Posts tagged ‘Economic growth’

01/09/2014

India Outpacing China’s Oil Demand – India Real Time – WSJ

India’s oil demand has grown faster than China’s so far this year, highlighting slowing energy demand in the world’s most populous country and fueling expectations that India may pick up the slack over the medium-to-long term. The pace of India’s demand also reflects optimism about India’s economic growth under Prime Minister Narendra Modi.

In absolute terms China is Asia’s largest oil consumer, having burned 10.76 million barrels a day of oil and accounting for 12.1% of global oil consumption in 2013, according to BP PLC. The second-largest oil consumer in Asia is Japan, though its oil consumption has been declining as its economy has matured.

India ranks third at 3.7 million barrels a day and accounted for about 4.2% of global oil consumption in 2013.

India’s oil demand has shown steady growth through July at an average of 3%, or 101,000 barrels a day. China’s oil demand has declined at an average of 0.6%, or 62,000 barrel a day, in the same period, Barclays PLC analyst Miswin Mahesh said.

Indian oil demand growth has “organic, domestic, economic activity-linked factors still driving it,” he said. Mr. Mahesh expects the south Asian country’s oil demand to accelerate to 210,000 barrels a day next year, spurred by healthy construction activity, government-financed industrial projects and strong growth in car purchases.

China’s oil-demand growth, on the other hand, remains uncertain, with a large portion of its imports this year going into strategic stockpiling instead of consumption. Its oil demand fell into negative territory in July and its oil imports declined for the first time this year.

“This surprise drop in crude imports further supported our view that [China's] full-year oil demand could be weaker than current market expectations,” Thomas C. Hilboldt, head of Asia Pacific oil research at HSBC Holdings PLC said last week.

The disparity of the demand drivers in India and China is also telling.

The bulk of oil demand in both countries is for diesel, the most widely consumed liquid fuel in Asia. China’s diesel consumption has shown a sharp decline because of its industrial slowdown, while India’s diesel demand rose sharply in the last few months because of power shortages and delayed monsoon rains.

Despite this, the extent to which Indian energy demand can compensate for China’s decline remains doubtful.

Markets are looking for the next emerging-market economy to take over as China moves into its post-industrial phase. Yet India has a fundamentally different economic structure and growth model, Janet Kong, head of market analysis at BP Singapore’s trading division pointed out last week.

“It’s very much a service-oriented economy…not relying on a lot of infrastructure investments or manufacturing,” she said.

The manufacturing sector in India has underperformed for many years, contributing to about 15% of gross domestic product and 12% of employment, compared with 25% or more of GDP in countries like China, Malaysia, Thailand and Vietnam, according to the Asian Development Bank’s 2014 report. Meanwhile, China is transitioning from an industrial economy dependent on exports to focus more on domestic consumption.

via India Outpacing China’s Oil Demand – India Real Time – WSJ.

30/08/2014

India posts highest GDP growth figures in over two years

GDP up by 5.7 per cent in April-June quarter

India’s Gross Domestic Product increased by 5.7 per cent in the April-June quarter, up from 4.6% in the previous quarter. Growth in this quarter was the highest since March 2012, and it was sparked by a boost in the manufacturing and service sectors. However, economists said that this rebound could be temporary and stifled by poor monsoon rains and rising food inflation.

via Scroll.in – News. Politics. Culture..

19/06/2014

Plotting the Shape of India’s Recovery – India Real Time – WSJ

Optimism abounds in India following Narendra Modi’s unexpectedly strong election victory. It’s still early days, but the new government’s priorities and coherence are a breath of fresh air.

As India’s economy gets back on its feet, one question is whether the  recovery will be shaped like a U, a V or a square root. In other words: Can growth rebound as quickly and strongly as it did after the global financial crisis?

Unfortunately, the answer is no: India’s recovery will be gradual and uneven, at least in the near term. Growth will accelerate sharply from fiscal 2016 onward.

It’s worth recalling the sting from the global financial crisis. Gross domestic product growth, as measured by production, plunged to 5.8% on-year in the final quarter of 2008, from 9.8% in the second quarter. Growth in expenditure GDP – a less reliable measure – dropped even more, to 1.5% on-year from 8.1%.

The main casualty was growth in gross fixed capital formation, which typically enhances an economy’s productive capacity. This fell from 13.9% in the second quarter to 2.1% in the fourth quarter – then declined by nearly 10% in early 2009.

Afterward, both capital formation and GDP recovered rapidly in a classic V-shaped pattern. Production GDP growth, which fell to 6.7% in fiscal 2009, averaged 8.8% a year in the next two fiscal years. Gross fixed capital formation averaged nearly 10% growth per year in fiscal 2010 and 2011, a swift recovery that hinted the economy was once again on an elevated trajectory — though policy paralysis later shortchanged it.

via Plotting the Shape of India’s Recovery – India Real Time – WSJ.

12/06/2014

China Minting Millionaires in Global Wealth Surge – Businessweek

Where do the world’s rich live? As has long been true, the U.S. has more millionaires (in U.S. dollars) than any other country, with 7.1 million. But China last year came in second with 2.4 million millionaire households, beating Japan with half as many. The number of millionaire families around the world reached 16.3 million last year, up from 13.7 million the year before.

Visitors crowd around a luxury yacht on display during the 19th China International Boat Show in Shanghai on April 10

All told, the total value of global private wealth grew far faster than global economic output, up 14.6 percent, to $152 trillion, compared with an 8.6 percent increase in 2012. Much of the new money originated in the Asia-Pacific region (excluding Japan), up by 30.5 percent, to $37 trillion. That put Asia in the No. 3 spot for riches, behind North America and Europe, according to the 14th annual survey on private wealth by Boston Consulting Group.

Driven by rapid GDP growth in China and India, Asia is expected to surpass North America and Europe as the leading source of global wealth in 2018. That year, the global pot of gold will total a bit less than $200 trillion, with the proportion from Asia projected to reach $61 trillion, slightly more than North America, with $59.1 trillion. “The Asia-Pacific region and its new wealth will account for about half of the total growth,” the report predicts.

via China Minting Millionaires in Global Wealth Surge – Businessweek.

21/05/2014

Is China’s Housing Bubble Beginning to Burst? – Businessweek

Earlier this month, financial analysts from Japan-based Nomura Group (NMR) issued a grim report on China’s housing market: “To us, it is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” the report read.

Residential apartment buildings under construction in Qingzhou city, in east China’s Shandong province

Nomura—which has historically been bearish on China, as the Wall Street Journal observes—predicted that a downturn in the housing market, caused by oversupply and shrinking developer financing, could sharply impact China’s economy, perhaps even driving GDP growth to less than 6 percent in 2014.

China’s economy is vulnerable because property investment accounts for anywhere from 16 percent to 20 percent of gross domestic product, according to varying analyses.

via Is China’s Housing Bubble Beginning to Burst? – Businessweek.

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06/05/2014

Why China Isn’t Worried About Slowing GDP: Jobs Strength – Businessweek

Even as China’s economy continues to show signs of a slowdown, Beijing has avoided rolling out any big new stimulus programs; that’s in direct contrast to its pump-priming response during the 2008 global financial crisis.

A tea plantation in Hangzhou, China

Why the apparent lack of worry? It’s got everything to do with jobs. In the first quarter, China created 3.44 million new urban jobs, 40,000 more than a year earlier. China has said for the full year it wants to create at least 10 million new positions—that target now looks easily reachable.

GDP growth has halved since peaking above 14 percent in 2007. But, with a greater share of output coming from more labor-intensive sectors, and the economy itself much larger, more new jobs are being created today,” wrote economists Mark Williams, Qinwei Wang, and Julian Evans-Pritchard, at London-based Capital Economics, in a May 2 note.

via Why China Isn’t Worried About Slowing GDP: Jobs Strength – Businessweek.

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07/04/2014

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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05/03/2014

* 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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03/03/2014

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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21/02/2014

* 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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