China - Economic Data & News 02 (Nov08 - May09)

China - Economic Data & News 02 (Nov08 - May09)

Postby winston » Sat Nov 01, 2008 5:18 pm

b]China Manufacturing Contracts as Crisis Trims Exports (Update1) [/b]
By Li Yanping and Wang Ying

Nov. 1 (Bloomberg) -- China's manufacturing contracted as the worst financial crisis since the Great Depression eroded export demand.

The Purchasing Managers' Index fell to a seasonally adjusted 44.6 last month from 51.2 in September, the China Federation of Logistics and Purchasing said today in an e-mailed statement. That was the lowest since the gauge was launched in July 2005. A reading below 50 reflects a contraction, above 50 an expansion.
China's cabinet has pledged extra infrastructure spending to stimulate the world's fourth-biggest economy amid the global slowdown. The government has already lowered rates three times in the past two months, increased export rebates and cut property transaction taxes.

``The government needs effective stimulus measures to spur growth,'' said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. ``The external economic outlook is worsening rapidly.''

Manufacturing contracted in July for the first time since the survey began in 2005. It also shrank in August. The October index was a record low.

China's economy grew at the slowest pace in five years in the three months through September as export orders shrank and industrial production waned. The expansion cooled for a fifth straight quarter, to a 9 percent gain from a year earlier.

Global Slowdown

Chinalco Luoyang Copper Co., a Chinese processor of the metal, said orders fell 20 percent in the third quarter as domestic and international demand weakened.

The global slowdown is curbing demand for the nation's goods. The International Monetary Fund estimates that advanced economies will expand 0.5 percent next year, the slowest pace since 1982.

Falling property sales and prices in major cities are another drag on China's growth.

The index is based on a survey of more than 700 companies in 20 industries, including energy, metallurgy, textile, automobiles and electronics.

The output index fell to 44.3 in October from 54.6 in September, while the index of new orders dropped to 41.7 percent from 51.3. The index of export orders declined to 41.4 percent from 48.8, the statement said.

The inventory index climbed to 51.4 from 50.5, it said.
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Re: China - Economic Data & News

Postby millionairemind » Sat Nov 01, 2008 9:33 pm

Watch China for political instability in the next 6 months as more and more SMEs shut down due to falling demand... this will have repercussions due to the mounting joblessness in the country.

November 1, 2008, 2.39 pm (Singapore time)

China to be hit hard by global recession: BOC exec

SHANGHAI - A global recession will have a huge impact on China's economy while currency volatility is expected to add further pressure on the country's banks, a top executive at Bank of China (BOC) said on Saturday.

'Next year, the global economy is very likely to enter recession and the world's biggest economies, including the United States, Europe and Japan, are very likely to post negative growth and that will have a huge impact on China,' executive vice president Zhu Min told a financial conference in Shanghai.

'The impact of the crisis on China has just started to appear as China has already seen a sharp slowdown in industrial profit growth and fiscal income,' he said.

'The financial crisis will technically precede economic and political turmoil by eight to 12 months,' he added.


China's banks have enjoyed robust profits for years as the country boomed but earnings growth is now slowing as the economy cools from the impact of the global financial crisis.

Although China's banks have manageable holdings of sub-prime-mortgage-related debt, they are exposed to huge foreign currency trading risk from turbulent financial markets.

'The uncertainties in the world's currency markets have exposed the Chinese banking sector to higher foreign asset risk,' Mr Zhu said.

BOC, the country's flagship foreign exchange lender, said on Wednesday profit growth slowed to 12 per cent during the third quarter, from 43 per cent in the first half.

The lender had US$6.2 billion worth of debt issued by troubled US mortgage companies Freddie Mac and Fannie Mae by the end of September, and was carrying US$3.3 billion of sub-prime-related securities.

Mr Zhu said several factors will hurt the banking sector's bottom line such as the possible deterioration of banks' asset quality as economic growth slows, and shrinking interest margins due to the global trend of interest rate cuts.

He expects the industry to face tougher regulations and supervision of derivative products in future.

BOC's focus on trade finance loans means rapidly slowing world demand for Chinese goods will put additional pressure on the lender's loan growth and asset quality, Deutsche Bank said in a recent report.

China's economy grew 11.9 per cent in 2007, but that rate slowed to 9.9 per cent in the first three quarters of this year.

China's manufacturing sector contracted sharply in October, an official monthly survey showed on Saturday, providing more evidence the global financial crisis was taking a toll on the once roaring Chinese economy. -- REUTERS
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Re: China - Economic Data & News

Postby winston » Sun Nov 02, 2008 8:40 am

Chinese president calls for domestic demand boost

BEIJING: China's President Hu Jintao has called for a boost in domestic demand to maintain the nation's economic growth in the face of the global financial crisis, state media reported Saturday.

Hu said that governments at all levels should "strive to expand domestic demand, especially consumer demand," as he visited farmers in the northern province of Shaanxi, the official People's Daily newspaper reported.

"Currently, the fundamentals of our country's economic development are good," he told officials accompanying him on the visit on Wednesday and Thursday, according to the report.

But he admitted that "prominent contradictions and problems" existed in China's economy due to the crisis.

"We must maintain confidence, raise spirits, perfect our policies, strengthen our struggle," the paper quoted him as saying.

Hu's comments come amid mounting evidence China is starting to feel the pinch from the global economic downturn.

The country's GDP growth slowed to nine per cent in the third quarter of the year, the lowest growth figure since the second quarter of 2003, and the growth of its exports has also decreased.

The pace of expansion in exports in the first three quarters slowed down by 4.8 percentage points from last year, growing by 22.3 per cent to US$1.1 trillion, official figures showed.

Thousands of people have been laid off in recent weeks in southern China's export hubs as toy and other factories that have sold to the developed world have gone bust.

Amid such a backdrop, economists and government officials have called for a boost in domestic economic growth to cushion the impact of the crisis.

Already, China has cut interest rates three times since September, and some analysts are expecting a fourth rate cut before the end of the year.

Authorities have also decided to invest heavily in infrastructure, including US$300 billion into its rail system, as a stimulus measure.

Keeping up robust growth is seen as a vital policy objective in Beijing. The government is eager to create enough jobs to keep unemployment down and prevent social unrest.

- AFP/yb
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby winston » Mon Nov 03, 2008 1:31 pm

Domestic growth to take hit from global crisis, warns Wen

The mainland's economic growth will take a hit from the global financial crisis, even as inflation remains a serious challenge, Prime Minister Wen Jiabao said in a signed article.

"The global financial turmoil and the economic downturn are getting worse,'' Wen said in the article carried by Qiushi, a journal published by the Communist Party.

"Inflationary pressure remains large as the world oil price is still at a high level despite some corrections. All these negative factors have affected and will continue to affect China,'' he warned.

Wen said that maintaining quick growth should "take an even more prominent position'' among the government's priorities.

AGENCE FRANCE-PRESSE
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby millionairemind » Mon Nov 03, 2008 3:16 pm

November 3, 2008, 1.32 pm (Singapore time)

Global crisis makes 2008 China's worst year in recent times: Wen

BEIJING - The global financial crisis has made 2008 the worst year for China in recent memory, with growth and inflation posing serious challenges, Prime Minister Wen Jiabao said in a signed article.

'We must be aware that this year is the worst in recent times for our economic development,' Wen said in the article, which was carried by Qiushi, a journal published by the Communist Party.

'The global financial turmoil and the economic downturn are getting worse. Inflationary pressure remains large as world oil prices are still at a high level despite some corrections.'

'All these negative factors have affected and will continue to affect China,' he warned.

China's growth slowed to nine per cent in the third quarter of this year, the lowest quarterly figure since the second quarter of 2003, partly due to a slowdown in exports.

China's trade surplus for the first nine months of the year reached US$.9 billion, down 2.6 per cent year-on-year, according to customs data.

Mr Wen said maintaining quick growth should 'take an even more prominent position' among the government's priorities.

Meanwhile, he called for a continued focus on inflation, which has emerged as a top policy concern over the past year.

'We should fully grasp the harm that inflation can cause to economic growth, people's livelihood and social stability,' he said.

The consumer price index rose 4.6 per cent in September from a year earlier, compared with a 12-year high of 8.7 per cent in February.

'We should... increase the focus, flexibility and effectiveness of the macro control policies, so as to maintain a balance between achieving stable and relatively fast economic growth and curbing inflation,' Mr Wen said.

China has cut interest rates three times since September, and some analysts are expecting a fourth rate cut before the end of the year.

Authorities have also decided to invest heavily in infrastructure, including US$300 billion in the nation's rail system, as a stimulus measure.

In his article, Mr Wen also urged a boost to domestic consumption to reduce the country's dependence on exports and therefore its exposure to external risks.

'We have to work hard to alleviate and avoid excessive dependence on foreign demand, because it squeezes the real demand inside the country and increases the risk of external impacts,' he said.

'Given the current world economic downturn and the serious export situation, encouraging domestic demand, especially consumption, is particularly important for expanding economic growth potential... and preventing a slowdown.'

He added the government would seek to reform the country's income distribution to 'ease and remove the worries that had prevented residents from consuming more.' -- AFP
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby millionairemind » Thu Nov 06, 2008 2:55 pm

This bears closer scrutiny. It has the potential to cause political havoc.

A book that I read a few years ago "The Coming Collapse of China" paints such a dire scenario, though I think it was written 5 years too early. If it hits the mkt now now, it might be more appropriate.

Chinese migrant workers struggle amidst global economic woes
By Simon Rabinovitch ReutersPublished: November 5, 2008

BEIJING: Short of food and running low on cash, a group of men huddled under a bridge in Beijing and waited for someone, anyone, to come by and offer them work - any work.

"This is the worst I've ever seen it," said a day laborer in his 40s who, in better times, had often been hired for construction crews.

"Normally I can get a job in a few days, but I've been out here a month already," he said.

The man, who asked to be identified by his surname, Ren, said he was contemplating giving up the life of a migrant worker in the Chinese capital and returning to his patch of farmland in Hebei Province.

As the global economic slowdown takes its toll on China, it threatens to swell the ranks of its unemployed, undoing impressive income gains made in recent years and undermining the "harmonious society" that the government prizes.

Chinese migrant workers struggle amidst global economic woes Hit especially hard are the rural migrants who have long streamed into Chinese cities to build office towers, to clean streets and to work in factories. There are estimated to be 130 million like Ren, laborers who are not legally registered as living in the cities where they work and who therefore do not show up in official employment statistics. Evidence is mounting that their prospects have turned bleak in just a few months.

The government, which bases its quest for social stability on economic strength, has responded to the economic troubles with tax breaks, interest rate cuts, big spending projects and pledges to do more.

The suddenness with which the Chinese economy has lost momentum is Beijing's immediate concern. Annual growth in the third quarter sank to 9 percent, well down from its scorching 11.9 percent pace in all of last year and putting the country on track to record its first annual expansion since 2002 to be measured in single digits, not double digits.

Since then, the ravages of the global financial crisis have raised the specter of a further slowdown, to 8 percent. Most countries would salivate at such growth, but for China it is a tipping point: Anything less, experts say, and the economy cannot create enough jobs to keep up with the mass of humanity, at least 15 million people, entering the labor market every year.

"If economic growth fell below 8 percent there would be tension, social tension, complaints and job losses," said Chen Xingdong, chief economist at the BNP Paribas bank in Beijing.

"You can understand why the Chinese government seems to have become desperate about delivering all kinds of stimulus measures," he added.

A small taste of exactly what the government wants to avoid came last month in the southern city of Dongguan, an exporting hub near Hong Kong. About 1,000 laborers protested outside the toy maker Smart Union's factory, demanding unpaid wages after the company, battered by the downturn overseas, closed its doors.

In Wenzhou, an export powerhouse in the east, about 20 percent of workers have lost their jobs, prompting an exodus to the countryside, the local news media recently reported.

"We must be crystal clear that without a certain pace of economic growth, there will be difficulties with employment," Prime Minister Wen Jiabao warned in the latest issue of the ruling Communist Party's ideological journal, Seeking Truth. "Factors damaging social stability will grow."

Pain has spread throughout China, beyond its export sector. Industrial production slumped in September to its weakest annual growth in six years, and real estate development has slowed as prices have faltered. Business managers have started to cut staff, a pair of recent surveys showed.

Just last year, companies complained that the surging Chinese economy had led to labor shortages and had forced wages higher.

But workers' newfound bargaining power may have been short-lived. In a south Beijing parking lot, groups of men sat dejectedly on the curb as they came to the end of another day of waiting in vain for work at a job market.

"I've been here for three weeks and not seen one boss come past," said Wu Xiao, 38, who has worked on building sites in the capital for five years. "It used to be bosses everywhere

Wu's oily hair and bloodshot eyes bore testimony to the 20 nights he said he had slept in a railroad station, splashing water from a public restroom sink on his face to wash every morning.

"I'd go back to my hometown, but I don't even have the money for the train ticket," said Wu, who had come to Beijing from Henan Province.

Migrant laborers have little to fall back on when they lose a job.

Their social protection is quite low and their jobs tend to be less formal, often with no legal framework, so they are more susceptible to shocks," said Du Yang, a labor economist at the Chinese Academy of Social Sciences.

Under the Chinese social security system, a person can collect welfare payments only in the city where he holds a hukou, or household registration permit, usually his birthplace. That means the vast majority of rural migrants have no coverage.

China has begun to strengthen its social security system, but with tax revenues plummeting as the economy slows, big improvements for migrants are off the table for now. The farms they left behind in search of better lives are their only safety net.

"Most have land in the countryside, so they could always go back to that," said Wang Xiaolu, deputy director of the National Economic Research Institute in Beijing.

"If they've been in cities for a long time, they might find it tough to readjust to the countryside. Conditions are more difficult and income is lower," Wang said.

The average farmer's income was 4,140 yuan, or $604, last year, less than one-third the urban average.

Many of the thousands of sometimes deadly protests that erupt across China every year have their roots in rural discontent over economic hardship.

Remittances from migrant laborers have been among the best ways of transferring wealth to the countryside, making the loss of urban jobs all the more worrying for a government that sees easing the imbalance between cities and farm as critical for social peace.

White-collar workers are also feeling the sting from the slowing economy, if not in quite the same way as migrant laborers. Employees at Citic Securities and Haitong Securities will take pay cuts of as much as 30 percent as the brokerages try to shave costs without laying off workers, according to company sources who spoke on the condition of anonymity.

At an official job center in Beijing, Huo Yong, an electrician, sat in front of a screen listing job advertisements, writing down one offer for 1,500 yuan a month.

"If you have skills like mine, you should do fine," he said. "But see that salary? Speak to the boss in person and I am sure he would say it is lower."

China has pinned its hopes on a rise in domestic demand making up for sagging exports. That will be hard to achieve if people are making less money.

"Consumption is definitely going to be affected, because income will be affected," said Chen of BNP Paribas. "By the first quarter of next year, we should be able to see quite a dramatic slowdown in retail sales."

Curiously, the one economic gauge that few expect to deteriorate is the unemployment rate. Officially, China's urban jobless rate was 4.0 percent at the end of September, unchanged over the past 12 months.

The problem is that the figure measures only legal urban residents who actually report that they are out of work and register for unemployment benefits. It excludes the tens of millions of migrants laboring in cities. Economists think China's real jobless rate could be twice as high as the government's figure.

Trouble in the months ahead may, officially at least, go unreported.

"The trend is clear. Unemployment is rising. That's for sure, but by how much, we don't know," Chen said. "And if the official statistics do show the unemployment rate going up strongly, then the economy would really be in big trouble."
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby kennynah » Thu Nov 06, 2008 3:01 pm

imho, China can live with inflation to some extend, but it will falter greatly if it allows for unemployment to surge... i suppose this is one reason they will continue to use monetary policy; such as rate cuts, to bolster economic activities...

and since their economic slowdown is largely external conditions, unlike USA, any aggressive monetary policies will theoretically boost economic activities....

i am actually not too concerned that China will collapse anytime soon.... they have a huge population that will drive internal consumption thereby maintaining their GDP growth; albeit at a slower growth in the next 2-3 years...
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby winston » Thu Nov 06, 2008 3:23 pm

kennynah wrote:i am actually not too concerned that China will collapse anytime soon.... they have a huge population that will drive internal consumption thereby maintaining their GDP growth; albeit at a slower growth in the next 2-3 years...


Internal consumption will not be able to offset the slowdown in exports. I'm starting to see the middle class tightened now. Dont forget, the middle upper class has also lost a lot in properties and the stock markets.

The only bright spot is that the govt still has alot of money to spend on infra projects.

Taxes are high so they can also reduce that as well. However, it may not flow back in to the economy.
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby LenaHuat » Thu Nov 06, 2008 5:14 pm

8% GDP growth is a recession for China. :mrgreen:
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Re: China - Economic Data & News (Nov 08 - Jan 09)

Postby winston » Fri Nov 07, 2008 8:01 am

China data may show sharp deterioration
Katherine Ng

Despite praise of China as a welcome oasis in the world economy, some economists believe upcoming data will reflect deteriorating conditions, with exports in October shrinking considerably.

Economic growth for the fourth quarter was cut to as low as 4.1 percent by JPMorgan chief China economist Frank Gong and 5.8 percent by Credit Suisse China economist Dong Tao. The full-year GDP growth forecast for 2008 was revised to 8.7 percent and 2009 to 7.2 percent by the Credit Suisse economic team.

And Morgan Stanley economists Denise Yam and Wang Qing noted: "Although export growth was more resilient than expected in September, the sharp deceleration in import growth in recent months suggests manufacturers [are] destocking ahead of the demand downturn."

Both Gong and Wang believe exports in October could be down by as much as 20 percent. Industrial output has slowed faster than exports, Wang said, indicating an economy deteriorating quicker than expected. Credit Suisse China strategist Vincent Chan expects corporate earnings to decline by at least 6 percent in 2009.

Still, Wang sees inflation slowing continuously - to 7.9 percent for producer inflation and 4.3 percent for consumers.

The International Monetary Fund takes a more optimistic view, predicting China will maintain steady growth.

China releases macro data for October next week.
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