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Chinese Economics Thread
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Jura The idiot
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13:30, 09-Mar-2019
Opinion: Commerce ministers’ take on stabilizing China’s foreign trade
13:30, 09-Mar-2019
Opinion: Commerce ministers’ take on stabilizing China’s foreign trade
During the annual conference at the sidelines of the second session of the 13th National People's Congress, Minister of Commerce Zhong Shan, together with Vice Minister and deputy representative of international trade negotiation Wang Shouwen and Vice Minister Qian Keming, answered questions from a room of Chinese and international journalists related to China's goal of stimulating a robust domestic market and promoting all-round opening up.
How can China's foreign trade be improved and stabilized?
President Xi Jinping and Premier Li Keqiang have put stabilization and improvement of trade one of the priorities of China this year. Amid heightened trade tensions with the U.S. as well as downward pressure on the Chinese economy, how to stabilize and improve China's trade has become a major concern.
Minister Zhong elaborated on this question by proposing a two-pronged approach. On the one hand, China will take strong measures to stabilize the scale of trade.
First, stabilize the policies of trade. Specifically, China will try every means to alleviate burdens and increase returns for businesses by improving such services as export insurance, finance credit and trade facilitation.
Second, stabilize the entities of trade, including state-owned enterprises, foreign-owned enterprises as well as private enterprises. Private enterprises, in particular, have become the mainstay in China's trade, making up of 48 percent of China's total trade value in 2018, and will unleash great potential.
Third, stabilize the markets of trade. China will step up efforts to push for the international economic cooperation in general and the Belt and Road Initiative (BRI) in particular. China will also optimize the market structure by consolidating traditional markets and exploring emerging markets.
On the other hand, China will improve the quality of trade. China is a large trading nation, but is far from a strong one. Thus, China will take measures to improve the quality of trade and its competitive edge in the international trade system.
First, encourage hi-tech, high-quality and high value-added export, in an aim to move China further up in the global value chain.
Second, optimize the structure of imports in an aim to meet the growing domestic demand.
Third, make innovation the primary driving force in order to facilitate an innovation-driven economy, which includes innovations in technology, systems and management.
How can China-U.S. trade relations be stabilized?
As the two largest economies in the world, how to stabilize the China-U.S. trade relations is the most sought-after question in this press conference.
Minister Wang Shouwen talked positively about the ongoing China-U.S. trade talks and clarified several crucial points.
First of all, he clarified the important consensus reached between the two sides, which is that the goal of both sides is to jointly abolish mutually-imposed tariffs and put an end to imposing additional tariffs.
Second, he pointed out that the two teams of trade negotiators are engaged in intense talks, with three rounds of high-level consultations already held during the past four months, and has made tangible progress in key areas of disputes.
Third, he reiterated the principle of “bilateral, equitable and equal” for the trade talks, and urged the two sides to deliver on the important consensus reached between President Xi and US President Donald Trump in Buenos Aires and return the bilateral relations to normal.
Given the importance of the bilateral relations, he believed that stabilizing the bilateral trade relations would be in the interests of both countries and also meet the expectation of the international community.
What to expect?
U.S. trade protectionism and unilateral trade bullying remain the biggest factor of uncertainty. According to the latest statistics from China's General Administration of Customs, China-U.S. trade volume fell by 16.1 percent, with China's export to the U.S. down by 9.9 percent and the U.S. export to China down by 32.2 percent during the past two months.
But there are also positive signs in China's overall trade performance. According to the statistics, China's total export and import volume rose to a new high in 2018, reaching the threshold of 300 billion RMB for the first time, up by 9.7 percent compared with last year. The first two months of 2019 witnessed 0.7 percent growth compared with the same period last year, which was largely owing to booming trade with the EU, ASEAN, Japan, and the BRI participating countries.
Facing setbacks in economic globalization and multilateralism, China's trade might face greater strain ahead. But just as Vice Minister Qian Keming pointed out, China would further improve the environment for foreign investment and build strong platforms for Chinese businesses' external investment. China will also facilitate FTA negotiations such as the RCEP and the China-Japan-ROK talks, which inject new vitality into China's trade activities.
The ministers' remarks sent encouraging signals. With a higher-level of opening-up and further stimulation in the domestic market, China's trade is expected to expand in scope and improve in quality, which would not only be critical to the country's socio-economic stability but also benefit the world at large.
Jura The idiot
General
now noticed the tweet
China's imports of solid waste continued to decline in Jan-Feb as the country tightened enforcement of an import ban; plastic, paper, and metal waste imports totaled 2.65M tonnes, down 22.9% from the same period last year: official data
China's imports of solid waste continued to decline in Jan-Feb as the country tightened enforcement of an import ban; plastic, paper, and metal waste imports totaled 2.65M tonnes, down 22.9% from the same period last year: official data
Jura The idiot
General
now I read
China says state-owned enterprises are ‘independent market players’
China says state-owned enterprises are ‘independent market players’
- State assets oversight agency denies any ‘systematic arrangement for extra subsidies’ for firms controlled by central government
- Sasac chief Xiao Yaqing also calls for more cooperation with foreign firms
China’s state assets oversight agency denied there is a “systematic arrangement for extra subsidies” for central government-owned firms and called for more cooperation with foreign companies, amid growing criticism from the US and Europe over unfair competition.
“State-owned enterprises are independent market players. They are self-operated, self-financed, self-sustained, self-disciplined and self-developed,” Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission (Sasac) under the State Council, said on Saturday.
“This is the direction of the Sasac. Therefore, state-owned enterprises and enterprises with other ownership structures are equally involved in market competition and are equally protected by the law,” said Xiao, who was speaking at the National People’s Congress in Beijing.
“Chinese law does not stipulate that subsidies must be offered to state-owned enterprises.”
He added that the government and various departments were “consolidating and regulating various subsidies” to boost the efficiency of state companies.
The United States and the European Union – China’s largest trading partners – have long complained that state-owned Chinese firms enjoy benefits such as monopolies in certain sectors and lower-cost financing than is available to private firms, which they say distort the market and disadvantage all private companies. It is also one of the issues Washington has been pressing Beijing to address in the protracted trade war.
“We hope that the [trade talks between] China and the US will produce a good outcome,” Xiao said. “Cooperation, we believe, is an important foundation for competition. We have had good cooperation with overseas companies. And because of that cooperation, Chinese companies, especially state-owned firms, can further deepen reforms, boost the quality of development and strengthen management. This is a win-win that we hope to see in the future.”
Xiao also dismissed reports that state-owned firms were now taking over private companies through a mixed-ownership structure. “Logically [the idea that state-owned firms are taking over private firms] is not correct. At any given time, certain companies will do better [than others].”
Analysts said state-owned enterprises were more likely to receive financing from banks than private companies, but historically they did not invest as much as those from the private sector in fixed assets, which accounted for economic growth.
Chen Yuyu, an economics professor at Peking University’s Guanghua School of Management, said while financial institutions tended to provide funds to state-owned enterprises, “not all state-owned enterprises have high returns and good investment opportunities”.
“Some state-owned enterprises rely on expanding their scale, and they are adding new debts rolling over old debts. But are they able to repay those debts in 10 years? This is an urgent problem that needs to be addressed,” Chen said.
China started a new round of reforms in 2016 aimed at streamlining its sluggish state-owned enterprises by introducing private capital, reducing overcapacity, closing down “zombie” subsidiaries and restructuring assets.
While Beijing has cut the total number of companies under central government control, the assets of state firms through consolidation are getting bigger, with profits hitting record highs, according to data released by the Sasac on Saturday.
Assets held by China’s state-owned enterprises reach 58.2 trillion yuan last year, up from 54.5 trillion yuan in 2017. The net profits of those companies meanwhile jumped 15.7 per cent from 2017 to 1.2 trillion yuan last year.
The Sasac also said the “principal part of the task of dealing with zombie enterprises and enterprises operating with difficulties has basically been completed”.
But Ge Honglin, chairman of the state-owned Aluminium Corporation of China, said tackling the zombie company issue was difficult.
“The party and the government have issued clear orders to move faster on the clean-up of zombie companies since 2014, but the result is not ideal so far,” he told more than 2,000 political advisers in Beijing.
are consistently unprofitable firms that remain in operation only because of government subsidies or regular loans from state-owned banks.
Ge urged China’s cabinet to set up a task force and coordinate with other authorities to help with the clean-up task by providing financial support via bond issues and favourable pension fund policies.
are consistently unprofitable firms that remain in operation only because of government subsidies or regular loans from state-owned banks.
Ge urged China’s cabinet to set up a task force and coordinate with other authorities to help with the clean-up task by providing financial support via bond issues and favourable pension fund policies.
China Auto Sales Crash in February Amid Accelerating Industry Collapse
New estimates from China's Passenger Car Association paint an outright terrifying picture for auto demand in the world's most populous nation as we head approach the end of the first quarter. Unofficial auto sales data for February includes China's passenger vehicle sales down 16.9% YOY to 1,207,538 units for wholesale, and down 19.0% YOY to 1,169,751 units for retail. Luxury brands saw a 2.9% retail sales decline and mainstream JV brands had a 13.8% decline. Domestic brands had a 27.5% decline.
Interesting the discrepancy between the luxury / mainstream sales numbers.
Jura The idiot
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now I read
Chinese insurers record double-digit premium income growth
Xinhua| 2019-03-10 15:20:56
Chinese insurers record double-digit premium income growth
Xinhua| 2019-03-10 15:20:56
Chinese insurers saw their combined premium income grow at a double-digit rate in January, latest official data showed.
Premium income totaled 850 billion yuan (about 126.4 billion U.S. dollars) in January, up 24 percent year on year, according to data from the China Banking and Insurance Regulatory Commission.
That was in sharp contrast with a near 20-percent year-on-year slump in the same period of 2018.
Premium income from health insurance business surged 49.8 percent in January, while that from property and life insurance business increased 13.9 percent and 23.5 percent, respectively.
The rise came after authorities tightened regulations last year to fend off financial risks in the world's second-biggest insurance market.
The sector has shown a stronger capacity to forestall risks as its overall leverage has gradually dropped and business structure improved, the regulator said in December.
Jura The idiot
General
now I read
China’s new bank lending falls sharply in February from record high
China’s new bank lending falls sharply in February from record high
- Loans, money supply indicators ease back after strong January results
- Central bank says combined data for first two months of the year stable given Lunar New Year holiday effect
New bank lending in China fell sharply in February because of seasonal factors, and as the government took action to dampen speculative activities after lending hit a the previous month.
Chinese banks made 885.8 billion yuan (US$131.8 billion) in net new yuan loans in February, only one-third of the record 3.23 trillion yuan in new lending in January, according to data from the People’s Bank of China (PBOC).
The February result was below expectations, with analysts polled by Reuters predicting new yuan loans of 975 billion yuan in February.
Other key credit gauges in the economy also sank last month. Total social financing (TSF) dropped to 703 billion yuan from 4.64 trillion yuan in January. TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.1 per cent in February from January’s 10.4 per cent but remained above the record low rate of 9.8 per cent in December.
Broad M2 money supply grew 8 per cent in February from a year earlier, the central bank data showed, down from 8.4 per cent in January and missing expectations for an unchanged 8.4 per cent rise.
Some of the decline in new lending may have resulted from government efforts to rein in speculative lending that was fuelling the sharp rebound in the Chinese stock market.
In a research note before the release, Goldman Sachs chief China economist Yu Song said the authorities likely took action to control short-term discount bill issuance, which was one of the main drivers of strong TSF growth in January, amid reports of heavy borrowing to buy into the rapidly rising stock market.
Interbank liquidity had become tighter in the second half of February as well, Yu added.
“These actions were in response to concerns that these [discount] bills represented speculative activities which would not support the real economy but instead could introduce unnecessary financial risks,” Yu said. “The strong credit growth in January and February contributed to the equity rally which then became a concern for policymakers and a [reason for] policy constraint.”
Before Friday’s sharp decline, the Shanghai Composite Index had rallied about 20 per cent so far this year, the best performing primary equity index globally.
PBOC governor Yi Gang, speaking in Beijing on Sunday, said observers should look at combined lending and total social financing data for January and February given the market distortions created from the Lunar New Year break.
The holiday began on February 5 this year, 10 days earlier than last year.
“Growth of outstanding total social financing in February was at 10.1 per cent, showing stable growth,” Yi said. “The continuous decline of social financing has been contained, providing a safeguard for financial development of the economy.”
Premier Li Keqiang on Tuesday that Beijing would step up targeted cuts in the reserve requirement ratio (RRR) for smaller and medium-sized banks, with an aim of having large banks boost lending to small companies by more than 30 per cent this year.
The PBOC has already cut the RRR – the amount of money banks are required to hold in reserve at the central bank – five times over the past year, most recently in January.
But analysts remain uncertain as to how much more monetary stimulus the government will want, given the challenges it faces to support growth while avoiding adding to the economic imbalances built up over past years.
China lowered its 2019 gross domestic product to a range between 6 per cent and 6.5 per cent from “around 6.5 per cent” in 2018, underscoring the authorities’ need for some leeway to manage the economy due to greater domestic and external uncertainties this year.
Fitch Ratings noted that the number of references to “stability” and “employment” rose to 97 in Premier Li’s work report to the legislature this year from 63 in 2018, indicating the government’s increasing stress on creating a “bottom line” for economic growth.
China’s general government debt level of 48 per cent of GDP is in line with similarly “A” rated peers, Fitch said. But a significant acceleration in credit growth could put pressure on China’s sovereign rating this year and next. In particular, a resurgence in off-budget borrowing could heighten contingent liability risks and exacerbate the prevalence of implicit guarantees associated with the debt burden of local government investment.
Jura The idiot
General
now I read this
Opinion 21:44, 10-Mar-2019
Deficit financing sustaining rather than crippling Chinese economy
Opinion 21:44, 10-Mar-2019
Deficit financing sustaining rather than crippling Chinese economy
For over 30 years, the mainstream Western media, analysts and scholars have been sounding the China debt alarm, telling the world that its economy is collapsing under "a pile of debts."
The Institute for International Finance (IIF) estimates the Chinese total debt GDP ratio at 299 percent in 2018, breaking down at approximately 50 percent, 70 percent, 49 percent, and 130 percent for government, financial corporations, household, and non-financial corporations respectively.
Whatever the figure, China's debt might be a reason why the country was able to sustain long-term high economic growth rates. Critics were wrong in predicting China's huge 2008 stimulus package of around 580 billion U.S. dollars financed by debts would cripple the economy.
The opposite, in fact, was true, reversing economic growth from 6.5 percent to 9.2 percent year-on-year in 2009, culminating in tripling the country's 2008 GDP of 4.6 trillion U.S. dollars to 13.6 trillion in 2018, according to World Bank figures.
Since then, the government has consistently practiced counter-cyclical fiscal and monetary policies, and deficit financing during periods of economic slowdowns.
At this year's Two Sessions, authorities announced huge increases in government spending and making available funds to encourage and stimulate private small- and medium-sized enterprises as a way to counter downward pressures in part from weak external demand.
One could argue that counter-cyclical policies focusing on domestic demand and emphasizing innovative growth are an appropriate and effective way of enhancing and sustaining China's long-term economic growth and stability.
Reducing taxes, as the government announced in this year's Two Sessions, could boost consumption, particularly when the younger generation (i.e. millennials) is increasingly opting for a more luxurious lifestyle than their parents.
Unleashing the purchasing power of China's increasingly affluent huge domestic market of almost 1.4 billion people would generate enormous economies of scale, thereby increasing the country's competitiveness in the foreign market.
Further, realizing the full potential of the domestic market could wean China's dependence on the U.S. and other developed countries. A market with almost 1.4 billion people is bigger than the combined economies of Europe and North America.
Focusing on innovation with government financial support could make China a high technology hub. It should be clear by now that the West, the U.S. in particular, will do whatever it takes to stifle China's innovative growth in light of its policies towards Huawei and other Chinese technology firms.
Moreover, the composition and nature of China's debts are conducive to economic growth. Of the public debt GDP ratio of 50 percent, two-thirds is attributed to local government loan guarantees to the private-public partnership (PPP) infrastructure and housing construction projects.
In the PPP projects, the private partner puts up the capital and local governments pledge land as their share of capitalization. In the event of payment default, local governments take over the projects.
The housing units are either sold or turned into social housing, earning the local governments profits and improving social stability. Roads are tolled, generating revenues to repay the loans. In short, the assets built by the debts have economic and social values, not a waste of money as the critics assumed.
Rather than "drowning in a sea of debts," local governments, in fact, are protecting the people's interests.
Household debts are largely mortgage loans that, according to government statistics, account for less than half of the value.
Unlike in the West, buying a home is a “family affair" whereby family members pitch in to help a young couple with the down payment and monthly mortgage payments if required, suggesting the chances of home foreclosure are low.
Financial corporation debts are largely attributed to China's shadow banking system which includes insurance, mortgage, and other non-commercial banking businesses. They are, for the most part, subsidiaries of state-owned commercial banks using shadow banks as a vehicle for wealth management programs.
The U.S. credit rating agency Moody's claimed China's shadow banking is the world's fastest-growing with its share of GDP being around 80 percent. But the number is pale compared to the West's, including the U.S. which stood at over 150 percent of GDP, according to Bloomberg.
The speculation that shadow banking in China could fuel housing and financial bubbles is just that, speculation. For reasons cited earlier, a housing bubble is not imminent. While some state-owned enterprises might be losing money, as a group they seemed to be doing well, raking in nearly 500 billion U.S. dollars in profits, a year-on-year increase of 12.9 percent in 2018.
Further, China's financial system is the biggest in the world, having accumulated over 36 trillion U.S. dollars in assets and deposits of over 26 trillion U.S. dollars.
China's government debt management method is not perfect and has indeed made costly mistakes. But the government learned from the mistakes, taking actions to curb over-borrowing and lending, culminating in non-performing loans to around 1.7 percent, in line with, if not better than, that of the West.
Jura The idiot
General
now I read
Economic Watch: China to maintain ample liquidity despite fall in Feb. bank loans
Xinhua| 2019-03-11 18:41:56
Economic Watch: China to maintain ample liquidity despite fall in Feb. bank loans
Xinhua| 2019-03-11 18:41:56
The fall in China's new bank loans in February was mainly caused by seasonal factors, and the country will continue to maintain market liquidity at a reasonably ample level, analysts said.
It's a normal phenomenon to see bank loans fall in February month on month due to the Spring Festival, said an official with the People's Bank of China.
"It's more advisable to look at the data of the first two months or even the first quarter," the official said in a statement posted on the central bank's website.
China's new yuan-denominated loans stood at 885.8 billion yuan (about 131 billion U.S. dollars) in February, a sharp fall from a record 3.23 trillion yuan in January, raising concerns about a further slowdown in the world's second-largest economy.
In the first two months, however, the country's new yuan-denominated loans increased by 374.8 billion yuan year on year to hit 4.11 trillion yuan.
Newly-added social financing, a measurement of funds that individuals and non-financial firms get from the financial system, stood at 703 billion yuan in February, down 484.7 billion yuan year on year.
In the first two months, however, newly-added social financing totaled 5.31 trillion yuan, up 1.05 trillion yuan from the same period last year.
"Putting the first two months together, we can see both new loans and social financing have maintained reasonable growth, which continued to bolster the real economy," said Wen Bin, chief researcher of China Minsheng Bank.
At the end of February, outstanding loans to the real economy stood at 139 trillion yuan, up 13.3 percent year on year. The total value of outstanding corporate bonds amounted to 20.5 trillion yuan, rising 10.7 percent from one year earlier, the fastest growth since April 2017.
China's banks are expected to increase lending and lower borrowing costs this year, especially for small and private firms vital for growth and job creation.
Premier Li Keqiang pledged in Tuesday's government work report that the country will reform and refine monetary and credit supply mechanisms, and employ a combination of quantitative and pricing approaches, such as required reserve ratios (RRR) and interest rates, in a bid to support the real economy.
The central bank has already cut RRR -- the amount that banks need to set aside as reserves -- five times since 2018, most recently in January.
The country will continue to keep a prudent monetary policy and strengthen counter cyclical adjustments while maintaining market liquidity at a reasonably ample level, Yi Gang, governor of the PBOC, told a press conference on the sidelines of the annual legislative session.
China sets its economic growth target for 2019 at 6-6.5 percent, after reporting a growth of 6.6 percent last year.