China Economy - News & Updates

[Pk_Thunder]

China unveils new measures to boost trade, consumption​

BEIJING: China published a series of measures Thursday to boost exports and consumption, marking the latest attempt to tackle the worst economic outlook in a generation.

A hike in tax incentives to exporters of machinery and electronic products were among measures unveiled after a meeting Wednesday of the State Council, or
Cabinet, chaired by Premier Wen Jiabao, the China Daily said.

Participants in the meeting also decided to expand the list of product categories where foreign investment in processing trade is permitted, according to the paper, which provided no further details.

As part of the same package, the government will increase subsidies for farmers buying household appliances in a bid to tap the potential of the 800 million consumers living in the countryside, Xinhua news agency reported.

Other measures include money spent on boosting retail outlets in urban and rural areas, according to Xinhua.

Evidence has been piling up that China is headed for harder times as its foreign trade sector takes a direct hit from the global crisis.

The nation's exports dropped 2.2 percent in November from a year earlier, the first decline in more than seven years.

The Chinese economy, on the verge of officially becoming the world's third-largest, is likely to see growth slow to 7.5 percent in 2009, the worst performance since 1990, according to the World Bank.

 

[nitesh]

good move, congratulations move in the right direction:

China makes yuan an international currency-India Business-Business-The Times of India

China makes yuan an international currency
26 Dec 2008, 0145 hrs IST, Saibal Dasgupta, TNN


BEIJING: Communist China on Thursday celebrated Christmas by announcing a high-end capitalistic dream: Making the Yuan an international currency.

The government wants to implement some aspects of this dream in a limited fashion. It has allowed businesses in certain regions of China to make payment settlements in Yuan instead of using a reference currency like the US dollar, with countries like Singapore.

Businesses located in the Yunnan province and in the Guangxi Zhuang autonomous region will be allowed to use the Yuan to settle trade payments with "neighbouring trade partners" like member-nations of Asean, the government said. But there was no mention of India would be engaged for this purpose.

The Chinese currency will also be used as the medium for settlement between businesses in the Pearl and Yangtze River delta regions and the special administrative regions of Hong Kong and Macao, the State Council, which is the national cabinet, said.

With China holding $1.9 trillion in foreign exchange, it has been able to make the Yuan fairly acceptable in certain quarters. But Beijing has been facing stinging criticism from western nations for controlling the value of the Yuan instead allowing it to behave in tune with market forces. The move would help Chinese exporters to overcome some of the risks associated with foreign exchange when they are able to make settlements in the local currency, experts said. The government may have been prompted by speculation that the US dollar might lose a lot of its value because of the ailing American economy.

The move might even considered the important role played by the Hong Kong dollar in global monetary system. Experts had earlier suggested that the Hong Kong dollar will come under pressure owing to the weakening of its economy due to global crisis.

 

[Neo]

China encourages mainland companies to invest in Taiwan ​

Friday, December 26, 2008

SHANGHAI: China on Thursday published guidelines for mainland companies to invest in Taiwan, in a bid to further strengthen ties with the long-standing rival that it considers part of its territory.

A joint statement by China’s National Development and Reform Commission and the Taiwan Affairs Office publicly outlined three criteria for companies registered on the mainland who wish to invest in Taiwan.

They said such companies would need approval for Taiwan-bound investment from the Chinese economic planning agency with adequate proof of financing, according to a statement posted on the government’s website late on Wednesday. They must also abide by laws and not harm China’s aim of bringing about unification with Taiwan, it said.

Chinese companies still cannot invest directly in the island without approval from Taiwan’s government, but the release of the guidelines pushes forward the issue of tightening ties, which Beijing has been pursuing.China still regards Taiwan as a renegade province that must eventually come back into Beijing’s political fold, by force if necessary. But relations have improved rapidly since the election in March of Taiwan President Ma Ying-jeou, who has promised closer ties.

 

[Neo]

China’s port cargo traffic drops in Nov amid global slowdown ​

Friday, December 26, 2008

BEIJING: Cargo traffic at Chinese ports in November fell 0.5 per cent from a year ago, state media said on Thursday, in yet a sign the global crisis is causing the nation’s export-dependent economy to lose steam.

Cargo throughput at major Chinese ports last month was 460 million tonnes, said the China Communication News, which is run by the transport ministry. “I can’t remember a sluggish performance like this ever happening since I started working on these statistics in 2000,” an official with the ministry’s statistics department, who declined to be named, told AFP.

The drop is mainly due to flagging demand from the real estate and auto industries for iron ore and coal, which account for around 30 per cent of China’s overall port cargo traffic, the official said. Shrinking demand from the United States and Europe for Chinese exports is another key reason, the official said.

China’s exports dropped 2.2 per cent in November from a year earlier, the first decline in more than seven years. The Chinese economy, on the verge of officially becoming the world’s third-largest, is likely to see growth slow to 7.5 per cent in 2009, the worst performance since 1990, according to the World Bank.

 

[Neo]

Daewoo seals Myanmar & China gas export deal ​

Friday, December 26, 2008

BEIJING: A Myanmar gas consortium led by South Korea’s Daewoo International has signed a 30-year agreement to sell natural gas to China, China’s Xinhua news agency said on Thursday.

Under the agreement, which cements a preliminary deal in June, China’s top state oil and gas firm China National Petroleum Corp (CNPC), will buy gas from the Shwe field in Myanmar’s A-1 offshore block, which has reserves of 4-6 trillion cubic feet (113-170 billion cu metres), Xinhua said. CNPC is the parent of listed PetroChina.

Daewoo has 51 per cent in the consortium, the China National United Oil Corporation (CNUOC). The other shareholders are India’s Oil and Natural Gas Corp with 17 per cent, India’s GAIL with 8.5 per cent, Korea Gas Corp with 8.5 per cent and Myanmar Oil & Gas Enterprise with 15 per cent.

CNPC and Myanmar Oil & Gas Enterprise plan to build oil and gas pipelines through Myanmar and into China’s southwestern Yunnan province, bypassing the long journey around the Malacca Strait for oil cargoes and solving the problem of getting the gas to market, Chinese media have reported.

Myanmar will also be able to tap the pipeline running across its territory to promote economic development once the gas starts flowing, which is expected to happen in 2013, Xinhua said.Few western companies will invest in the former Burma because of its poor human rights record and continued detention of Nobel Peace Prize laureate Aung San Suu Kyi, which has led to a broad range of US and European sanctions.

China, typically wary of supporting or imposing sanctions and one of Myanmar’s few diplomatic allies, has shown no qualms about investing in its neighbour, eager for its natural gas, oil, minerals and timber to feed a booming economy. Daewoo said last year it had picked China as a preferred bidder for natural gas from a project in Myanmar, putting it at the front of a queue that also includes India and Thailand.

 

[Neo]

China plans to avert US-style auto crisis ​

Friday, December 26, 2008

SHANGHAI: China’s top economic planning agency is drafting a stimulus package to save the automotive sector from a US-style crisis, state media reported on Thursday. The National Development and Reform Commission is to send rescue plans to the cabinet by the end of the week, and if approved they are expected to be implemented in January, the Shanghai Securities News said, citing sources.

Measures will include cuts in the 10 per cent vehicle purchase tax to boost consumption, and direct government funding to help automakers upgrade their technologies, the report said. The Ministry of Science and Technology has also suggested steps such as facilitating mergers in the sector and encouraging banks to provide low-interest loans to automakers, the report said.

China’s auto sales fell 14.6 per cent in November from the same month a year earlier, according to industry association figures, as consumer confidence showed further signs of weakening amid the economic slowdown. China cut gasoline and diesel prices by around 13 per cent and 17 per cent respectively last week, in what was seen as a signal aimed at boosting confidence among car buyers and manufacturers.

 

[gpit]

More on yuan trades...


BBC NEWS | Asia-Pacific | China to allow freer yuan trades

China has said it is to allow some trade with its neighbours to be settled with its currency, the yuan.

The pilot scheme was announced in a package of measures designed to help exporters hit by the global downturn.

It means if the two parties to a trade have yuan available, they need not enter world exchange markets to pay.

Most of China's foreign trade is settled in US dollars or the euro, leaving exporters vulnerable to exchange rate fluctuations.

The yuan is not yet a freely convertible currency.

Officials did not say when the trial scheme would start.

When it does, the yuan could be used to settle trade between parts of eastern China (Guangdong and the Yangtze River delta) and the territories of Hong Kong and Macau, and between south-west China (Guangxi and Yunnan) and the Asean group of countries (Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam).

Spreading yuan

Analysts told Chinese media that the yuan was already being used in some South East Asian countries and that China was happy to see such use extended.

They also agreed that the measure was intended to help companies cope with the global financial meltdown, even though buying and selling the currency requires the presentation of legitimate trade documents to banks.

The latest measure follows Beijing's announcement earlier this month of a 30-point directive in which it vowed to "support the development of yuan business in Hong Kong" and expand the use of the currency to settle trade with neighbouring countries.

Central bank governor Zhou Xiaochuan was quoted by the South China Morning Post as saying: "The US dollar is unlikely to be stable next year and later.

"And the likelihood of the United States issuing more money in the near future adds to the depreciation risk in US-dollar-denominated assets and trade settlements."

He also reportedly said that Guangxi, a province in southern China, had already been settling trade with Vietnam in yuan for some time.

Spurs to spend

A document released after a meeting of China's State Council on Wednesday announced more measures to stimulate domestic consumption.

These include subsidies to rural households for the purchase of household appliances and other goods, and the setting up of new stores and distribution centres in rural areas.

The document called for the renovation of urban food markets, the provision of more variety of goods on sale, the setting up of more second-hand markets, incentives for distribution companies to merge and consolidate, and support of small and medium-sized enterprises.

The state news agency Xinhua said the government intended to raise export tax rebates for high-technology products, to encourage foreign investment, extend customs and inspections services, lower inspection fee for exports and strengthen trade relations in emerging markets.

Analysts said the ideas, though vague, indicated growing concern among China's policy makers about the domestic impact of the current global financial turmoil.

Powered by exports, China's economy has grown by double digits in recent years.

In November, official figures showed a 2.2 percent drop in exports, the first decline in more than seven years.

 

[gpit]

Trades in yuan is another very important step of soft power development. It is truly intersting...

 

[Neo]

China foreign debt rises to $442 billion at end of September​

BEIJING: China’s foreign debt grew at a slower pace in the third quarter, the country’s foreign exchange regulator said on Friday, reflecting a slowdown in investment from abroad amid the weaker global economy.

China’s foreign debt reached $442.0 billion at the end of September, up 3.4 percent from $427.4 billion at the end of June, the State Administration of Foreign Exchange (SAFE) said on Friday.

China’s foreign debt rose 8.9 percent in the second quarter and 5.1 percent in the first quarter. The end-September level was up 18.3 percent from the end of 2007, the foreign exchange regulator said on its website.

Short-term foreign debt, an indicator of inflows of capital, rose to $280.0 billion at the end of September, up from $265.4 billion at the end of June. That amounted to 63.4 percent of the total. But medium- and long-term foreign debt, which accounted for 36.6 percent of the total, fell $0.2 billion in the third quarter.

China’s short-term foreign debt was about 14.6 percent of its $1.906 trillion in foreign exchange reserves as of the end of September.

China’s yuan has stablised against the US dollar since the second half of 2008. The country’s foreign exchange reserves fell in October for the first month since December 2003, despite a record high trade surplus of the month, suggesting that speculative capital has begun to flow out of the country.

SAFE issued rules this week allowing exporters to accept 25 percent of the total due as prepayment and allowing importers to delay paying 25 percent of the total they owe, both up from 10 percent previously. reuters

 

[nitesh]

Trades in yuan is another very important step of soft power development. It is truly intersting...

Hey gpit, will Chinese government make the yuan take up and down like any other currency? Any policy statement came in regarding this?

 

[gpit]

Hey gpit, will Chinese government make the yuan take up and down like any other currency? Any policy statement came in regarding this?

Dear Nitesh,

I personally don’t think the Chinese government will let their currency to float freely, since this is prone to external manipulation, as demonstrated by 97 Asian currency crises. And it is not in the national interest of China, nor in the interest of SE Asian countries. Those countries have a huge amount of Chinese living there and traditionally have tight relationship (good and bad) with China.

If current financial crises were not here, I bet the currency will strengthen a little bit more. The advent of this crisis may see yuan either keep its current value or float downward a bit. In either case, big oscillation of the Yuan value may not be in China’s interest, as the government is keen to move up their industries in the value chain (which is pretty tough, IMHO).

 

[nitesh]

^^

Thanks for the reply, but sooner or later it has to open up because otherwise it will be difficult in international arena.
But any way let's see how the policy decisions are taken

 

[Pk_Thunder]

Chinese dairy firms to pay out millions to milk victims​

Updated at: 1320 PST, Monday, December 29, 2008
BEIJING: Twenty-two Chinese dairy firms will pay 160 million dollars into a compensation fund for families of babies that died or fell ill after drinking tainted milk, state media said on Monday.

Families of children killed by the tainted milk will each receive 200,000 yuan (29,000 dollars) in compensation from the fund. Parents of infants who were hospitalised will each get between 30,000 and 50,000 yuan, it said.

At least six babies in China died this year and another 294,000 fell ill after drinking milk laced with the industrial chemical melamine, which is normally used to make plastic.

Melamine was mixed into the watered-down milk to make it appear richer in protein. But the chemical caused severe kidney problems and urinary tract problems in babies who drank the tainted milk powder.

The scandal, which emerged in September after initially being covered up, shook the foundations of a Chinese food industry that was already tainted by repeated safety problems.

It quickly became a global concern after contaminated Chinese milk products were found abroad. Lawyers for victims have said the government warned them not to sue, possibly out of fears over a slew of potentially costly lawsuits that would also attract bad publicity.

 

[Pk_Thunder]

Myanmar signs gas deal with China​

Updated at: 1200 PST, Monday, December 29, 2008
YANGON: Myanmar's government and four foreign companies have signed an agreement to sell natural gas from offshore fields to neighboring China, state media said Monday.

The agreement, signed last Wednesday, was the first for sales of gas from Myanmar's northwestern offshore fields.

The local newspaper said South Korea's Daewoo International and Korea Gas Corporation and two Indian companies _ONGC Videsh Ltd. and GAIL Ltd were part of a consortium with the Myanmar government that finalized the deal with the China National United Oil Corporation. The consortium is led by Daewoo, with a stake of 51 percent.

 

[gpit]

^^

Thanks for the reply, but sooner or later it has to open up because otherwise it will be difficult in international arena.
But any way let's see how the policy decisions are taken

You are welcome.

Whether Yuan can fully open to free trade or not, IMHO, is fully dependent on how and to what stage China ascends in the world stage. If China can’t compete with external world, mainly US and EU, it will not truly free trade the Yuan.

China, in an attempt to appease US’s pressure for raising Yuan value, made Yuan float within a limits with “a basket” of foreign currencies years back. But China doesn’t even reveal what the basket is. I called an economy professor in China, asking that question. She replied:” This is a state secrete”. Obviously, China can’t/is unable to dispel US claim of currency manipulation. Or maybe it is not in an intention to do so completely.

If a currency is freely traded, it is not up to government control, but can be subject to the control of a handful financial alligators, such as George Soros. I don’t see there are too many differences for our ordinary people. Perhaps the latter is even worse.

In fact, Japanese Yan is constantly influenced by its government.