Chinese Economic News & Discussions

[Brotherhood]

Robust domestic market to support China' s growth in five years: official - People's Daily Online December 26, 2010

A robust domestic market, an increasingly competitive technological edge, a vibrant economic structure and a stable society will continue to provide strong support for China's growth in the next five years, a senior official said on Saturday.

In the next five years, China will proceed with the development of its industrialization, information, urbanization and market economy while the global environment will be generally favorable to China's peaceful development, said Zhu Zhixin, vice director of the National Development and Reform commission, or China's top economic planning body.

However, China is still challenged by problems in pursuing a balanced, coordinated and sustainable development, he said at a lecture attended by members of the Standing Committee of the National People's Congress (NPC), or the top legislature.

The lecture, which was held in the Great Hall of the People, was presided over by Wu Bangguo, Chairman of the NPC Standing Committee.

Source: Xinhua

 

[Brotherhood]

China raises interest rate second time this year to curb inflation - People's Daily Online December 26, 2010

China 's central bank announced Saturday that it will raise the one-year lending and deposit interest rate for the second time this year, as the government continues its battle against surging prices.

The People's Bank of China (PBOC) said in a statement posted on its website that it will hike the benchmark interest rate by 25 basis points beginning Sunday, which raised the one-year lending rate to 5.81 percent and one-year deposit rate to 2.75 percent.

The PBOC increased the benchmark lending and deposit rates by 25 basis points on Oct. 20, which was the first increase in nearly three years.

The rate hike came after the central bank vice governor, Hu Xiaolian, said Friday that China would bring its overall money supply to a normal level using various policy tools, as the government shifts monetary policy from "moderately loose" to "prudent" to rein in rising inflationary pressures and curb asset bubbles.

The country's consumer price index (CPI), a main gauge of inflation, accelerated to a 28-month high in November of 5.1 percent, while new loans reached 7.45 trillion yuan in the first 11 months of this year, compared to the government's full-year target of 7.5 trillion yuan.

A recent PBOC survey also showed that the proportion of Chinese citizens satisfied with the current price level had sunk to an 11-year low, and only 17.3 percent of the consumers said they intended to consume more in the future.

Rising prices have prompted the government to take measures to rein in the hikes, including boosting supplies and providing financial aid to the needy.

Li Daokui, a member of the monetary policy committee with the PBOC, said the rate hike mainly aimed at managing inflationary expectations and reflected the policy shift, as tightening the money supply is the best way to curb inflation.

The rate increase came "at the right time", as western countries are celebrating the Christmas holiday, to avoid overreaction from the global markets, Li added.

Besides interest rate hikes, China had increased the bank reserve requirement ratio six times in 2010 to 18.5 percent and 19 percent for some large commercial banks.

"The decision was made in consideration of China's economic condition next year," said Lian Ping, chief economist with the Bank of Communications, the country's fifth largest lender, who described fighting inflation as the central bank's primary task at present.

Lian expected inflation to continue to go up in the first quarter next year due to rises both in demand and cost, as well as other influences from the external market.

His views were echoed by Zhuang Jian, chief economist with the Asian Development Bank, who also attributed rising inflation to holiday seasons and the extreme winter weather.

Observers believe that further rate hikes are to be expected since solving inflation and liquidity pressure at the same time is considered a difficult task.

"You cannot expect one or two rate rises to have a significant impact on economic indicators," said Zuo Xiaolei, chief economist with Galaxy Securities.

However, Lian said China only has room for two or three rate hikes, as higher interest rates would increase risks of "hot money" inflows due to a widening interest margin between China and the United States, which is likely to keep rates low.

Li Daokui also attributed the timing of the rate increase to avoiding rapid capital inflows.

But currently the factors that decides the direction of capital flows are currency exchange rates and assets prices, Lian added.

UBS Securities economist Wang Tao said last month that she expected the central bank to raise the interest rate by 25 basis points before the end of the year and by another 75 basis points in 2011.

China's economy grew 9.6 percent year on year in the third quarter this year, slowing from the 10.3 percent increase in the second quarter and 11.9 percent in the first quarter.

The country targets about a 3 percent inflation rate in 2010.

Source: Xinhua

 

[Brotherhood]

China on road from acquired to world's No. 2 acquirer - People's Daily Online December 27, 2010

China will become the world's second-largest acquirer this year after the United States with surging outbound direct foreign investment, according to a Chinese Academy of Social Sciences report issued yesterday.

In the first 11 months, China's non-financial outbound foreign investment was US$47.5 billion, 1.1 times the total value of last year, according to the Ministry of Commerce data. In 2003, the figure was just US$2.8 billion.

"Despite the country's continued efforts to attract foreign investment, China has been in transition from the acquired to an acquirer," said Zhang Yuyan, chief author of the report. "It is based on China's solid economic development and many good opportunities offered by the global financial crisis."

China eclipsed Japan to become the world's second-largest economy in the first half of the year and is on its way to claim the position for the whole year.

In August, the Zhejiang Geely Holding Group took over Volvo from the Ford Motor Co for US$1.5 billion, putting China's "going global strategy" into headlines across the world. Last week, China Petrochemical Corp, better known as the Sinopec Group, won government approval to purchase oil and gas assets in two deals in South America.

Commerce Minister Chen Deming said last week that China will support domestic companies to invest overseas and the "going global strategy" will be a priority for the ministry in the 12th Five-Year Plan starting next year.

Zhang said mergers and acquisitions in the energy sector so far still make up the majority of China's outbound takeovers, but the tendency is that targets of investment will become more diversified.

From 2005 to the first half of this year, Chinese enterprises clinched 91 deals worth US$31.9 billion with overseas coal and mineral partners, the report said.

It predicted China's two-way investment will become more balanced in the future. In the first 11 months, China's inbound foreign direct investment was US$91.7 billion, far exceeding the outbound figure. This year's overall outbound investment is expected to rise to US$50 billion.

Source: Shanghai Daily

 

[Brotherhood]

Analysis: Global market has jitters over China's interest rate increase - People's Daily Online December 27, 2010

Is China's interest rate hike, which was announced on Christmas Day, a welcome gift for investors around the world? As the first trading day opens after China's surprise move on Saturday, the global financial market is anxiously watching and speculating about how China's interest rate hike will affect the prices of shares, commodities and gold.

As Reuters said, it is the Chinese stock market that will "set the tone" for the global market. Historical data shows that the Chinese share prices were all up in each of the nine previous interest rate hikes since 2006, a move that is normally supposed to dampen stock markets. There is confidence about the short-term price curve on the market.

However, it seems things are different this time, and the interest rate hike is working on the stock market. The Shanghai Composite Index plummeted by as much as 1.9 percent on Monday afternoon after a slight climb in the morning, reflecting investors' concern over the possibility of more tightening policies in early next year. In spite of that, a survey shows that 95 percent of fund managers are bullish about share prices next year, according to a report by China Securities Journal.

The interest rate increase is regarded as evidence of China's determination to curb its inflation. Although China's CPI hit new records in October and November at 4.4 percent and 5.1 percent, respectively, China has been cautious about using the price tool. It has raised the banks' deposit-reserve ratio six times, but only increased interest rates twice this year. That may mean China's concern over the inflation has outweighed its desire to sustain its rapid economic growth.

The central bank has made it clear that it will use a quantitative measure, namely banks' deposit-reserve ratio, and the credit price, namely the interest rate, as well as foreign exchange rates to get the monetary policy back to "normal."

The Australian dollar dropped against the U.S. dollar Monday as a result of China's interest rate hike because trade with China has a big effect on the Australian economy, according to Reuters. It also predicted that the yuan, China's currency, would gain against the U.S. dollar. On Monday yuan gained ground against the U.S. dollar.

If that is the case in the future, it would be a factor that enables China to shift toward more imports. An aspect that so far has been neglected by analysts observing China's interest rate hike is China's strategy of economic restructuring for a more balanced, innovation-oriented and eco-friendly growth model. Increasing imports is part of the efforts to achieve that. A stronger yuan would of course facilitate China's imports.

In addition, tightened money supply will probably help reign in blind investment, which does not pay enough attention to the quality of investment. In the mean time, sectors facilitating the country's economic restructuring, such as the clean energy and environmental protection, will get more support. In that way, China's economy, which is currently investment driven, will grow in a slower but more rational way.

China's interest rate hike has happened while the interest rate in the United States remains low. That has fueled the concern over the risk of hot money flooding into China. Analysts are divided on that prospect. But Chinese banks reported huge forex dealing surplus in November. And the Ministry of Commerce has recently beefed up surveillance over the surging foreign investment into China's property market. The market should wait and see whether more capital control measures would be installed.

International institutions seem to have reached a consensus on gold prices. Financial giants, such as Goldman Sachs, Barclays and JP Morgan Chase all predict a golden age for gold prices in 2011 as long as the interest rates in the United States are kept low and emerging markets continue buying gold.

China Securities Journal reported on Dec. 25, the day when the People's Bank of China announced the interest rate hike, that Xia Bin, an advisor of the People's Bank of China, said that China should hold more gold reserves to diversify its forex reserve.

By Li Jia, People’s Daily Online

 

[Brotherhood]

New railway to open in eastern Hainan island - People's Daily Online December 28, 2010

A bullet train runs during a trial operation on the East Ring Railway, or Donghuan Railway linking Haikou, capital of South China's island province Hainan and Sanya city, Dec 26, 2010. Built with a total investment of 20.2 billion yuan (about $3 billion), the railway skirts along the eastern coast of the island spanning a length of 308 kilometers. The trip between the two cities will take only 90 minutes, half the time of a trip by road. The railway will be put into use at the end of December or the beginning of January.(Xinhua Photo)

Photo taken on Dec 26 shows the Haikou East Station of the Donghuan Railway, in Haikou. (Xinhua Photo)

A bullet train arrives at Sanya Station after a pilot run on the Donghuan Railway, Dec 26, 2010. (Xinhua Photo)

Crew members on the train prepare gifts for the passengers, Dec 26, 2010.(Xinhua Photo)

A bullet train heads for Sanya on the Donghuan Railway linking Haikou, capital of South China's island province Hainan and Sanya city, Dec 26, 2010.(Xinhua Photo)

 

[Brotherhood]

China invested 1.3 bln USD to promote scientific literacy in 2009 - People's Daily Online December 28, 2010

China invested 8.712 billion yuan (1.31 billion U.S. dollars) last year, a one-third increase year on year, to promote knowledge of science among its citizens.

According to figures released Monday by the Ministry of Science and Technology, 67.6 percent of the money was from the Chinese government, while the rest came from private channels.

Also, more than 1.8 million people were employed in the field of science popularization last year, up 2.69 percent compared with that in 2008.

Volunteer science popularization workers surpassed 1.54 million, doubling the 2008 figure.

Last year, 297 science popularization centers were set up, which took the national total of such centers to 370,000.

According to a survey conducted by the China Association for Science and Technology (CAST) and released last month, 3.27 percent of Chinese this year have a basic understanding of science and technology, up from 2.25 percent in 2007 and 1.98 in 2003.

However, scientific literacy remained low compared with developed countries, which could undermine the country's economic and social development, and even social stability, CAST president Han Qide warned.

Source:Xinhua

 

[Brotherhood]

More needy people receive help from China's social security network - People's Daily Online December 28, 2010

More people enduring poor living conditions have been covered by China's social security system, according to the country's Ministry of Civil Affairs.

Various figures disclosed during a national working conference held Monday by the Ministry in Beijing showed that as of November, about 75 million people had been provided with minimum living allowances, an increase of 5.4 percent from the same period of last year.

In terms of medical services, 8.58 billion yuan (about 1.3 billion U.S. dollar) were spent in to aid nearly 60 million people in need in the first nine months of the year, up 28 percent than the same period last year.

In addition, over one million vagrants and beggars with no means of support in cities had been receiving help as of December 2010.

Also, the Ministry has set up aid centers for homeless juveniles in 40 counties and cities with 30 million yuan of the proceeds from the welfare lottery.

Source:Xinhua

 

[Brotherhood]

3 Chinese firms among Newsweek's list of most innovative - People's Daily Online December 28, 2010

Three Chinese companies are listed among the 10 most innovative firms globally in 2010 by Newsweek. The list also includes such regulars like Microsoft, Apple and Google.

They are Taiwan-based smart phone maker HTC at No. 4, solar battery and new energy car maker BYD at No. 8 and home appliance giant Haier taking the 10th spot in the list, reflecting advances made in innovation by Chinese companies.

The 10 firms on the list possess two vital elements that are necessary for them to be innovative - "creating something and making people want it," according to Newsweek.

Microsoft led the list followed by Apple, Google, Disney, Ford and Amazon as well as Japan's Fast Retailing.

HTC produces smart phones that run on Google's Android system and Microsoft's Windows 7. In the United States market HTC's Droid Incredible and Evo 4G phones have propelled Android to stand side-by-side with Apple and Research in Motion.

BYD, in which Warren Buffett's Berkshire Hathaway has owned a 10 percent stake since 2008, makes cell phone batteries, solar panels and environmentally friendly automobiles. The Hong Kong-listed firm expects profit to triple within a year, thanks to the booming domestic vehicle market. It is set to launch several new energy cars in 2011. BYD expects to export its hybrid and electric cars to the United States and Europe next year.

According to Euromonitor International, Qingdao-based Haier has sprung to the top spot in global appliance sales by capturing 6.1 percent of the world's white goods market.

The improved level of China's innovation has also helped domestic firms, like Youku dubbed as Chinese YouTube, list in the US this year, which has seen 38 Chinese firms launch initial public offerings so far.

Source: Shanghai Daily

 

[中国万岁-ProsperThroughCo-]

FT

Eaton chief hits out at Beijing’s critics

By Peter Marsh in London
Published: December 27 2010 18:13 | Last updated: December 27 2010 18:13

Criticism of China for its role in favouring local industry at the expense of US companies has gone too far and could lead to a dangerous bout of trade protectionism, according to Sandy Cutler, chief executive of Eaton, US industrial conglomerate, for the past 10 years.

He said that some of the criticism of China by US industrialists and politicians over actions such as currency manipulation was the result of “national jealousy” in the US about China’s relatively buoyant economy.

In an interview with the Financial Times, he said: “There is a strand of political thought in the US that is against the idea of free trade, with China bearing the brunt of a lot of negative commentsn.

“But I hope the US will resist the populist idea that the best way to ignite [national] growth is to construct walls around local economies through protectionist measures, the aims of which are to restrict trade.”

He said such moves – which could include imposing high tariffs and other import barriers to restrict sales in the US of goods made in China and other countries – were part of “discredited” policies that would only damage growth in the long run.

Some politicians and industrialists in the US have called for tariff barriers as a way to stimulate the US economy, which is still struggling to move into a higher phase of growth after the recession.

In 2011, according to projections from the IHS Global Insight economics consultancy, the US is likely to lose to China the position it has held over more than 100 years as the world’s biggest manufacturing nation by output.

Asked about negative comments on China earlier in the year by Jeff Immelt, chief executive of General Electric, Mr Cutler said he did not share the view that the mood in China was turning against foreign businesses.

“There are some political pressures inside China to favour local companies when awarding [government] contracts but this is not the same as saying that the climate is acting to discourage companies based outside China,” Mr Cutler said.

He also side-stepped the question of whether China had indulged in “currency manipulation” by giving its exporters an artificial boost through keeping the renminbi low. The topic is another controversial issue in the US, with a number of commentators pressing for the US government to step up action to force a revaluation. “I don’t have the [economic] competence to give a view as to whether the renminbi is fairly valued.”

But he added that swings in currencies were a problem for most international manufacturers, and that they had to cope as best they could. One way to do this, he said, was to open up local centres of production so that demand for goods in specific countries could be matched as much as possible by products made in the same location, as a result reducing currency risks.

Eaton produces a range of products and services, from fuel-efficient systems to management tools and aircraft components, and is likely this year to have sales in China of about $1bn, making the country one of its largest markets.

Mr Cutler said China’s political rulers deserved praise for “the fine job” they had made of “fine-tuning” the economy by pushing up growth without sparking inflation

 

[Brotherhood]

China's freeways extend 74,000 kilometers - People's Daily Online December 29, 2010

China has built 33,000 kilometers of new freeways over the past five years, taking the country's total to 74,000 kilometers, the country's top transportation official said Tuesday.

The total was still short of the 100,000 kilometers of expressways in the United States, the longest in the world, Li Shenglin, China's Minister of Transport said at a national conference on transportation.

Meanwhile, 639,000 kilometers of new roads were built over the past five years, with 527,000 kilometers of them built in rural areas, bringing the country's road length to well over 3.98 million kilometers, Li said.

According to the government's freeway development plan over the next five years, Li forecast China would complete construction of seven new freeways radiating out from the capital city of Beijing, nine expressways running north to south, as well as an extra 18 thruways running east to west.

By the end of the 12th Five-Year-Plan period (2011-2015), Li believed China could overtake the United States in terms of freeway developments and rank the first on earth in this regard.

Source:Xinhua

 

[Brotherhood]

Sinopec expects 2010 sales to increase to $296 billion - People's Daily Online December 29, 2010

Sinopec Group, Asia's top oil refiner by capacity, said on Tuesday that its 2010 sales are estimated to grow by 41 percent year-on-year, buoyed by surging domestic demand for oil products and increasing upstream sales arising from oil price hikes.

The State-owned energy company's sales are to reach 1.96 trillion yuan ($296 billion) this year, compared with 1.39 trillion yuan it made in 2009, the group forecast on Tuesday.

Its total assets are forecast to hit around 1.5 trillion yuan this year, compared with 1.29 trillion yuan in assets last year.

"The company's growth is within our expectations, as demand for oil products have grown rapidly in China over the year, while its upstream exploration sector has also benefited from soaring oil prices," said Rui Dingkun, analyst with China Jianyin Investment Securities in Beijing.

The crude oil price peaked at $91.88 a barrel during Monday's trading session, a record high since October 2008.

But Sinopec said that China's controlled pricing scheme for finished petroleum products has cast a shadow over the energy giant's performance, resulting in gain of its refining sector reducing 350 billion yuan this year.

Meanwhile, sales from the conglomerate's overseas operations are to account for 27.3 percent of the group's total by the end of this year, and overseas assets will make up 31.4 percent, said Huang Wensheng, a spokesman of Sinopec Group.

That compared with the proportion of 10 percent in sales and 8 percent in assets in 2006. The increase reflected the energy company's accelerated overseas acquisitions of energy resources in recent years, analysts said.

The majority of the energy firm's sales abroad are from its products trading in Europe, particularly the United Kingdom, Huang told China Daily, without revealing details figures.

China, the world's largest energy consumer, is estimated to consume 11.63 million barrels of oil each day by 2015, up from 9.16 million barrels a day on average in 2010.

The world's second-largest economy's fast expansion pace, which is expected to be more than 9 percent this year, has triggered an oil demand surge and an increasing dependence on imports.

The country produced 189 million tons of crude oil in 2009, when the import volume hit 199 million tons, according to the National Energy Bureau. Imported crude oil accounted for 52 percent of China's total oil usage in 2009. Eighty percent of Sinopec's total crude oil consumption is imported from overseas.

The oil refiner announced on Dec 10 that it plans to buy the entire oil and gas assets of the Argentinean arm of US-based Occidental Petroleum Corp for $2.45 billion, marking its entry into the South American country's upstream oil and gas sector.

The company has six oil and gas production bases abroad in Africa, the Middle East and South America.

"We will increase our overseas sales proportion in the future and will make endeavors to develop overseas oil and gas exploration," Huang said.

Source: China Daily

 

[Brotherhood]

China-Vietnam trade up 42.4% in first 10 months: official - People's Daily Online December 29, 2010

Trade volume between China and Vietnam in the first 10 months climbed 42.4 percent from a year earlier to 23.12 billion U.S. dollars, a Chinese official said here Tuesday.

Zhu Hongren, chief engineer of China's Ministry of Industry and Information Technology (MIIT), said at a China-Vietnam trade seminar that the trade growth was pushed up by intensified exchanges between small and medium-sized enterprises (SME) of both countries.

Since China and Vietnam signed a memorandum of understanding on the cooperation between SMEs of both countries in an APEC ministerial meeting in 2006, SMEs from both countries have become more involved in the bilateral trade, according to Zhu.

Among the five China Economic and Trade Cooperation Zones that China established in ASEAN countries, two are located in Vietnam.


Source: Xinhua

 

[Brotherhood]

China launches 1st domestic nuclear plant simulator - People's Daily Online December 29, 2010

China's first self-developed 1-million-kilowatt full-scope simulator of a nuclear power plant was officially put into operation at Ningde Nuclear Power Station, southeastern China's Fujian Province on Dec. 28.

This means that China has ended its long-time reliance foreign procurement and imported equipment.

Construction at Ningde Nuclear Power Station is under construction.

The full-scope simulator was built as the training base for operation and management personnel of nuclear power plant.

By Zhang Qian, People's Daily Online

 

[Brotherhood]

Beijing launches 5 new subway lines - People's Daily Online December 30, 2010

Five new subway lines were launched today in Beijing and opened to passengers at 2:00 p.m. In the morning, the Beijing Mass Transit Railway Group Co., Ltd. held an opening ceremony at West Wangjing Station.

The five subway lines include two new complete lines — the Yizhuang and Daxing lines — as well as the Fangshan, Changping and No. 15 lines, which have all completed their first phase. The total length of new track is 108 kilometers.

With the addition of these five subway lines, Beijing's subway operating mileage now exceeds 300 kilometers for the first time.

The new lines began trial operations at 2:00 p.m. today and every new line opened at the same time. The five new lines completed test runs yesterday. Every company in charge of the lines then started to do the commissioning and final inspections.

The official website of the Beijing Subway Corporation has added five new subway lines, including train schedules of every station, and the maps of the surrounding areas.

Starting today, 18 trains will be added on Subway Line No. 13 in the evening peak hour to ease the line's passenger pressure brought by the experimental operation of the new lines. Meanwhile, with the opening of the first phase of the Changping Line, the original last train timetable of Subway Line No. 13 will be restored.

By Yan Meng, People's Daily Online

 

[Brotherhood]

Highspeed railway linking S. China cities sets off maiden voyage - People's Daily Online December 30, 2010

A train is seen on a test run on the to-be-opened highspeed railway connecting Hainan's capital Haikou and the famous tourist destination Sanya in south China's Hainan Province, Dec. 29, 2010. The 308-kilometer highspeed railway that opened on Thursday allowed a maximum train speed of 250 kilometers per hour, or less than one and a half hours to travel from Haikou to Sanya. (Xinhua/Guo Cheng)

People gather to celebrate the opening of the highspeed railway connecting Hainan's capital Haikou and the famous tourist destination Sanya in Haikou, south China's Hainan Province, Dec. 30, 2010. The 308-kilometer highspeed railway that opened on Thursday allowed a maximum train speed of 250 kilometers per hour, or less than one and a half hours to travel from Haikou to Sanya. (Xinhua/Guo Cheng)

Passengers check in to board on the train traveling from Hainan's capital Haikou to the famous tourist destination Sanya in Haikou, south China's Hainan Province, Dec. 30, 2010. The 308-kilometer highspeed railway connecting Haikou and Sanya opened on Thursday, allowing a maximum train speed of 250 kilometers per hour, or less than one and a half hours to travel from Haikou to Sanya. (Xinhua/Guo Cheng)

A man buys ticket for the train traveling from Hainan's capital Haikou to the famous tourist destination Sanya in Haikou, south China's Hainan Province, Dec. 30, 2010. The 308-kilometer highspeed railway connecting Haikou and Sanya opened on Thursday, allowing a maximum train speed of 250 kilometers per hour, or less than one and a half hours to travel from Haikou to Sanya. (Xinhua/Guo Cheng)

A train sets off on its maiden voyage from Hainan's capital Haikou to the famous tourist destination Sanya in Haikou, capital of south China's Hainan Province, Dec. 30, 2010. The 308-kilometer highspeed railway connecting Haikou and Sanya opened on Thursday, allowing a maximum train speed of 250 kilometers per hour, or less than one and a half hours to travel from Haikou to Sanya. (Xinhua/Guo Cheng)