Chinese Economics Thread

siegecrossbow said:

"Complete body" is a hard translation for the Chinese phrase for "fully ready", which lends credence to your suggestion.

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• A Chinese producer of socks brandishing the face and hair of US President Donald Trump is set to be hit with a new trade war tariff
• Manufacturers of ‘Trump’ wigs and American national flags also face incoming tariffs, but were not aware of this when contacted

China's economic performance continued within a reasonable range and maintained stable momentum in April, official data showed Wednesday.

China's value-added industrial output, an important economic indicator, "held steady" in April with an expansion of 5.4 percent, the National Bureau of Statistics (NBS) said in a statement.

The rate was down by 3.1 percentage points from March, but 0.1 percentage points faster than the first two months, the statement said.

In the first four months, industrial output increased 6.2 percent year on year, the same pace as that for the whole year of 2018.

China's value-added industrial output is used to measure the output of large companies with an annual main business revenue of more than 20 million yuan (about 2.9 million U.S. dollars).

In a breakdown by ownership, the output of state-controlled enterprises went up 6 percent last month, joint-stock companies up 6.3 percent, and that of overseas-invested enterprises increased by 2.5 percent.

In April, the output of the high-tech manufacturing sector surged 11.2 percent, more than doubling the pace of overall industrial output growth.

The production of new energy vehicles and microcomputers grew 17.1 percent and 16.6 percent, respectively.

Last month, the manufacturing purchasing managers' index stood at 50.1, staying above the boom-bust line of 50.

China's service industry index continued rapid growth last month at a rate of 7.4 percent, 0.2 percentage points slower than that of March but 0.1 percentage points faster than the first two months.

Retail sales of consumer goods rose 7.2 percent year on year to over 3 trillion yuan, slowing by 1.5 percentage points from March.

In the first four months, retail sales rose 8 percent. In contrast, online retail sales surged 17.8 percent, maintaining robust growth.

Fixed-asset investment grew 6.1 percent year on year during the January-April period, down slightly by 0.2 percentage points from the first quarter.

"Investment has maintained steady growth, with that in high-tech industries continuing to post relatively fast growth," the NBS said.

Investment in high-tech manufacturing and services surged 11.4 percent and 15.5 percent year on year, respectively.

NBS data also showed that 4.59 million new jobs were created in cities nationwide in the first four months, accomplishing 42 percent of the task for the whole year.

In April, the surveyed urban unemployment rate was 5 percent, down 0.2 percentage points from the previous month.

In the future, the country must implement the counter-cyclical economic adjustment in a timely and moderate manner, the statement said.

"[We should] intensify efforts to maintain stability in areas such as employment, financial sector, foreign trade, foreign investment, domestic investment, and market expectation, to boost sustained, stable and healthy economic development," it added.

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Washington is waging a bullying campaign in an attempt to coerce Beijing into swallowing trade concessions it cannot accept.

While wielding a big stick of punitive tariffs, the Trump administration is also trying to mislead the international community into believing that China is to blame for the ongoing trade tensions.

The first lie is that China has been deliberately pursuing a huge trade surplus with the United States.

Mainstream economists worldwide have already refuted such a claim. According to Stephen Roach, a senior fellow at Yale University, the fact that the United States ran trade deficits with over 102 countries in 2018 reflects a profound shortfall in domestic savings.

When Americans are consuming far more than their country can deliver, the United States needs to import surplus savings from overseas and run huge current-account deficits to attract the foreign funds. Therefore, trade deficits are the result and not some kind of a foreign conspiracy.

The truth is that tariffs on imported products would not help the United States water down any trade deficit. Statistics show that in 2018, the year when Washington kicked off its tariff bullying, U.S. merchandise and service trade deficits still increased by 12.5 percent, reaching 621 billion U.S. dollars, a ten-year record high.

Another unwarranted accusation made by Washington is that trading with China is slashing jobs in the United States. According to a report released by the U.S.-China Business Council, China-U.S. trade has supported almost 2.6 million jobs in the United States across a range of industries.

Raising tariffs is highly likely to cause job losses in the United States because supply chains would be disrupted and corporate costs would rise.

As for Washington accusing China of forced technology transfers and theft, don't believe it. Such accusations are conjured up by desperate U.S. politicians looking to score points. They have ignored the fact that technology transfers between Chinese firms and their foreign partners happen on a consensual basis.

Over the past few decades, China has achieved some notable progress in cutting-edge technology because it has stepped up measures to encourage innovation and protect intellectual property rights.

So far, China has joined almost all major international conventions on intellectual property. Its firms always pay for patents they use. In 2017, royalties paid by China to the United States reached 7.13 billion U.S. dollars, accounting for a quarter of the total intellectual property charges China paid to other countries, according to data.

China has worked hard to improve its business environment for foreign investment. In January this year, the U.S. electric carmaker Tesla Inc. broke ground in Shanghai to build a factory, becoming the first foreign automobile company to do so in China. That is a vote of confidence in the country.

Last but not least, Washington's belief that tariffs will be paid by China is another lie. In fact, these tariffs are a tax on Americans.

Already, U.S. consumers are feeling the heat. According to a recent study by the University of Chicago and a Federal Reserve Board Governor, the price of washing machines have gone up by an average of 12 percent after additional tariffs were imposed. That's almost 100 bucks per washer.

The tariff war on China has already stoked a wave of opposition from U.S. industry. Several U.S. industrial groups including the American Soybean Association, the National Retail Federation, and the Information Technology Industry Council denounced the move, saying it will jeopardize American jobs and increase costs for consumers.

The fact that economic relations between China and the United States are highly intertwined means Washington cannot pull itself out of the situation unscathed.

Moreover, its tariff strategy is already sending shock waves around the world. Global stock markets have been on a roller coaster ride in recent weeks. Investors are facing huge uncertainties, and a future global economic recovery is very much in doubt.

Decison-makers in Washington need to understand that bullying isn't the solution to its trade disputes with Beijing. Only a trade deal that respects China's sovereign rights and legitimate concerns will do.

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China's solid economic fundamentals, increased appeal to foreign investors and strengthened market regulation will ensure a healthy capital market in the long term despite short-term fluctuations.

As of May 16, China's benchmark Shanghai Composite Index has plunged 8.96 percent from the peak level this year.

Meanwhile, net capital outflow under the northbound trading of the "Stock Connect" programs between the Shanghai and Hong Kong exchanges and the Shenzhen and Hong Kong exchanges totaled 30.71 billion yuan (about 4.46 billion U.S. dollars) and 18.08 billion yuan respectively since April, under the influence of fluctuated exchange rate of Chinese yuan and external uncertainty.

The short-term fluctuations of the stock market partly mirrored investors' concerns over the future, however, China's capital market has a solid foundation to continue its sound and upward development.

INCREASED APPEAL

The MSCI announced Tuesday that it will raise the inclusion factor of all large-cap China A-shares in the MSCI indexes from the current 5 percent to 10 percent.

The move followed its decision in March that it will increase the inclusion factor of A-shares to 20 percent in a three-step process in May, August and November, each time upping the representation of Chinese large-cap stocks by 5 percentage points.

Upon the completion of the plan, about 68 billion U.S. dollars of capital is expected to flow into Chinese market, Sheng Hao, a senior researcher of the Huatai-PineBridge Investments said.

With the considerable foreign capital inflow and domestic institutional investors' improved capability of asset allocation on stock market, Chinese A-share is increasing its appeal to foreign investors, Sheng said.

Those flows of foreign capital would in turn further lift valuations for A-shares, according to Kinger Lau, chief China Strategist at Goldman Sachs, in an analytic note to investors.

"For foreign investors, China's financial markets offer an opportunity to benefit from China's ongoing strong growth, as well as to invest in an large and diversified economy," Zhang Tao, deputy managing director of the International Monetary Fund said.

STRENGTHENED REGULATION

The advanced reforms of the capital market and strengthened market oversight have also added strong impetus to the sound development of the Chinese stock market.

Supervision on listed companies will be strengthened as the quality of them serves as the cornerstone of capital markets' sustainable development, Yi Huiman, head of the China Securities Regulatory Commission said last week.

According to Yi, listed companies with consistent standards of operation will see more convenience on financing and mergers to boost the internal growth momentum, while companies with more problems and risks will be placed under strict supervision.

Continuous and precise supervision will also be carried out to promote the quality of listed companies' information disclosure, Yi added.

As of the end of April, China had 3,627 domestic listed firms with a combined market value totaling about 60 trillion yuan.

Apart from the toughened market supervision, a number of other regulatory reforms underway have also been "broadening the scope of what foreign investors can invest in," Christina Ma, head of Greater China Equities of Goldman Sachs Securities said.

RESILIENT ECONOMY

The sound economic fundamentals of Chinese economy have provided the solid base for stock market to remain bullish in the long run.

Data released this week by the National Bureau of Statistics (NBS) have shown that China's economic performance has continued within a reasonable range and maintained stable momentum while persistently optimizing the economic structure.

"Investment has maintained steady growth, with that in high-tech industries continuing to post relatively fast growth," the NBS said.

Investment in high-tech manufacturing and services surged 11.4 percent and 15.5 percent year on year, respectively.

NBS data also showed that 4.59 million new jobs were created in cities nationwide in the first four months, accomplishing 42 percent of the task for the whole year.

Meanwhile, foreign investors showed improving confidence in the Chinese capital market.

Foreign direct investment into the Chinese mainland expanded 6.4 percent year on year to reach 305.24 billion yuan in January-April period, the Ministry of Commerce announced Thursday.

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• Politburo Standing Committee member Wang Yang reveals ‘worst case scenario’ at forum for Taiwanese businesspeople in Beijing but says dispute will not do any long-term damage
• Firms should not relocate away from Chinese mainland as it still offers huge development opportunities, he says

The US-China trade war could slash one percentage point off Beijing’s economic growth this year, a senior Chinese policymaker said on Thursday.

Speaking to a group of Taiwanese businesspeople whose companies are based in mainland China, Wang Yang – one of the seven members of the elite Politburo Standing Committee – said that the government had assessed the impact of the near year-long dispute and estimated that in the worst case scenario gross domestic product growth would be one percentage point lower than expected.

Beijing had earlier set a target of 6 to 6.5 per cent growth for the full year.

While Wang did not outline any plans for dealing with the fallout from the trade war, he is the first official from the top policymaking body to speak so candidly about its possible impact on headline targets.

A member of the audience at the event in Beijing said that despite the official’s frank assessment, he did not seem too worried about the long-term effects of China’s spat with the US.

“Wang said that although the trade war would have an impact on the mainland’s economic development, and had caused significant waves it would not lead to any structural changes,” said the delegate, who asked not to be named but said he was based in Shanghai and was a member of the Association of Taiwan Investment Enterprises on the Mainland.

“He said the most pessimistic forecast was that it would trim one percentage point off the mainland’s GDP growth,” the person said.

“Wang said that the authorities would not oppose Taiwanese businesses that wanted to move their operations away from the mainland [to avoid US tariffs], but stressed that the vast market there offered huge development opportunities for us.”

Wang, who is party secretary of the Chinese People’s Political Consultative Conference, said also that the US had underestimated the tenacity of the Chinese people if it thought a trade war would “bring suffering” to China, the businessman said.

Wang’s comments were also reported by several Taiwanese media outlets, including United Daily News, the Central News Agency and China Times.

With China’s economy already slowing, any discrepancy between actual and targeted performance would be a significant blow to Beijing as it would hit corporate earnings and jobs, and could threaten social stability, analysts said.

Julian Evans-Pritchard, senior China economist at Capital Economics, said that if the US went ahead with its threat to impose 25 per cent tariffs on the US$300 billion worth of Chinese imports currently free from such duties, it would shave 0.7 percentage points off China’s GDP growth.

“On top of that, there will be the indirect impact on confidence and investment, so a one percentage point drag from the trade war seems like a reasonable guess,” he said.

“But that doesn’t necessarily mean that growth will decline by one per cent, as we expect part of the drag to be offset by policy stimulus.”

Evans-Pritchard said the impact of the recent acceleration in credit growth should take effect in the second half of the year, which would support growth and reduce the negative impact of the trade war on jobs.

On Friday, the National Development and Reform Commission – China’s top economic planning agency – said it would continue to use measures to support growth in the private sector and among small- to medium-sized enterprises, as well as stimulating consumption in rural areas.

“We will provide more help for key groups like college graduates [to find jobs] … and focus on solving the problem of structural unemployment,” spokeswoman Meng Wei said.

“We will also strengthen vocational skills training and implement a plan to enrol 1 million people in higher vocational colleges,” she said.

The US and China appeared to be moving towards a trade deal until US President Donald Trump – as threatened – more than doubled the tariff on US$200 billion worth of Chinese imports to 25 per cent on May 10. He justified the move by saying Beijing had reneged on commitments made during earlier rounds of the trade negotiations.

This week, the US said it had started making preparations to levy tariffs on a further US$300 billion worth of Chinese imports, which could go into effect in July.

Evidence of the impact the trade war is having on China’s economy came with the

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, which showed that its exports in April fell by 2.7 per cent despite expanding by 14.2 per cent a month earlier. Despite the downturn, economic growth for the

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of the year stabilised at 6.4 per cent.

Larry Hu, head of China economics at Macquarie Securities, said China’s economy was likely to remain under pressure.

“China’s economy has been cooling for the past 24 months and that is not just due to the trade war but because of a broader trend,” he said.

“But if the growth headwinds intensify, I think the Chinese government can do more to stimulate consumption, such as cutting the car sales tax and subsidising home appliance purchases.”

The NDRC drafted a plan earlier this year to provide such incentives but because of the strong economic performance in the first quarter did not implement it.

Iris Pang, Greater China economist at ING, said that in the event of a one percentage point drop in China’s GDP growth the urban unemployment rate could rise to about 6 per cent from around 5 per cent at present.

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China National Petroleum Corp is planning to open dozens of petrol stations in Myanmar, the first major foreign investor to enter the fast-growing Southeast Asian fuel market, as the state giant expands its retail oil business, company officials said.

The investment, which could eventually reach tens of millions of dollars, follows a new strategy to tap overseas retail margins as China's domestic fuel market is saturated. The move follows a similar but larger investment in Brazil, where CNPC's global trading and refining unit bought 30 percent of a leading Brazilian fuel dealer last year.

CNPC sees Myanmar as a prime frontier market for fuel retailing, where foreign participation is minimal but demand is growing at about 10 percent annually on a fast-expanding vehicle fleet and barely existent local refining industry.

“Myanmar is one of the few markets in this region that's open to outside investment and where demand is growing fast,” said a Beijing-based PetroChina executive with direct knowledge of the investment.

Myanmar is the fastest-growing economy in Southeast Asia, with the Asian Development Bank (ADB) forecasting growth of 6.8 percent next year.

Myanmar's removal of fuel subsidies in 2007 and opening of the market to private investors has seen the number of petrol stations increase 10-fold over the past decade to more than 2,000, said PetroChina officials and a Yangon-based analyst.

Instead of using its PetroChina brand, which has thousands of petrol outlets in China, CNPC's first fuel station in Myanmar bears the bright red logo of its wholly-owned unit Singapore Petroleum Company (SPC), a Singapore-based refinery that CNPC acquired in 2009.

“The SPC logo is used as it's one of the top brands in Southeast Asia,” said a second PetroChina official.

CNPC is planning “several dozen” petrol stations to start with in Yangon, Mandalay and capital Naypyidaw, under a longer-term goal of setting up hundreds of outlets in Myanmar, said the PetroChina executive, without giving a timeline.

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