Re: PRC Economy - New Reflections : April 20 2015
Posted: 30 Sep 2016 02:10
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this is the secret to CPEC. donkeys!!!!
That would be a welcoming change to the world order.Austin wrote:I am not sure if Japanese Yen and UK Pound even deserves to be inside SDR basket by any yard stick , probably 20 years back yes but today they dont deserve to be in SDR basket.
May be in next 10 years Rupee can make to SDR basket.
Please read the 2nd statement quoted above. It is about a period of previous decade, i.e. 1st decade of 21st century. We are in the 2nd decade of 21st century. Further PRC's working age population started declining either 1 year ago or 2 years ago based on different calculations. So whether that is a valid reason for price increase in Residential Property it not so much clear cut.In 42 of the cities surveyed by the NBS – those with industrial overcapacity and excessive property inventories – price increases amounted to less than 5%, with eight cities recording falling or stagnant property prices.
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A study by China Securities International showed that, in 2000-2010, cities in eastern China received 82.4% of total migrant inflows. By 2010, the migrant population in Beijing, Shanghai, and Tianjin had more than doubled, to 34.5%, 37.9%, and 21%, respectively.
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According to a study by China International Capital Corp, the urban built-up area in Shanghai is only 16%, compared to 44% in Tokyo and 60% in New York City. Within that area, only 36% is used for residential functions in Shanghai, compared to 60% in Tokyo and 44% in New York City.
In other words, the available residential land for sale in Shanghai is considerably smaller than that available in New York City or even Tokyo, which is a major reason for surging property prices in these cities.
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Please read the last statement again. It is assuming that PRC has the fiscal as well as monetary capacity to counteract any slowing down of the economy. Fiscally PRC's revenues are pinned by the revenues of its SoE, it's export sector and its growing New economy. The first sector looks wobbly. The second sector is weak. Will PRC have the capacity when it's Property Prices stops increasing.At a time of slowing economic growth, some are advocating more Keynesian macro-stabilization measures, much like those China used to sustain growth after the global economic crisis of 2008. But in many areas, particularly in the northeast, central, and western parts of the country, the slowdown cannot be resolved through more stimulus.
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The recent increase in demand for housing may reflect households’ desire to hedge their high savings against inflation or, more fundamentally, the sense that they must secure housing urgently, given limited supply. Either way, they now seem convinced that investment in housing is a relatively safe bet.
If that is the case, the risk of a property bubble in China is probably being overstated. But that does not mean that all is well in China’s property sector. If the government ignores market price signals, mismatches between supply and demand could build up, undermining growth in dynamic regions, while leaving low-growth regions weighed down by excess capacity and bad assets.
The good news is that there is still considerable room for policy maneuver.
Do you agree? I don't. Its wishful thinking.Christopher Sidor wrote:It is assuming that PRC has the fiscal as well as monetary capacity to counteract any slowing down of the economy. Fiscally PRC's revenues are pinned by the revenues of its SoE, it's export sector and its growing New economy. The first sector looks wobbly. The second sector is weak. Will PRC have the capacity when it's Property Prices stops increasing.
Now for some figures as quoted in the articleThis is evidence that China may be in for a long period of Japan-like stagnation rather than a single event triggering a crisis - what some economists call a "Lehman moment" after the collapse of Lehman Brothers in 2008, which touched off the global financial crisis.
"They are kicking the can down the road for stability in the short term," said Roland Mieth, Singapore-based emerging markets portfolio manager for U.S. fund manager PIMCO. "China can maintain status quo for many years to come, like Japan did with their leverage, without triggering a financial crisis."
In China no one depends on IP protection and patents are only fig leafs even internally. Chinese typically take any ideas globally they find worthwhile and work on commercializing on a massive scale using their highly trained and productive manpower, integrated manufacturing systems and logistics dominance and large internal markets to showcase innovations and then taking it global becomes much easier... its no longer good enough to generate ideas in a lab or even patent or show pilots, as an inventor you need to be ready to go the whole hog.asgkhan wrote:https://www.theguardian.com/world/2016/ ... nese-visit
You mean like some sort of international law? Most countries have some sort of IP law already and they're all free to enforce them on Chinese imports, which many of them do.Hitesh wrote:There should be a law that if China copies the design China is not allowed to sell the stuff abroad. There should be massive or triple tariffs on any goods that violate IP rights coming into any country.
The billionaire chairman of China’s LeEco has admitted his technology empire is running out of cash to sustain a headlong rush into businesses from electric cars to smartphones.
With looming debt crisis, How long PRC can manage high growth by Govt induced Infrastructure spending?Coupled with worries about China’s economy and its rapidly rising debt, that has stoked capital outflows and weighed on the yuan, analysts say.
China removed its high-profile, reformist finance minister from the post in a shuffle that comes as President Xi Jinping positions trusted allies in key roles and Beijing prioritizes short-term growth over major overhauls.
The shuffle put more senior government posts in the hands of Xi loyalists ahead of a twice-a-decade Communist Party Congress next fall that will shape policy for years to come.
Mr. Xi’s supporters say he still faces pockets of political resistance and needs to consolidate power further to enact meaningful economic restructuring in his second five-year term.
Within China’s political, academic and business elite, however, there are concerns that Mr. Xi is increasingly focused on hitting growth targets and suppressing dissent rather than restructuring the economy and tackling other urgent problems. The latest moves on Monday include a rare intervention in the politics of Hong Kong and a plan to boost coal power despite a pledge to battle China’s severe air pollution.
Lou Jiwei, the ousted finance minister, was an outspoken Communist Party veteran picked for the job for his competence rather than a close relationship with Mr. Xi in the early days of the Xi administration.
Shortly before his appointment in the spring of 2013, according to people with knowledge of the matter, Mr. Lou expressed a wish to Premier Li Keqiang to allow him to serve his full five-year term. Mr. Lou’s pitch, these people said, was that he had a plan to overhaul the country’s creaky fiscal system and tax code and needed time to carry it out. The chat with Mr. Li helped launch him as a major voice for market-oriented changes in China.
On Monday, with nearly two more years to go before his term ends, the 65-year-old Mr. Lou—weakened in part by his loss of Mr. Li’s backing and at odds with senior officials bent on sparing no effort to prop up the economy—was succeeded by a relatively low-profile bureaucrat.
“Lou Jiwei’s abrupt ouster sends a strong signal that any prospects of even limited economic reforms are falling prey to President Xi’s focus on consolidating his power,” said Eswar Prasad, a Cornell University professor and former China head of the International Monetary Fund.
It's always tough to get timing right, if you can pull it off you could make a lot of money. The important thing is that it cannot continue forever, so we'll see how the Chinese government will deal with it. Judging by current pattern, they seem to be taking a 2 steps forward 1 step back approach, causing intermittent mini-crisis with some months of stabilization following it.Vinu wrote:Foreign Reserves Plunged.
http://fortune.com/2016/11/07/china-for ... reciation/
With looming debt crisis, How long PRC can manage high growth by Govt induced Infrastructure spending?Coupled with worries about China’s economy and its rapidly rising debt, that has stoked capital outflows and weighed on the yuan, analysts say.
As I understand, the municipalities earn revenue from the sale of land. It is a one-time cash flow. But that shouldn't matter as there is always another parcel of land to be sold. In a situation where the local party officials mandate sale of public lands and additionally also commandeer banks to lend money to real estate promoters and easy credit to speculator investors to buy property closing the loop in this manner is the public finance equivalent of perpetual motion machines.Suraj wrote:There's no property tax in PRC ??? For real ?? How on earth does the government accrue regular revenues from real estate then ?
True. And *probably* this is one of the reasons why Chinese local govts are very aggressive on removing old settlements and sale the land to new developers.nandakumar wrote:As I understand, the municipalities earn revenue from the sale of land. It is a one-time cash flow. But that shouldn't matter as there is always another parcel of land to be sold. In a situation where the local party officials mandate sale of public lands and additionally also commandeer banks to lend money to real estate promoters and easy credit to speculator investors to buy property closing the loop in this manner is the public finance equivalent of perpetual motion machines.Suraj wrote:There's no property tax in PRC ??? For real ?? How on earth does the government accrue regular revenues from real estate then ?
No, the PRC collects "rent" from the people holding the land. They do not consider landowners rights in China. However they do recognize long term leases such as 50 or 99 year leases.Suraj wrote:There's no property tax in PRC ??? For real ?? How on earth does the government accrue regular revenues from real estate then ?
I think this is a superior system than outright sale of land. People who own the land have done nothing to create it so why should they "own" it at best they can get right to use it by paying rentHitesh wrote:No, the PRC collects "rent" from the people holding the land. They do not consider landowners rights in China. However they do recognize long term leases such as 50 or 99 year leases.Suraj wrote:There's no property tax in PRC ??? For real ?? How on earth does the government accrue regular revenues from real estate then ?
Gautamhttp://thediplomat.com/2016/11/evaluati ... s-economy/
Evaluating China's Economy
Can China keep up its growth and deliver on its “harmony” pact with the Chinese people?
By Fatima-Zohra Er-Rafia
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One of the factors analysts are keen to understand is the Chinese employment market. From 1980 until 2014, China’s long-term average unemployment rate was around 3.86 percent. It reached a low of 1.8 percent in 1985 and a high of 4.9 percent (both in 1980 and 1991, during global recessions). The projections for 2015-2017 are showing an unprecedented high unemployment rate.
At first, the unemployment rate seems relatively constant, but we know that China’s official statistics are just that: Official. The real numbers are probably both higher and more volatile than what it is presented.
The ‘traditional’ equation used to calculate the unemployment rate has its limitations when applied China. Both the informal economy, as well as the vestiges of communism and its social safety nets, cloud the economic landscape.
The problem for China is that while maintaining an upward trend in wealth, salaries are expected to rise as well. This is where the CCP’s headache grows. Moreover, there is the famous “harmony” pact between the CCP and the Chinese that must be kept in mind: As long as the state continues to hire millions of young people in its SOEs, as well as allowing the emergence of a middle class that is getting wealthier over time, the Chinese agree to accept limitations on their freedoms. With millions of young people joining the labor market annually, and salaries increasing, the situation is unsustainable in the long term, especially with the burden of the informal economy getting out of hand.
Moreover, the foreign companies that came to China for its cheap labor (around 20,000 companies per year since 1979) have started to leave for neighboring countries, where the lower costs are becoming more attractive each day. For example, during the period from 2010-2013, Nike production shares in China dropped from 40 percent to 30 percent while Vietnam’s shares increased from 13 percent to 42 percent. What is more worrying for China’s economy is that even some Chinese companies have started outsourcing part of their production to other countries, including Vietnam and Bangladesh, which is unprecedented.
With a labor force of around 804 million people of working age (between 15-64 years old), China cannot afford a domestic crisis because of outsourcing. That’s especially true at a time when external factors, such as the worldwide economic slowdown, oscillating stock markets, tumbling oil prices, and intense competition from other countries, including India, are complicating matters for the CCP.
That said, China continues to export its labor force overcapacity around the world, especially to Africa, through various projects. China has extended more loans to African countries than the usual Western organizations such as the World Bank; Beijing then signs infrastructure contracts that allow Chinese companies to work onsite, bringing with them the labor force and machinery. This is a rising trend in Africa, although a few African countries (e.g. Morocco) now ask for the participation of their local labor force, in order to stimulate their own economies. The infrastructure projects of the new Silk Road in Eurasia, Oceania, and Africa help as well, and China has kept on pushing them, and developing them at a good pace.
China’s GDP growth trend follows a reverse trend with regards to China’s unemployment rate — as unemployment rises, GDP growth falls. In general, China has followed the same pattern as the world’s GDP growth, albeit at much higher rates. While the world’s average growth maxed out at 4.6 percent in 1983, China’s growth was then over three times higher, at 15.2 percent. China’s entry into the World Trade Organization in 2001 had a positive impact on the rise of the GDP, while the worldwide financial crisis in 2007-08 had a negative one.Projected GDP growth for 2016 and 2017 shows a decline. Despite this slowdown, China’s economy is in relatively good shape compared to many other Western countries.
However, the question of the comparison reaches its limits when China enters the equation: While Western countries are capitalist, China is not (for now). China abides by a different set of rules, and its domestic functioning is different as well: more complex, tangled, and less clear for Westerners.
This said, China’s economic slowdown is due to both external factors such as the worldwide economic slowdown (leaving China’s trading partners in bad shape) and to internal factors such as the inefficient allocation of capital by state-owned Banks, industrial overcapacity and well-known ticking debt-bomb that nobody can evaluate accurately. This year, the Institute of International Finance estimated that the total payload debt-to-GDP ratio is 295 percent. With the gloomy global economic climate, China’s debt problem is not reassuring — mostly because nobody knows the real extent of it. The uncertainty leads to speculations of all sorts, ranging from descriptions of China’s debt as “wet powder” (i.e., a situation that will be defused by the government as usual) by some optimistic investors to predictions of an unprecedented “global financial cataclysm” by other, more pessimistic hedge fund managers.
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Beijing’s aim is reaching the perfect balance to keep its side of the “harmony” pact. In order to do so, the CCP, with Xi Jinping at the helm, must pull different strings like a master puppeteer. First, the government should have a clear and well-thought-out vision about China’s economic future. They can do this by focusing on future-oriented industries — for example, investing in renewable and green energy to avoid an environmental and social catastrophe whose consequences may be devastating on a very large scale. China must avoid short-term strategies and work on long-term ones that will strengthen China’s economy over time, instead of patching it up whenever a crisis arises.
Second, China must take steps abroad as well. This would include exporting its labor force overcapacity to work on the many infrastructure projects under the umbrella of the new “One Belt, One Road” initiative sweeping through Central Asia, as well as projects won through international bidding, mainly in Africa. This would increase opportunities in the Chinese employment market. Meanwhile, attracting Foreign Direct Investment (FDI) must stay a priority, not only for coastal China, but more importantly for mainland China’s poorer western provinces. Typically, FDI come from businesses. As a bonus, this time, new groups (such as cooperatives or fair trade organizations) may enter the FDI picture to make investment sustainable and keep it in line with communism’s fundamental principle of economic equality. This will work to China’s benefit in both the economic and social spheres and will lift the economy of the poor provinces out of their current downturn.
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China's increasingly aggressive measures to clampdown on capital outflows will not have gone unnoticed by U.S. hedge-fund manager Kyle Bass.
Bass is famed for his successful bet against the U.S. housing market in the global financial crisis, so markets monitor his comments closely. He has long argued the yuan, or renminbi (RMB), is set to fall 30 percent against the dollar and he sees capital outflows as backing his view.
"China's capital outflows are worse than they appear, which is why the government has allowed the RMB to depreciate over the last two months," Bass told Reuters.
"We believe this pressure will continue with the prospect for higher interest rates in the U.S."
China is trying to tighten its grip on capital outflows after a slide in the yuan this year of almost 6 percent, which has pushed the currency down to levels last seen more than eight years ago and revived memories of a wave of capital flight late last year and in January.
China's Vice Finance Minister Zhu Guangyao was quoted on Saturday as saying policymakers were watching capital outflows closely.
Bank of China, the country's biggest currency trading bank, has begun to sharply limit corporate customers' ability to purchase foreign exchange in Shanghai, sources said on Friday. Customers who insist on buying foreign currency are being restricted to $1 million, compared with no caps previously.
Among other moves, the State Administration of Foreign Exchange (SAFE) is vetting transfers abroad of $5 million or more, down from $50 million previously, and is stepping up scrutiny of major outbound deals, sources said.
China today, like the United States in the 1940s, is running trade surpluses but also seeking to encourage wider international use of its currency. For other countries to get their hands on renminbi, China will therefore have to lend and invest abroad. That this lending and investment is something we are now beginning to see is an indication that Chinese officials know what’s up.
Подробнее на ТАСС:BEIJING, December 7th. / Corr. TASS Aleksey Selishchev /. The volume of China's foreign exchange reserves shrinking the fifth consecutive month in November of this year it amounted to $ 3.05 trillion from $ 3.121 trillion in October. This is stated in the report released by the People's Bank of China (central bank). Thus, foreign exchange reserves have decreased over the month by 2.3% and reached the lowest level since 2011.
The paper reported that the volume of gold reserves in China has decreased by 7.37% last month and amounted to $ 69.785 billion in monetary terms.
Over the past ten years, China's foreign exchange reserves soared thanks to the export of Chinese goods. Since 2014 the volume of reserves began to decline due to reduced demand for Chinese goods abroad, as well as the slowdown of the economy and changes in the international financial market.
In 2014, the Chinese city of Haimen on the mouth of the Yangtze River set out to build a large apartment complex and turned to Bank of Nanjing Co. for about $29 million in financing.
The bank was happy to oblige but it didn’t call the money a loan, according to people familiar with the matter. It was added to Bank of Nanjing’s balance sheet as an “investment receivable,” a loosely regulated category of assets that allows bank officials to set aside little or nothing for potential losses.
Bank officials aren’t shy about the accounting sleight of hand, which is rampant across China. The bank had about $39 billion in investment receivables in the third quarter, nearly as big as its loan portfolio, and profits have climbed by more than 20% a year.
As of June, 32 publicly traded Chinese banks had a total of $2 trillion in investment receivables as of June, up from $334 billion at the end of 2011, according to a tally by The Wall Street Journal of the latest available information from data provider Wind Information Co.
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The epidemic of investment receivables has created a parallel buildup of debt in addition to China’s rising official debt levels, now 2½ times gross domestic product. “The rapid growth in banks’ off-balance-sheet and investment activities, in essence, means hidden credit risks and could threaten financial safety,” said Shang Fulin, China’s top banking regulator, in an unusually blunt speech in September.
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Last year, nearly 90% of the loan-like investments created by Bank of Luoyang Co. and shadow lenders were used to finance real-estate developments, according to a June report by China Chengxin International Credit Rating Co., one of China’s top ratings firms.
Most of the projects were concentrated in Zhengzhou, a city that symbolizes China’s housing glut. Bank officials didn’t respond to requests for comment.
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The lender isn’t worried about its funding for the apartment complex in Haimen or the industrial park in Nanjing, according to people close to the bank. The reason: Whether the projects make economic sense or not, bank officials expect to be repaid because of the projects’ government ties.
“All banks are trying to move [loans] off balance sheets,” said an official at Bank of Nanjing, nodding to a common belief in China that Beijing always will stand behind the country’s banks. “The only risk we have is sovereign risk.”