Bharat Rakshak

China leapfrogged over Germany to become the world's third-largest economy in 2007, sooner than predicted, underscoring how quickly the concentration of global economic power has shifted.

Although earlier estimates had put growth of China's gross domestic product that year at 11.9 percent, revised figures released Wednesday by the government statistics bureau show that its economy actually expanded by 13 percent to $3.38 trillion. That compares with Germany's 2007 GDP of $3.32 trillion.

Chinese exports did not decline as much the market expected in December. Such a statement would have seemed preposterous only recently. But many analysts have come to be nearly as gloomy on China as they are about other economies. Still, the country's trade surplus continued to balloon, keeping pressure on China to take action to narrow its imbalances with Western countries.

Top Chinese oil firm China National Peroleum Corp (CNPC) signed a deal on Wednesday to develop Iran's north Azadegan oilfield, an Iranian Oil Ministry official and media said.

By MICHAEL CORKERY

Some home builders already struggling in Florida's dismal housing market are facing another headache: The Chinese-made drywall they used is causing unpleasant odors and possibly leading to electric problems in dozens of homes constructed during the housing boom.
[chinese drywall] Getty Images

Homes under construction last year in Miami. In some developments in south Florida, odors from Chinese-made drywall are drawing complaints and health concerns from homeowners.

A handful of builders and environmental consultants are investigating whether the drywall, a wide flat board used to create interior walls, is emitting sulfur-based gases that may be corroding air-conditioner coils, computer wiring and metal picture frames.

Some homeowners are concerned about possible respiratory problems, but the Florida Department of Health says tests show that the levels of emissions from the drywall pose no "immediate health threat." The affected homeowners also worry that the drywall problems will reduce their already decimated property values and hamper their ability to resell, even when the market recovers.

"My biggest fear is we'll be stuck with a house we can't sell," said Marty Smith, whose air conditioner in his home near Tampa has had repeated problems. His builder, Lennar Corp., recently tested the air and drywall in his house and expects the results in a few weeks. Lennar's previous tests in other developments have found no health threats.

Although officials are still investigating the drywall from China, the complaints about drywall follow a rash of safety problems with other Chinese exports, ranging from toys to pet food.

Lennar, the nation's second-largest builder by volume, has tested air quality in at least 50 houses and has relocated several homeowners in order to rip out and replace the drywall, a costly process. It is trying to find less-intrusive ways to fix the problem. Lennar is continuing tests in a dozen of its Florida developments and has shared results with the state health department.

"Our first concern is our homeowners," said Darin McMurray, the builder's southwest Florida division president. "Lennar will continue to stand by our homes and work closely with homeowners to resolve their concerns."

Typically, builders use domestically produced drywall, which is made mainly from the mineral gypsum. But in 2006 -- amid the housing boom and the scramble for construction material along the Gulf Coast for reconstruction after Hurricane Katrina -- suppliers began importing drywall from China.

Much of the problematic drywall, which is also known as wallboard or plasterboard, was manufactured in China. One manufacturer that is dealing with the fallout is Knauf Plasterboard, Tianjin Co., a subsidiary of the German construction-material company Knauf International GmbH.

In a statement, Knauf Tianjin said it hired experts in 2006 to investigate complaints about an odor and found "no health concerns related to the odor or any emissions in the residences."

The drywall problems, which appear to be confined to south Florida, are sparking dozens of homeowner complaints at a time when home builders can little afford the expense and negative publicity.

"The building industry is in a situation where it doesn't need one more issue of negativity out there," said Gary Aubuchon, president of Aubuchon Homes, a small Cape Coral, Fla., builder that recently relocated one homeowner while the company tests his house's air and drywall, some of which was made in China.

Knauf Tianjin said the drywall is made of naturally mined gypsum. After investigating drywall odors, the company said it switched mines and installed a monitoring device to detect gases.

In some Florida developments, the drywall issue emerged after months of failures in heating and cooling systems.

Mr. Smith said his air-conditioning unit has had multiple problems since he moved into his Lennar townhouse in March 2007. He said repair workers were perplexed by the frequency of the units' failures.

Tests done at other developments by Environ, an environmental consulting firm hired by Lennar, found that in some cases they drywall was emitting sulfur-based gases, which can be corrosive to electrical equipment, such as copper air-conditioning coils.

Florida health officials say they still are investigating whether the Chinese drywall is causing the odors and other problems.

"We have to nail down whether it's a causal or coincidental association," said David Krause, a toxicologist in the Florida Health Department.

Write to Michael Corkery at [email protected]

Raghav K wrote:Roubini Sees China Recession Despite ‘Massaged’ GDP

http://www.bloomberg.com/apps/news?pid= ... mmms3xufOc

By Michael Patterson

Jan. 22 (Bloomberg) -- China is in a recession despite government statistics today showing the world’s third-largest economy expanded in the fourth quarter from a year earlier, according to Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

Unlike the U.S. and western Europe, China’s figures on gross domestic product measure growth from the same quarter a year ago rather than the previous three months. The year-on-year figures fail to capture the economy’s slowdown at the end of 2008 because growth was so high in the preceding quarters, Roubini wrote.

Raghav K wrote:Unlike the U.S. and western Europe, China’s figures on gross domestic product measure growth from the same quarter a year ago rather than the previous three months. The year-on-year figures fail to capture the economy’s slowdown at the end of 2008 because growth was so high in the preceding quarters, Roubini wrote.

Singha wrote: its gone all quiet lately on the "showing off pix part"

http://www.thenational.ae/article/20080 ... 90272/1042

This section of the mall has four floors, and two levels above Xia’s shop is a loud arcade, Dino’s World, that blares techno music throughout the empty atrium. There’s also a huge Teletubbies playroom for kids, and a bridge leading off to the indoor section of Amazing World. A tour of the section’s 600 retail storefronts yields glimpses of what the South China Mall might have been; in some parts, there are even signs for three or four stores in a row, most of them south Chinese or Hong Kong chains with eccentric English names. You pass Kentex, Marino Orlandi, and Ebose, all empty. US Eell, Wen Chun, IP Zone, Weekend Workshop – empty. Balenno, Smitih’s [sic], Greenwood – empty. Carslan – gated. Henan Medicine – locked, full of pharmaceutical products, with an eviction notice for “breach of contract” . Triumph International – empty but with an angry notice from the mall: “According to records, the entity closed its business without first acquiring official permission from our company, thus constituting a breach of contract and directly affecting the image of the shopping center.”

Singha wrote:if you recall, people were all over the place showing off the giant new malls
built in last few years. here is the fate of the biggest - the south china mall in dongguan with space for 1500 stores and many amusements/replicas.

its gone all quiet lately on the "showing off pix part"

http://www.thenational.ae/article/20080 ... 90272/1042

excerpt:-

On a recent Friday afternoon, an amusement-park employee, slouched in a forsaken ticket booth, tried to kill time by making origami. Another worker slept, with perfect impunity, on a table. In front of the haunted house attraction, one attendant was doing hand-stands while two others looked blankly on.

There was nothing else to do, because the South China Mall, which opened with great fanfare in 2005, is not just the world’s largest. With fewer than a dozen stores scattered through a space designed to house 1,500, it is also the world’s emptiest – a dusty, decrepit complex of buildings marked by peeling paint, dead light bulbs, and dismembered mannequins.
..................
Rent for the shop, located in a theoretically high-traffic spot next to an escalator, was originally 28,000 yuan (Dh15,000) a month, but Xia says it’s never been paid. The company invested 230,000 yuan in renovations, she said, and since they’re one of only four small retailers left, the mall gives them free rent. On Friday, Xia passed the time chatting with a friend who’d dropped by with her baby. On Saturday, my translator and I found Xia alone, playing cards with herself. At her suggestion, we sat down and played three rounds of a game called Catch the Landlord.

..................
About 500 new malls have been built in China over the last five years, estimates Kevin Jiang, a researcher at the Mall China Information Center. All of them are waiting for the arrival of this coming mega-middle class, as are the rest of China’s countless “visionary” development projects. These include a from-scratch “eco-city” for 500,000 residents north of Shanghai, a compound of a hundred luxury villas in the Ordos desert of Inner Mongolia and a thousand-acre theme-park replica of the old imperial Summer Palace, which was destroyed by British and French troops in the nineteenth century.

The cowboy developers of China, like the bored employees of the South China Mall, are still waiting. Some day – and they hope it’s soon – this new middle class will finally show up to fill the empty spaces. The malls will overflow, the stuff will sell, and the country will take its rightful place among the world’s great consumer powers. But until then, Xia Qunyan remains sitting on a stool in front of her shop, shuffling her playing cards and wondering how to pass the time.

I have experianced this many places. Huge mall's with hundreds of shops, without customers. All the customers are in the shopping areas with small shops that sell cheap stuff. The markets are buzzing, but the exensive malls are empty.The same goes to huge reality developments. Something simmilar to the stuff in Greater Noida, where perhaps 50-70% of the appartments are built for speculation purposes. i

vsudhir wrote:

I have experianced this many places. Huge mall's with hundreds of shops, without customers. All the customers are in the shopping areas with small shops that sell cheap stuff. The markets are buzzing, but the exensive malls are empty.The same goes to huge reality developments. Something simmilar to the stuff in Greater Noida, where perhaps 50-70% of the appartments are built for speculation purposes. i

And who built these expensive malls, office space and villas? And how were these financed?

Short answer:

By the state owned banks in PRC that have a monopoly on the hard earned savings of the aam chinavasi. The NPAs in these banks must be monstrous. PRC has leaned on several 'independent' western auditing firms to not make negative outlook on the NPA scene in PRC and all relented.

The SoEs and SoBs (thats state owned banks, pun unintended) continue to be a huge drain and PRC's recently announced grand stimulus too shall be administed thru them (our NREGS isn;t the only boondoggle out there!).

Singha wrote:BBC

China birth defects 'up sharply'
Beijing power plant - photo October 2007
The report suggests China's rapid development has a human cost

A senior family planning official in China has noted an alarming rise in the number of babies with birth defects, a Chinese media report says.

Jiang Fan, from China's National Population and Family Planning Commission, said environmental pollution was the cause of the problem.

He said a child was born with physical defects every 30 seconds because of the degrading environment.

The report said China's coal-rich Shanxi province had the highest rate.

The commission blamed emissions from the region's large chemical industry for the problems there.

'Prevention plan'

Correspondents say the report suggests there is a human cost to China's rapid economic development.

Researchers also blamed exposure to nitrogen dioxide, carbon monoxide and particulates for the increase.

"The number of newborns with birth defects is constantly increasing in both urban and rural areas," China Daily newspaper quoted Ms Jiang as saying.

"The rather alarming increase has forced us to kick off a high-level prevention plan."

The commission had introduced a screening programme in the eight worst-affected provinces, Ms Jiang explained.

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.

However, a growing number of economists say the unrest proves that it is not the exchange rate but years of sweatshop wages and income inequality in China that have distorted global competition and stifled domestic demand. The influential Far Eastern Economic Review headlined its latest issue “The coming crack-up of the China Model”.

Yasheng Huang, a professor at the Massachusetts Institute of Technology, said corruption and a deeply flawed model of economic reform had led to a collapse in personal income growth and a wealth gap that could leave China looking like a Latin American economy.

Richard Duncan, a partner at Blackhorse Asset Management in Singapore, has argued that the only way to create consumers is to raise wages to a legal minimum of $5 (£3.50) a day across Asia – a “trickle up” theory.

Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns...

The Communist party is so concerned to buy off trouble that in one case, confirmed by a local government official in Foshan, armed police forced a factory owner to withdraw cash from the bank to pay his workers.

“Hundreds of workers protested outside the city government so we ordered the boss to settle the back pay and sent police armed with machine-guns to take him to the bank and deliver the money to his workforce that very night,” the official said.

On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.

On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.

About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.

In one sample week in late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.

All along the coast, angry workers besieged labour offices and government buildings after dozens of factories closed their doors without paying wages and their owners went back to Hong Kong, Taiwan or South Korea.

In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.

In northern China, television journalists were punished after they prepared a story on the occupation of a textile mill by 6,000 workers. Furious local leaders in the city of Linfen said the news item would “destroy social stability” and banned it.

At textile companies in Suzhou, historic centre of the silk trade, sales managers told of a collapse in export orders. “This time last year our monthly output to Britain and other markets was 60,000 metres of cloth. This month it’s 3,000 metres,” said one.

She said companies dared not accept orders in pounds or euros for fear of wild currency fluctuations. Trade finance has all but ceased. Some 40% of the workforce had been laid off, she added.

Nearby, in the industrial hub of Changshu, all the talk was of Singapore-listed Ferro China, which exported steel products to customers in Britain, Germany, Korea and Japan. Last October its shares were suspended.

The company is reported to have been weighed down by $800m in debts and, according to the specialist business magazine Caijing, has started a court-or-dered restructuring.

A researcher found the gates closed and under tight guard, 2,000 employees out of work and witnesses who told of company vehicles being seized by impatient creditors. Holders of Ferro China debt include Credit Suisse and Citi-group.

Even in the city regarded as the most entrepreneurial in China, Wenzhou, the business community is reeling. “We estimate that foreign companies have defaulted on payments for 20 billion yuan (£20 billion) owed to Wenzhou firms,” said Zhou Dewen, chairman of the city’s association for small and medium-sized businesses.

vsudhir wrote:x-post

Unrest in China worse than reported

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.

No doubt there will be unrest but am not sure the authorities will let these carry on or link up. In any case, too much unrest could lead to military adventurism by the PLA, I worry.

However, a growing number of economists say the unrest proves that it is not the exchange rate but years of sweatshop wages and income inequality in China that have distorted global competition and stifled domestic demand. The influential Far Eastern Economic Review headlined its latest issue “The coming crack-up of the China Model”.

Yasheng Huang, a professor at the Massachusetts Institute of Technology, said corruption and a deeply flawed model of economic reform had led to a collapse in personal income growth and a wealth gap that could leave China looking like a Latin American economy.

Richard Duncan, a partner at Blackhorse Asset Management in Singapore, has argued that the only way to create consumers is to raise wages to a legal minimum of $5 (£3.50) a day across Asia – a “trickle up” theory.

Dunno what to make of the 'trickle up theory'. It would certainly serve to make Asia less competitive than the west in manufacturing, perhaps. Like some columnists in NYT have repeatedly trumpeted, some countries are so poor that 'sweatshop jobs seem nice because there's a roof over the head' types (N Kristoff writing abt Cambodia, IIRC). We've anyway seen non-tariff barriers like 'environment standards' in addition to 'labor standards' come into play often before. Protectionism by another name and this crisis may revive those old games.

Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns...

The Communist party is so concerned to buy off trouble that in one case, confirmed by a local government official in Foshan, armed police forced a factory owner to withdraw cash from the bank to pay his workers.

“Hundreds of workers protested outside the city government so we ordered the boss to settle the back pay and sent police armed with machine-guns to take him to the bank and deliver the money to his workforce that very night,” the official said.

On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.

On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.

About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.

In one sample week in late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.

All along the coast, angry workers besieged labour offices and government buildings after dozens of factories closed their doors without paying wages and their owners went back to Hong Kong, Taiwan or South Korea.

In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.

In northern China, television journalists were punished after they prepared a story on the occupation of a textile mill by 6,000 workers. Furious local leaders in the city of Linfen said the news item would “destroy social stability” and banned it.

At textile companies in Suzhou, historic centre of the silk trade, sales managers told of a collapse in export orders. “This time last year our monthly output to Britain and other markets was 60,000 metres of cloth. This month it’s 3,000 metres,” said one.

She said companies dared not accept orders in pounds or euros for fear of wild currency fluctuations. Trade finance has all but ceased. Some 40% of the workforce had been laid off, she added.

Nearby, in the industrial hub of Changshu, all the talk was of Singapore-listed Ferro China, which exported steel products to customers in Britain, Germany, Korea and Japan. Last October its shares were suspended.

The company is reported to have been weighed down by $800m in debts and, according to the specialist business magazine Caijing, has started a court-or-dered restructuring.

A researcher found the gates closed and under tight guard, 2,000 employees out of work and witnesses who told of company vehicles being seized by impatient creditors. Holders of Ferro China debt include Credit Suisse and Citi-group.

Even in the city regarded as the most entrepreneurial in China, Wenzhou, the business community is reeling. “We estimate that foreign companies have defaulted on payments for 20 billion yuan (£20 billion) owed to Wenzhou firms,” said Zhou Dewen, chairman of the city’s association for small and medium-sized businesses.

The picture painted is stark. But PRC is a huge country and 100s of minor protests keep happening. As long as they don;t link up, no sweat up Beijing's musharraf.

Wen looks at fresh Chinese stimulus

In an FT interview, China’s premier said Beijing was considering fresh measures to boost its economy and rejected as ‘ridiculous’ suggestions that the huge pool of Chinese savings is partly to blame for the global crisis - Feb 1 2009
Beijing court to rule on political blog case

A Beijing court is to due to rule this week on whether to accept a lawsuit over the shutdown of a political blog - Feb 2 2009
Analysis: Message from Wen

China’s premier pledges ‘extraordinary’ measures to protect his populace from a downturn that has its roots in the west’s excesses - Feb 1 2009
Opinion: Tough rhetoric is no way to sway Beijing

The Obama administration needs to get China right – right now. A summit should be planned as soon as possible with Beijing’s leaders, writes Lyric Hughes Hale - Feb 1 2009
Beijing pumps $30bn into rural bank

The Chinese government has decided to inject $30bn into Agricultural Bank of China, the premier Wen Jiabao said in an interview with the Financial Times - Feb 1 2009
Wen hits back in renminbi policy dispute

Wen Jiabao has mounted a vigorous defence of the country’s exchange rate policy, in Beijing’s highest level response to criticism from Barack Obama’s US administration - Jan 30 2009
Wen and Putin lecture western leaders

The leaders of China and Russia turned the tables on their western counterparts who have dictated the world’s economic agenda, lecturing them for policy failures they said had led to the global financial crisis - Jan 29 2009
Wen hails thaw between China and EU

China and the European Union put aside their differences, agreeing to hold a summit soon and co-operate more closely on overcoming the world economic downturn - Jan 30 2009
Chinese steel mills forecast price rise

A majority expect average steel prices this year to be higher – even though half expect domestic steel demand to fall - Jan 28 2009

Vipul wrote:China demands loyalty from the military as 20 million lose their jobs.

If 20 Million is the figure admitted by the Chinese, then how high would the real numbers be?

China’s World-Beating Stocks Keep BlackRock Bullish (Update3)
http://www.bloomberg.com/apps/news?pid= ... efer=china

By Chen Shiyin and Michael Patterson

Feb. 2 (Bloomberg) -- The world’s largest money managers say China’s steepest monthly stock gain in more than a year shows the fastest-growing major economy will avert a recession.

The Shanghai Composite Index, the broadest measure of shares traded on the mainland, rose to the highest in more than a month today after a weeklong Lunar New Year celebration. The gauge advanced 9.3 percent in January, the most among the world’s 10 biggest markets. The index fell 65 percent last year, the worst since at least 1996, data compiled by Bloomberg showed.

Chinese shares rebounded after the central bank lowered interest rates five times since September and the government announced a $584 billion stimulus plan. China’s economy is expected to grow near 8 percent this year even after expanding 6.8 percent in the fourth quarter, the slowest pace since December 2001, according to fund managers Richard Urwin at BlackRock Inc. and Barclays Plc’s Russ Koesterich, who together help manage more than $3 trillion in assets.

“China is going to do what it has to do to keep the economy humming,” Koesterich, the San Francisco-based head of investment strategy at Barclays Global Investors, said in a Bloomberg Television interview Jan. 26. “They can enjoy faster growth than the rest of the world in 2009 and in 2010 as well.”

The Shanghai Composite of 895 stocks gained 1.1 percent to 2,011.68, the highest since Dec. 19. It fell 0.7 percent on Jan. 23, paring its third straight weekly gain to 1.9 percent.

China Stimulus

China pressured state-owned banks to increase lending, unveiled the 4 trillion yuan ($584 billion) stimulus package, reduced export taxes and agreed to provide support for 10 industries, through tax cuts and subsidies for steel and autos.

The central bank dropped quotas limiting annual lending by banks in the fourth quarter. The government has also urged banks, most of which are state-owned, to lend more to small and medium- sized companies. Money supply and lending surged in December, according to the statistics bureau.

China is considering additional measures to help prevent a slump in economic growth, the Financial Times reported today, citing an interview with Premier Wen Jiabao.

“The Chinese have a pretty strong pro-growth agenda at the moment and they tend to do whatever it takes to stabilize the growth slowdown,” said Urwin, the head of asset allocation at BlackRock in London.

Stephen Roach, chairman of Morgan Stanley Asia Ltd., said it’s a “myth” that China will lead the world out of a recession, especially as the U.S., China’s biggest export market after the European Union, imports less.

‘Going South’

“Most of the juice in the Chinese growth results in the last five or six years have been export-led,” Roach said in a Bloomberg Television interview from Zurich. “How can an export- led economy lead the world out if its export markets are going south?”

The U.S. economy shrank the most since 1982 in the fourth quarter as consumer spending slid. U.S. Treasury Secretary Timothy Geithner said on Jan. 22 that President Barack Obama believes China is “manipulating its currency,” suggesting that the new administration may take a tougher line on China’s exchange-rate regime.

Geithner also said last month that China should focus on “more aggressive” efforts to boost its own economic growth, in concert with the coming U.S. stimulus package. The U.S. House of Representatives on Jan. 29 passed Obama’s $819 billion stimulus plan, aimed at lifting the economy out of recession through tax cuts and new spending.

‘Tall Order’

China’s gross domestic product will expand 6.3 percent this quarter from a year earlier, the median estimate of nine economists surveyed by Bloomberg News showed. Manufacturing shrank for a sixth month in January, CLSA Asia-Pacific Markets’ China Purchasing Managers’ Index showed today.

Premier Wen said on Jan. 28 it will be a “tall order” meeting the nation’s 8 percent growth target. New York University Professor Nouriel Roubini predicts economic growth in China will slow to less than 5 percent.

China stocks are likely to be “range-bound” as a bleak outlook for economic growth and corporate profits is countered by the government’s efforts to stimulate growth, Goldman Sachs Group Inc. analysts led by Thomas Deng said in a note today.

“This year will be a difficult one for stocks,” said Howard Wang, who oversees $10 billion at JF Asset Management Ltd. in Hong Kong. Government stimulus measures are unlikely to offset a contraction in private real estate investment and capital investment for exporters, Wang said.

Falling Valuation

Demand for property has sagged in China, with home prices across 70 cities dropping for the first time on record in December.

Chinese stocks are trading at less than one-third of their peak valuations in January 2008. The Shanghai Composite Index is valued at 15.6 times reported earnings, down from a six-year high of 50 times a year ago. That’s still the highest among benchmark indexes in Asia.

Gansu Yasheng Industrial (Group) Co., a holding company with agricultural investments, jumped by the 10 percent limit in Shanghai trading today after the government pledged to buy more grains and cotton to bolster the farming industry.

“China is still a market we continue to be overweight in because it has the best potential for effective policy stimulus,” said Mark Tan, who helps oversee about $3 billion in Asian equities at UOB Asset Management Ltd., a unit of Singapore’s second-largest bank.

To contact the reporters on this story: Chen Shiyin in Singapore at [email protected]; Michael Patterson in London at [email protected]

February 3, 2009
In Shift, Chinese Spend More Money Overseas
By KEITH BRADSHER

HONG KONG — More money is moving in a new direction in China — out.

Some Chinese are so eager to turn their yuan into other assets that when an online real estate brokerage organized a tour of foreclosure auctions in the United States, it received so many applications that it had to turn away nearly 400 people.

In Shanghai, cash-rich Chinese companies are buying high-yield bonds issued by distressed American companies at a time when many Western investors are steering clear of bonds even from solid companies.

All over the world, Chinese companies are sending home fewer of the billions of dollars they earn from exports, parking them in overseas bank and brokerage accounts instead.

And in Hong Kong, wealthy mainlanders are turning up at jewelry stores in growing numbers seeking diamonds, big ones.

“They’re looking for five-carat diamond rings and six-carat diamond earrings — three carats for each ear,” said Yollanda Lam, the marketing manager for the King Fook jewelry store chain here.

Together, these trends represent a potentially tectonic shift. As Chinese citizens are starting to send more money out of the country, foreign investors are pulling money out too, and slowing the pace of new investment.

“There is a recognition for sure that China is slowing down, so why keep your money there?” said Henry Lee, a Hong Kong fund manager.

Nobody knows how long this trend will last. If China’s series of economic stimulus measures are successful, then the Chinese economy could rebound later this year and start drawing back money on the same scale that it did over the last decade.

Total outflows in the fourth quarter were as much as $240 billion, but this is using the broadest possible definition and includes everything from capital flight to a slowdown in repatriation of overseas profits by Chinese companies. There is no good data assessing the motives of those moving money out of China.

Most troubling for China would be if a sizable portion of these disparate streams represented capital flight — people taking their money out because they worry about the stability of the country.

Though there are myriad reasons to move capital around, there is also cause for concern: Chinese authorities announced Monday that 20 million migrant workers had lost their jobs. If they do not find new work, these workers could form a volatile class of unemployed.

Even more crucial, Chinese individuals and companies placing more of their money outside China could affect one of the constants of international finance over the last five years: China’s central role in bankrolling American trade and budget deficits.

To prevent China’s currency, the yuan, from rising, the government has been buying up the dollars pouring into the country from trade and foreign investment, accumulating more foreign exchange reserves than Japan, Saudi Arabia and Russia put together. It has paid for the dollars by printing more yuan, and has invested at least two-thirds of the dollars in American securities, particularly Treasury securities.

If considerably fewer dollars come in, China will not have the yuan to continue buying vast amounts of Treasuries, assuming it wants to keep buying them.

Over the weekend, China’s prime minister, Wen Jiabao, said, “Whether China will continue to buy, and how much to buy, should be in accordance with China’s needs, and depend on the safety and protection of value of foreign exchange.” The statement, reported by the semi-official China News Service, was taken by some analysts as official ambivalence.

Right now, the challenge for economists is figuring out why money is leaving China — and how long the trend will last. Torrents of cash are still pouring in from trade surpluses, as imports shrank faster than exports in the final months of last year. But that inflow has been nearly balanced in recent months by an outflow of private cash from the mainland and a slowing of investment.

The quarterly pace of accumulation in China’s foreign exchange reserves plunged 74 percent over the course of last year. In the fourth quarter, it reached $40.45 billion, the lowest point since the spring of 2004.

Most economists say that actual capital flight seems the exception rather than the rule, and anecdotal evidence appears to bear that out.

Jewelry stores in Hong Kong are a barometer of trends on the mainland, because Hong Kong stores do not charge the luxury consumption taxes imposed on the mainland and have a reputation for not selling counterfeits. Daniel Chun, the manager of Gaily Jewelry here, said he had seen an influx since December, with mainland Chinese mainly buying diamonds, either set in jewelry or as loose stones.

Sales to mainlanders were 50 percent higher at Chinese New Year this year compared to a year ago, he said, but cautioned that it was impossible to determine how much of the increase represented worries about China’s future.

Yet the Hong Kong government said on Monday that retail sales of jewelry, clocks and watches fell 9.8 percent in December. While this may reflect plunging demand from local residents as Hong Kong’s economy slowed suddenly, it also indicates that demand from visitors, a big part of the market, could not have increased very quickly.

Hong Kong residents have been snapping up gold bars at a brisk pace in another sign of anxiety. Few mainlanders have been willing to take the risk of flouting the mainland’s stringent gold import regulations, said Lin Tat Yin, a manager at Chow Tai Fook, a jewelry store chain.

Another motive for money coming out of China may be simply a perception, among individuals and companies, that better bargains are available elsewhere.

Soufun.com, an online real estate brokerage, is offering a tour for at least 40 people to San Francisco, Los Angeles, Las Vegas and New York City, starting on Feb. 24, and found that demand outstripped the spaces available. “The people in the group are obviously interested in diversifying their investments, and the United States certainly is a very attractive location since real estate prices there have dropped drastically,” said Zhao Xingyu, a manager organizing the tour.

Chinese real estate industry executives say that there was considerable speculation here in recent years by overseas investors, especially overseas Chinese. Those purchases contributed to a bubble that peaked last spring and has gradually deflated since, removing the incentive for further real estate investments here.

“Certainly a lot of the Hong Kong money seems to be coming back,” said Brad W. Setser, a fellow at the Council on Foreign Relations in New York.

Beijing’s slowing accumulations of Treasuries may be partly offset by Hong Kong’s increased purchases of Treasuries, he said.

The Hong Kong dollar is pegged to the American dollar, and the Hong Kong Monetary Authority typically buys more Treasuries to offset strong inflows of money.

Another reason less money could be flowing into China is the government’s decision to halt the rise of the yuan against the dollar last July, and even to allow a short-lived decline against the dollar in late November. This removed the incentive for investors to put money into China in pursuit of currency gains.

Stephen Green, an economist in the Shanghai offices of Standard Chartered, said in a research note that yet another important contributor to slowing flows of money into China this winter may be that hard-up retailers in the West have been waiting longer to pay for Chinese goods. If that is the case, more dollars may start entering China again soon.

Two agencies have primary responsibility for regulating the movement of money in and out of China — the People’s Bank of China, which is the central bank, and the State Administration of Foreign Exchange, which is part of the central bank but enjoys considerable independence. Officials from both agencies have said conspicuously little about capital flight in recent weeks.

The central bank and the exchange administration were supposed to limit unauthorized investment, often described as “hot money.” But they had limited success over the last five years, said Victor Shih, a specialist in Chinese finance at Northwestern University.

“They never admitted there was hot money in the first place,” Mr. Shih said, and with a portion of that money now leaving, “some parts of the government don’t want to admit it.”

DETROIT (Reuters) - U.S. auto sales plunged to a 27-year low in January, a steeper-than-expected drop that took the slumping U.S. market below China's for the first time.

The two U.S. automakers struggling to restructure under a $17.4 billion government bailout led the market lower. Chrysler LLC posted a 55 percent sales plunge. Sales for General Motors Corp were down 49 percent.

The bleak results were one of the first indicators of the depth of the recession at the start of 2009, underscored by sharp declines by the industry's stronger players.

Toyota Motor Corp, the world's top automaker, was hit with a 34 percent sales decline. Sales were off almost 30 percent for Nissan Motor Co and 28 percent for Honda Motor Co.

"The truth is that the entire auto industry finds itself in the eye of this economic storm," Bob Carter, Toyota's U.S. manager for its flagship brand, told reporters.

Ford Motor Co, considered the best-positioned of the embattled U.S. automakers, posted a 40 percent drop that one analyst said would test its stated intent to make it through the downturn without an emergency infusion of government cash.

"Even with a boost from the anticipated federal stimulus plan, we see consumers taking a cautious approach to large ticket discretionary purchases," S&P equity analyst Efraim Levy said in a note for clients.

Preliminary results showed U.S. auto sales at the lowest level on an annualized basis since 1982, extending a stretch of 15 months of consecutive declines.

outofin wrote:China sends its poor people abroad pretending tourists. Tourist cities around the global are receiving busloads of Chinese, while the Indian tourists are practically non-existent.

Rishirishi wrote:

Raghav K wrote:Roubini Sees China Recession Despite ‘Massaged’ GDP

http://www.bloomberg.com/apps/news?pid= ... mmms3xufOc

By Michael Patterson

Jan. 22 (Bloomberg) -- China is in a recession despite government statistics today showing the world’s third-largest economy expanded in the fourth quarter from a year earlier, according to Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

Unlike the U.S. and western Europe, China’s figures on gross domestic product measure growth from the same quarter a year ago rather than the previous three months. The year-on-year figures fail to capture the economy’s slowdown at the end of 2008 because growth was so high in the preceding quarters, Roubini wrote.

Even if they can sustain last years figures, it is better news then what I thought. The 3 main growth engines of the Chinease economy are, exports, investment into reality from the earings of export and speculation (bank lending), and finally governement spending. Even though the government says it will keep up the governmental spending, the exports are going to see a massive decline. (Japan experiance a decline of 35% in exports). If China manages this, without negative growth, it will be a great achievement. But my personal guess is a total loss of 10-12% of the GDP, before the resession ends.

Singha wrote:dont worry, the hordes of violent and starving workers now let loose will
soon restore "order" upon "disorder"