PRC Economy and Industry: News and Discussions

[Nayak]

Ethnic Uighur soldiers gather at a ceremony in August 2008 to remember 16 Chinese police killed in an alleged terrorist attack in Xinjiang. A senior politician in charge of the northwest region, which borders Central Asia, warned on Friday that 2009 would be more challenging than 2008, itself a violent year.
(AFP/File/Peter Parks)



Chinese riot police patrol in front of the Potala palace in Lhasa on June 20, 2008. In a stark reminder of the ethnic unrest facing China, a top leader from Tibet said Friday more security troops were needed while Muslim-majority Xinjiang warned 2009 would be a "severe" year.
(AFP/fILE/Teh Eng Koon)

[Nayak]

Chinese petitioners throw written accounts of their grievances in the air at a busy shopping street, near Tiananmen square, in hopes to have her case seen and heard by a larger audience, after failed attempts to have their cases heard at the Petition's office in Beijing, China, Tuesday, March 3, 2009. Many Chinese have come from around the country to Beijing seeking redress for problems with local officials, flocking to the capital to coincide with the annual National People's Congress session. Their numbers commonly increase ahead of the meeting, and they are often followed by local police to the capital and taken back home.
(AP Photo/Elizabeth Dalziel)



A Chinese petitioner shows a written account of her grievances in hopes to have her case seen by the petitions office in Beijing, China, Tuesday, March 3, 2009. Many Chinese have come from around the country to Beijing seeking redress for problems with local officials, flocking to the capital to coincide with the annual National People's Congress session. Their numbers commonly increase ahead of the meeting, and they are often followed by local police to the capital and taken back home.
(AP Photo/Elizabeth Dalziel)



Chinese police arrive to the scene where petitioners have thrown written accounts of their grievances in a busy shopping street, near Tiananmen square, in hopes to have her case seen and heard by a larger audience, after failed attempts to have their cases heard at the Petition's office in Beijing, China, Tuesday, March 3, 2009. Many Chinese have come from around the country to Beijing seeking redress for problems with local officials, flocking to the capital to coincide with the annual National People's Congress session. Their numbers commonly increase ahead of the meeting, and they are often followed by local police to the capital and taken back home.
(AP Photo/Elizabeth Dalziel)



A Chinese petitioner writes account of his grievances in hopes to have his case seen by the petitions office in Beijing, China, Tuesday, March 3, 2009. Many Chinese have come from around the country to Beijing seeking redress for problems with local officials, flocking to the capital to coincide with the annual National People's Congress session. Their numbers commonly increase ahead of the meeting, and they are often followed by local police to the capital and taken back home.
(AP Photo/ Elizabeth Dalziel)



Chinese petitioners prepare written statements of their of their grievances in the cramp quarters they share in hopes to have their cases seen by the petitions office in Beijing, China, Tuesday, March 3, 2009. Many Chinese have come from around the country to Beijing seeking redress for problems with local officials, flocking to the capital to coincide with the annual National People's Congress session. Their numbers commonly increase ahead of the meeting, and they are often followed by local police to the capital and taken back home.
(AP Photo/Elizabeth Dalziel)

[Nayak]

A garbage collector reads newspaper stories about the opening of the annual session of China's legislature, in Lanzhou, in northwest China's Gansu province Friday March 6, 2009. In his opening speech Chinese Premier Wen Jiabao announced job creation programs for urban Chinese and more welfare for the poor and farmers who have benefited less from recent years of torrid growth and are more prone to protest as the economic situation worsens.
(AP Photo)



Migrant workers carry their belongings as they arrive at a long-distance bus station to look for jobs in Nanjing, Jiangsu province March 6, 2009. China still has at least 20 million unemployed migrant workers who lost their jobs because of the impact of the global economic crisis, a senior official said on Friday.
REUTERS/Sean Yong (CHINA)

[Nayak]

Police negotiate with a woman who began shouting at them as she holds her child in Beijing's Tiananmen Square, next to the venue of this week's National People's Congress meetings, Friday, March 6, 2009. Police called in dozens of paramilitary police to clear the area of onlookers before grabbing the woman and separating her from her child, and then taking both away in a police van. Security in the area around Beijing's Great Hall of the People has been increased in an effort to prevent any protests during the annual meeting of China's legislature.
(AP Photo/Greg Baker)

[Nayak]

China: All about jobs

It's just after 8 and I am standing in the middle of a jobs market in Dongguan in Southern China.

It's mobbed. There are thousands of unemployed young people milling around in a car park in front of a commercially run jobs market.

The employment exchange - plays Chinese pop music at deafening volume, perhaps to give a lift to the idle young people.

Wearing (mostly) dark blue jackets and jeans, they pick up a flimsy newspaper which lists what's available today in the basic industries that characterise the vast local economy.

Its six pages contain just 300 vacancies, not remotely enough to meet the needs of those who are surging in from all sides.

And round the corner, there are hundreds more men - and they are mostly men - at similar recruitment markets (I am told that companies regard women as less bolshy so exercise gender discrimination by sacking fewer of them).

The men come in by bus, by bike, but mostly on foot. And their numbers keep swelling.

When I speak to them, they are grim about prospects: jobs are few; and vacancies so scarce that employers are ruthlessly cutting wages.

A salary of £4 ($5.60) a day is not untypical, even for a position requiring some skills. That's barely a subsistence wage, even here.

The crowd is a troubling manifestation of South China's jobs crisis. Thousands of factories have closed in the region, millions of workers - mostly migrants from impoverished rural China - have been made redundant.

And unlike last year, the global recession means that very few new job opportunities are being created.

South China is one of the great manufacturing areas in the world. And just as thousands of factories sprouted over the past few years, covering every inch of hundreds of miles along the southern coast, now they are being vacated and abandoned at alarming speed.

In manufacturing - from Germany, to Japan, to this vast coastal strip that sucked in millions of migrant workers from China's impoverished countryside - what's going on is a fully-fledged crisis.

In Japan, there's what increasingly looks like a manufacturing depression, a fall in annual output of a tenth or more.

Here in China the official statistics don't speak of quite such a severe output squeeze, but the armies of unemployed going home to their birthplaces - or thronging the job exchanges - suggest that the data understate what's been going on.

This matters to the whole of China, because exports - mostly of manufactured goods - represent almost 40% of China"s economic output.

Of the bigger nations only the German economy is more dependent on overseas sales.

That said, Japan and Germany are more vulnerable than China to the collapse in global demand for goods, because over the past few years their growth has been much more driven by a surge in exports than China's.

For China, this isn't just an economic problem: it may be a social disaster in the making.

Today, the mob was good-humoured. But those I spoke with were pessimistic that things would soon improve.

And they were doubtful that the government's £420bn stimulus package - focused on infrastructure spending rather than direct help for manufacturers - would do much for them (however, the premier, Wen Jiabao, is expected to double this package on Thursday).

For years now millions of Chinese migrants to cities have been working all hours, seven days a week, for the slimmest of wages. They've slept in basic dormitories attached to factories and have enjoyed little leisure and only the most meagre of luxuries.

However the work allowed them to dream of a better life.

If that dream has now been snatched from them, at some point they may manifest their displeasure - which, in a one-party state lacking the conventional western safety valve of protest via the ballot box, could turn this economic debacle into social and political tumult.

[rundstedt]

China's budget records highest fiscal deficit in six decades.

China has announced a record budget deficit of 950 billion yuan (US $139 billion) for 2009 - the highst in six decades - as the impact of the global financial crisis eats into the country's revenues, forcing it to resort to deficit financing that is nine times higher than last year's deficit of 111 billion yuan.

because of the china budget for 2009 is US $1110 billion, more than than the GDP of india.

[KarthikSan]

China's budget records highest fiscal deficit in six decades.

China has announced a record budget deficit of 950 billion yuan (US $139 billion) for 2009 - the highst in six decades - as the impact of the global financial crisis eats into the country's revenues, forcing it to resort to deficit financing that is nine times higher than last year's deficit of 111 billion yuan.

because of the china budget for 2009 is US $1110 billion, more than than the GDP of india.

Wait another year brother! When Amirkhan Unkil stops buying your crap (literally) we'll see where your budget is

[rundstedt]

Wait another year brother! When Amirkhan Unkil stops buying your crap (literally) we'll see where your budget is

yes, the whole world bought goods from china, and they paid US $1428.5 billion in last year, great than the GDP of india.
If boasters pay for crap, I think the chinese could not refuse.

[KarthikSan]

Wait another year brother! When Amirkhan Unkil stops buying your crap (literally) we'll see where your budget is

yes, the whole world bought goods from china, and they paid US $1428.5 billion, great than the GDP of india.
If boasters pay for crap, I think the chinese could not refuse.

Every boaster pays for crap someday or the other

[Arya Sumantra]

We were talking about international trade in Rupees and they are already at it.

China to Open Yuan's Role in Trade

China may soon allow Chinese trading companies to buy and sell merchandise internationally using yuan, a technical step that would move one of the world's largest trading nations closer to having a fully convertible currency.

Four commercial banks could begin settling international merchandise-trade deals in yuan as soon as this month, China's central bank governor, Zhou Xiaochuan, said Friday.

"It won't be long before the policy could be made public," the head of the People's Bank of China told reporters at the National People's Congress. The program was first brought up for discussion in December.

[Arya Sumantra]

Despite official ban, spyware is hot seller in China

The Chinese government doesn't have a monopoly on spying here anymore. Despite an official ban on James Bond-like hidden surveillance tools such as cameras disguised as pens or buttons, sales of such products in China are soaring.
Experts attribute the trend to the growth of private investigation firms, the improved quality of such gadgets — and, more generally, a broad disregard for privacy rights in a country where the communist government openly monitors its citizens to control what they say, read and write.

"Everybody feels unsafe now," says Liu Renwen, a law professor at the Chinese Academy of Social Sciences, a top government think tank. He calls covert video and audio surveillance "an ever more serious problem in China" and has urged the government to pass a privacy law that was drafted six years ago — but has yet to be enacted.

Many of the gadgets are made in China's southern Guangdong province, where they are exported to countries around the world, including the USA.

"Our sunglasses with camera are easy to carry and look very cool to wear," boasts Kevin Chen of Lanmda Technology, a specialist spy camera maker. At Chinavasion, a large online retailer, the "secret agent pen with camcorder" is the most popular item sold, company representative Rose Li says.

[Singha]

http://www.nytimes.com/2009/03/09/world ... ls.html?hp

free & fair legal system onlee.

Seeking Justice, Chinese Land in Secret Jails
Du Bin for The New York Times

Police officers outside Majialou, a detention center for people who come to Beijing seeking redress of grievances.

By ANDREW JACOBS
Published: March 8, 2009

BEIJING — They are often tucked away in the rough-and-tumble sections of the city’s south side, hidden beneath dingy hotels and guarded by men in dark coats. Known as “black houses,” they are unofficial jails for the pesky hordes of petitioners who flock to the capital seeking justice.

Wu Bowen was confined to this Beijing hotel room for nine days after she sought more compensation for her home’s demolition.

This month, Wang Shixiang, a 48-year-old businessman from Heilongjong Province, came to Beijing to agitate for the prosecution of corrupt policemen. Instead, he was seized and confined to a dank room underneath the Juyuan Hotel with 40 other abducted petitioners.

During his two days in captivity, Mr. Wang said, he was beaten and deprived of food, and then bundled onto an overnight train. Guards who were paid with government money, he said, made sure he arrived at his front door.

As Beijing hosts 10 days of political pageantry known as the National People’s Congress, tens of thousands of desperate citizens are trying to seek redress by lodging formal complaints at petition offices. A few, when hope is lost, go to extremes, as a couple from the Xinjiang region did last week: they set their car afire on the city’s best-known shopping street, injuring themselves critically.

In his annual report to the legislature on Thursday, Prime Minister Wen Jiabao said China should use its petition system to head off social unrest in the face of a worsening economy. “We should improve the mechanism to resolve social conflicts, and guide the public to express their requests and interests through legal channels,” he said.

According to the state media, 10 million petitions have been filed in the last five years on complaints as diverse as illegal land seizures and unpaid wages. The numbers would be far higher but for the black houses, also called black jails, the newest weapon local officials use to prevent these aggrieved citizens from embarrassing them in front of central government superiors. Officially, these jails do not exist.

In China’s authoritarian state, senior officials tally petitions to get a rough sense of social order around the country. A successfully filed petition — however illusory the prospect of justice — is considered a black mark on the bureaucratic record of the local officials accused of wrongdoing.

So the game, sometimes deadly, is to prevent a filing. The cat-and-mouse contest has created a sizable underground economy that enriches the interceptors, the police and those who run the city’s ad hoc detention centers.

Human rights activists and petitioners say plainclothes security officers and hired thugs grab the aggrieved off the streets and hide them in a growing constellation of unmarked detention centers. There, the activists say, the aggrieved will be insulted, roughed up and then escorted back to their home provinces. Some are held for weeks and months without charge, activists say, and in a few cases, the beatings are fatal.

The police in Beijing have done little to prevent such abuses. They are regularly accused of turning a blind eye or even helping local thugs round up petitioners. That raises suspicions that the central government is not especially upset about efforts to undermine the integrity of the petition system.

The petition system provides people with the semblance of an appeals process that top leaders hope will keep them off the streets. But for officials at all levels, it seems, the appearance of order — measured by reducing the number of petitions — is an acceptable approximation of actual order.

Rights advocates say that black houses have sprouted in recent years partly because top leaders have put more pressure on local leaders to reduce the number of petitioners reaching Beijing. Two of the largest holding pens, Majialou and Jiujingzhuang, can handle thousands of detainees who are funneled to the smaller detention centers, where cellphones and identification cards are confiscated.

China’s petition system originated in the Ming Dynasty, from the 14th to the 17th centuries A.D., when commoners wronged by local officials sought the intervention of the imperial court. Since the Communist Party came to power, the right to petition the central government has been enshrined in the Constitution.

With few legal channels available, petitioners come to Beijing, saying it is their only hope for resolving grievances.

“I know my life is in danger, but I just can’t swallow this injustice,” said Mr. Wang, explaining why he has made 10 trips to Beijing in recent years, each ending in detention.

Chinese Human Rights Defenders, an organization in Hong Kong that recently interviewed more than 3,000 petitioners, has documented what it says is the lucrative business of abduction and repatriation. “When you’re taken to a black jail, no one knows where you are and you are totally vulnerable,” said Wang Songlian, a researcher.

The authorities deny such a system exists. During testimony to the United Nations Rights Council last month, Song Hansong, a representative of China’s Supreme People’s Procurate, said, “There are no such things as black jails in our country.”

But over the past year, rights workers have been gathering evidence of what they say is an underground network of jails, first established in 2005, that was aggressively expanded in the months before the Olympics.

Alarmed by their unchecked spread, a group of lawyers has taken to organizing citizen raids that seek to free detainees through a show of force. Although they say instances of extralegal detention dropped after the Summer Games, one of the lawyers, Xu Zhiyong, said they rose sharply in recent days, coinciding with the start of the annual legislative session.

He and other advocates say that armies of paid interceptors have been roaming the city in pursuit of as many as 40,000 petitioners, many of whom have swarmed the entrances to the city’s main petition centers.

By Friday, however, the tough-looking throngs of interceptors outside the State Council and supreme court petition offices appeared to outnumber would-be petitioners, whose worn shoes and sacks of paperwork make them easy to recognize.

Wu Lijuan, a seasoned petitioner from Hubei Province, said she helped coordinate over 10,000 former bank employees who came to Beijing from across the nation last week. She said most of the petitioners, middle-aged women seeking more compensation for their dismissals, were rounded up outside the main petition office and put on buses.

Those who escape the dragnets are often betrayed by employees at the very offices set up to process petitions. Sun Lixiu, 51, a farmer from Sichuan Province, said a clerk at the State Council petition office asked for her ID card, handed back an application form and then tipped off interceptors, who took her to a black jail, where she was held for a day.

“No one can be trusted,” said Ms. Sun, who is seeking to free her husband from the local police station, where he has been held since July, after accusing town officials of embezzlement.

On Sunday, Ms. Sun was seized again and taken to another black jail. She was still being held on Monday, according to a friend to whom she sent a text message.

The financial rewards for apprehending petitioners can be irresistible. According to a directive obtained by Chinese Human Rights Defenders, the police in one Hunan Province county are authorized to pay nearly $300 for each petitioner who is detained.

The money ends up in the pockets of the interceptors, corrupt petition clerks and those who run the black jails. The organization said that officers in one Beijing police precinct demanded as much as $140 for each petitioner they turned over to provincial interceptors.

The story of Wu Bowen, 61, a retired shop clerk from Zhejiang Province, is typical. On Feb. 25 she came to the capital to file a petition seeking more compensation for the demolition of her home. The next day, as she sat on the curb, a policeman told her that as an out-of-towner, she had to register at the precinct.

Once there, however, the officer called the Zhejiang Province liaison office in Beijing. Soon after, a clutch of interceptors led her to a hotel not far from the city’s main tourist attractions.

After nine days of confinement, Ms. Wu stole back her cellphone and revealed the hotel’s address to her son, who called the offices of The New York Times.

When three men reluctantly opened the door to Room 208 at the Zhanle Hotel, Ms. Wu cried out for help. Confounded by the presence of foreign journalists, the men seemed unable to prevent Ms. Wu from escaping, although they begged her to stay, saying she could not leave until a local county official arrived with their reward money.

Out on the street, Ms. Wu was shaken but undeterred. Asked if she wanted to be taken to the train station so she could return home, she shook her head. “No,” she said. “I’m going to stay in Beijing until I get justice.”

[wrdos]

Report: China-made auto sales up 25 pct in Feb

Tuesday March 10, 7:33 am ET

SHANGHAI (AP) -- China's sales of domestically made vehicles surged 25 percent in February from a year earlier, as customers took advantage of a tax cut for small cars, the official Xinhua News Agency reported Tuesday, citing industry figures.

February's sales totaled 827,600 units, up 12 percent from the 735,000 sold in January, Xinhua said, citing figures from the China Association of Automobile Manufacturers.

Production in February totalled 807,900 units, up about 23 percent from the year before, it said.

Calls to the association's Beijing headquarters rang unanswered Tuesday.

"Passenger autos with engines under 1.6 liters accounted for 70 percent of the passenger vehicle market, so the bounce of small-engine cars played a critical role in the revival," the report cited Zhu Yiping, the group's assistant secretary general, as saying.

China is the world's second biggest auto market, though sales declined in recent months after several years of torrid growth. The country's monthly auto sales overtook the U.S. in January for the first time, as U.S. sales plunged.

Authorities have implemented tax cuts and subsidies for small-car purchases to lure car buyers back into showrooms.

[Vipul]

China exports plunge 25.7% in February.

China's exports plunged 25.7 per cent in February from a year earlier, the customs bureau said today, in a worrying sign of the depth of the global slowdown that took markets by surprise.The world's third-largest economy last month posted exports of $64.9 billion, the customs bureau said on its website.

"This is clearly worse than expected," said Robert Subbaraman, a Hong Kong-based analyst with Nomura International.

"We were looking for a rise (in exports) of 1.2 per cent. The market consensus was looking for a rise of one per cent."
Imports last month dropped 24.1 per cent to $60.1 billion, according to the customs bureau.

China's trade surplus in February stood at $4.84 billion, the customs bureau said, a massive drop from $39.1 billion the previous month.

It was down by nearly half compared with last year's February trade surplus, which was $8.56 billion, according to earlier customs figures.

[RamaY]

China exports plunge 25.7% in February.

Well there were 21 working days in Feb'2008 compared to 20 days in Feb'2009.

PRC 2008 GDP was $4.222T (yes, that is trillion and I know you SDRE indians doesn't know big numbers... you invented zero onleee) and it works out to be $21.11B GDP per day in communist china.

This year, China reduced its exports to that amount to divert all that wealth for internal consumption... because we want to boost internal economy you know...

THAT is the reason for the drop in PRC's trade surplus in this month.

Yous sincerely,
a BJCutie fan

[vsudhir]

MaoA biraders.

The soup-e-rear PRC system has beaten all forecasts yet again....

PRC trade surplus widely beats forecasts again

(falls to 1/8th of its previous month level)

China’s trade surplus plunged in February as exports fell by a record, adding pressure on the government to spur domestic consumption to prop up the world’s third-biggest economy.

The trade gap narrowed to $4.8 billion, about an eighth of the amount in the previous month, the customs bureau said in a statement. Exports tumbled 25.7 percent from a year earlier. Imports fell 24.1 percent.

The government has halted the yuan’s gains against the dollar and plans to cut export taxes to zero as demand dries up because of the global slump...

“There’s no hope for export demand to recover any time soon,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. “How fast imports recover depends on how soon the government’s stimulus package kicks in and creates real demand in major industries.”

The timing of a Lunar New Year holiday masked what would otherwise have been a steeper decline in trade, said Mark Williams, a London-based economist at Capital Economics Ltd. The holiday meant that there were more working days in February this year than in 2008. {Hah, the imperialist foreign devils are out again to malign PRC's pristine image by spreading these vile lice, err lies...}

The median estimates in a Bloomberg News survey of 16 economists were for a $28.3 billion trade surplus, a 1 percent decline in exports and a 22.5 percent drop in imports. {Really? What were these conomists smoking? The purest opium couldn't cut it this fine}

[derkonig]

MaoA MaoA..

[ramana]

Is MaoA: Mao Akhbar!

[vsudhir]

Aye aye Ramana saar.

Chini drones here display all traits of being packee abduls with led leplacing gleen onlee.

Meanwhile, Brad Setser is on a roll again.... and only chini drones, like packee abduls, can deny the soundness of his conclusions.

The fall in China’s exports caught up with the fall in China’s imports, at least for now

After soaring for most of this decade — the pace of China’s export growth clearly turned up in 2002 or 2003 and then stayed at a very high pace — China’s exports are falling back to earth. The surge in China’s exports could prove to be as unsustainable as the rise in US (and some European) home prices. They might end up being mirror images … as Americans and Europeans could only import so much from China so long as they could borrow against rising home prices.

And nope, it ain't all mere conjecture either. Data will show the same, I suspect.

Calculated Risk adds:

Historically there has been a strong correlation between household mortgage equity withdrawal (MEW) in the U.S. and the U.S. trade deficit. Now that MEW is essentially over, the U.S. trade deficit has declined sharply too.

As Setser suggests, the surge in China's exports were very dependent on the U.S. and European housing bubbles - and MEW.

Note: Q4 MEW will probably be available next week (the Fed's Flow of Funds report will be released tomorrow).

Well, the west expects to just walk off or what - after creating the world's largest overcapacity bubble on top of an unsustainable commercial realty bubble on top of an environmental disaster of biblical proportions on an ancient land?

We'll know soon enough when real assets amongst the west's tech and industrial assets currently in their private sector pass ownership and control into chini ones....or not, depending on how much the west will allow.

We do live in interesting times, in the chinese sense of the word.

[Singha]

BW

Recession Slams Chinese Exports Again

China exports dropped an "ugly" 25.7% in February after January's 17.5% fall. The government is trying to boost domestic spending to alleviate the pain

China is facing a difficult employment situation in 2009 as the global financial crisis affects the country's economy. China's urban registered unemployment rate climbed to 4.2% in December 2008, its highest level in 5 years. China

New data about China's economy is providing further evidence that the global recession is making the once mighty Chinese export machine sputter badly. After falling 17.5% in January, exports plunged a further 25.7% year-on-year in February, the government announced on Mar. 11. The drop was worse than what most analysts expected; a Merrill Lynch research note described it as "an ugly number." And the way things are shaping up in the rest of the world, the figure for this month isn't going to look very pretty either. While stock markets across most of Asia rallied on the strength of the previous day's rebound in the U.S., the Shanghai Stock Exchange fell 0.91%.

The poor export performance casts serious doubt on China's ability to meet the government's growth forecast for 2009. While Premier Wen Jiabao last week, in a speech opening the National People's Conference in Beijing, predicted the Chinese economy would be able to achieve 8% growth, many outside economists are less upbeat. The International Monetary Fund has projected Chinese economic growth of just 6.7% this year, but other estimates are far more pessimistic.

The export numbers overshadowed a bit of good news about China's economy that came out at the same time. Beijing also released data on fixed asset investment, which climbed 26.5% during the first two months of the year. The rise reflects a government spending spree on infrastructure as part of the $585 billion fiscal stimulus package unveiled last November.
Inflation Is Tamed

But so far there is little evidence of a pickup in private sector investment, as most companies have adopted a wait-and-see attitude rather than invest in new plants and equipment. Indeed, some analysts believe the easy credit extended so far this year has been used by companies to speculate in the stock market, which is up more than 17% year-to-date.

China's economy, meanwhile, faces the problem of falling prices. This time last year, inflation was raging at double digits due to high food and energy prices. Today, inflation has been entirely tamed: The consumer price index actually fell 1.75% in February year-on-year. However, as Jing Ulrich, managing director and chairman of China equities at JP Morgan (JPM) points out in a note, deflation is undesirable when it builds in expectations of further price declines, thus leading consumers to defer purchases.

Like other Asian countries, China is looking for ways to get people to spend in hopes of offsetting plunging foreign demand. The eastern Chinese cities of Nanjing, Hangzhou, and Ningbo, for instance, have spent millions distributing coupons to consumers for use in hotels, restaurants, and tourist destinations. But, given health, education, and retirement benefits that even government officials admit are inadequate, convincing Chinese consumers to open their wallets during these uncertain times is a huge challenge. "First, we need to have a healthy and complete social security system," Commerce Minister Chen Deming said in a Mar. 7 China Central Television interview. "Only when people feel that they have basic security…will they be willing to spend money."
One Prescription: More Government Spending

Beijing still has plenty of ammunition to stimulate the economy. JP Morgan's China chief economist and head of equity research, Frank Gong, agrees that China needs to spend more on the social safety net before the Chinese will abandon their thrifty ways. "Consumer coupons are better than cash because you get people to spend first before they get the cash back," he says. "But they should do more, spend more money to build national pensions, health care insurance, and unemployment benefits." Although Chinese Premier Wen did not unveil additional spending in his speech last week, the Chinese government has nearly $2 trillion in reserves and a debt-to-GDP ratio of just 18%, compared to 80% in the U.S. and Britain and 160% in Japan.

China's trade travails are problem enough for Beijing to be sure, but the export plunge in the mainland spells even more trouble for neighboring countries like Japan, South Korea, and Taiwan that provide much of the inputs assembled in China and re-exported to Europe and North America. "We can only hope and pray for some sort of a miracle in the U.S. and Europe coming to grips with financial systems, recapitalizing the banks and starting lending," says Supavud Saicheua, Thai economist at Merrill Lynch.

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.

[rsingh]

Well nothing to worry about falling exports.........I am told. Jan 2009 export fell because of new year holiadys and in Feb 2009 exports fell because this month had only 28 days.

[Vipul]

'China may be the world's worst-affected economy'.

The next shock to the global economy, already reeling from recession, could come from China, which witnessed excessive 'malinvestment' during the boom years and where the investment structure is collapsing rapidly, says economist and Asianomics founder Jim Walker. India, on the other hand, will probably grow by 3-5% in 2009, which given the economic contraction or tepid growth elsewhere could possibly be the world's highest, he reckons. Excerpts from the first of a two-part interview that Walker gave DNA in Hong Kong on Tuesday:

Two years ago, you said, 'The butterfly has flapped its wings in subprime USA; the hurricane will be felt in rustbelt China.' Have we seen the worst of the hurricane? Some analysts are flagging a recovery there.
Quite the reverse. I think things are unravelling quite fast in China. Obviously, the export sector has been hit hard, and the trading goods sector is struggling. But when you look at the data in China, what is perhaps even more interesting is how quickly imports are collapsing relative to exports. In fact, China's trade surplus is going up. That tells you that domestic demand is falling faster than external demand.

The biggest problem, we've always felt, is that the signals being sent in China in terms of the industrial sector were that it should be export-orientated and it should be capital-intensive; in other words, the exchange rates were undervalued and interest rates were too low.At this stage, external trade is shrinking; at the same time, the capacity that has been put in place in China by private investment is being shown to be overcapacity and bad investment . The investment structure in China is coming down very, very quickly.The government has underestimated the impact of this on economic growth. Bear in mind that when investment comes down as it always does in a business cycle it doesn't go from 20% growth to 10% growth; it goes from 20% growth to 20% contraction. That's the process we are seeing in China now.

We have the two biggest drivers of the Chinese economy trade (the export sector) and investment absolutely collapsing. It's too early to talk of a recovery in China; we haven't even really got anywhere near the depths of the recession.

Will the 4 trillion yuan stimulus package add to 'malinvesment'?
The biggest danger is that it will go to the wrong industries and the wrong places, not the ones that are not efficient or profitable, which means eventually they will become bad debts in the banking system.

The banking system is perceived to have slack, loans-to-deposit ratios are relatively low, so there's a big push to get banks to lend. The big difference between the mid-1990s and now is that banks are now listed. What you're going to do is use money that's partly owned by investors foreign and local to support economic growth; whether that money will ever be repaid or not is immaterial. Basically, banks are being used as a policy tool. That makes equity investments in China a very dangerous proposition for a long number of years. China is really in danger of making foreign investors disappear for some time.
At the same time, that 4 trillion yuan is enough to raise economic growth rate. Our forecast is that in 2009, China GDP will grow between 0 and 4% GDP growth, with a 30% possibility that it will be negative , and 0% possibility that it will be 8%.
That 0-4% projection assumes a huge effort by the government to spend money. What it has to overwhelm on the private sector side is gigantic. In any case, they are not going to be able to spend 4 trillion in one year; a lot of that is actually not new spending.Work report effectively spoke of 1.4 trillion yuan in new spend. That's about 4.5% of GDP. That should, with a bit of luck, keep them at 0-4%

How will this recession manifest itself in China?
Empty factories, mothballed production lines, increased unemployment.

For what period of time? Where will demand come from when it revives?
These are the hardest questions for China at the moment. It's not too difficult to make a case that China may be the worst-affected economy in the world. And that's still ahead of us.

In 2007-08, China's current account surplus was 10-11% of GDP. That told us that in order to balance domestic supply and domestic demand, China had to export 10-11% of its economy. That is a very big imbalance.Now, with the rest of the world in recession, exporting 10-11% of your economyis not going to happen. It's a question of what percentage of that 10-11% needs to be destroyed in terms of capacity reduction to balance domestic supply and domestic demand. There's still going to be some external demand. This could a very severe problem that takes 2-3 years.

But beyond the next 2-3 years, when the malinvestment gets sorted out, are you bullish on China?
That's always been my hope. But I am more concerned about the policy response in China not just now, but over the past 2-3 years. If anything, China has been going backward in terms of policy management for at least two years. It was unwilling to allow oil prices to find their proper levels when they were rising fast last year, and it's been getting banks to lend in a way that makes them 'handmaidens of national policy' . That's very dangerous because capital is already mispriced, and interest rates are not set by the market. Secondly, the kind of people they want banks to lend to have a bad track record of repaying.So, policy direction in China has not been consistent over the past five years. It was moving strongly in a market direction from 2002 to 2005, but by 2006, they stopped going down that that track, partly by balancing the currency appreciation with all sorts of offsets. (This includes lending to people who they know will default)

Does that influence your long-term view on China?
It's making me more concerned than I was two or three years ago. Unless they begin to reverse their interventionist tendencies, this could be a longer crisis. It would signal to people that China is just too immature to be investing in. For now, however, they're still starry-eyed about China.(What is they say about people wanting a long rope?)

[svinayak]

http://www.nytimes.com/2009/03/12/busin ... ade&st=cse

China’s Big Recycling Market Is Sagging

BEIJING — Each morning Tian Wengui emerges from the home he makes under a bridge here, two large sacks slung over his shoulder. Through the day, and well into the night, he scours garbage cans for soda bottles, soy sauce containers and cooking oil jugs. Selling the refuse to one of Beijing’s ubiquitous recycling depots, Mr. Tian can earn $3 on a good day.
The Sagging Trash Market

But good days are getting harder to come by.

Since Mr. Tian migrated from Sichuan province, the multibillion-dollar recycling industry has gone into a nosedive because of the global economic crisis and a concomitant fall in commodity prices. Bottles now sell for half of what they did in the summer.

“Even trash has become worthless,” Mr. Tian said recently as he made his way to a collection center, his sacks nearly bursting.

The collapse of the recycling business has affected people like Mr. Tian, the middlemen who buy the waste products and the factories that refashion the recyclable waste into products bound for stores and construction sites around the world. American and European waste dealers who sell to China are finding that their shipments are being refused by clients when they arrive in Asia.

The ultimate victim may be the environment, already overrun with enough trash in places to threaten people’s health, now further burdened with refuse that until recently would have been recycled.

The effect is being felt acutely in China, the world’s largest garbage importer. The United States, for example, exported 11.6 million tons of recovered paper and cardboard last year to China, up from 2.1 million tons in 2000, according to the American Forest and Paper Association.

Because Chinese consumption is far less developed than the West’s, more than 70 percent of the materials that feed the country’s recycling industry must come from abroad, said Wang Yonggang, a spokesman for the China National Resources Recycling Association.

“Chinese tradition is all about saving and being thrifty,” he said. “People here would rather have things repaired several times before abandoning them.”

The drop in commodity prices was so rapid that in a matter of weeks last fall container ships carrying used railroad wheels and empty dog food cans arrived in Chinese ports worth far less than they had been when they departed Newark, Rotterdam or Los Angeles.

“Everything was moving along just fine until October and then we fell off a cliff,” said Bruce Savage, a spokesman for the Institute of Scrap Recycling Industries, a trade organization that mostly represents American waste processing companies.

[KarthikSan]

Well nothing to worry about falling exports.........I am told. Jan 2009 export fell because of new year holiadys and in Feb 2009 exports fell because this month had only 28 days.

Yes and March exports will be low because of NCAA March madness. Us poor SDRE Yindoos are not smart enough to understand that. So we now have a picture book where we are being pontificated about the greatness of the Chini system.

[vsudhir]

China's way forward

Pettis wrote recently that China’s worldwide trade surplus, “the cleanest measure of overcapacity”—factories that are running and workers who are employed only because of foreign customers—is by one measure at least as large as America’s was in 1929. China today, like America then, has a trade surplus equal to about 0.5 percent of global economic output. But as a proportion of its own economic output, China’s trade surplus is much bigger than America’s was. In proportional terms, today’s China is five times as reliant on foreign customers to create domestic jobs as America was in 1929. So unless China can find a way to keep selling when its customers have stopped buying, it will face a proportionately greater employment shock.

A tad alarmist if the implication is that PRC faces anything like the 1929-33 great depression. A lot of water has since flowed below the bridge. IMHO, risks of military misadventurism rise as PRC gets increasingly sucked into crisis vortex and social unrest risks mount. All of PRC's neighbors better be wary.

[ArmenT]

China Tries Peddling Its Wares in ... China?

Chinese Plants Hope Buyers at Home Can Make Up for Lost Buyers Abroad
...
...
One happy customer was Liu Jingzhu, a middle-aged economics researcher at a government-run think tank. "Exports are very difficult at the moment so they are selling to local consumers," she said. "Lucky for us."

"I couldn't find this in China normally," she added. "You seldom see export-quality goods on the shelves here." That seemed to explain the size of the crowds of shoppers who gathered in a curious crush around the stalls. "People think the quality of export goods is better," says a young man selling glass ornaments who would give only his surname, Ma. "And they are right. We can't put any lead in things we sell abroad, for example."

[vina]

Boyz, remember what 'ol vina had said long ago, just as the subprime implosion lens went off and started compressing the fissile stage .. The end multi mega ton Tsar Bomba will be set off only when China goes of with a gigantic Kaboom. It is already happening. All the one power plant a week, half the world's use of iron ore, coal etc, half the out put of lot of metals etc, is definitely going to implode. No sir. The Commie Command and Control aint going to be able to fight against the fundamentals like law of gravity . What goes up comes down. The Chinese bubble has well and truly burst. Whichever way you cut it, the gigantic white elephants that were used to put up the Beijing Olympics will go to seed. All those towers that made a mockery of Manhattan in Shanghai are never going to pay for themselves . Those are massive capital write offs. With Unkil leveraging up on Treasurys and finally inflating it's way out of commitments, Chicom are screwed massively. Both externally by Unkil and internally by the collapse of the investment bubble.

When the Chinese Tsar Bomba goes off, Comrades Andrei Sakharov and Igorr Tamm would be envious of the size of the Chinese bum.

[Virupaksha]

Boyz, remember what 'ol vina had said long ago, just as the subprime implosion lens went off and started compressing the fissile stage .. The end multi mega ton Tsar Bomba will be set off only when China goes of with a gigantic Kaboom. It is already happening. All the one power plant a week, half the world's use of iron ore, coal etc, half the out put of lot of metals etc, is definitely going to implode. No sir. The Commie Command and Control aint going to be able to fight against the fundamentals like law of gravity . What goes up comes down. The Chinese bubble has well and truly burst. Whichever way you cut it, the gigantic white elephants that were used to put up the Beijing Olympics will go to seed. All those towers that made a mockery of Manhattan in Shanghai are never going to pay for themselves . Those are massive capital write offs. With Unkil leveraging up on Treasurys and finally inflating it's way out of commitments, Chicom are screwed massively. Both externally by Unkil and internally by the collapse of the investment bubble.

When the Chinese Tsar Bomba goes off, Comrades Andrei Sakharov and Igorr Tamm would be envious of the size of the Chinese bum.

Vina,

The question is whether they take US down with them or they patch up for a "united front". They have more than 1.5T treasury bonds. Today if they offload even 25% of it, no bank can absorb them for the next 6 months and the US will be worst affected. But not doing that will mean China not using its own resources. What will be the quid pro which US will offer?

[vina]

Ravi_Ku. My guess is Chinese are not suicidal Packees. The Commie Party has an inherent agenda in the stability of China. The first thing that will get swept away into the dustbins of history is the CPC. That is why this "harmonious society" thing is so big for them. No. They wont be dumping dollars, because that is like plunging a dagger into their bellies , sort of a Chinese version of the Japanese Hara-Kiri / Seppuku /whatever. This is a game where they have no good options and no control.

I think it might play out this way. If the Chinese Tsar Bomba goes off (eventually it will deflate, question is , will it be an "orderly" gradual deflation or the Chicoms by their ham handed meddling and trying to fight gravity manage to set off a Tsar Bomba), there will be a rush of capital out of China. That is where the Chicom Treasury holdings will be useful. All the top CPC thugs and every Panda and his mother-in-law will look to run and hide and try to save value of their holdings they can. And guess what is the "safe currency" ? . Everyone will be buying greenback and dumping RMB like there is no tomorrow. The ChiPanda govt will have no option to sell dollahs then. Such massive currency plunges like what happened in Indonesia in 1998 will hurt the average chinese most and will have "serious disturbances to harmonious society" . Remember, that kind of plunge does not translate immediately into improved export competitiveness. A lot of Chinese exports is highly import intensive as well . What will get killed is the value that is added in China. As usual, it is the usual "serf"/ "abdul" /"Chang" who will get short changed with worthless RMB for his/her labor. The ChiCom party fat cats and apparatchicks will have spirited their wealth away, along with their wives/mistresses and concubines in Yamreeka /Vilayat in greenbacks

[Arya Sumantra]

All those towers that made a mockery of Manhattan in Shanghai are never going to pay for themselves . Those are massive capital write offs.

But isn't it a good thing for a chikoo middle class if his politician loses his ill gotten wealth in his own country?? The real estate sector in which the chicom politicians have put all their money and built all those steel and glass luxurious apartments would now be available to a middle class buyer for say half the price- a good deal for the middle class at a massive loss to the politicians. Isn't that something even we would crave for? That our mantrijis lose their bonanza on our soil rather than lose it in swiss misadventures in khan crises.

JMT

[shynee]

Chinese Economy Monitor - B.Raman on SAAG

[vsudhir]

MaoA biraders....

China lost billions buying stocks just before crash

More vile defamation against PRC's pristine record in the imperialist western press..... What is the xinhua POV (a.k.a. the truth)??

[ramana]

X-posted..

Chinese Exports Contract by 26% in February and Trade Surplus Shrinks: How Deep Will the Export Slump Get?

# Chinese exports contracted by 25.7% y/y in February, a near -record drop and the fourth consecutive decline (they fell by 17.5% in January). In a change, Chinese imports contracted less than exports (24.1%) leading to a much smaller trade surplus than the$39b average of November 08-January 09. The $4.84b trade surplus was the smallest since February 2006
# The deep import contraction (43.1% in January) took China's trade surplus to the third highest of all time $39.11b (record $40.09b in November)
# China's trade with the EU dropped 20.2% yoy to $48.78b, with the US 17.4% to $39.43bn and Japan down 25.7% to $28.56bn in the first two months of 2009. The performance with the three biggest trade partners is better than the overall drop.
# there were smaller declines in exports of traditional goods such as footwear (-2.3%y/y), garments (-11%) and toys (-17.1%) as overseas consumers shifted to these low-end products. Exports of electronics & machinery dropped 22% exports of steel fell 34%. Exports of ordinary trade (-32.5% yoy in Feb09) dropped more than that of processing trade exports (-23% yoy in Feb 09)
# February’s trade surplus typically falls because of seasonally strong commodity imports and seasonally weak consumer exports(Simpendorfer (via Pettis))The Import surge may reflect rebuilding of commodity reserves
# China's imports of primary products saw a huge drop of 44.8% in Jan and Feb, signaling that domestic demand remained weak. Only the import of soybeans and iron rose by 15.1% and 6% respectively, despite plummeting global prices for both the commodities. The price reductions of these commodities benefited China, the biggest world's consumer of the two. (EEO)
# Danske: recent turnaround in the new export orders in manufacturing PMI suggests deterioration in exports may be turning around
# UOB: Stripping out Chinese New Year effect, exports fell 6.8% yoy in January.The sharp drop of imports is misleading because of the decline of trade volume is much smaller than the drop of price. Exports could remain weak in coming months due to the sluggish rebound of G3 economies; imports may recover earlier as exporters turn to domestic market and government stimuli.
# Barclays: after taking into account holidays, exports declined by 7% in January and imports by 35.9%. (via FT)
# Via WSJ: collapse in prices of commodities and waning domestic demand of commodities have been falling and domestic demand is waning. Imports linked to domestic demand (excl. purchase of overseas-made components used to manufacture goods for export) fell 40.1% y/y. Import of components for final consumer goods for export fell almost 65%. China is buying fewer components from Taiwan and South Korea to make end products
# The collapse in demand from Chinese key export destinations U.S. and EU (which absorb over 50% of total exports) can not be offset by exports to emerging economies as those in Asia count on final demand in the G3, and emerging economies are also reducing consumption especially those that export commodities. Intra-Asia trade trade has plunged since October. Import slump reflects a reduction in price and volume of commodities as well as lower demand for processing trade inputs - it may also reflect slowing domestic demand. The Lunar new year may have exacerbated the slump in exports as factories shut early.
# Chinese exports declined by 2.8% y/y in December and imports fell 21.3%. Shipments to the EU, China’s biggest export market, fell 3.5% and shipments to the U.S. slipped 4.1% y/y.
# Citi: Container throughput at Shanghai and Shenzhen, the biggest two container ports in China, slumped by 15% and 17% in Jan (YoY), underpinning market expectation that China export/import may have plunged in Jan. As empty boxes released from collapsing global trade continue to flood to Asia, China container throughput is inflated
# contraction now driven by slowdown of higher valued exports such as electronic goods, containers and steel products. Exports of textiles, clothing and footwear, which fell sharply early in 2008 have stabilized.
# Green: Machinery imports continue to be weak indicating a real downturn in domestic investment and manufacturing and evidence of a sharp deceleration of economic growth in the fourth quarter and poor growth momentum in the first quarter (via WSJ)
# Exports and Imports last grew 19.2% and 15.6% in October but growth in volumes slowed sharply. the collapse in exports is consistent with the plunge in new export orders in manufacturing surveys.Overall new orders (and export orders) continue to reflect a contraction but the pace of deterioration has slowed
# The steep contraction in imports suggests further export declines (particularly in the processing trade) in the future as well as slowing domestic demand and indicates that China may roll out further aggressive monetary and fiscal measures from the ones it has already introduced.
# Lack of trade credit may be exacerbating trade slowdown. When global financial system recovers, so might trade. Collapse in imports reflects weakness in processing trade (Merrill)
# Citi: Stripping out prices, import quantity growth already declined considerably beginning in mid 2008 to near zero, reflecting insufficient domestic demand
# Customs bureau reported that about half of China's toy exporters shut down in the first seven months of the year, foreign orders at October Canton trade fair fell sharply
# Holland: declining import growth today may well be a lead indicator of slowing export growth tomorrow. Chinese commodity importers may be asking suppliers to delay shipments or canceling them outright.
# L+F :processing trade has been losing weight in total foreign trade, total exports and total imports. In 1-3Q08, processing trade accounted for only 40.8% of the total trade value, compared with 45.4% in 2007. This trend was in line with the government’s policy direction to discourage processing trade and the exports of products that are energy- and resource-intensive, highly polluting, labor-intensive and low value-added.

[svinayak]

MaoA biraders....

China lost billions buying stocks just before crash

More vile defamation against PRC's pristine record in the imperialist western press..... What is the xinhua POV (a.k.a. the truth)??

They were trying to shore up the market for the west before it sank

[svinayak]

http://china-economics-blog.blogspot.co ... results=50

[Arya Sumantra]

Graduates retreat to rural China

[Arya Sumantra]

After lead paint, now it is drywall that emits sulfur based gases

Drywall from China blamed for problems in homes

[shyamd]

China in Deflation? More Easing to Come?

* Chinese CPI fell 1.6% in February y/y, the first drop in more than six years. The producer Price index dropped 4.5% y/y, steeper than January’s 3.3% decline.
* Chinese CPI peaked in February 2008 on high commodity prices and the year on year declines in such prices will depress prices for several months. The rapid extension of credit and government spending might reduce need for and effectiveness of rate cuts
* Caijing: China’s corporate goods price index, which measures prices paid by businesses for key commodities, fell 6% yoy in Feb, and 0.8% from Jan, raising the odds of deflation in coming months. China already had one month of y/y Consumer price decline and several of Producer prices. February coal prices rose 14.2% y/y but were flat from January. Power prices rose 3.2% y/y but were also flat month-on-month.
* Goldman (via WSJ) high base effects from the shifting Chinese New Year holidays and the snow storm last February account for the sharp y/y decline but CPI growth has been negative in month-on-month terms for 7 months, suggesting that China had entered deflation before February 2009 and that rate cuts are likely
* Citi: negative CPI could persist for much of this year, as producer price declines transmit to consumer prices in an environment of overcapacity meaning more rate cuts are necessary despite past easing and credit extension
* Nomura (via WSJ) Given the inflationary nature of the stimulus package, the People’s Bank of China will hesitate in cutting rates meaning an additional rate cut may be more symbolic
* Danske: The current disinflation is to a large degree driven by the weak real estate market.
* MS:The initial deflationary impulse due to positive supply shocks should bring about cost savings, especially to energy- and raw materials-intensive sectors. Yet sticky nominal wages will lead real wages to rise, profit margins to fall and employment to be cut back, which along with the effects of past tightening may set off a deflationary cycle with far more serious consequences unless the government can prevent deflationary expectations from getting entrenched.
* The moderation in PPI for consumer goods is more modest than overall numbers, suggesting that deflationary pressure is not yet broad-based. Despite the downward trend in the PPI, prices of some goods (steel) have rebounded on the stimulus plan and post-winter rollout may boost prices (UOB)
* China now plans to adjust fuel prices down in accordance with global trends
* Fitch: inflation suboptimal rebalancing tool despite possibility that it might reduce rural urban gap
* Economist: whatever the inflation driver (money or food), faster appreciation of the RMB would bring it down as it reduces imported inflation

Chinese Reserve Growth Slowing Sharply : Outflows Now Replacing Inflows?

* Rate of growth of Chinese foreign exchange reserves has slowed sharply with reserve stock reaching only $1946 billion at the end of 2008, only $40b higher than at the end of September, much smaller than the pace of the first three quarters.
* Pettis: rumors suggest that Chinese reserves fell by $30bn. Given January's trade surplus and FDI, even adjusting for valuation, there are about $40-50bn in unexplained outflows meaning it is hard to believe that we haven’t seen at least $20-30bn of hot money outflows in January
* China's significant holdings of Euros resulted in valuation losses in October and November and gains in December as the dollar first weakened and then corrected - Adjusted for valuation, Chinese fx reserves might have increased less than $50 billion (RGE estimate). This figure is much lower than the sum of the inflows from the trade surplus and FDI- indicating that China has suffered capital outflows in the fourth quarter
* Setser: Outflows may have been very large in December08. Given a $40 billion trade surplus and another $10 billion from FDI and interest income, the small increases in reserves implies $70 billion plus in monthly hot money outflows … in excess of 10% of China’s GDP annualized.
* Lardy: the combined centrally financed injection of capital, which has been reported, and nonperforming loan write offs, which have not been reported, for the Agricultural Bank of China could have reduced officially reported official foreign exchange holdings by $110 billion to $120 billion
* export firms and banks could be choosing to hold more dollars now that the government has reversed some regulations and the RMB appreciation flows have now reversed. (Reuters)
* Chinese reserves rose to $1.906T by the end of September, an increase of less than $100b in the third quarter, a slower pace than in the first two quarters despite the substantial trade surplus and FDI inflows, indicating that some of the hot money inflows betting on a revaluation have ebbed or reversed as worries shifted to growth and RMB appreciation stalled. Yet valuation losses on Euro and pound holdings suggest reserve accumulation might have been higher (perhaps $150b - RGE estimate)
* Glenn Maguire: $10 billion to $20 billion of funds may now be leaving each month
* Reserves increased $377b from January to September but the pace of accumulation began slowing in May. China's sovereign wealth fund. monthly increase in H108 exceeded the already fast pace of accumulation in H107 (~40b/month), and is much higher than H207 ($32b/m) or 2006 (~$20b/m)
* Setser: Total Chinese official foreign asset growth – counting central bank reserves, the CIC, and the state banks – in 2007 was over two times the global increase in reserves in 2000 or 2001.
* Wang: residual approach to measuring ‘hot money’ (ie subtracting out FDI/trade balance) may over state short-term capital inflows by excluding remittances and income, for which high-frequency data are not available
* Pettis: RMB appreciation caused massive hot money inflows (exacerbated by the sub-prime crisis). As much as $40 billion of Q1 reserves were unexplained by trade surplus, FDI, valuation and interest gains. Banks may have been asked to hold recent increase in RRR in dollars ($40b for each 50bp hike), meaning domestic monetary impact of reserve growth is even higher than headline indicates..
* Explanations for reserve growth earlier this year include repatriation of fx that flowed to HK in 2007 or onshore dollar lending (Green), Anderson: Falling dollar increased the value of Chinese reserves in dollar terms (Anderson) Onshore fx lending (Zhao)

[ramana]

Shyamd, A request. Please x-post PRC economy related posts in the new thread I started in the Strat forum.

[shyamd]

No problem.


Is The Chinese Economy Bottoming Out?

* World Bank: China’s real economy has been hit hard by the global crisis, but has been holding up with domestic demand less vulnerable than global demand. global crisis is bound to contain China’s growth in 2009 (est 6.5%) and 2010, especially via weaker exports and market-based investment
* There are signs that the pace of Chinese economic deterioration has slowed - lending growth has accelerated, PMI show that manufacturing sector output is not deteriorating as much as in November (though it remains in contraction) credit extension is at record levels (though it may not be being deployed in stimulus projects yet) and government investment is up 40% y/y, boosting overall investment to near 2008 levels. However, this increased activity may only partly offset the weakness of the export sector, corporate capital expenditure and residential investment even as consumption is decelerating (15% in Jan/Feb 2009)
* OECD Leading indicators continue to show sharp deterioration
* Bradsher: The rebound in investment (up 27% in Jan/Feb) and deepening slump in exports (down 26% in Feb and 17.5% in January) sketched a picture of a country that is spending huge sums at home in an attempt to offset steadily weakening demand overseas — with no conclusive signal yet on whether the stimulus program will succeed.
* Danske: It looks like China's stimulus measures are working. Domestic demand is improving given real income gains but because of the weak global environment there remains considerable downside risk for the Chinese economy.
* There is a risk that the China could experience a W- shaped growth path with the combination of the end of steep destocking and Chinese fiscal stimulus leading to a temporary recovery but with the absence of strong domestic and external demand putting off sustained growth (Ziemba)
* Wen: government measures “have shown preliminary results” suggesting that retail sales grew 18% in January (albeit a slower pace than in the recent past) and power output and consumption increased from the middle of February (Bloomberg)
* Data from January and February are distorted by the Chinese Lunar new year holiday
* Pettis: the sudden surge in lending in December put back on balance sheet loans that were taken off in 2007 and 2008. Chinese capex reliance on retained earnings will limit investment pickup - suggests China will not avoid the hard adjustment it faces ahead
* Citi: Further downside risks are possible if the macro condition worsens, but China's valuations seem to be bottoming from an ROE perspective, current 2009 P/B of 2.1x for 18% 2009 ROE looks more appealing than a 2008 P/B of 5.0x for 21% ROE in January 2008.
* Setser: available trade data still seems negative for China. eg Korea’s exports to China have been falling faster than Korea’s overall exports, suggesting China's export contraction continued
* Dollar: Industrial growth declined sharply, but primary sectors grew at 7.3% in Q4 and services at 8.0%, perhaps indicating the beginning of rebalancing in which service sectors become the growth leaders. the Chinese consumer is a bright spot in an otherwise gloomy global picture and the right govt policies (support of heath, education etc) could cushion consumption
* Although exports make up less than 20% of GDP, a considerable amount of investment is targeted towards this sector, meaning that the still weak external demand might limit Chinese recovery furthermore, manufacturing deterioration may have stopped but the sector continues to contract and with lack of profits to finance investment and weak outlook for external and domestic demand in many sectors, investment may be limited
* Loss of jobs, reduction in incomes will depress consumption in urban areas.
* MS: lending rates may not be sustainable given that most is bill financing