Chinese Economy/Development thread (updated regularly)

[Brotherhood]

Engineers' plan for Taiwan Straits bridge ready by 2015 - People's Daily Online
November 03, 2010

There may be more than one way to skin a cat, and for engineers in Fujian province there is more than one way to build a bridge across the Taiwan Straits.

While experts from both sides have provided three viable ways to create a land link between the island and the mainland, engineer Lin Yuanpei with the Chinese Academy of Engineering on Tuesday revealed an updated design for a northern route.

The bridge would stretch about 100 km, connecting Pingtan Island in Fujian and Hsinchu in northwestern Taiwan.

"It's like a tunnel hanging in the air," said Lin, who also designed the 32.5-km Donghai Bridge in Shanghai, which was the longest cross-sea bridge in the world until the 36-km Hangzhou Bay Bridge opened in 2008.

"The cost will increase for adding the walls and roofs, but the traffic capacity will skyrocket," said Lin, who did not provide any specifics about the cost.

He suggested a suspension bridge style be adopted where the water is deeper than 40 meters but the suspension sections would not be longer than 3.5 km.

Li Dejin, director of the Fujian Provincial Department of Transport, said engineering experts have been discussing the bridge project for 14 years.

"I hope all the scientists and industry associations can work together and promote the implementation of the project," Li said at the 12th annual meeting of the China Association for Science and Technology held in Fuzhou.

Engineers on the mainland are expected to complete a plan for building a bridge across the Straits in the coming five years, Li said on Tuesday.

There has been no response yet from Beijing on the latest proposal and the bridge project has not received official approval.

In 2005, the Ministry of Transport unveiled an expressway plan to link Beijing with Taipei before 2030.

But the Taiwan Affairs Office of the State Council claimed in 2007 that at least 30 years would be needed for the Beijing-Taipei expressway project and there has not been any timetable set for launching the program.

"Thirty years ago, nobody could have imagined building a bridge across the Straits," said Tsai Chung-chih, a Taiwan engineering expert.

Engineers from both sides of the Straits have provided three plans for building a cross-Straits bridge: a northern route connecting Pingtan to Hsinchu, a middle route connecting Putian to Taichung and a southern route connecting Xiamen to Kaohsiung.

But Lin said the north route is preferred as the water is less than 80 meters deep and the geological structure is quite steady with less risk of earthquake.

By Hu Meidong and Peng Yining, China Daily

 

[no_name]

I though a tunnel would be better. Would it allow large gap for passing ships.

 

[Chinese-Dragon]

I though a tunnel would be better. Would it allow large gap for passing ships.

Good idea. Also it would be safer, considering the amount of Typhoons we get in our part of the world.

However I think a tunnel would be much more expensive than a bridge.

 

[Brotherhood]

US urged to reduce barriers - People's Daily Online November 02, 2010

China is encouraging investment into the United States, but is also urging the world's largest economy to improve its investment environment and reduce barriers.

China has so far invested "more than $900 million" in the US non-financial sector, and is encouraging and assisting more domestic enterprises to inject funds "in all areas", Chen Jian, vice-minister of commerce, told a news conference on Monday.

"We have no specific goal (on volume of the investment)", but "we expect the US could improve the investment environment to attract more investment from China, and to strengthen China-US economic relations", he added.

The amount is just a fraction of China's total overseas investment of $56.5 billion in 2009, despite the huge trade volume between the two largest global economies.

Chen said that in the next five years, China's outbound direct investment (ODI) will make huge strides, both in size and quality, and consequently its contribution to GDP growth will rise significantly and boost the nation's global influence as an investor.

While the Chinese government has been urged by the US and some European nations to allow its currency to rise, Chen said ongoing yuan revaluation will have a positive effect on Chinese overseas investment, although he believed currency appreciation will hurt exports.

The ministry on Monday launched its 2010 Report on Development of China's Outbound Investment and Economic Cooperation. In 2009, China's ODI reached $56.5 billion, catapulting the nation to fifth largest, by volume, from 12th position. From 2002 to 2009, China's ODI grew by 54.4 percent annually.

"China's overseas investment activities are still at a fledgling stage, despite the rapid growth," Chen said. Chinese companies' lack of experience in internationalization and management curtailed high-end investment, he added.

Song Hong, a researcher on international trade with the Chinese Academy of Social Sciences, said China's ODI is expected to grow more rapidly than direct foreign investment and will hit $100 billion by 2015.

From January to September, China's ODI rose by 10.4 percent to $36.27 billion, mainly targeting the mining, commercial service, manufacturing and retail sectors. Just more than 30 percent was achieved through mergers and acquisitions.

China's investment into the US registered staggering growth during the past nine months, yet some domestic companies felt obstacles had been placed in their way.

According to the Ministry of Commerce, China's US-bound investment for the first nine months of the year rocketed up by 530 percent from a year earlier, which contrasted with growth of 10.4 percent during the same period for the nation's total ODI.

"China's investment in the US has been much smaller compared with those in other regions, as small companies are usually incapable of investing there and big firms and State-owned enterprises find it difficult to make inroads due to invisible barriers," said Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation with the ministry.

The situation will not change soon, Huo said, and he is not "hopeful" about prospects for the near future.

"Restrictions will always exist, so it is hard for Chinese companies to invest alone in the US. But we can either seek out the possibility of cooperating with American counterparts for win-win solutions or expand sales and marketing there," he said.

The majority of China's investment in the US was conducted during the past two years. From January to September, Chinese companies invested funds worth $828 million, but this accounted for just 2.3 percent of the total. China's investment mainly goes to Asia and Latin America.

Despite growing enthusiasm, Chinese companies have encountered bottlenecks when investing in the US. The US Commerce Department recently announced it will investigate exports of China's clean energy sector for alleged subsidies provided by the Chinese government.

Yao Wenping, vice-president of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said the probe will not only lead to shrinking Chinese exports, but also dampen confidence.

In July, some US congressmen urged the Obama administration to turn down a proposal by Anshan Iron and Steel Group to establish a joint venture with an American steel mill, but the deal was finally signed in September, the first case of a Chinese company investing in a US steel mill.

"We cannot find any real or obvious rules or regulations by the US government and governments from the European Union on restricting Chinese investment, but we sometimes experience unfair treatment, or say, investment protectionism," Chen said at the conference.

On China's rare earth exports, Chen said there would be no significant quota cuts.

"I don't think there will be a big cut in export quotas," Chen said, when asked whether China would slash exports next year.

"China has a management system, but China has no embargoes," he said. "But that does not mean you can buy freely, there will be a quota system - the quota system is a way of management."

Reuters contributed to this story.

Source:China Daily

 

[Brotherhood]

China plans strategic reserves for rare metals - People's Daily Online November 03, 2010

The government is studying a plan to build strategic reserves for 10 rare metals, namely rare earth, tungsten, antimony, molybdenum, tin, indium, germanium, gallium, tantalum and zirconium, according to today's Shanghai Securities News.

China is rich in some of the 10 rare metals, such as rare earth, tungsten, and antimony, but it has neither properly exploited nor economically used these resources over the past many years. The long-standing unlicensed exploitation, indiscriminate mining and serious waste of resources have caused serious damage to ecosystems near mines.

Furthermore, because of the relatively low requirements for environmental protection in the country, the market prices of some rare metals have long been lower than their real values.

However, other rare metals such as tantalum are scarce resources in China, giving the country no choice but to import these resources for a long time. Thus these metals are often subject to price fluctuations in overseas markets.

Insiders disclosed that the central government's plan to build rare metal strategic reserves is aimed at recreating a balance between supply and demand as well as maintaining price stability.

Rare metals are of increasing strategic importance to industrial development. Since the beginning of 2010, the Ministry of Industry and Information Technology, Ministry of Land and Resources and local governments have introduced a number of measures to enhance concentration of production and to increase integration of metal resources, such as rare earth, tungsten, antimony, molybdenum and tin.

By People's Daily Online

 

[Brotherhood]

WB sees change in China's growth pattern - People's Daily Online November 04, 2010

An expected global slowdown next year could hit exports, but China's consumption remains robust as it reduces dependence on external demand, the World Bank (WB) said on Wednesday.

"In China we see a quite different economic growth pattern this year and last because of both domestic and external reasons," said Ardo Hansson, lead WB economist in China, at a press conference releasing the China Quarterly Update.

While edging up China's gross domestic product (GDP) growth projection for both 2010 and 2011, the report said that growth in domestic demand would remain strong although exports could suffer from a predicted global economic slowdown next year.

"The expected slowdown in global growth is likely to affect China's exports," the report said, but consumption would benefit from a robust labor market and private sector investment.

China's retail sales, a measure of domestic demand growth, expanded by about 18 percent in recent months, compared to about 15 percent a year earlier.

The world's second largest economy has taken a slew of measures to encourage domestic consumption and reduce export reliance to ensure more sustainable growth. Export growth momentum, for example, has weakened significantly. In the proposed 12th Five-Year Plan (2011-2015), economic rebalancing tops the agenda.

"Changing the growth pattern is rightly a key target," the WB report said. "The need to rebalance to a more domestic demand-led, service-sector oriented growth seems stronger now than five years ago, in part because the international environment is less favorable."

Some developed countries, for example, have complained about China's trade surplus, and the accumulated external surpluses have increased revaluation pressure on the yuan.

Zhou Xiaochuan, the central bank governor, said on Tuesday that the economy's structure would witness substantial and profound changes during the next five years, as the country focuses on stimulating domestic demand.

Accelerating urbanization would bring more demand for non-export categories such as healthcare and education, he said, adding that the focus of investment would also change to the service sector from more traditional areas.

"China could make substantive changes to its economic structure in three years and substantially reduce its reliance on external demand," said Li Daokui, a member of the monetary policy committee of the central bank, at an Oct 29 forum.

Li said China's ratio of trade surplus to GDP is likely to drop below 5 percent this year, down from the pre-crisis level of 10 percent.

"In the past five years, China's reliance on external demand has already declined, and structural changes will certainly occur as the workforce expands and consumption increases naturally," said Dong Xian'an, chief economist of Industrial Securities.

The WB report raised its forecast for China's year-on-year GDP growth for 2010 to 10 percent from 9.5 percent and that for 2011 to 8.7 percent from 8.5 percent.

Xin Zhiming contributed to this story.

By Wang Xiaotian, China Daily

 

[Brotherhood]

'Firewall needed' to prevent cash surge - People's Daily Online November 05, 2010

China should "set up a firewall" as uncontrolled dollar printing in the United States will drive more liquidity into emerging markets, a central bank adviser said on Thursday.

"The most urgent need for the emerging market economies is to curb capital inflows," Xia Bin, an academic member of the central bank's monetary policy committee, told a financial forum in Beijing.

Xia's comments came as the US Federal Reserve announced a new round of quantitative easing - pledging to buy $600 billion of government bonds - to prop up the ailing economy.

Claiming the US quantitative easing was "unbridled money printing", Xia said China should push for plans to stabilize the world's major currencies at the upcoming G20 summit.

In an essay published on Thursday elaborating his thoughts on reforming the international framework for prudent macroeconomic management, Xia warned that "another crisis would be inevitable" if the world failed to restrain the issuance of major reserve currencies, such as the US dollar.

Policymakers in emerging market economies criticized the Fed's decision of pumping money into the economy, as they fear the flood of cash will intensify asset-bubble risks and push up their currencies. Analysts said such countries might roll out more measures to curb capital flows.

World stock markets climbed on Thursday as the Fed move boosted liquidity. The benchmark Shanghai Composite Index closed at 3,086.94, a nearly seven-month high, while other major stock markets in Asia also responded positively as investors are betting on more money flowing into emerging markets.

Oil prices approached $86 a barrel thanks to the US quantitative easing plan.

High real estate prices in China's major cities and the country's well-performing stock market, which has rebounded about 30 percent from the July low, could receive a boost from capital inflows, analysts said.

Xia said he is concerned about asset-bubble risk in China as a spillover from US policy.

Pressure for yuan appreciation could also increase, analysts said.

"The quantitative easing policy might not fulfill the target of revitalizing the US economy as the country's financial system is still saddled by heavy debts, but the move will add pressure for yuan appreciation," said Li Daokui, central bank adviser and professor at Tsinghua University.

The central bank set the reference rate of the yuan at 6.6708 against the greenback on Thursday while the dollar continued to weaken. But Li said there is no need to "overly panic", and China's exchange rate should move at its own pace.

Li said there will be a substantial amount of speculative capital flow into China, but given the country's $5.5 trillion economy, the shockwave of "hot money" would be limited compared to its impact on Brazil and India.

"China is less sensitive or vulnerable to capital inflows given the comprehensive capital controls," said Louis Kuijs, senior economist with the World Bank.

"The quantity of capital inflows (into China) is smaller than other countries in Asia, and the risks are still manageable," Kuijs said.

Donna H. J. Kwok, an economist with HSBC, said the existing tight controls will keep out a tide of capital inflows.

Upward pressure on the yuan will increase, and keeping inflation contained is a more immediate concern for the government, Kwok said before predicting another 25 basis points interest rate hike before the end of the year.

China's central bank raised interest rates by 25 basis points in October for the first time in nearly three years to curb inflationary pressure after consumer inflation rose to 3.6 percent in September.

Richard Lambert, director-general of the Confederation of British Industry, called the latest US move a "logical step" because "it's clear that the economy has not recovered from the recession".

Lambert said he understands "China's concerns that such a loose policy will have implications for the relationship of the currencies between the two countries".

"I welcome China's policy to let the currency rise some more," he said as it would be "an error for China and the US" if the currency dispute worsened.

Li Xiang, Lu Chang, Zhang Chunyan and Zhang Haizhou contributed to this story.

Source:China Daily

 

[Brotherhood]

China leaps forward in WEF 2010 Financial Development Index - People's Daily Online November 04, 2010

The World Economic Forum (WEF) issued its 2010 Financial Development Report on Thursday, showing that China has advanced four places in the index, climbing up from 26th in 2009 to 22nd in 2010, among the 57 economies listed.

The advance, said the WEF, was bolstered by "improvements in non-banking financial services" and "a notable rise in its standing in the FDI," adding that a highly stable currency and low risk of sovereign debt crisis also contributed to the stability of China's overall financial system.

As to China's nonbanking financial services, the WEF noted vigorous activities across insurance (ranking 5th), IPO (ranking 1st) and Mergers And Acquisitions (ranking 6th), despite that securitization activity (ranking 45th) still "represents one area for further development."

The index indicates Asia economies continue to show strength in financial development, in spite of the Financial Crisis. China's Hong Kong SAR has jumped 2 places from the 5th place last year to the 3rd, while Singapore remained the 4th.

The United States reclaims top spot in index, though it was said to have "no change in absolute performance," followed by the United Kingdom, which falls from the top to the 2nd.

Source: Xinhua

 

[CardSharp]

'Firewall needed' to prevent cash surge - People's Daily Online November 05, 2010

PRECISELY why China can't allow its currency to float. Uncontrolled capital flow has destroyed more than a few developing countries economically.

 

[StingRoy]

PRECISELY why China can't allow its currency to float. Uncontrolled capital flow has destroyed more than a few developing countries economically.

It was obviously done to protect the local economy from the external factors which helped it ride the recession. But now with the US pushing the dollar liquidity in the market, you will start to see this advantage diminish... It is particularly scary not just for China, but all other global economies which are relying on the dollar.

Hopefully the recent US intervention buying back the treasury bonds will put more pressure on the Chinese economists to ponder floating the currency. I still doubt it will make it float totally in the market.

 

[ThatDamnGood]

PRECISELY why China can't allow its currency to float. Uncontrolled capital flow has destroyed more than a few developing countries economically.

Any economy in the world that is worth a damn will be "Mahathir-ian" soon enough, as per recommendation of the IMF. Some form of capital control will have to be put in place.

http://thestar.com.my/news/story.asp?file=/2003/9/4/nation/6205342&sec=nation

 

[CardSharp]

It was obviously done to protect the local economy from the external factors which helped it ride the recession. But now with the US pushing the dollar liquidity in the market, you will start to see this advantage diminish... It is particularly scary not just for China, but all other global economies which are relying on the dollar.

Hopefully the recent US intervention buying back the treasury bonds will put more pressure on the Chinese economists to ponder floating the currency. I still doubt it will make it float totally in the market.

As in Chinese economists will be forced to take profits? please explain.


Also QE2 is just another way to tax everyone holding dollars. Which sucks. The US is trying to inflate away it's debts and taking everyone with dollars down with them.

@ thatdamngood

It doesn't take a genius to see that the IMF was wrong.

 

[Brotherhood]

China will gain 80 million non-agriculture jobs in next decade - People's Daily Online November 04, 2010

China's effective labor supply will remain abundant over the next decade, and a decline in the growth rate of the working-age population is unlikely to be a barrier to overall economic expansion in China, according to a recent report by Morgan Stanley.

An average GDP growth of 8 percent per year through 2020 is achievable, the report said.

Wang Qing, Morgan Stanley's chief economist for greater China, predicted in the report that although China's working-age population is expected to increase by merely 20 million from 2010 to 2020, its urban and rural non-farm employment will increase by 80 million, lifting the share of urban and rural non-farm employment in total from 67 percent in 2010 to 75 percent in 2020.

Wang wrote that several long-standing distortions in China's labor market have driven a wedge between the working-age population and the effective labor supply. This is shown both by the distinct disconnection between the growth of GDP and the working-age population over the past 20 years as well as the current disproportionately high share of the rural population and employment in the primary sector.

Surplus rural labor force will remain a prominent problem in China. The primary sector represented as much as 35 percent of total employment in 2008. Although this ratio has already fallen sharply from 45 percent 10 years ago and 55 percent 20 years ago, it is still 1.7 and 2 times as high as the shares of South Korea and Japan, respectively.

Wang said that in the 1970s and 1980s, the growth rate of China's GDP was obviously proportional to the growth rate of employment and was also correlated with the growth rate of the labor force. However, the relationship between the growth rate of GDP and the growth rate of employment and labor force has disappeared since the early 1990s.

This reflected the effect of the rapid growth in labor capacity toward the strong economic growth. Meanwhile, the effect of the increase in the amount of labor supply toward economic growth is relatively small.

"The 'quantity' of employment is very important to workers along with the strong increase in labor force. However, it is the 'quality' of the labor force that can truly improve the labor capacity and has the greatest impact on economic growth," Wang said.

Wang said in recent years China has gradually relaxed the supervision of the labor force, allowing it to flow from rural areas to cities. China also accelerated the process of urbanization, promoted development in the western areas, launched large-scale public housing construction projects and provided better education. These policies can stimulate the labor supply as well as the rapid and substantial growth of labor capacity.
By People's Daily Online

 

[StingRoy]

As in Chinese economists will be forced to take profits? please explain.

No, I meant that the decreasing value of dollar in the recent market because of buy back of Treasury bonds will put pressure on the Chinese govt to ponder floating the currency valuation. That ways it could prevent the hot money flowing into developing markets thereby preventing hyper inflation.

 

[Brotherhood]

Economist: US exporting inflation to emerging markets - People's Daily Online November 04, 2010

The United States is exporting inflation to emerging economies, said Sun Lijian, vice dean of the School of Economics at Fudan University, wrote in a recent article, which urged China to address the problem of excessive liquidity.

The U.S. Federal Reserve launched a fresh effort to support a struggling U.S. economy Wednesday, committing to buy 600 billion U.S. dollars in government bonds despite concerns that the move could do more harm than good.

Low interest rate and a weak dollar will lead to a higher inflation rate and real effective exchange rate in emerging countries, Su said.

"The developed countries' excessively loose monetary policies will hurt themselves as emerging economies will lose economic vitality, and the outlook for global recovery will be unclear," he said

The Consumer Price Index (CPI), the main gauge of inflation in China, is likely to rise 4.1 percent in October after accelerating to a 23-month high of 3.6 percent in September, according to the Bank of Communications forecast released on Wednesday.

"Oversupply of liquidity at home, surging food prices, rising labor costs and pressures caused by imported inflation would mean very limited room for the index to drop," the bank wrote in the report.

Sun wrote that great attention should be paid to expanding credit pressure in the banking system, and the public's reluctant decision to invest in the property market in the first-tier cities is due to the lack of a perfect social security regime and concerns about more inflation risks in the future.

"A flexible measure to guard employment and curb inflation will be the main tune for China's monetary policy in the early period of the 12th Five-Year Plan," he predicted.

By People's Daily Online