Chinese Economics Thread
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"", by Richard McGregor, Financial Times, March 30 2008:
More at the link. It will be interesting to see what comes of Secretary Paulsons' visit; at the very least, there should be a recognition on both sides that the U.S.' own economic difficulties - due in part to U.S. regulation, or rather, the lack of it - is now a powerful contributor to stresses in the economic relationship between the two countries.
More at the link. It will be interesting to see what comes of Secretary Paulsons' visit; at the very least, there should be a recognition on both sides that the U.S.' own economic difficulties - due in part to U.S. regulation, or rather, the lack of it - is now a powerful contributor to stresses in the economic relationship between the two countries.
Violet Oboe
Junior Member
PBoC should make some waves after the Renminbi breaks the mark of 7.00 against the $ since this would relieve some of the pressure to accelerate the appreciation of the Yuan. Of course overall PBoC must continue the course of a ´steady but slowly´ approach.
(Fighting inflation by rapid and substantial appreciation??
Most economic textbooks call this a ´monkey idea´ and I would concur with that...)
(Fighting inflation by rapid and substantial appreciation??
Most economic textbooks call this a ´monkey idea´ and I would concur with that...)
Good link Mr. T. The inflation bit is just such a caught-between-a-rock-and-a-hard-place issue that it seems almost no matter what the Chinese Government decides on monetary policy, it amounts to little more than the cutting of one's losses for the foreseeable future.
"," by Nirmal Ghosh, The Straits Times, Tuesday, April 1, 2008 (via LexisNexis News):
More at the link. Well, being able to drive all the way from Bangkok to Beijing on the same road - with never getting off once. Not sure just how much economic development this will actually bring, but it's both powerfully symbolic and a real, concrete achievement.
"", by Eric Ng, South China Morning Post, Tuesday, April 1, 2008 (via LexisNexis News):
More at the link. Somewhat risky, but if there's major new oilfields to be found in areas anything like adjacent to China itself, it's going to be deepwater - and in parts of the South China Sea, that could mean very deep water. It would be interesting to see what other effects such finds would have upon R&D in China's petroleum industry for deep-water petroleum extraction.
"", by Gita Dhingana, The Standard, Wednesday, April 2, 2008:
"", by Gita Dhungana, The Standard, Wednesday, April 2, 2008:
More at the link. As investors around the globe are discovering these days, governments are not necessarily eager to help bail them out when the stock market heads south. However, given the proportion of the Chinese population that has their savings invested in the stock markets, this has rather more potential for some political blow-back if things were to get really bad.
"", by Michael Pettis, China Financial Markets, 31 March, 2008:
More at the link. Michael Pettis' take on the Government's refusal so far to intervene to stabilize the financial markets, and that such an intervention may yet be in the works.
"," by Nirmal Ghosh, The Straits Times, Tuesday, April 1, 2008 (via LexisNexis News):
More at the link. Well, being able to drive all the way from Bangkok to Beijing on the same road - with never getting off once. Not sure just how much economic development this will actually bring, but it's both powerfully symbolic and a real, concrete achievement.
"", by Eric Ng, South China Morning Post, Tuesday, April 1, 2008 (via LexisNexis News):
More at the link. Somewhat risky, but if there's major new oilfields to be found in areas anything like adjacent to China itself, it's going to be deepwater - and in parts of the South China Sea, that could mean very deep water. It would be interesting to see what other effects such finds would have upon R&D in China's petroleum industry for deep-water petroleum extraction.
"", by Gita Dhingana, The Standard, Wednesday, April 2, 2008:
More at the link. The World Bank is not tolling the bell for China's rapid economic expansion. But it is indeed warning of a modest cooling ahead; implicitly, the forecasted end of the heady days of 10%+ growth may in fact be beneficial overall. Certainly the Government would welcome relief from the inflation it has spawned.
"", by Gita Dhungana, The Standard, Wednesday, April 2, 2008:
More at the link. As investors around the globe are discovering these days, governments are not necessarily eager to help bail them out when the stock market heads south. However, given the proportion of the Chinese population that has their savings invested in the stock markets, this has rather more potential for some political blow-back if things were to get really bad.
"", by Michael Pettis, China Financial Markets, 31 March, 2008:
More at the link. Michael Pettis' take on the Government's refusal so far to intervene to stabilize the financial markets, and that such an intervention may yet be in the works.
In a world ruled by the delivery date and supply schedule, it means everything, as now this area is open for real International business.
A lot of what you are seeing are the effects of Institutions (mostly Western) having to liquidate otherwise good investments to cover margin calls on bad ones. If Chinese Investors sit tight and don't panic and look at the fundamental performances of the companies involved, they should be OK and maybe even do well, it they get a chance to pick up a few bargains.
It does mean though that a lot of Western Capital is now being withdrawn and the effect of this will be worth keeping an eye on.
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Hendrik_2000
Lieutenant General
Chinese "Flywheel Economy". Contrary to China basher assertion and inuendo that China economy growth is the result of Currency manipulation or other BS like Copyright infringement, FT has just released Quarterly economic research who come to conclusion that IT IS PRODUCTIVITY STUPID.
And defend the Chinese currency undervaluation and Once for all debunked outdated concept like Money supply that come about the same time as Supply side economy or trickle down economy and Laffleur curve concept. Now who ever heard of these concepts these days. Nice debating topic for Ivy league economic school but has no relevant in real world
I don't see any slow down in economic productivity if anything I see acceleration because China is shedding their low cost manufacturing and moving up the value scale mean more machinery and increase automation that can only translate into higher wages and low inflation. So the prophet of doom and gloom ia a bit premature in calling the sky is falling just like Gordon Chang and other false prophet. The current slow down is god send and good tonic for temporary overheating due to food price increase and rise in oil price
Stock market go up and down and the recent Dip is good in the long run because it wring out all the excesses But the underlying fundamental is stil solid Chinese company as a whole increase the profit by 24% and retail market goes up 12% Wages still goes up but by lower percentage.
so hang in there
some degree of currency undervaluation may be seen as an unavoidable result of China's massive industrial transformation and growth.
China's extraordinary productivity growth in manufacturing since industrial restructuring intensified in the mid-1990s has been an important driver of the country's growing international competitiveness and corporate profitability - much more so than low wages or an undervalued exchange rate.
In a recent article for China Economic Quarterly, Pieter Bottelier and Gail Fosler of The Conference Board argue that China's spectacular economic growth is driven by a self-sustaining "flywheel" of rapid productivity gains, increased profitability and rising investment in manufacturing. Because these factors are mutually reinforcing, China's economic flywheel is unlikely to slow any time soon. As a result, the internal and external imbalances generated by this growth model are likely to grow worse before they get better.
The enormous scale and intensity of China's industrial restructuring since the mid-1990s is hard to imagine and is not fully appreciated internationally. In spite of continuing output growth, total recorded employment in all manufacturing enterprises fell by some 18m between 1995 and 2003, at least 6 times the manufacturing job losses in the United States during the same period.
Economy-wide employment did not fall by much during this period because other parts of the economy - e.g. construction, communications and other service industries - absorbed most of those who had been laid off in manufacturing. Manufacturing employment started to grow again, but very slowly, from 2004.
When serious restructuring of state enterprises got underway in the mid-1990s, initial productivity gains were mainly due to the shedding of redundant labour. But in later years, technical, managerial, and labour upgrading, combined with falling logistics costs, became more important factors.
Since non-state enterprises are on average more efficient than state enterprises, the rapidly growing share of private enterprise in total industrial output accelerated average productivity growth. But in both state and non-state enterprises, technological upgrading, facilitated by relatively inexpensive capital, was often seen as the only way to stay in business. Domestic competition became even more intense as a result of China's entry into the World Trade Organisation in 2001.
The Conference Board calculates that average annual labour productivity growth in large and medium-sized industrial enterprises during the period 1995-2003 was 20.4 per cent, an astonishingly high number by international standards. This number is consistent with the findings of other empirical studies undertaken by Chinese researchers at Peking University.
Average national labour productivity gains (7.3 per cent per annum between 1995 and 2004 according to official data) were far higher than those achieved during the same period in the US (2.4 per cent), the EU-15 (1.4 per cent), Japan (2 per cent), and India (3.9 per cent).
Productivity trends also help explain why China's growth has accelerated since the turn of the century and why the trade surplus has expanded so dramatically since 2004. The growth of the trade surplus is almost entirely attributable to private and foreign-invested firms, which have the highest productivity. The state sector, where productivity is lower, has run an increasing trade deficit.
The upward trend in corporate profitability began in the late 1990s, lagging the initial productivity gains by a few years, and has continued through the present time. Impressively, many manufacturing enterprises were able to a) increase real wages by 10-15 per cent a year after 2000 while reducing unit labour costs, b) maintain or reduce export prices to gain market share (at least until 2006, when many Chinese export prices began to rise), and c) increase profitability.
Rapid productivity growth is an important explanation for these achievements, but it is not the only one. A number of other growth-enhancing factors converged to create an economic "flywheel" spinning at high speed with little inflationary friction, whose motion will be difficult to stop.
These factors include an increase in foreign demand following the 1998 Asian financial crisis and economic recovery of Japan and the United States beginning in 2002; a cash infusion from the privatisation of the state-owned housing stock, which began in earnest in 1998; investment capital raised through stock market listings; and improved infrastructure, which sharply reduced logistics costs.
Did the exchange rate play a role in boosting Chinese competitiveness? To be sure, it provided at least some protection against employment losses during a time of intense economic restructuring. But the exchange rate, by most measures, did not become undervalued until 2003 or 2004. Dramatic productivity improvements began several years before that.
In any case, it is highly doubtful that China could have adjusted its nominal exchange rate fast enough to compensate fully for relative productivity gains in manufacturing. It would have created serious adjustment problems in sectors with little or no productivity growth. Hence, some degree of currency undervaluation may be seen as an unavoidable result of China's massive industrial transformation and growth.
And defend the Chinese currency undervaluation and Once for all debunked outdated concept like Money supply that come about the same time as Supply side economy or trickle down economy and Laffleur curve concept. Now who ever heard of these concepts these days. Nice debating topic for Ivy league economic school but has no relevant in real world
I don't see any slow down in economic productivity if anything I see acceleration because China is shedding their low cost manufacturing and moving up the value scale mean more machinery and increase automation that can only translate into higher wages and low inflation. So the prophet of doom and gloom ia a bit premature in calling the sky is falling just like Gordon Chang and other false prophet. The current slow down is god send and good tonic for temporary overheating due to food price increase and rise in oil price
Stock market go up and down and the recent Dip is good in the long run because it wring out all the excesses But the underlying fundamental is stil solid Chinese company as a whole increase the profit by 24% and retail market goes up 12% Wages still goes up but by lower percentage.
so hang in there
some degree of currency undervaluation may be seen as an unavoidable result of China's massive industrial transformation and growth.
China's extraordinary productivity growth in manufacturing since industrial restructuring intensified in the mid-1990s has been an important driver of the country's growing international competitiveness and corporate profitability - much more so than low wages or an undervalued exchange rate.
In a recent article for China Economic Quarterly, Pieter Bottelier and Gail Fosler of The Conference Board argue that China's spectacular economic growth is driven by a self-sustaining "flywheel" of rapid productivity gains, increased profitability and rising investment in manufacturing. Because these factors are mutually reinforcing, China's economic flywheel is unlikely to slow any time soon. As a result, the internal and external imbalances generated by this growth model are likely to grow worse before they get better.
The enormous scale and intensity of China's industrial restructuring since the mid-1990s is hard to imagine and is not fully appreciated internationally. In spite of continuing output growth, total recorded employment in all manufacturing enterprises fell by some 18m between 1995 and 2003, at least 6 times the manufacturing job losses in the United States during the same period.
Economy-wide employment did not fall by much during this period because other parts of the economy - e.g. construction, communications and other service industries - absorbed most of those who had been laid off in manufacturing. Manufacturing employment started to grow again, but very slowly, from 2004.
When serious restructuring of state enterprises got underway in the mid-1990s, initial productivity gains were mainly due to the shedding of redundant labour. But in later years, technical, managerial, and labour upgrading, combined with falling logistics costs, became more important factors.
Since non-state enterprises are on average more efficient than state enterprises, the rapidly growing share of private enterprise in total industrial output accelerated average productivity growth. But in both state and non-state enterprises, technological upgrading, facilitated by relatively inexpensive capital, was often seen as the only way to stay in business. Domestic competition became even more intense as a result of China's entry into the World Trade Organisation in 2001.
The Conference Board calculates that average annual labour productivity growth in large and medium-sized industrial enterprises during the period 1995-2003 was 20.4 per cent, an astonishingly high number by international standards. This number is consistent with the findings of other empirical studies undertaken by Chinese researchers at Peking University.
Average national labour productivity gains (7.3 per cent per annum between 1995 and 2004 according to official data) were far higher than those achieved during the same period in the US (2.4 per cent), the EU-15 (1.4 per cent), Japan (2 per cent), and India (3.9 per cent).
Productivity trends also help explain why China's growth has accelerated since the turn of the century and why the trade surplus has expanded so dramatically since 2004. The growth of the trade surplus is almost entirely attributable to private and foreign-invested firms, which have the highest productivity. The state sector, where productivity is lower, has run an increasing trade deficit.
The upward trend in corporate profitability began in the late 1990s, lagging the initial productivity gains by a few years, and has continued through the present time. Impressively, many manufacturing enterprises were able to a) increase real wages by 10-15 per cent a year after 2000 while reducing unit labour costs, b) maintain or reduce export prices to gain market share (at least until 2006, when many Chinese export prices began to rise), and c) increase profitability.
Rapid productivity growth is an important explanation for these achievements, but it is not the only one. A number of other growth-enhancing factors converged to create an economic "flywheel" spinning at high speed with little inflationary friction, whose motion will be difficult to stop.
These factors include an increase in foreign demand following the 1998 Asian financial crisis and economic recovery of Japan and the United States beginning in 2002; a cash infusion from the privatisation of the state-owned housing stock, which began in earnest in 1998; investment capital raised through stock market listings; and improved infrastructure, which sharply reduced logistics costs.
Did the exchange rate play a role in boosting Chinese competitiveness? To be sure, it provided at least some protection against employment losses during a time of intense economic restructuring. But the exchange rate, by most measures, did not become undervalued until 2003 or 2004. Dramatic productivity improvements began several years before that.
In any case, it is highly doubtful that China could have adjusted its nominal exchange rate fast enough to compensate fully for relative productivity gains in manufacturing. It would have created serious adjustment problems in sectors with little or no productivity growth. Hence, some degree of currency undervaluation may be seen as an unavoidable result of China's massive industrial transformation and growth.
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"`", by Benjamin Scent and Katherine Ng, The Standard, Thursday, April 03, 2008:
More at the link. As the article says, possible, but not certain by any means. Which pretty much describes the present economic outlook anyway.
"", by Katherine Ng, The Standard, Thursday, April 03, 2008:
More at the link. Talk about trying to play it safe; but until the economic outlook stabilizes definitively, prudence may be just about the only game in town right now.
More at the link. As the article says, possible, but not certain by any means. Which pretty much describes the present economic outlook anyway.
"", by Katherine Ng, The Standard, Thursday, April 03, 2008:
More at the link. Talk about trying to play it safe; but until the economic outlook stabilizes definitively, prudence may be just about the only game in town right now.
Wow a pessimistic approach but none the less very improbable. Notice PRC has a lot of wiggle room to combat any potential destabilizing force. China is well positioned to boost consumption and the fact that government spending is well below average means a likely recession may actually trigger something good like instigating universal health care by the government to increase GDP growth.
Yes, indeed pessimistic. Hopefully investment within China itself, and the transition to value-added products will help the economy mitigate the worst of whatever ill-effects may be had from global economic problems in the short term, whilst sustaining domestic economic development and growth in the long-term. But right now, it's just too soon to tell with any trustworthy confidence. And "cheap" capital within China may be part of its own problem.
"", Lloyd's List, Monday, April 7, 2008 (via LexisNexis News):
More at the link. Without China - or the Straits of Malacca - , this is like playing the World Series without any U.S. baseball teams involved. The electronic navigation charts that will be available to merchant ships through the AVC offer some real conveniences; whether those conveniences are a real substitute for stocking up-to-date hard copy navigation charts for ports and shipping routes that one may not be using at the moment, is another.
"", by David Barboza, The International Herald Tribune, Friday, April 4, 2008 (via LexisNexis News):
More at the link. Interesting comment by Secretary Paulson; it certainly applies in the U.S. case, but it is somewhat more problematic in the Chinese case. How is an average person in China making a few hundred dollars a month, with basic food and fuel prices climbing dramatically, spend more, let alone keep saving?
"", by Goh Eng Yeow, The Straits Times, Friday, April 4, 2008 (Via LexisNexis News):
More at the link. Hoping that Chinese investment will prop up Singapore stocks is hardly a solid basis for making predictions; hope is not a plan. As the article pointedly observes, with China itself requiring capital to develop its own potential, there may be more than a little reluctance to put large amounts of into South-East Asia - unless the pay-offs are very substantial.
"", REUTERS, AGENCE FRANCE-PRESSE, The Standard, Thursday, April 03, 2008:
More at the link. Right now China does not have the luxury of permitting the markets to hold full sway over currency valuations; this will take some time yet.
"", AGENCE FRANCE-PRESSE, The Standard, Thursday, April 03, 2008:
A little more at the link, but just a news blurb.
"", by Michael Pettis, China Financial Markets, 2008-04-03:
More at the link. Somewhat pessimistic, but Michael Pettis suspicion's seem to ring rather true; more than just food production or other transient factors are driving inflation.
"", Lloyd's List, Monday, April 7, 2008 (via LexisNexis News):
More at the link. Without China - or the Straits of Malacca - , this is like playing the World Series without any U.S. baseball teams involved. The electronic navigation charts that will be available to merchant ships through the AVC offer some real conveniences; whether those conveniences are a real substitute for stocking up-to-date hard copy navigation charts for ports and shipping routes that one may not be using at the moment, is another.
"", by David Barboza, The International Herald Tribune, Friday, April 4, 2008 (via LexisNexis News):
More at the link. Interesting comment by Secretary Paulson; it certainly applies in the U.S. case, but it is somewhat more problematic in the Chinese case. How is an average person in China making a few hundred dollars a month, with basic food and fuel prices climbing dramatically, spend more, let alone keep saving?
"", by Goh Eng Yeow, The Straits Times, Friday, April 4, 2008 (Via LexisNexis News):
More at the link. Hoping that Chinese investment will prop up Singapore stocks is hardly a solid basis for making predictions; hope is not a plan. As the article pointedly observes, with China itself requiring capital to develop its own potential, there may be more than a little reluctance to put large amounts of into South-East Asia - unless the pay-offs are very substantial.
"", REUTERS, AGENCE FRANCE-PRESSE, The Standard, Thursday, April 03, 2008:
More at the link. Right now China does not have the luxury of permitting the markets to hold full sway over currency valuations; this will take some time yet.
"", AGENCE FRANCE-PRESSE, The Standard, Thursday, April 03, 2008:
A little more at the link, but just a news blurb.
"", by Michael Pettis, China Financial Markets, 2008-04-03:
More at the link. Somewhat pessimistic, but Michael Pettis suspicion's seem to ring rather true; more than just food production or other transient factors are driving inflation.