick-up in manufacturing expansion came as factories resumed production after the Spring Festival holiday, with sub-indices for production and new orders both rising to 53.1 and 53.3, respectively, according to NBS senior statistician Zhao Qinghe.

Small enterprises witnessed a particularly strong increase in manufacturing activities, as the PMI for small manufacturers jumped to 50.1 in March from 44.8 last month, NBS data shows.

Zhao also attributed the faster expansion to stronger foreign trade, better industrial structure, and increased business purchasing activities.

Sectors like equipment, high-tech and consumer goods manufacturing recorded higher PMI than the overall manufacturing PMI level in March, indicating progress in bringing in new growth engines.

For non-manufacturing industries, the service sector, which accounts for more than half of the country's GDP, reported healthy expansion with the business activity index standing at 53.6, well above the boom-bust line of 50, NBS data showed.

Construction business picked up in March due to warmer weather and further progress in infrastructure construction. Its business activity index rose to 60.7 from 57.5 in February.

Both service and construction firms remained positive on the market outlook in March as the business outlook index stayed above 60 this month, an optimistic range, for the 11th month in a row.

Beijing-based investment bank CICC said despite factors like an unfavorable working day effect from a late Chinese Lunar New Year, March manufacturing PMI came in "more resilient than expected," indicating relatively robust cyclical momentum in the first quarter.

"Looking forward, we expect the industrial enterprise profitability to continue to improve and manufacturing investment growth to be on the mend throughout 2018," said the CICC in a research note.

Chen Zhongtao, an analyst with China Logistics Information Center, said a good start in the first quarter will lay a solid foundation for future growth, who expects China's economic performance to remain sound and stable in the second quarter.

The NBS is scheduled to release key economic data of China for the first quarter on April 17.

China expects economic expansion to be around 6.5 percent this year, unchanged from 2017.

Click to expand...

Financial risk from China's external debt is controllable overall, despite continuously rising, the foreign exchange regulator said.

All major indicators of the external debt remain within international safety standards, the State Administration of Foreign Exchange (SAFE) said on its website.

At the end of 2017, the outstanding external debt stood at 1.71 trillion U.S. dollars, an increase of 294.8 billion dollars from one year earlier.

That translated to a debt ratio, or outstanding external debt to GDP ratio, of 14 percent, and the ratio of short-term external debt to foreign exchange reserves was 35 percent, according to the SAFE.

The SAFE attributed the rising external debt to stable economic growth, increasing two-way movement of the yuan exchange rate and the government's policies to facilitate cross-border financing.

It said the country will continue to improve the macro-prudential management policy that focuses on banks and short-term capital flow, preventing risk while better serving the real economy.

Click to expand...

texx1 said:

IMO, this development played a bigger role than simple trade imbalance when it comes to initiating US-China trade war. Petro-yuan won't displace petrodollar any time soon. But it will chip away US dollar's dominance in oil little by little. With that comes far reaching consequences for US.

Click to expand...

taxiya said:

Although I don't see the relation between "Yuan for Oil" and the trade war, I agree with your last sentence. In fact, I think that consequence is much more bigger than the trade war. For one example, when in the future China buys oil from Iran or anyone under US sanction with Yuan, US would be kept in the dark and has nowhere to put its pressure. That is only one of the many new possibilities that this new development creates.

Click to expand...