Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
BRUSSELS (Reuters) – The euro zone’s trade surplus with the rest of the world grew in February, with a decline in imports from China as well as sharply lower energy needs because of mild winter weather.
The unadjusted goods trade surplus grew to 23.0 billion euros ($25.1 billion) in February, compared with 18.5 billion euros a year earlier. Exports rose by 1.6%, while imports fell by 1.0%.
For China, which already had widespread coronavirus restrictions in place in February, exports from the European Union as a whole were slightly lower than in February 2019. However, imports were down by 8.1%, according to data on Eurostat’s website.
Energy imports as a whole also declined by 9.6% in February, when comparing Jan-Feb data issued on Monday and January data from a month ago. That translated into 10.1% lower imports from Russia and 5.9% less from Norway.
The trade surplus with the United States, by contrast, grew by 21% in the month as exports increased and imports declined. The persistent surplus in goods has been a source of transatlantic tension.
On a seasonally adjusted basis the euro zone trade surplus also rose to 25.8 billion euros in February from 18.2 billion euros in January. Exports were 1.8% higher month-on-month and imports 2.3% lower.
China’s economy shrank for the first time in decades in the first quarter of the year, as the virus forced factories and businesses to close.
The world’s second biggest economy contracted 6.8% according to official data released on Friday.
The financial toll the coronavirus is having on the Chinese economy will be a huge concern to other countries.
China is an economic powerhouse as a major consumer and producer of goods and services.
This is the first time China has seen its economy shrink in the first three months of the year since it started recording quarterly figures in 1992.
“The GDP contraction in January-March will translate into permanent income losses, reflected in bankruptcies across small companies and job losses,” said Yue Su at the Economist Intelligence Unit.
Last year, China saw healthy economic growth of 6.4% in the first quarter, a period when it was locked in a trade war with the US.
In the last two decades, China has seen average economic growth of around 9% a year, although experts have regularly questioned the accuracy of its economic data.
Its economy had ground to a halt during the first three months of the year as it introduced large-scale shutdowns and quarantines to prevent the virus spread in late January.
As a result, economists had expected bleak figures, but the official data comes in slightly worse than expected.
Among other key figures released in Friday’s report:
Factory output was down 1.1% for March as China slowly starts manufacturing again.
Retail sales plummeted 15.8% last month as many of shoppers stayed at home.
Unemployment hit 5.9% in March, slightly better than February’s all-time high of 6.2%.
Analysis: A 6% expansion wiped out
Robin Brant, BBC News, Shanghai
The huge decline shows the profound impact that the virus outbreak, and the government’s draconian reaction to it, had on the world’s second largest economy. It wipes out the 6% expansion in China’s economy recorded in the last set of figures at the end of last year.
Beijing has signalled a significant economic stimulus is on the way as it tries to stabilise its economy and recover. Earlier this week the official mouthpiece of the ruling Communist Party, the People’s Daily, reported it would “expand domestic demand”.
But the slowdown in the rest of the global economy presents a significant problem as exports still play a major role in China’s economy. If it comes this will not be a quick recovery.
On Thursday the International Monetary Fund forecast China’s economy would avoid a recession but grow by just 1.2% this year. Job figures released recently showed the official government unemployment figure had risen sharply, with the number working in companies linked to export trade falling the most.
China has unveiled a range of financial support measures to cushion the impact of the slowdown, but not on the same scale as other major economies.
“We don’t expect large stimulus, given that that remains unpopular in Beijing. Instead, we think policymakers will accept low growth this year, given the prospects for a better 2021,” said Louis Kuijs, an analyst with Oxford Economics.
Since March, China has slowly started letting factories resume production and letting businesses reopen, but this is a gradual process to return to pre-lockdown levels.
Media caption Why does China’s economy matter to you?
China relies heavily on its factories and manufacturing plants for economic growth, and has been dubbed “the world’s factory”.
Stock markets in the region showed mixed reaction to the Chinese economic data, with China’s benchmark Shanghai Composite index up 0.9%.
TOKYO (Reuters) – Uncertainty over Japan’s economic outlook is “extremely high” as the coronavirus pandemic hits output and consumption, central bank Governor Haruhiko Kuroda said, stressing his readiness to take additional monetary steps to prevent a deep recession.
While aggressive central bank actions across the globe have eased financial market tensions somewhat, corporate funding strains were worsening, Kuroda told a quarterly meeting of the Bank of Japan’s regional branch managers on Thursday.
“The spread of the coronavirus is having a severe impact on Japan’s economy through declines in exports, output, demand from overseas tourists and private consumption,” he said.
Japan recorded 503 new coronavirus infections on Wednesday – its biggest daily increase since the start of the pandemic – as a state of emergency took effect giving governors stronger legal authority to urge people to stay home and businesses to close.
In contrast to stringent lockdowns in some countries, mandating fines and arrests for non-compliance, enforcement will rely more on peer pressure and a deep-rooted Japanese tradition of respect for authority.
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The balancing act underscores the difficulty authorities have in trying to contain the outbreak without imposing a mandatory lockdown that could deal a major blow to an economy already struggling to cope with the virus outbreak.
Hideaki Omura, the governor of the central Japan prefecture of Aichi, said he would declare a state of emergency for his prefecture on Friday.
Omura said Aichi, which includes the city of Nagoya and hosts Toyota Motor Corp, was talking with the central government about being included in the national state of emergency as well, but felt he could not wait any longer to restrict movement.
“Looking at things the past week and watching the situation – the rise in patients, the number without any traceable cause – we judged that it was a very dangerous situation and wanted to make preparations,” he told a news conference.
Even with less stringent restrictions compared with other countries, analysts polled by Reuters expect Japan to slip into a deep recession this year as the virus outbreak wreaks havoc on business and daily life.
Shares of Oriental Land Co (4661.T) fell on Thursday after the operator of Tokyo Disneyland said it would keep the amusement park shut until mid-May.
Entertainment facility operator Uchiyama Holdings (6059.T) said it was closing 43 karaoke shops and 11 restaurants until May 6.
“For the time being, we won’t hesitate to take additional monetary easing steps if needed, with a close eye on developments regarding the coronavirus outbreak,” Kuroda said.
Kuroda’s remarks highlight the strong concern policymakers have over the outlook for Japan’s economy and how companies continue to struggle to generate cash, despite government and central bank promises to flood the economy with funds.
At its policy meeting later this month, the BOJ is likely to make a rare projection that the world’s third-largest economy will shrink this year, sources have told Reuters.
The BOJ eased monetary policy in March by pledging to boost purchases of assets ranging from government bonds, commercial paper, corporate bonds and trust funds investing in stocks.
The government also rolled out a nearly $1 trillion stimulus package to soften the economic blow.
SEOUL/TOKYO (Reuters) – With more employees working from home to help slow the spread of the coronavirus, demand is surging for laptops and network peripherals as well as components along the supply chain such as chips, as companies rush to build virtual offices.
Many firms have withdrawn earnings forecasts, anticipating a drop in consumer demand and economic slump, but performance at electronics retailers and chipmakers is hinting at benefits from the shift in work culture.
Over the past month, governments and companies globally have been advising people to stay safe indoors. Over roughly the same period, South Korea – home of the world’s biggest memory chip maker, Samsung Electronics Co Ltd – on Monday reported a 20% jump in semiconductor exports.
Pointing to further demand, nearly one in three Americans have been ordered to stay home, while Italy – where deaths have hit 5,476 – has banned internal travel. Worldwide, the flu-like virus has infected over 300,000 people and led to almost 15,000 deaths since China first reported the outbreak in December.
“With more people working and learning from home during the outbreak, there has been rising demand for internet services … meaning data centres need bigger pipes to carry the traffic,” said analyst Park Sung-soon at Cape Investment & Securities.
A South Korean trade ministry official told Reuters that cloud computing has boosted sales of server chips, “while an increase in telecommuting in the United States and China has also been a main driver of huge server demand.”
In Japan, laptop maker Dynabook reported brisk demand which it partly attributed to companies encouraging teleworking. Rival NEC Corp said it has responded to demand with telework-friendly features such as more powerful embedded speakers.
Australian electronics retailer JB Hifi Ltd also said it saw demand “acceleration” in recent weeks from both commercial and retail customers for “essential products they need to respond to and prepare” for the virus, such as devices that support remote working as well as home appliances.
CHINA LEAD
China is leading chip demand, analysts said, as cloud service providers such as Alibaba Group Holding Ltd, Tencent Holdings Ltd and Baidu Inc quickly responded to the government’s effort to contain the virus.
“Cloud companies opened their platforms, allowing new and existing customers to use more resources for free to help maintain operations,” said analyst Yih Khai Wong at Canalys.
“This set the precedent for technology companies around the world that offer cloud-based services in their response to helping organisations affected by coronavirus.”
China’s cloud infrastructure build-up has helped push up chip prices, with spot prices of DRAM chips rising more than 6% since Feb. 20, showed data from price tracker DRAMeXchange.
UBS last week forecast average contract prices of DRAM chips to rise as much as 10% in the second quarter from the first, led by a more than 20% jump in server chips.
It said it expects DRAM chips to be modestly under supplied until the third quarter of 2021, with demand from server customers rising 31% both in 2020 and 2021.
SUPPLY DISRUPTION
Concerns over supply disruption has also contributed to a price rise.
“You’ve got lots of OEMs and systems integrators in the global market who have intense demand for memory now,” said Andrew Perlmutter, chief strategy officer at ITRenew, a company that buys and reworks used data centre equipment for resale.
“Nobody is shutting down their factories – it is still production as normal – but people worry about memory supply in particular, so they want to get out ahead of production.”
About 69% of electronics manufacturers have flagged possible supplier delays averaging three weeks, showed a poll on March 13 by industry trade group IPC International.
Half of those polled expected business to normalise by July, and nearly three-quarters pointed to at least October.
Image copyright GETTY IMAGESImage caption A model displays a car at the annual Indian Auto Expo
Chinese attendees are not welcome at India’s Auto Expo next week due to concerns about the coronavirus.
Chinese guests are prevented from attending the show because of “government policy” an Indian Society of Automobile Manufacturers (SIAM) spokeswoman said.
Yet Chinese cars will be on display.
Other events across Asia will be missing the large delegations that usually come from Chinese firms because of travel restrictions.
Changing car markets
India and China have much at stake in spurring domestic car sales as well as exports, making such industry events vital to drum up business.
New Indian car sales fell 16% last year and China, the world’s largest car market, saw an 8% dip as both markets saw increased turnover in used cars. However there is interest in newer models in the electric vehicle segment, according to Chinese market consultancy LMC Automotive and SIAM figures.
India’s Tata Motors, owner of the Land Rover and Jaguar brands, has developed electric car models for sale at home and abroad, while China’s SAIC Motor and Great Wall Motor also offer electric vehicles for the domestic and export markets. That makes auto shows like the one in India next week important venues to showcase the newest models.
Ripple effect
With hotels and conference fees paid in advance and lunch and dinner meetings arranged months earlier, missing a big industry show has a major ripple effect on economic activity. Events like the Auto Expo in suburban New Delhi, or the Singapore air show due to take place next week draw thousands of out-of-town guests.
In China, the conference circuit has come to a standstill with over 20,000 infections and more than 420 people dead as the virus spreads from the epicentre of the city of Wuhan.
In the case of the Singapore Airshow organisers have faced cancellations by vendors from China, including aircraft maker Comac, and reduced attendance by companies from elsewhere in the world concerned about the spread of the virus outside of China. Singapore has reported 24 cases. India to date has seen three coronavirus cases.
To mitigate the impact, both events have highlighted plans to screen throngs of guests for fever and ensure thorough sanitation measures as well as access to medical care to ensure they can carry on even at reduced attendance.
Image copyright GETTY IMAGESImage caption The onion is India’s most “political” vegetable
Onion prices have yet again dominated the headlines in India over the past week. BBC Marathi’s Janhavee Moole explains what makes this sweet and pungent vegetable so political.
The onion – ubiquitous in Indian cooking – is widely seen as the poor man’s vegetable.
But it also has the power to tempt thieves, destroy livelihoods and – with its fluctuating price a measure of inflation – end the careers of some of India’s most powerful politicians.
With that in mind, it’s perhaps unsurprising those politicians might be feeling a little concerned this week.
So, what exactly is happening with India’s onions?
In short: its price has skyrocketed.
Onion prices had been on the rise in India since August, when 25 rupees ($0.35; £0.29) would have got you a kilo. At the start of October, that price was 80 rupees ($1.13; £0.91).
Fearing a backlash, the Bharatiya Janata Party (BJP)-led government banned onion exports, hoping it would bring down the domestic price. And it did.
Image copyright GETTY IMAGESImage caption Onion prices peaked by the end of September
A kilo was selling for less than 30 rupees on Thursday at Lasalgaon, Asia’s largest onion wholesale market, located in the western state of Maharashtra.
However, not everyone is happy.
While high prices had angered consumers in a sluggish Indian economy, the fall in prices sparked protests by exporters and farmers in Maharashtra, where state elections are due in weeks.
And it is not just at home where hackles have been raised: the export ban has also strained trade relations between India and its neighbour, Bangladesh, which is among the top importers of the vegetable.
But why does the onion matter so much?
The onion is a staple vegetable for the poor, indispensable to many Indian cuisines and recipes, from spicy curries to tangy relishes.
“In Maharashtra, if there are no vegetables or you can’t afford to buy vegetables, people eat ‘kanda bhakari’ [onion with bread],” explains food historian Dr Mohseena Mukadam.
True, onions are not widely used in certain parts of the country, such as the south and the east – and some religious communities don’t eat them at all.
But they are especially popular in the more populous northern states which – notably – send a higher number of MPs to India’s parliament.
“Consumers in northern India wield more power over the federal government. So although consumers in other parts of India don’t complain as much about higher prices, if those in northern India do, the government feels the pressure,” says Milind Murugkar, a policy researcher.
Image copyright GETTY IMAGESImage caption Onions are so ubiquitous that the government has been selling them at subsided rates
A drop in prices also affects the income of onion farmers, mainly in Maharashtra, Karnataka in the south and Gujarat in the west.
“Farmers see the onion as a cash crop that grows in the short term, and grows well in dry areas with less water,” says Dipti Raut, a journalist, who has been on the “onion beat” for years.
“It’s like an ATM machine that guarantees income to farmers and sometimes, their household budget depends on the onion produce,” she said.
Onions have even attracted robbers: when prices skyrocketed in 2013, thieves tried to steal a truck loaded with onions, but were caught by the police.
Why do politicians care about the onion?
Put simply, because the price moving too far one way or another is likely to anger a large block of voters, be they everyday households, or the country’s farmers.
Image copyright GETTY IMAGESImage caption The Delhi government transported 70 vans full of subsidised onions
Onions are so crucial they have even featured in election campaigns. The Delhi state government bought and sold them at subsidised rates in September when prices were at their peak: chief minister Arvind Kejriwal, it should be noted, is up for re-election next year.
Meanwhile, Indira Gandhi swept to power in 1980 on slogans that used soaring onion prices as a metaphor for the economic failures of the previous government.
But why did onion prices rise this year?
A drop in supply, due to heavy rains and flooding destroying the crop in large parts of India, and damaging some 35% of the onions stocks in storage, according to Nanasaheb Patil, director of the National Agricultural Co-operative Marketing Federation.
He said the flooding had also delayed the next round of produce, which was due in September.
Image copyright GETTY IMAGES
“This has become a fairly regular phenomenon in recent decades,” Mr Murugkar said. “Onion prices swing heavily with a small drop or increase in production.”
In fact, the shortage – and subsequent rise in prices – happens almost every year around this time, according to Ms Raut.
“It’s a vicious cycle and the trader lobby and middlemen benefit from even the slightest price fluctuations,” she added.
What’s the solution?
Ms Raut says more grass-root planning and better storage facilities and food processing services will ease the problem – and making a variety of cash crops and vegetables available across the country would also ease the pressure on onions.
“The government is quick to act when onion prices rise. Why don’t they act as swiftly when prices fall?” asked Vikas Darekar, an onion farmer in Maharashtra. He said the government should buy onions from farmers at a “fair price”.
Mr Murugkar, however, feels that the government should never interfere in “onion matters”.
“If you are interested in raising purchasing power of the people, they should not curtail exports. Do we have such a ban on software exports? It’s really absurd. A government which has won such a huge majority should be able to withstand the pressures from a few consumers.”
It took China less than 70 years to emerge from isolation and become one of the world’s greatest economic powers.
As the country celebrates the anniversary of the founding of the People’s Republic of China, we look back on how its transformation spread unprecedented wealth – and deepened inequality – across the Asian giant.
“When the Communist Party came into control of China it was very, very poor,” says DBS chief China economist Chris Leung.
“There were no trading partners, no diplomatic relationships, they were relying on self-sufficiency.”
Over the past 40 years, China has introduced a series of landmark market reforms to open up trade routes and investment flows, ultimately pulling hundreds of millions of people out of poverty.
The 1950s had seen one of the biggest human disasters of the 20th Century. The Great Leap Forward was Mao Zedong’s attempt to rapidly industrialise China’s peasant economy, but it failed and 10-40 million people died between 1959-1961 – the most costly famine in human history.
This was followed by the economic disruption of the Cultural Revolution in the 1960s, a campaign which Mao launched to rid the Communist party of his rivals, but which ended up destroying much of the country’s social fabric.
‘Workshop of the world’
Yet after Mao’s death in 1976, reforms spearheaded by Deng Xiaoping began to reshape the economy. Peasants were granted rights to farm their own plots, improving living standards and easing food shortages.
The door was opened to foreign investment as the US and China re-established diplomatic ties in 1979. Eager to take advantage of cheap labour and low rent costs, money poured in.
“From the end of the 1970s onwards we’ve seen what is easily the most impressive economic miracle of any economy in history,” says David Mann, global chief economist at Standard Chartered Bank.
Through the 1990s, China began to clock rapid growth rates and joining the World Trade Organization in 2001 gave it another jolt. Trade barriers and tariffs with other countries were lowered and soon Chinese goods were everywhere.
“It became the workshop of the world,” Mr Mann says.
Take these figures from the London School of Economics: in 1978, exports were $10bn (£8.1bn), less than 1% of world trade.
By 1985, they hit $25bn and a little under two decades later exports valued $4.3trn, making China the world’s largest trading nation in goods.
Poverty rates tumble
The economic reforms improved the fortunes of hundreds of millions of Chinese people.
The World Bank says more than 850 million people been lifted out of poverty, and the country is on track to eliminate absolute poverty by 2020.
At the same time, education rates have surged. Standard Chartered projects that by 2030, around 27% of China’s workforce will have a university education – that’s about the same as Germany today.
Rising inequality
Still, the fruits of economic success haven’t spread evenly across China’s population of 1.3 billion people.
Examples of extreme wealth and a rising middle class exist alongside poor rural communities, and a low skilled, ageing workforce. Inequality has deepened, largely along rural and urban divides.
“The entire economy is not advanced, there’s huge divergences between the different parts,” Mr Mann says.
The World Bank says China’s income per person is still that of a developing country, and less than one quarter of the average of advanced economies.
China’s average annual income is nearly $10,000, according to DBS, compared to around $62,000 in the US.
Slower growth
Now, China is shifting to an era of slower growth.
For years it has pushed to wean its dependence off exports and toward consumption-led growth. New challenges have emerged including softer global demand for its goods and a long-running trade war with the US. The pressures of demographic shifts and an ageing population also cloud the country’s economic outlook.
Still, even if the rate of growth in China eases to between 5% and 6%, the country will still be the most powerful engine of world economic growth.
“At that pace China will still be 35% of global growth, which is the biggest single contributor of any country, three times more important to global growth than the US,” Mr Mann says.
The next economic frontier
China is also carving out a new front in global economic development. The country’s next chapter in nation-building is unfolding through a wave of funding in the massive global infrastructure project, the Belt and Road Initiative.
The so-called new Silk Road aims to connect almost half the world’s populations and one-fifth of global GDP, setting up trade and investment links that stretch across the world.
Even though officials have sounded more positive about negotiations with the US recently, failure to achieve a deal would see tariffs on $200bn (£152bn) of Chinese goods rise almost immediately and could see the US impose fresh tariffs.
Still, Mr Evans-Pritchard said “broader weakness in global demand means that, even if Trump and Xi finalise a trade deal soon, the outlook for exports remains gloomy.”
BEIJING (Reuters) – China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade.
China’s exports in February are expected to have fallen 4.8 percent from a year earlier, according to the median estimate of 32 economists in a Reuters poll, following a 9.1 percent rise in January.
Such a drop would be the biggest since December 2016, and suggest a further weakening in global demand.
Imports in February are expected to have fallen 1.4 percent from a year earlier, compared with the previous month’s 1.5 percent decline.Stronger-than-expected imports could prompt some China watchers to say the economy is showing signs of bottoming out in response to a string of stimulus measures in 2018.
But most analysts typically caution that China’s data early in the year can be highly distorted by the timing of the Lunar New Year holidays, when some business rush out shipments or scale back output before shutting for a extended break. As such, analysts’ estimates for February varied widely.
TRADE DEAL NOT A SILVER BULLET
In recent weeks, the United States and China appear to have moved closer to a trade deal that would roll back tit-for-tat tariffs on each others’ goods, with Beijing making pledges on structural economic changes, a source briefed on negotiations said on Sunday.
But President Donald Trump will reject any pact that is not perfect, Secretary of State Mike Pompeo said this week.
Even if concrete steps such as dismantling tariffs are agreed, it would not be a panacea for all of China’s economic woes. Its exporters would have to piece supply chains back together, win back market share and contend with slowing demand globally.
Factory surveys have suggested exports and imports will remain weak in coming months, with February’s official gauge showing export orders fell to their weakest level since the global financial crisis.
China’s overall trade surplus is seen to have shrunk sharply to $26.38 billion in February from $39.16 billion the previous month, according to the Reuters poll.
In response to growing domestic and global pressure, China’s government this week unveiled a 2019 economic growth target of 6.0-6.5 percent, down from an actual 6.6 percent in 2018, the slowest pace in nearly 30 years.
China to slash taxes, boost lending to prop up slowing economy
Premier Li Keqiang told parliament on Tuesday that China will shore up the economy through billions of dollars in additional tax cuts and infrastructure spending, and will lower real interest rates.
“A set of pro-growth measures are planned despite positive progress in U.S.-China trade talks, which makes us think that either China doesn’t have full confidence in a trade truce or that the damages from the trade conflict cannot easily be undone,” said Iris Pang, Greater China economist at ING.
HANGZHOU, March 1 (Xinhua) — East China’s Zhejiang Province plans to increase its trade volume with Africa to 40 billion U.S. dollars by the end of 2022 to account for at least 20 percent of the total Sino-Africa trade.
Zhejiang’s department of commerce issued an action plan revealing the details on Friday as China’s first provincial-level plan on economic cooperation with African countries.
The 40-billion-dollar target will mark a significant rise from the 30.1-billion-dollar trade between Africa and Zhejiang, home to many of China’s most successful private businesses, in 2018.
The plan also promises to increase investments in Africa’s industries of textiles, garments, chemicals, equipment manufacturing and pharmaceuticals to meet the continent’s development needs.
The province, however, will bar investments that are polluting and highly energy-consuming from going to Africa, said the plan, which also calls for more agricultural investments and cooperation.
The document also said the province would expand goods imports from Africa, especially in the non-resources category.
According to China Customs, China’s foreign trade with Africa reached 204.19 billion dollars in 2018, up 19.7 percent year-on-year and 7.1 percentage points higher than the growth of China’s overall foreign trade during the same period.
Specifically, the country’s exports to Africa rose 10.8 percent to 104.91 billion dollars in 2018, while its imports from Africa surged 30.8 percent to reach 99.28 billion dollars.
CHINDIA ALERT: You'll be living in their world, very soon 