Posts tagged ‘Economy of the People’s Republic of China’

20/10/2015

Survey Shows China Passes U.S. in Stuff Built – China Real Time Report – WSJ

China is the world’s No. 2 economy by most measures, but by one it has surpassed the U.S. China has overtaken the U.S. as the world’s wealthiest nation in terms of built assets in 2014, and is likely to double that of the U.S. by 2025, according to the Arcadis Global Built Asset Wealth Index.

The study compares 32 countries in terms of their buildings and infrastructure – homes, schools, roads, airports, power plants, malls, rail tracks  and other structures. In fact, China’s stock of built assets will exceed the next four economies combined in the next 10 years, according to the index.

The firm calculates the data at purchasing-power-parity rates, which adjusts the figures to account for differing costs in each country. That measure tends to boost the size of figures from developing countries. China has the largest stock of built assets at $47.6 trillion in 2014 and the U.S. came in second at $36.8 trillion, according to the study released Monday. In the last report, the U.S. was ahead at $39.7 trillion in 2012 compared to China’s $35.4 trillion. China’s rapid asset building came alongside soft investment in the U.S. to replace old machinery, equipment and buildings, the report said.

The index is billed as an alternative economic indicator to measure a country’s performance. the index quantifies the value of a country’s infrastructure as well as its public and private property.

Policymakers have been trying to direct the Chinese economy to rely more on consumer spending rather than investment. Still,  the pace of economic rebalancing has been slow, leading to softer growth despite some positive signs in China’s consumer sector.

The transition “is encountering difficulties, as the government has repeatedly used fiscal stimulus to try to meet its growth targets,” said the report. “The proportion of the economy accounted for by investment is falling only very slowly.  This keeps China’s built asset stock growing rapidly.”

China’s economy grew at 6.9% in the third quarter this year, falling below 7% for the first time since 2009. In the past two years, Beijing has been struggling to turn to more sustainable drivers of growth amid mounting concerns about manufacturing overcapacity and an oversupplied property market.

“There is also likely to be significant underutilization of assets in China given growth is so rapid and much asset creation is pre-emptive, also known as ‘build it and they will come,’” said the biennial report. Since 2000, China has invested $33 trillion in built assets, with its investment in infrastructure at 9% of GDP, dwarfing the U.S.’s current 2%said the report. In per capita terms, however, populous China appears far from being overbuilt.

China’s built asset wealth per person stood at $34,100, which ranks it No. 24 worldwide, unchanged from its previous ranking in 2012, according to the index. The latest figure is slightly less than a third of the U.S. per capita figure of $114,100. The countries at the top of this ranking are disproportionately made up of smaller nations by population or area, hence the density of built asset stock is much greater per resident, the report said.

Source: Survey Shows China Passes U.S. in Stuff Built – China Real Time Report – WSJ

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05/09/2015

What if the China Panic Is All Wrong? – China Real Time Report – WSJ

China’s stock-market routs and economic deceleration are widely cited as the major trigger for the latest round of global market volatility. But what if the dominant narrative about China—that the world’s No. 2 economy is on the verge of falling off a cliff—is wrong?

It would mean the global market turmoil hitting equities, commodities and currencies is an overreaction. “We may have seen overshooting,” said Hung Tran, executive managing director of global capital markets at the Institute of International Finance, an industry group representing around 500 of the world’s largest banks, funds and other financial institutions. Even the head of the International Monetary Fund indicated as much earlier this week.

One of the chief problems is that it’s difficult to gauge China’s black-box economy. The country’s true growth is a guessing game given a number of statistical factors. That’s why growth forecasts show a range spanning several percentage points. Lombard Street Research, for example, estimates the economy will only expand by 3.7% this year, nearly half Beijing’s official growth forecast. Even if China’s economy is healthier than many now fear, uncertainty is oxygen for market volatility.

More clarity from Beijing about growth prospects and crisis-management plans would likely prove fruitful. That’s why the U.S. plans to press Chinese officials for greater details on their policy plans at a meeting of finance ministers and central bankers from the Group of 20 largest economies late this week. Here are some of the arguments that might moderate market fears:

• China’s stock market valuation is a bad indicator of Chinese growth. “Investors should not get carried away by the collapse of the Shanghai Composite Index,” warns Melanie Debono from Capital Economics in note to clients, “not least because its performance often bears little relation to that of the economy, primarily due to wild swings in its valuation.” The market run-up in advance of the selloff was out of step with reality, says Nick Lardy, a China expert at the Peterson Institute for International Economics. That’s why he says there’s likely more to come in the Chinese market correction. Even after the rout, “The market was still trading at 39 times earnings. Give me a break, it’s still too high.”

• The devaluation of the renminbi likely isn’t Beijing scrambling to save the economy through competitive devaluation. Beijing’s depreciation was likely more about addressing a key concern for the International Monetary Fund as it considers whether to include the Chinese yuan in its basket of currencies that comprise its lending reserves than it was about reviving economic growth by juicing exports. On Aug. 11, Beijing changed the way it values the yuan, allowing markets to play a greater role in the exchange rate. Market pressure has long been for depreciation, so allowing the currency to be more market-determined would, in the near-term, naturally see the yuan move lower. Against a basket of global currencies, the yuan has appreciated over the last year by nearly 15%, accounting for inflation. That’s despite Beijing intervening for months to prevent the yuan from losing value. “So the fact that the yuan came down 3% to 4% is not going to make much difference,” said Ted Truman, a former top international finance official at the U.S. Treasury and the Federal Reserve.

GDP growth may not be nearly as bad as suspected. Economists such as Clare Howarth at Oxford Economics say that beyond official industrial production figures, data on car and cell phones sales are jacking up the risk that China’s growth stalls. But “critics are really overlooking the fact that the growth model has changed in China,” Lardy says. “The service sector is now the driver of growth. So the fact that industrial growth has slowed down quite a bit does not mean, as it would have meant 10 years ago, that the economy is falling off a cliff.” Based on electricity consumption, “I just don’t see any signs that the Chinese economy is experiencing a hard landing,” says Torsten Sløk, Deutsche Bank’s chief international economist. Joe Hockey, treasurer for an economy that is intimately tied to China, Australia, says market reactions have been overblown. “We’re confident about our understanding of the Chinese economy and we see over time huge opportunities for growth,” Mr. Hockey told the Journal.

• Rather than regressing to policies of old, China’s government has actually been showing signs of moving ahead with market reforms.

Source: What if the China Panic Is All Wrong? – China Real Time Report – WSJ

26/08/2015

The World Struggles to Adjust to China’s ‘New Normal’ – China Real Time Report – WSJ

China’s leaders have warned their people they need to accommodate a “new normal” of economic growth far slower than the rate that propelled the economy into the world’s second-largest in the past two decades. As WSJ’s James T. Areddy and Lingling Wei report:

Now, the rest of the world also needs to get used to the new normal: a China in the midst of a tectonic shift in its giant economy that is rattling markets world-wide.

The slowdown deepening this year is part of a bumpy transition away from an era when smokestack industries, huge exports and massive infrastructure spending—underpinned by trillions in state-backed debt—powered China’s seemingly unstoppable rise. Today, debt has swelled to more than twice the size of the economy, and some of those industries, such as construction and steel, are reeling.

Instead of them, China is pushing services, consumer spending and private entrepreneurship as new drivers of growth that rely less on debt and more on the stock market for funding.

via The World Struggles to Adjust to China’s ‘New Normal’ – China Real Time Report – WSJ.

12/07/2015

13 Million Guangdong Migrants Could Gain Permanent Residence By 2020 – China Real Time Report – WSJ

Faced with a persistent influx of rural workers, China’s most populous province plans to allow more migrant residents to settle permanently in its cities, in its latest effort to ease decades-old curbs on rural-urban migration.

Under new guidelines published this week, Guangdong authorities aim to grant local household registration to roughly 13 million migrant workers by 2020, allowing them to access public services—spanning housing, health-care, social security and education—that are typically reserved for urban residents.

Guangdong has often taken the lead in efforts to liberalize the hukou system, a national household-registration regime that curbs rural-urban migration by tying benefits like health care and pensions to a person’s place of birth. Experts say the system forces many rural migrants to live as second-class citizens in urban areas, aggravating social inequality while fueling tensions between locals and outsiders.

Hukou reforms are a pressing matter for Guangdong, a southern Chinese manufacturing hub that hosts the country’s largest transient population. Among its roughly 110 million residents, more than 24 million are migrants from other regions, while another 10.6 million have relocated within the province.

“Reforming the household-registration system will speed up our province’s urbanization process, and facilitate the coordinated development of the Pearl River Delta region,” Peng Hui, deputy director-general of Guangdong’s public security department, told a news briefing this week.

As part of the reforms, provincial officials will aim to “equalize” the provision of public services and ensure “balanced” economic development between rural and urban areas, according to the new guidelines.

China has used the hukou system since the 1950s to keep people from moving to the cities and forming the sort of slums that plague other developing nations. In recent decades, however, rural migrants have increasingly bucked the system to seek better opportunities in urban areas, without approval to live there.

Beijing, for its part, has since changed tack and pushed to urbanize its population of nearly 1.4 billion people, of which about 45% still in live in rural areas. But experts say the government must speed up its dismantling of the hukou system, warning that social tensions could fester and even boil over in the coming decade as China’s “floating population” of more than 250 million continues to expand.

Last year, Beijing pledged some changes to the hukou system, with restrictions to be lifted first in small towns. More stringent requirements will remain on those who want to live in larger cities, which are generally more attractive to migrants.

 

Guangdong’s plan follows a similar approach. Provincial officials say they plan to “fully liberalize” settlement rules in small, county-level cities and so-called “administratively designated towns,” where migrants with legal and stable places of residence will be allowed to apply for permanent residency.

via 13 Million Guangdong Migrants Could Gain Permanent Residence By 2020 – China Real Time Report – WSJ.

11/03/2015

China to raise retirement age as pressure on pension fund rises | Reuters

China’s pension fund will come under tremendous pressure to break even in coming years and as such, the government needs to gradually raise the official retirement age to salvage the finances, a top official said on Tuesday.

Military delegates arrive for the opening of the annual full session of the National People's Congress, the country's parliament, at Tiananmen Square in Beijing March 5, 2015. REUTERS/Carlos Barria

Yin Weimin, minister of human resources and social security, said the government will gradually raise the official retirement age, which is as low as 50 for some female workers, but stressed that any policy changes will be phased in over five years.

He did not say when retirement ages will be raised.

Analysts have long warned about China’s state pension crisis and the severe funding shortage, with some estimating that the cash shortfall could rise to as high as nearly $11 trillion in the next 20 years.

Yin said the finances were not as dire for the moment, but warned about challenges ahead.

“The pension fund faces tremendous pressure in terms of breaking even in future,” he told reporters at a news briefing on the sidelines of the annual meeting of China’s parliament.

The fund’s income stood at 2.3 trillion yuan (243.28 billion pounds) in 2014, exceeding its expenditure of 2 trillion yuan for the year, he said.

But in coming years, the proportion of Chinese over the age of 60 will rise to 39 percent of the population, from 15 percent now, Yin said.

via China to raise retirement age as pressure on pension fund rises | Reuters.

05/03/2015

China 2015 defense budget to grow 10.1 pct, lowest in 5 years – Xinhua | English.news.cn

China on Thursday announced a 10.1-percent rise in its national defense budget in 2015, the lowest growth in five years as the country confronts mounting pressure in the face of an economic slowdown.

According to a budget report released shortly before the country’s top legislature starts its annual session, the government plans to raise defense budget to 886.9 billion yuan (about 144.2 billion U.S. dollars).

That would make China the second largest military spender in the world following the U.S., whose defense budget amounted to 600.4 billion U.S. dollars in 2013.

Nonetheless, the 10.1-percent rise represented the lowest expansion in China since 2010, when the defense budget was set to grow by 7.5 percent.

The figure has thereon been riding on a multi-year run of double-digit increases, expanding 12.2 percent last year.

Thursday’s budget report did not explain the rationale behind this year’s abated growth, but a government work report to be presented by Chinese Premier Li Keqiang may offer some clues.

According to the report, national defense development would be coordinated with the country’s economic growth.

The Chinese economy grew 7.4 percent in 2014, registering the weakest annual expansion in more than two decades. The government set this year’s growth target to approximately 7 percent, brewing new concerns that the world’s economic powerhouse is losing steam.

But the report played down such concerns, stressing that China is now in a “new normal” state, where a balance ought to be stricken between growth and structural optimization.

via China 2015 defense budget to grow 10.1 pct, lowest in 5 years – Xinhua | English.news.cn.

03/03/2015

Marks & Spencer to close five Shanghai stores, Asia head quits | Reuters

British retailer Marks & Spencer (MKS.L) has decided to close five stores in the greater Shanghai region following a review of its plans for China that will nevertheless see it stick to a commitment to expand into the country’s other large cities.

Clothes are displayed on hangers in an M&S shop in northwest London July 8, 2014. REUTERS/Suzanne Plunkett

M&S also said on Monday that Bruce Findlay, its regional director for Asia, was quitting the firm after less than two years in the role to take up a position with another retailer.

The company entered China in 2008 with a store in Shanghai, and it now has 15 in the greater Shanghai region. But it has struggled to make a major impact in a country that it said on Monday remains one of its priority international markets along with India, Russia and the Middle East.

For the long term the group is in the process of evaluating potential local partners to expand in China, a path taken by other British retailers such as supermarkets group Tesco (TSCO.L) and home improvements firm Kingfisher (KGF.L).

Updating on its plans for the country following a review announced last April, M&S said it would continue to invest in its existing flagship store portfolio with the complete modernisation of its West Nanjing Road store in Shanghai in the autumn.

However, five of its supporting stores in the greater Shanghai region will close by August. Some 60 jobs will be effected. M&S also plans to reduce the size of its Shanghai head office.

M&S said it has a firm intent to enter other cities such as Beijing and Guangzhou over the next year, while further expansion online would enhance its brand across China.

via Marks & Spencer to close five Shanghai stores, Asia head quits | Reuters.

18/02/2015

China maps out vision of future prosperity along a New Silk Road | The Times

About half an hour west of Kashgar, China’s westernmost city, a chic estate agent bristling with pamphlets presents a vision of the future. Buy a place here — a short hop from the Uzbek border — and soon the global economy will pivot around you.

Her pitch boasts an artist’s impression of the villa complex a buyer might expect: miniature European palaces nestled between crystal lakes, arcades of high-end boutiques and a pine forest.

It takes (to put it mildly) an imaginative leap to square this idyll with the blistering desert and sheer, barren mountain range just outside the showroom, not to mention stories of ethnic bloodshed in the villages near by.

Yet the large image on the wall is a show-stopper. Kashgar, normally shown on the far left-hand side of Chinese maps, is a red dot at the centre of the world. Around and through it, planned road and rail lines on an epic scale twine and lunge towards Calais and Rotterdam at one end and Guangzhou and Shanghai at the other. Spurs dart off to Karachi, Tashkent, Helsinki, Moscow and Tehran. Australia and Turkey are mentioned as eventual waypoints. This Kashgar villa project, the saleswoman says, will sit at nothing less than the heart of the New Silk Road, a project viewed by some as the most important piece of geo-economic engineering we will see in our lifetimes.

Cheerleaders of the New Silk Road story have plenty to back their optimism, not least the fact that the vision is the unambiguous focus of President Xi. Talk about the Silk Road will ride high on China’s domestic political agenda this year; the global trade implications will start to reverberate soon afterwards. In 2013, when Mr Xi first laid out his ambition of building a Silk Road economic belt and a maritime Silk Road to run in parallel, he did so with the glint of a nation that is getting better and better at turning expansive blueprints into reality.

Mr Xi’s rhetoric doesn’t feel empty. China has buckets of cash to invest and a rising sense that it is deploying those funds at an historically perfect juncture: Europe is light on leadership, Putin’s Russia is not a natural builder of partnership and American domestic politics are a long-term drag on Washington’s capacity to build cohesive global visions. All around it, Beijing sees countries that may be wary of China’s ambition but, at the very least, are underwhelmed by the alternatives.

Yesterday, China’s central bank officially opened its new Silk Road fund, a $40 billion wedge of cash that supposedly will be run like a private equity investor and will drive the construction of the rail and road infrastructure on which all of President Xi’s strategic vision depends.

The blossoming of the Silk Road vision marks an even greater inflection-point in China’s economic advance — the moment when its outward direct investments, as a percentage of global investment flow, outpace inflows. Its investments abroad rose from $45 billion to more than $600 billion between 2004 and 2013. Since 2010, its two largest state-owned development banks have annually lent more to developing countries than the World Bank and China is the predominant funder of the Asia Infrastructure Investment Bank and the Brics Development Bank.

This all needs to be built into the way European leaders see the world, because at the moment, Mr Xi has a vision that could be internationalised or forever belong to China. While the initial stages of the Silk Road expansion will involve dreary-looking handshakes between China’s leaders and their various central Asian counterparts, the moment is fast arriving when the European economies have to work out the extent of their buy-in to Mr Xi’s dream.

via China maps out vision of future prosperity along a New Silk Road | The Times.

12/02/2015

Racing the elephant against the dragon | The Economist

IN 1991 India’s finance minister presented a budget to India’s parliament that would change the economic history of his country. His reforms dispensed with mounds of the red tape that reined in Indian growth, and opened up many industries to foreign capital. But India was a late-comer to the liberalisation game; China had been opening its economy since the 1970s and accelerated its efforts in the 1990s. China’s reforms have been the more successful; except for a brief period in 1999, the Chinese economy has consistently outperformed its smaller neighbour. But that picture may soon reverse.

Official statistics published on February 9th revealed that India’s GDP rose by 7.5% in 2014, a shade faster than China’s over the same period. Later this month Narendra Modi, India’s prime minister, is likely to push new reforms. India also enjoys a demographic advantage. Whereas China’s workforce began to shrink in 2012, more than half of India’s current population is younger than 25. India, rather than China, may henceforth be the symbol of rapid emerging-market growth.

via Daily chart: Racing the elephant against the dragon | The Economist.

10/02/2015

Pollution: The cost of clean air | The Economist

A DESOLATE scene surrounds Little Zhang’s Tyre Repair in the dusty rock-mining township of Shijing, in the northern province of Hebei. Zhang Minsheng, the owner, still gets some business from passing traffic. But the recent closure of nearby rock quarries, because of air-pollution restrictions, has taken its toll. He reckons his monthly income has fallen by 30-40% to around 4,000 yuan ($640). Next door a wholesale coal business has closed. So too have a small family-owned barbecue restaurant and an alcohol, tobacco and grocery store. Red characters posted by their entrances still forlornly proclaim their “grand opening”.

Last year on a typically smoggy day in Beijing, Li Keqiang, the prime minister, declared “war” on air pollution—a problem that has become a national fixation. Smog remains a grave danger in most Chinese cities, but environmental measures are beginning to show teeth. Regulators in the most polluted provinces are ordering mass closures of offending enterprises. In some areas officials are being punished for failing to control pollution. Policymakers are placing less emphasis on GDP growth—long an obsession of officials at all levels of government—and talking up greenness.

The transformation will be painful. China’s new toughness on polluting quarries, mills and factories coincides with an economic slowdown that will make it harder to create new jobs for those laid off. Slower growth is in line with the government’s efforts to curb wasteful investment, and with it a dangerous build-up of debt. The slowdown also happens to be helpful in curtailing pollution: China’s consumption of coal, a huge contributor to smog as well as to climate-change emissions, fell slightly in 2014 after 14 years of growth.

Mr Li’s war is especially bloody in Hebei, which is blamed for much of the smog in Beijing. Keeping the air of the capital clean is a political priority. Chinese leaders have been embarrassed by the damage caused to China’s international image by the city’s relentlessly grey skies. They worry that the smog could fuel dissatisfaction with the government and undermine stability in the capital, as well as affect their own and their families’ health. Dutifully, Hebei, which surrounds Beijing, has been trying to clean up. Since the beginning of 2013 it has reported closing down 18,000 polluting factories. In January Hebei Daily, a state-run newspaper, said that in Mancheng county, to which Shijing township belongs, 37 rock quarries and rubble pits had been shut.

via Pollution: The cost of clean air | The Economist.

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