China - Economic Data & News 01 (May 08 - Oct 08)

Re: China - Economic Data & News

Postby winston » Sun Oct 12, 2008 7:00 am

China: all bets are off
Michael Sheridan in Hong Kong

FROM Hong Kong to Shanghai, shuttered factories and laid-off workers tell a tale of how the world credit crisis may end the Chinese export miracle and pose the greatest threat to economic reforms since they began in 1979.

Bankruptcies and unemployment are climbing, while political pressure is mounting from the left on policymakers. Some officials are openly challenging the export-driven model that led China to stack up foreign reserves of $1,800 billion (£1,060 billion). There has been little effort to cover up the distress, perhaps because of rivalries between factions of the Communist party.

China Central Television, for example, recently broadcast a report prepared for the cabinet saying that 67,000 companies have gone bankrupt in the first half of the year and 20m workers have lost their jobs.

The latest phase of the crisis, in which stock markets fell sharply across Asia, forced the authorities to reverse policy by cutting interest rates and restoring subsidies to exporters.

However, the most important, if understated, signal of China’s response came in the currency-futures market, which now prices in a 2.5% fall in the value of the yuan against the dollar over 12 months.

That is a defeat for the strong-currency policy urged on China by US Treasury secretary Hank Paulson, who boasts of his leadership ties forged during 70 visits to Beijing on behalf of Goldman Sachs.

The yuan has strengthened by more than 20% against the dollar since 2005. Halting its rise is the one sure way to restore a cost advantage to exporters, although it would infuriate China’s trade partners in Europe and America.

This crisis has already cast doubt on fundamental assumptions about global trade, though, and presents China’s leaders with another serious domestic challenge.

Their propaganda triumph at the Olympics was overshadowed by riots across Tibet, terrorism in the Muslim far west and an earthquake that killed 60,000 people. There were also scandals over fake or contaminated goods, most recently milk products tainted with melamine that have killed and hospitalised many children.

Now their main claim to legitimacy – a strong economy – is under pressure as Chinese stock markets have fallen more than 60% while real estate in the nation’s most liberalised city, Shenzhen, is down by 40%.

Critics at home have openly challenged their policy of investing dollar reserves in US Treasury bonds. China holds $519 billion, second only to Japan, which has $593 billion.

These investments kept US interest rates low, funding the sub-prime mortgage boom and the war in Iraq. For China, though, they could turn out to be a bad deal.

Most ordinary Chinese are unaware that foreign-exchange reserves are not free assets but represent liabilities against domestic currency issued by the central bank to “sterilise” dollar inflows earned by exporters. Even so, public opinion does grasp that every percentage point fall in the value of the dollar against the yuan represents a loss for China in its own money.

There is also angry popular debate about state-directed forays into foreign acquisitions, such as loss-making investments in Morgan Stanley, the US investment house, and Fortis, the recently nationalised European bank.

A significant fall in exports, leading to more unemployment and company failures, could intensify unrest and destroy confidence in private enterprise.

That would strengthen the hand of Marxist intellectuals – who, contrary to wishful thinking in the West, have not vanished from China. That is why economic reformers are striving to avert a sharp slow-down.

In August, production of fridges fell 14% compared with a year earlier, said Huo Dufang, chairman of an industry association. Output of a i r - c o n d i t i o n i n g units fell 7.7% and of microwave ovens by 6.5%, he said.

“As more and more developed countries run into a financial crisis, China’s exports will contract exponentially,” said Wang Jie, an economic analyst in Shanghai. “I forecast that a third of small and medium-sized enterprises in the export sector will go bankrupt by the second quarter of 2009,” he added.

In the export-orientated provinces of Guangdong, Zhejiang and Jiangsu, the slowdown has already cut a swathe through businesses.

Out of some 6,000 shoe factories in the Pearl River Delta, 2,331 have gone bankrupt, according to a trade magazine.

One in five small or medium-sized enterprises in Zhejiang have also gone under, said the Securities Daily, a business newspaper.

Scenes of angry workers and creditors besieging the premises of the Golden Sun group were shown on local television, which reported that its boss, Zhang Zhengjian, had fled owing almost £100m.

And last week the China Youth Daily told the story of how an employee, Xiao Gao, showed up early for work at the biggest printing and dyeing group in Zhejiang to find the offices stripped of computers and strewn with documents.

Police were looking for the owner and his wife, who are reputed to owe £85m to state-owned banks and a further £57m to the institutions known in Chinese as “underground banks”.

The latter, which levy interest at up to 40% a year, have proliferated in a landscape of commercial desperation despite the fact that Chinese businessmen fear their sinister figureheads and their drastic methods of debt collection.

“At first the government thought that Chinese companies could export more to Europe while America was in a slowdown but now the crisis has spread,” said Wu Jian, an analyst at Ping An insurance.

Optimists can argue that China is a vast country of 1.3 bill i o n p e o p l e , w h i c h h as absorbed far worse shocks in the past 50 years than a down-turn in exports. This ignores the reality that the export zones of south and east China have been the locomotives of economic reform, generating prosperity and helping to create a class of Chinese with a stake in political stability.

Not surprisingly, some officials are openly arguing that China has got its priorities wrong. Wen Zongyu of the Ministry of Finance research centre, said: “We need to admit that most of our exports were low-quality, without brand value or added knowledge, which meant that most of our exports to America and Europe were sold to poor people.”

Speaking on state television, Wen said: “Poor people in America and Europe are having a hard time, so the fall in consumption will directly affect China’s production and exports.”

British businessmen visiting China last week to attend the big annual trade fairs disagreed with this analysis. “In a recession, the top end and bottom end of the market do well but t h e m i d d l e m a r k e t g e ts squeezed,” said one. “Unfortunately for China, that’s exactly where they’ve been trying to shift their exports.”

Yet some Chinese thinkers are already exulting, saying the crisis is proof of the superiority of the Beijing model of state-dominated capitalism over its free-market counterpart.

Vindication of that theory will come at a high price.

The title of a banned book by an economist, circulating to great enthusiasm on the internet in Chinese last week, s a i d i t a l l : C h i n a - T he Twilight of a Miracle.

http://business.timesonline.co.uk/tol/b ... 925762.ece
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Re: China - Economic Data & News

Postby winston » Mon Oct 13, 2008 12:38 pm

China to ease monetary policy further, boost infrastructure spending - JPMorgan

BEIJING (XFN-ASIA) - China is likely to ease monetary policy further, alter fiscal policies and boost spending on infrastructure to bolster growth in light of the turmoil on world financial markets, JPMorgan said.

Following a meeting of the country's ruling Communist Party, JPMorgan noted that Beijing recognizes the need to expand domestic demand and maintain stability in China's financial system.

The party's central committee also agreed to a package of reforms to lift income among the rural population.

"The Chinese leadership clearly recognizes the challenges facing the domestic economy and capital markets, in view of the unprecedented global events of recent weeks," said Jing Ulrich, head of China equities at JPMorgan.

"We expect the government to employ a multi-pronged strategy, comprising a further easing of monetary policy, as well as more proactive fiscal programs to bolster growth," she said in a note.

High levels of infrastructure spending are likely in the coming months in order to offset the slowdown in China's property sector, Ulrich said.

A key objective will be to maintain employment and household consumption, and Beijing could raise the threshold for personal income tax in an effort to increase disposable income levels, Ulrich added.

"The cyclical outlook for the Chinese economy depends largely on whether domestic consumption will be able to pick up some of the slack," she said.

Agricultural land reforms will also help farmers' incomes and support the government's objective of enhancing agricultural productivity and rebalancing the sources of economic growth, Ulrich said.

There were few details about rural reforms made available after the party meeting, but a draft report of the plan suggests that a key reform would be to establish in law the rights of farmers to transfer or rent land-use rights to other individuals or companies, Ulrich noted.

"By allowing farmers to participate in a market for agricultural land, the reforms could reduce the rural-income gap and promote modern farming practices through a framework permitting land transactions to large-scale farm operators," she said.

She added that reforms are expected to benefit companies involved in rural infrastructure construction, such as Anhui Conch. Fertilizer companies like Sinofert could also benefit, along with agricultural machinery producers, Ulrich said.

Anhui Conch shares were trading up 3.75 pct at 29.05 hkd in Hong Kong, while Sinofert shares were down 3 pct at 2.91 hkd.
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Re: China - Economic Data & News

Postby financecaptain » Tue Oct 14, 2008 11:38 am

Bankruptcy in China

Silent busts
Oct 9th 2008 | HONG KONG
From The Economist print edition


More Chinese businesses are collapsing—though you would never know it


OFFICIALLY, only a few thousand companies will declare bankruptcy this year in China. Unofficially, local manufacturing groups believe many more than that will go out of business in the southern province of Guangdong alone. And the underlying causes—falling demand for exports, higher material costs, stricter labour laws—are hardly unique to that province. But in contrast to Europe and America, where business failures are meticulously tracked, the only trace left by most of these firms will be rusting locks on their old front gates.

This is because Chinese business owners who wish to shut down their companies have three options: to reach informal agreements with employees, trading partners and the government; to file under the auspices of a court; or to walk away. Each has its drawbacks.

A Shenzhen manufacturer who recently tried to close by informal agreement describes the process as almost impossible. He had to negotiate separately with over a dozen government agencies, including tax, labour and even the fire department; each had demands that changed by the day. Then there were skittish suppliers, one of whom blockaded his firm’s entrance. “Everyone just wanted more money,” he says. “That is why most people just shut down overnight.” The only thing everyone agreed on was the need to avoid the local courts.

Last year a new bankruptcy law came into effect, but it is incomplete and poorly understood. Even firms that might recover by restructuring under court protection are reluctant to use it, says Helena Huang of Kirkland & Ellis, a law firm. In the past, bosses often preferred to run a business down to its last yuan before acknowledging problems, at which point there was little to reorganise. Even under the new law, it is unclear whether lenders who step in after a bankruptcy have priority over old claims, undermining any incentive for a would-be backer to give a firm a second chance.

As a result, any reorganisations that do take place often happen informally. One local municipal government, Ms Huang says, recently bailed out a big local firm because it feared that a collapse would harm local jobs and its own reputation—and this is hardly uncommon. There are quiet bail-outs, she adds, even among publicly listed companies.

More than 30 companies on the national stockmarkets have recently failed, says Alan Tang of Grant Thornton, a consultancy. But in many cases control has been acquired by other firms to engineer a “backdoor listing”, without the lobbying and delays common in China. Evidently some Chinese entrepreneurs continue to believe that a listed firm’s ability to raise public capital is worth having—if not now, then one day.
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Re: China - Economic Data & News

Postby millionairemind » Fri Oct 17, 2008 7:37 pm

Massive layoffs coming. This will contribute to social instability as the Gini Coefficient in China is way above norm, bordering on social instability.

October 17, 2008, 12.28 pm (Singapore time)

China toymaker Smart Union lays off 6,000

BEIJING - A Chinese toy maker that exported to big US brands such as Mattel and Disney has shut down due to the financial crisis, leaving more than 6,000 people without work, state press reported on Friday.

Smart Union closed its factory doors in the southern Chinese export hub of Dongguan this week, leaving its workers stranded outside the plants, the China Daily reported.

'The main reason for the closure is we are too dependent on the US market, which has become sluggish,' said Ms Xu Xiaofang, a Smart Union human resource worker, according to the China Daily.

Rising labour costs, expensive raw material prices and the appreciation of the Chinese currency, the yuan, had also contributed to the problems, Ms Xu said.

Smart Union announced to the Hong Kong stock exchange, where it is listed, a loss of HK$201 million (US$25.92 million) in the first half of the year.

It was unclear if the factory had halted production temporarily, or if it would be closed for good.

Smart Union had sold many of its products to US toy giants Mattel and Disney, according to the China Daily.

'After losing money for the first half of the year, its cash flow finally dried up,' the paper said.

'The workers... have become the latest victims of the worldwide financial tsunami.'

Chinese state press had already reported this week that more than half of the nation's toy exporters had gone bust in 2008, hit by rising production costs, the stronger yuan and tightened safety standards for their products.

A total of 3,631 enterprises that made toys for export, or 52.7 per cent of all such companies, had gone out of business in the first seven months of the year, Xinhua news agency reported.

The businesses were mainly smaller producers with an export value of less than 100,000 dollars, it said, citing a report by the General Administration of Customs.

China is the world's largest toy producer and exporter, sending about 17 billion of them to overseas markets in 2007, according to Chinese customs data. -- AFP
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Re: China - Economic Data & News

Postby millionairemind » Mon Oct 20, 2008 10:27 am

China's GDP Grew 9% in Quarter, Slowest Pace in Five Years

By Kevin Hamlin and Li Yanping

Oct. 20 (Bloomberg) -- China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.

The median estimate of 12 economists surveyed by Bloomberg News was for a 9.7 percent expansion, after a 10.1 percent gain in the previous three months. The statistics bureau released the data in Beijing today.

China may cut interest rates for the third time this year after weaker export orders and factory closures for the Olympic Games damped industrial output. The nation will raise investment in infrastructure and boost export-tax rebates to protect the economy from the increasing risks posed by the financial turmoil, the cabinet said yesterday.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

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Re: China - Economic Data & News

Postby winston » Fri Oct 24, 2008 4:22 pm

Strong words...

=================================================

Global crisis increases uncertainty for China-Hu

BEIJING, Oct 24 (Reuters) - China is doing all it can to counter the international financial crisis, which has been a "severe shock" to the global economy and increased uncertainties for China, its leaders told the opening ceremony of an Asia-Europe meeting on Friday.

"The global financial crisis has clearly increased the uncertainties and unstable factors in the Chinese economy's development," President Hu Jintao said.

"China's economic growth faces various hardships and challenges." Beijing is hosting a summit of 27 European Union member states and 16 Asian countries to discuss the global downturn, climate change and international security.

"The global financial crisis has been constantly spreading and worsening, creating a severe shock to global economic growth," Chinese Premier Wen Jiabao told the opening of the summit.
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Re: China - Economic Data & News

Postby winston » Fri Oct 24, 2008 9:07 pm

Southern China to shed millions of jobs as economic crisis bites

DONGGUAN: At least 2.7 million factory workers in southern China could lose their jobs as the global economic crisis hits demand for electronics, toys and clothes, according to industry estimates.

The region has seen massive export-driven expansion in recent years by supplying the world with cheap consumer goods, but rising production costs and falling US and European demand have marked a swift end to the boom.

Now 9,000 of the 45,000 factories in the cities of Guangzhou, Dongguan, and Shenzhen are expected to close before the Chinese New Year in late January, the Dongguan City Association of Enterprises with Foreign Investment estimates.

By then, the association expects overseas demand for products from the three manufacturing hubs to have shrunk by 30 per cent, as the knock-on effects of the US housing market collapse and credit crunch filter down to Chinese workers.

"I am afraid it is not going to look good on the Chinese government if the decline of the export-led industries and the unemployment problem continue to worsen," Eddie Leung, the association's president told AFP.

Leung, also a member of the Chinese Manufacturers' Association, said the estimate of 2.7 million job losses was conservative, given that many of the larger factories in Guangdong province employ thousands of workers.

One of them, Hong Kong-listed Smart Union, a major toy manufacturer in Dongguan supplying US giants Mattel and Disney, closed its doors last week, leaving 7,000 workers out of work and with several weeks of back pay owed.

Clement Chan, chairman of the Federation of Hong Kong Industries, said a quarter of the 70,000 Hong Kong-owned companies in southern China, 17,500 businesses, could go to the wall by the end of January.

Describing the likelihood as a "worst case scenario," he said Hong Kong firms in the region employed a total of 10 million workers, but did not want to speculate on the extent of possible job losses.

While small and medium-sized factories are especially prone, the threat of lay offs looms just as large over the region's manufacturing giants, further squeezed by the appreciation of the yuan.

Harry To's Mansfield Manufacturing is a classic example of the spectacular growth in China's industrial heartland over the last three decades.

To started a metal business from a small room in Hong Kong in 1975. In 1991, he joined hundreds of other Hong Kong entrepreneurs moving their production across the border into China to take advantage of cheap labour and land.

He now employs 8,500 workers in 11 factories in China and Europe. His six factories in Dongguan cover 140,000 square metres.

To's company, which is now a subsidiary of Singapore-listed InnoTek Ltd. supplies metal components for cars, plasma televisions, printers and other electrical appliances to Japanese brands including Canon, Toshiba, Epson, Minolta and Fuji-Xerox.

Business for the company, among the largest in its field in China, has grown by 40 per cent annually in recent years, but with credit being harder to come by, no manufacturer is safe, he said.

"With banks being so tight on their lending policies now, bringing down a factory overnight has now become very easy."

All his expansion plans have had to be put on hold.

"Some of our long-time Japanese and European clients have asked us to stop producing for them in the next two to three weeks," he said.

"They said they did not want to have too much stock piled up in their warehouse as demand continues to dwindle."

To recently started building a new 70,000 square metre factory in Dongguan and was planning to hire 2,000 more workers later this year. But now, all work on the unfinished factory has stopped until more orders roll in.

"No one would expand their business when the prospects for the entire manufacturing industry look so grim," he said.

Instead of hiring more workers, To is looking at cutting 1,000 employees across his operations.

But far from being downhearted, he is shifting part of the company's export-led production to developing energy-saving electrical appliances for the domestic market, which he sees as weathering the current financial turmoil.

"In the long run, I am confident that mainland Chinese consumers' purchasing power will keep rising as their Western counterparts continue to lose out."

- AFP/yb
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Re: China - Economic Data & News

Postby winston » Sat Oct 25, 2008 10:00 pm

Should be good for the Steel and Railroad stocks ( which were affected by forex losses )...

==================================================

China to invest in rail network as stimulus measure

BEIJING: China will invest nearly 300 billion dollars in its overburdened rail system as a stimulus measure aimed at blunting the impact of the global financial crisis, state press said on Saturday.

The investment is part of plans to extend the country's railway network from the current roughly 78,000 miles to nearly 100,000 miles by 2010, Shanghai's Oriental Morning Post reported.

The Beijing News quoted a rail official as saying that, while the network needed extending, the massive investment of 292 billion dollars was also intended to help lift the nation's economy as it suffers amid the global woes.

"New rail investment will become a shining light in efforts to push forward economic growth," railway ministry spokesman Wang Yongping was quoted saying.

China's economy recorded its slowest growth in five years at 9.0 percent in the third quarter of 2008.

The situation has looked increasingly dire in recent days with export-dependent factories closing and laying off thousands of workers, with warnings from industry heads of much worse to come.

The China Daily newspaper said the rail investment plan had been approved by the State Council. About 1.2 trillion yuan (about 170 billion dollars) had already been allocated, it said.

The paper quoted a government policy adviser saying the plan was similar to China's successful strategy for warding off the Asian financial crisis of the late 1990s.

"In 1997, we dealt with the Asian financial crisis by stimulating domestic economic growth through investment in the construction of highways," policy advisor Zheng Xinli was quoted as saying.

"This time the money will go to improving the rail network."

China's railway network is one of the most extensive in the world, but has come under pressure as the nation's economy has boomed, giving millions more the opportunity to travel.

Among them, more than 200 million migrant workers are estimated to have left their homes in the countryside for work in urban or coastal areas.

The vulnerability of the rail network was laid bare last winter, when fierce snowstorms crippled China's transport systems, stranding millions of passengers trying to return to their homes during the peak Chinese New Year travel period.


- AFP/so
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Re: China - Economic Data & News

Postby millionairemind » Tue Oct 28, 2008 10:03 pm

This is getting very bad for China's image. Who dares to buy Chinese food stuff???

Suspect eggs pulled off shelves in southern China
Posted: 28 October 2008 1406 hrs

BEIJING: Eggs suspected of being tainted with the industrial chemical melamine have been pulled from shelves of major retailers in southern China, state press reported Tuesday.

Retailers in Guangzhou city began recalling eggs produced in northeast China after Hong Kong authorities announced over the weekend the discovery of melamine in mainland Chinese eggs, the Guangzhou Daily said.

French retail giant Carrefour and other domestic retailers such as Huarun Wanjia and Baijia removed the "Kekeda" brand of eggs produced by the Hanwei Group, one of China's biggest egg producers, the report said.

The contaminated eggs in Hong Kong were from Hanwei.


Four children have died of kidney failure and 53,000 fallen ill in China this year after drinking milk or consuming dairy products laced with melamine, which is usually used in making plastics and fertilisers.

The melamine was added into the milk to give it the appearance of having higher protein levels.

The discovery of melamine in eggs has raised concerns about contamination spreading through China's food chain.

A UN agency called Tuesday for China to immediately disclose if an industrial chemical found in dairy products had been used in livestock feed and contaminated the wider food chain.

The recent discovery of melamine in mainland chicken eggs sold in Hong Kong has triggered worries that the chemical was present in a wide range of foods such as farm-raised meats and fish, a UN official said.

Zhang Zhongjun, programme officer with the UN Food and Agricultural Organisation, told AFP that China's agriculture ministry was investigating the possibility that melamine had been mixed into farming feed.

“But we do not know the details of the investigation... we want them to immediately report to us the results of their findings," Zhang said.

"If the feed is found to be contaminated, then there is the possibility (that pork, chicken, fish and beef could also be contaminated)."

Zhang said that feed producers could have laced their products with melamine to falsely boost protein content, similar to the methods of milk producers in a scandal that has left China's dairy industry in shambles.


The Hanwei Group has refused to comment on whether its eggs were tainted with melamine. Phone calls by AFP to the company headquarters went unanswered on Tuesday.

Press reports said Beijing branches of Hanwei denied the existence of tainted eggs.

- AFP/yb
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Re: China - Economic Data & News

Postby millionairemind » Wed Oct 29, 2008 10:15 pm

China cuts interest rates for third time in six weeks
Analyst says more easing likely in coming months

By Michael Kitchen, MarketWatch

Last update: 9:30 a.m. EDT Oct. 29, 2008NEW YORK (MarketWatch) - China's central bank said Wednesday it is cutting its key one-year interest rates by just over a quarter-percentage point, continuing its recent easing trend as it focuses on slowing economic growth.

The People's Bank of China said on its Web site that it was reducing the benchmark one-year deposit rate by 27 basis points to 3.60% from 3.87%. It also cut the one-year lending rate 27 basis points to 6.66% from 6.93%. A basis point is 1/100th of a percentage point.

J.P. Morgan's China Equities head Jing Ulrich said Wednesday that the move - the third rate-cut action in the last six weeks - comes as the Chinese economy appears to be slowing more sharply than previously expected.
China's announced earlier this month that its gross domestic product grew by a less-than-expected 9.0% in the third quarter, marking the fifth straight quarter in which growth has slowed. See full story.

Ulrich said that announcement also comes in the middle of a relatively weak earnings season for Chinese firms.
"We believe that China's policymakers will consider further [bank reserve ratio] and interest rate cuts in the coming months and draw on its fiscal resources to bolster investments in infrastructure," Ulrich said.

"In addition, the government may introduce additional targeted measures to support the export sector, property and financial markets, domestic consumption and rural reform. China is in a position of relative fiscal strength, having recorded a budget surplus of 1.25 trillion yuan ($183 billion) in the first nine months of 2008," Ulrich said.
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