Posts tagged ‘Economic growth’


Why China Needs Such Rapid GDP Growth: More Jobs – Businessweek

As China frets about meeting its target of about 7.5 percent growth in 2014, it’s time for more stimulus. The State Council, China’s cabinet, announced plans this week to further expand railways across the country, renovate dilapidated urban housing, and provide new tax breaks for small businesses. Many analysts are expecting a return to looser credit policies this year as well.

But what China considers unacceptable levels of gross domestic product growth would be the envy of most other countries. So why do China’s leaders demand such rapid rates of economic expansion?

A clue to that is found in Premier Li Keqiang’s recent work report, China’s version of a state of the union speech. Creating enough jobs—mentioned 11 times in the document released on March 5—is what drives Chinese officials’ obsession with fast-rising GDP.

China needs high levels of growth—at least 7 percent, says Li—to ensure enough jobs for 7.2 million college grads and 10 million people flooding cities from the countryside every year. China’s leaders have set a target of producing at least 10 million jobs this year, and a record-high 13.1 million urban jobs were added last year. “Employment is the basis of people’s well-being,” Li said in the work report. “We will steadfastly implement the strategy of giving top priority to employment.”

The trouble is, new stimulus mainly means more investment-driven expansion, which already accounts for about half of the economy. That’s problematic given industrial overcapacity and soaring debt levels held by local governments and companies. And while it indeed boosts the headline GDP number, it doesn’t always create lots of jobs. Heavy industries such as steel, aluminum, and real estate construction, which have rapidly expanded particularly in the years following China’s 2009 stimulus, tend to be capital-intensive rather than labor-intensive.

The country has struggled in recent years to substantially boost the portion of its economy driven by consumption and the job-creating service sector. The plan to cut taxes may provide some support toward that goal. Unfortunately, more train tracks and urban housing may instead set China back.

via Why China Needs Such Rapid GDP Growth: More Jobs – Businessweek.

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* China signals focus on reforms and leaner, cleaner growth | Reuters

China sent its strongest signal yet that its days of chasing breakneck economic growth were over, promising to wage a “war” on pollution and reduce the pace of investment to a decade-low as it pursues more sustainable expansion.

An attendant serves tea for China's President Xi Jinping during the opening session of the National People's Congress (NPC) at the Great Hall of the People in Beijing, March 5, 2014. REUTERS-Jason Lee

In a State of the Union style address to an annual parliament meeting that began on Wednesday, Premier Li Keqiang said China aimed to expand its economy by 7.5 percent this year, the highest among the world’s major powers, although he stressed that growth would not get in the way of reforms.

In carefully crafted language that suggested Beijing had thought hard about leaving the forecast unchanged from last year, Li said the world’s second-largest economy will pursue reforms stretching from finance to the environment, even as it seeks to create jobs and wealth.

After 30 years of red-hot double-digit growth that has lifted millions out of poverty but also polluted the country’s air and water and saddled the nation with ominous debt levels, China wants to change tack and rebalance its economy.

“Reform is the top priority for the government,” Li told around 3,000 hand-picked delegates in his first parliamentary address in a cavernous meeting hall in central Beijing.

“We must have the mettle to fight on and break mental shackles to deepen reforms on all fronts.”

Idle factories will be shut, private investment encouraged, government red-tape cut and work on a new environmental protection tax speeded up to create a greener economy powered by consumption rather than investment, Li said.

via China signals focus on reforms and leaner, cleaner growth | Reuters.

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What’s in a Number? For China’s Leaders, a Lot – China Real Time Report – WSJ

After years as a planning formality, China’s official target for economic growth is posing a problem for the country’s leaders amid confusion about the signals the goal sends — and whether it even matters.

Premier Li Keqiang will announce the annual GDP target in a speech Wednesday to the legislature.

Some economists see the growth target as a holdover from the days of the planned economy and a symbol of short-term thinking. They say officials naturally will try to exceed the goal, generating growth without regard to environmental and social ills.

“Targeting has achieved the goal of providing economic development incentives, but it also created a whole host of problems with land policy, with local government debt, with the banking system and generally rising debt levels,” said Li Wei, an economics professor at Beijing’s Cheung Kong Graduate School of Business.

At issue for Chinese leaders is where to set the target, given that overall growth is slowing – perhaps even faster than Beijing would like. Setting a high target would show that the government still places a premium on growth. A lower target would signal that the government’s focus has shifted from growth at any cost to tackling debt, tax and other structural problems.

Local media, citing unidentified sources inside the government, say this year’s target is likely to repeat last year’s aim of “about 7.5%” growth. Officials may opt to soften their wording, calling the figure an “expectation” rather than a target, Mr. Li said.

For most of the past 20 years the target has been set between 7%-8%. In most years China exceeded it handily, on average by two percentage points. It missed only once, in 1998, by a whisker.

China’s gross domestic product grew 7.7% in 2013, the same as the year before. But with mounting debt and recent signs of weakness in the manufacturing sector, many economists doubt the economy can keep up a similar pace.

“I think fixing it at 7.5% will prove to be a very awkward situation for the government,” said Yao Wei, an economist at Société Générale. “It would be better to give themselves some leeway.”

via What’s in a Number? For China’s Leaders, a Lot – China Real Time Report – WSJ.

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* Even China’s Economists Are Singing the Blues – China Real Time Report – WSJ

It’s all relative.  To any developed nation, a GDP growth of just over 7% would look absolutely marvellous!

“China’s state media have long accused foreign analysts of being too bearish on the Chinese economy. Those analysts looking in from the outside are often said to be too eager to be “chanting decline”—chang shuai—when it comes to the economy’s prospects.

This time around, China’s own economists seem to be chanting a pessimistic tune about growth prospects. Perhaps they are not quite as negative as those pesky foreign counterparts—who according to at least one report China’s state media are being told to avoid—but they are increasingly outspoken about slowing growth and rising financial risk.

“We are now in a painful stage,” economist Wang Luolin told a seminar this week.  “Let’s not try to dress things up,” said the consultant to the Chinese Academy of Social Sciences, a government think tank.

Yu Bin, a senior researcher at the influential Development Research Center under the State Council, took a similarly pessimistic view.

“The fact is, China’s economic growth is facing substantial downward pressure,” he said. “I don’t think we should get our hopes up for this year’s growth.”

China’s growth has been slowing amid a recovering global economy coupled with weak domestic demand. The days of double-digit expansion are long gone. Economic growth slipped to 7.7% in the fourth quarter of last year from 7.8% in the third – and many economists see a further slackening ahead.

“We expect the economic growth rate to be just above 7% this year, and that’s about it,” Mr. Yu said. That would be well below the 7.7% expansion in all of 2013.

Mr. Yu added that all three big drivers of China’s growth — investment, consumption and exports— are looking weak.”

via Even China’s Economists Are Singing the Blues – China Real Time Report – WSJ.

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Boeing to Raise India Plane Demand Forecast Amid Surge in Travel – Businessweek

Boeing Co. (BA:US) is set to raise its India market forecast as the planemaker expects surging travel demand in the world’s second-most populous nation to withstand a slowdown in economic growth and a fall in rupee.

Jet Airways Boeing 737

Boeing will increase its prediction for India plane demand in the next couple of months, Dinesh Keskar, a senior vice president at the Chicago-based company, said in an interview to Bloomberg Television’s Haslinda Amin in Singapore today.

The planemaker in 2012 raised its 20-year India market forecast by 9.8 percent, at least the third increase in a row. Carriers in the Asian nation will need 1,450 new aircraft, worth $175 billion over the next two decades, it said last year.

via Boeing to Raise India Plane Demand Forecast Amid Surge in Travel – Businessweek.

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India Predicts Climb From Decade-Low GDP Growth Amid Risks (1) – Businessweek

India forecast a faster acceleration in economic growth than analysts had estimated, a prediction facing risks from interest-rate increases to quell inflation and expenditure curbs by the government.

Gross domestic product will rise 4.9 percent in the 12 months through March 31, compared with the decade-low 4.5 percent in the previous fiscal year, the Statistics Ministry said in New Delhi yesterday. The median of 24 estimates in a Bloomberg News survey had been 4.7 percent. The projection may be revised upward later and the final growth rate is unlikely to be less than 5 percent, Finance Minister Palaniappan Chidambaram said in a statement e-mailed today.

India last month joined nations from Brazil to Turkey in raising interest rates, striving to stem the fastest inflation in Asia and shield the rupee from a reduction in U.S. monetary stimulus that’s hurt emerging-market assets. Opinion polls signaling that the general election due by May could lead to an unstable coalition government are adding to risks.

via India Predicts Climb From Decade-Low GDP Growth Amid Risks (1) – Businessweek.

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China’s economy: In three parts | The Economist

CHINA’S economy, worth over $9 trillion in 2013, divides opinion. Often it divides it neatly in two: optimists contend with pessimists, apologists with alarmists, bulls with bears. Figures released this month encouraged both camps. China’s economy grew by 7.7% in 2013, a little faster than once feared. But a widely watched index of manufacturing, published by HSBC, a bank, fell for the fourth month in a row.

This binary split in opinion is too crude. To understand China’s economy today, it is more helpful to think in threes. Start, for example, with three forms of growth: in supply, demand and credit. Over the long run, China’s economic might depends on the size of its workforce and its productivity. This combination determines how much stuff China can supply without overstretching itself. Numbers released this week confirm that the supply-side limits on growth are gradually tightening.


The country’s urban workforce, which produces most of its output, is growing more slowly. The age group from which this workforce springs is now shrinking outright. The population of working age shrank by 2.44m in 2013, having already fallen by several million the year before.

This demographic turning-point (dubbed “peak toil”) has contributed to a marked slowdown in China’s potential rate of growth from the double-digit tempo of yesteryear. Whether the economy actually fulfils that (diminished) potential depends on a second kind of growth: that of demand. On the one hand, too little spending on goods and services will result in the underemployment of even a shrinking population (witness Japan). On the other hand, too much results in inflation.

By that yardstick, demand in China is still modest. It was enough to increase GDP by just over the government’s minimum threshold of 7.5%. But the economy did not grow fast enough to generate any inflationary pressure. Consumer prices rose by only 2.5% in the year to December. Prices paid to producers fell, for the 22nd month in a row. The Chinese economy is not overheating in any conventional sense.

China’s excesses take a different form. It is not the growth in demand that worries pessimists, but the growth in credit. The stock of outstanding financing for the private sector grew by about 20% last year, according to the central bank’s broad measure (which includes corporate bonds, equity issuance, and a variety of loans by banks and other lenders) even as nominal GDP grew by only 9.5% (see chart). Some of those loans are now turning ugly.

One credit product, sold exclusively through ICBC, China’s biggest bank, on behalf of China Credit Trust, a non-bank lender, is poised to default at the end of this month. It raised 3 billion yuan (over $490m) for Zhenfu Energy group, an ill-fated coal-mining venture, the vice-chairman of which was arrested for taking deposits without a licence. Zhenfu cannot repay its debts. The big question that remains is whether the product’s buyers, sellers or issuers will bear the loss.

China’s credit is not all this bad. And even the bad lending is not all bad in the same way. In fact credit, too, can usefully be divided into three categories, according to how it is spent, argues Richard Werner of Southampton University. Some is spent fruitfully, on new capital and infrastructure, increasing the economy’s productive capacity. Because lending of this kind adds to both demand and supply, it should result in higher economic growth without higher inflation.

Another chunk of credit is spent wastefully, either on consumption or on misconceived projects, such as bridges without destinations or coal mines without markets. These loans add nothing to the economy’s productive capacity, but they do add to demand. They make a claim on the economy’s goods and services, without adding anything to its ability to provide them. Credit of this second kind should, then, result in higher inflation, increasing nominal GDP but not real GDP.

The surprising lack of inflation suggests that much of China’s credit is instead of a third kind. It is spent speculatively, on existing assets, real or financial, in the hope they will rise in value. Because these assets already exist, they can be purchased (and repurchased) without adding directly to GDP or straining the economy’s capacity to produce new goods and services. Credit and asset prices can chase each other higher, even as consumer prices remain flat.

Because this third kind of credit adds little to economic growth, curbing it need not, in principle, subtract much from growth. China’s financial authorities have repeatedly stated their desire to shrink overstretched balance-sheets, especially among mid-tier banks, without discouraging the flow of credit to the “real economy”. But although this is entirely feasible in principle, it is a difficult trick to pull off in practice.

via China’s economy: In three parts | The Economist.

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Tea growers get big year-end bonus[1]-

A tea company in Wande county of Jinan city, capital of East China\’s Shandong province, shared nearly a million yuan ($165,200) in year-end bonuses with its tea growers, on Jan 20, 2014.Some growers got about 200,000 yuan.Li Taishan Tea Co was established after thevillage piloted a land circulation project in 2003.

Tea growers get big year-end bonus

via Tea growers get big year-end bonus[1]-

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China’s IT sector to gross 12.5 trillion yuan –

The sales revenue of China\’s information technology sector will hit 12.5 trillion yuan (about $2.04 trillion) this year, a Ministry of Industry and Information Technology official has forecast.

English: Logo Information Technology

English: Logo Information Technology (Photo credit: Wikipedia)

In the first nine months of 2013, the sector\’s sales revenue reached 8.98 trillion yuan, up 14 percent year on year, said Ding Wenwu, chief of the ministry\’s electronics and information department, at the 13th China Tianjin Information Technology Exposition, which opened in Tianjin on Thursday.

China\’s information technology sector has maintained stable growth in the past three years, with its output of mobile phones, computers and color TV sets world leading, according to Ding.

With new developments such as the Internet of Things, cloud computing and big data, the information technology sector faces new growth opportunities, he said.

The ministry will underscore innovations in the sector to enhance its core competitiveness and promote the consumption of information products and services, and deep integration between industrialization and informationization, the official added.

China aims to boost the consumption of information products and services and make the sector a new engine for domestic demand and economic growth.

via China’s IT sector to gross 12.5 trillion yuan –


China to aim for 7.5 percent growth in 2014 as exports recover | Reuters

China will likely stick with this year\’s growth target of 7.5 percent for 2014 as top leaders balance the need to keep the economy on an even keel while pushing through necessary structural reforms, sources at top government think tanks said.

Growth will be supported by a steady recovery in China\’s exports next year thanks to stronger demand from developed economies, the commerce ministry\’s think tank said.

The 2014 growth target was endorsed at the annual Central Economic Work Conference earlier this month, when top leaders pledged to maintain policy stability and reasonable economic growth at the closed-door meeting.

via China to aim for 7.5 percent growth in 2014 as exports recover | Reuters.


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