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

[winston]

China's farm produce trade deficit up 14.3 times in first five months
2008-07-13 10:48:26

BEIJING, July 13 (Xinhua) -- China's trade deficit in agricultural products rocketed 14.3 times on the year-earlier level to 7.57 billion U.S. dollars in the first five months of this year, sources with the Ministry of Agricuture said on Sunday.

Foreign trade in agricultural products amounted to 39.93 billion U.S. dollars in the five-month period, a growth of 36.1 percent year-on-year. The total included 16.18 billion dollars in export value, up 12.2 percent, and 23.75 billion dollars in import value, up 59.2 percent.

The five months saw the nation's net cereal exports decline drastically and trade deficit in animal by-products increase rapidly.

Between January and May, China exported 1.19 million tons of cereals, down 76.6 percent from the year-earlier level, but imported 911,000 tons, up 14.2 percent. The net exports stood at 276,000 tons, down 93.5 percent.

In the five months, 1.65 billion U.S. dollars worth of animal by-products were sold abroad nationwide, up 10 percent, while 3.28billion dollars worth were imported, up 35.9 percent. The trade deficit was 1.63 billion dollars, up 78.6 percent.

Meanwhile, the country imported 3.58 million tons of edible vegetable oil, up 11.2 percent. The total included 1.13 million tons of soybean oil, up 7.6 percent, 98,000 tons of rapeseed oil, down 12.8 percent, and 2.33 million tons of palm oil, up 17.1 percent.

[winston]

China's auto import growth slows down in first five months
www.chinaview.cn 2008-07-13 09:37:16

BEIJING, July 13 (Xinhua) -- Growth in China's auto imports slowed down in the first five months of this year, thanks largely to a compulsory coding system for standardizing vehicle purchase from abroad, according to General Administration of Customs.

The new import management system, which took effective in April, denies refitted and stolen motor vehicles access to the Chinese market.

Upon the tightened control, China's auto imports in April declined 7.5 percent from March level to 37,000 units, and in May, went further down 18 percent from April level to 31,000 units.

The customs said between January and May, China bought 171,000 motor vehicles from abroad, a growth of 59 percent on the same period of last year. The arrivals were valued at 6.26 billion U.S. dollars, up 74.9 percent. The import growth rate, however, was 15.7 percentage points lower than the first quarter level.

The total imports included 71,000 motor vehicles bought from Japan, up 100 percent, and 57,000 from the European Union, up 54 percent. The growth rates were 19 percentage points and 13 percentage points, respectively, lower than the first quarter level.

The January-May period saw off-road vehicles imports soar 91 percent to 87,000 units nationwide, or 50.9 percent of the total auto arrivals. The growth rate was 32 percentage points higher than that for the total imports, while the proportion was up from the 42.4 percent level a year earlier.

Car imports went up 29.6 percent to 65,000 units, or 38.2 percent of the total, down 8.7 percentage points

[millionairemind]

Growth in Chinese forex reserves slows
By Geoff Dyer in Beijing

Published: July 14 2008 19:07 | Last updated: July 14 2008 19:07

China’s foreign exchange reserves grew at their slowest pace in more than two years in June, prompting questions over whether the flow of speculative capital into China was slowing as a result of government efforts.

The People’s Bank of China said its foreign currency reserves grew to $1,810bn (€1,140bn, £910bn) at the end of June but increased by a relatively modest $11.9bn over the month after increasing by a record $75.5bn in April and $40.3bn in May.

China’s foreign exchange reserves, which are the biggest in the world, have trebled in size since 2004. But the $11.9bn increase in June was the smallest monthly jump since February 2006.

If the June figures were the result of a slowdown in capital inflows, it would provide a big relief to the government, which has tried to prevent flows of speculative “hot money” from leaking into domestic inflation.

But economists warned that the June reserve figures could reflect changes in the way reserves are accounted for rather than significant reductions in capital inflows.

This year’s large increase in reserves has become part of a debate in Beijing about whether to tighten monetary policy and accelerate currency appreciation to tackle inflation, or whether to relax those policies to avoid damaging the real economy.

The increase in reserves in June is less than the combined trade surplus and foreign direct investment figures, which could indicate that China saw an outflow of speculative funds at a time when currency appreciation was slower than earlier in the year.

Analysis of the reserves has been complicated this year by the creation of China Investment Corporation, the sovereign wealth fund, which is expected to receive transfers of reserves.

Some economists believe the June figures reflect a government policy obliging commercial banks to convert part of the reserves they hold with the central bank to US dollars from renminbi, in effect taking down the foreign currency stock on the central bank’s balance sheet.

Logan Wright, an analyst at Stone & McCarthy in Beijing, calculated that the 1 percentage point increase in reserve requirements in June decreased the headline figure for reserves by $40bn-$45bn. “There is no real evidence of outflows,” he said. “The June numbers reflect the strategy of outsourcing reserve accumulation to commercial banks.”

Ha Jiming at China International Capital Corporation said the slowdown in accumulation reflected concerns about the economy and the weak equity and property markets. “China has become less attractive to international hot money,” he said.

The central bank revealed that the annualised growth rate of money supply, as measured by the broad M2 indicator, had slowed from 18.1 per cent in May to 17.4 per cent in June.

Reuters reported that the ministry of commerce had made a formal proposal that the pace of renminbi appreciation should be slowed and tax rebates to exporters increased to prevent a big drop in exports. But Hong Liang at Goldman Sachs said: “Loosening monetary policy before energy price controls are lifted would en-tail significant risks of worsening the inflation outlook.”
Copyright The Financial Times Limited 2008

[winston]

Equity channel may widen for insurers
(07-15 19:24)
China Insurance Regulatory Commission may allow small and mid cap size insurers to invest in the domestic stock market directly instead of via asset management units as at present, the Shenzhen-based 21st Century Business Herald quoted unnamed sources as saying.

The move follows other measures taken since January to spur investments in the nation's beleaguered stock markets.

Recently, the CIRC allowed mainland insurance firms to keep 10 percent of their total assets in equities, raising the limit from 5 percent.

[millionairemind]

China’s economy slows in second quarter
By Geoff Dyer in Beijing

Published: July 17 2008 08:35 | Last updated: July 17 2008 12:16

China’s growth rate slowed again in the second quarter of the year due to weaker export markets and restrictions on lending, although the economy is still expanding at double-digit rates in the face of a global slowdown.

The government said that the economy grew 10.1 per cent in the second quarter, down from 10.6 per cent in the first quarter, which was the fourth quarter in a row of declining growth in gross domestic product. The result was the lowest growth rate since the last quarter of 2005 and was also slightly below analysts’ forecasts.

The government also announced mixed news on inflation. While consumer price inflation continued to decline from 7.7 per cent in May to 7.1 per cent last month, factory gate inflation rose again from 8.2 per cent to 8.8 per cent.

The batch of new figures underlined the delicate challenge that the Chinese authorities are facing of trying to cool the economy in the face of high inflation without prompting a sharp drop in activity and employment.

Li Xiaochai, the official spokesman at the National Bureau of Statistics (NBS), said the government was trying to balance the risk of inflation with the need to create jobs. But he added: “The current slowdown in growth has been happening steadily – there are no big ups or downs.”

The authorities have tried to tackle inflation this year by accelerating the rate of currency appreciation and by placing stricter quotas on new bank lending, although they have not increased interest rates.

However, the central bank is under growing pressure from different parts of the government and industry to relax some of the tightening measures, which could increase with the latest signs of slowing growth. In particular, the Commerce Ministry called last week for slower appreciation of the currency.

Stephen Green, economist at Standard Chartered in Shanghai, said: “We do not think recent comments signal an imminent change in either monetary or foreign exchange policy … but the tide does seem to be turning”.

Several private sector economists said that as growth was still robust, controlling inflation should remain the main priority, especially given that higher factory prices indicate potential future inflationary pressures.

“It is too early for a change in monetary policy,” said Ben Simpfendorfer, economist at Royal Bank of Scotland in Hong Kong. However, several economists said yesterday that they no longer expected further increases in interest rates this year.

The slower rate of overall growth reflected weaker growth of exports, especially to the US. However, economists said the main drivers of economic activity, particularly domestic investment, remained intact.

Figures for economic activity in June were above forecasts, according to Goldman Sachs. Fixed asset investment was 29.5 per cent higher than in the same month last year, against an increase of 25.4 per cent in May, while real retail sales were 15.1 per cent stronger in June this year than the same month in 2007, compared to a 13.1 per cent increase the month before.

Andy Rothman at CLSA in Shanghai said the government might seek to relax in the second half some of the controls it has placed on real estate investment, which have slowed price increases and led to a slump in transactions in some large cities.

Rising food prices could have an influence on the widening wealth gap between urban and rural areas. The NBS said that real rural incomes grew by 10.3 per cent in the first half of the year, while urban real incomes were up 6.3 per cent.
Copyright The Financial Times Limited 2008

[winston]

Financial Times: China on brink of electricity shortfall

“China faces its worst power shortage in at least four years as soaring coal prices and government-set electricity tariffs force dozens of small power plants to shut down rather than face mounting losses.

“Nearly half of China’s provinces have started to ration electricity as the country enters the peak summer season, facing what analysts describe as its worst coal shortage.

“Analysts warn that this year’s electricity shortfall could be more severe than in 2004, when the country was affected by its worst power shortage in decades because of soaring demand for power as the economy boomed.

“China’s problems mirror those of other Asian countries, where the rising price of fuel and other commodities has had an impact on governments that traditionally subsidise everything from the cooking kerosene used by the poor to the electricity used by industry. Companies in Indonesia, for example, have complained of rolling blackouts and action by the government to force them to shift factory production to weekends.”

Source: Jamil Anderlini and Geoff Dyer, Financial Times, July 16, 2008.

[winston]

Wen attempts to reassure manufacturers
Chen Liyiand agencies
Monday, July 21, 2008

The mainland government is under pressure from increasingly vocal exporters to provide them with more support, and Premier Wen Jiabao attempted to reassure manufacturers as he visited a southern manufacturing hub.

Wen has visited Guangzhou, Dongguan and Shenzhen in the past two days. Wen said: "I know you are facing pressure from rising input costs, and a shrinking consumer market, but I understand your greatest concern is foreign trade policy."

"I can answer you that our foreign trade policy will be basically stable," he added - though that may be little comfort for businessmen hoping Beijing will backpedal on existing policies aimed at curbing some exports of goods such as textiles, he added.

Meanwhile, small businesses on the mainland stand to benefit from loans that would go their way if calls of top bank officials are implemented.

Speaking at an economic forum in Beijing yesterday, People's Bank of China vice governor Yi Gang was quoted as saying that he prefers " using favorable policies to support small banks giving out loans to rural areas, small companies, and residents."

Yi, however, did not give specific details. His pronouncements came on the heels of calls from China Banking Regulatory Commission chairman Liu Mingkang for banks to lend to small enterprises and support them through "difficult times."

Liu said during a commission meeting on Saturday that banks and other financial institutions should watch the credit situation of small businesses closely. This would enable them, he explained, to formulate policies that would be helpful to qualifying small enterprises, especially those with reasonable credit needs based on areas ravaged by the snowstorm and earthquake disasters this year.

The statement emphasized the need for banks to strengthen their ability to handle risks. Liu also encouraged the development of more scientific forecasting. He emphasized the need to solve the problems of the banking industry in line with the government's macroeconomic austerity measures.

[winston]

HONG KONG ECONOMIC TIMES

-- The impact of the government's inflation relief measures will emerge in the third quarter and continue through mid-2009, according to chief economist Kwok Kwok-chuen.

-- Forty percent of manufacturers along the mainland's coastal regions are said to be in half-closed status as many productions have been halted due to higher costs related to fuel, labour and yuan exchange.

[winston]

China pension fund to stabilise stock holdings, up fixed-income

BEIJING, July 21 (Reuters) - China's national pension fund will "stablise" its investments in stocks and increase investments in fixed-income assets, its chairman, Dai Xianglong, said in comments published on Monday in the official People's Daily.

Dai, the head of the National Social Security Fund (NSSF), also said the fund, which manages 516.2 billion yuan ($75 billion) in total assets as of the end of 2007, would not invest directly in individual stocks.

He said the fund's investment in stocks has suffered heavy losses in the first half, but the decline in value was less than the drop of the Shanghai Stock Composite Index .SSEC.

[winston]

China says to tighten supervision of share sales

SHANGHAI, July 21 (Reuters) - China's securities watchdog, seeking to ease market concern over heavy supplies of fresh equity, said on Monday it would tighten monitoring of sales of shares made tradable by the expiry of lock-up periods.

Data on such sales will be published regularly on the website of the government's securities clearing house, China Securities Depository Trust & Clearing Co, the China Securities Regulatory Commission said in a statement quoted by the Xinhua news agency.

Tens of billions of dollars worth of shares will become freely tradable this year and next with the expiry of lock-up periods related to initial public offers and reforms of companies' state shareholding structures.

The resulting supply of fresh equity has helped to push the stock market down sharply, with the Shanghai Composite Index .SSEC down 53 percent from last October's record peak.

To help support the market, the commission has from April required any shareholder which plans to sell over 1 percent of a listed firm's outstanding shares freed up by a lock-up expiry to conduct the deal off-market.

But since then, some shareholders are believed to have circumvented the rules, some of them by selling shares through affiliates.

About two-thirds of the Shanghai and Shenzhen stock markets' combined capitalisation of 19 trillion yuan ($2.8 trillion) remains non-tradable, according to exchange data. Most of the non-tradable shares will become tradable over the next two years as lock-up periods expire.

Xinhua quoted the securities commission as saying on Monday that state or institutional shareholders had sold off 30 percent of shares becoming tradable over the past couple of years.

Dozens of Chinese state shareholders have pledged not to sell off their holdings for several years after the expiry of lock-up periods, and fund managers believe the securities commission may be encouraging them to make such pledges.