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

[kennynah]

15 Jun 2008 06:25 GMT

Econ Slowdown, Inflation China's Key Risks - Ex-PBOC Adviser

JEJU, South Korea -(Dow Jones)- A potential domestic economic slowdown, compounded by weakness in the U.S. economy, is among the "major challenges" China faces, a former adviser at the People's Bank of China said Sunday.

Rising inflation and falling asset prices in the share and real estate markets are also among the biggest risks facing China, said Yu Yongding, currently the director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, a government think tank.

China's economy is still closely linked with the U.S. despite China's increasing domestic demand and diversified trading partners, he said, estimating China's gross domestic product growth may decrease by more than one percentage point for each percentage point of slowdown in the U.S.

"I will be overjoyed if China's economy grows 9% this year," he said at an Asia-Europe Finance Ministers' Meeting conference. "But I wouldn't be surprised if it's below 9%." China's economy grew 11.9% in 2007.

But annual GDP growth of 8% could be a policy floor for China because any growth slower than that carries severe "political consequences" stemming from the potential jump in unemployment, he said. Yu was a former academic member of the People's Bank of China's monetary policy committee.

"In China, each year we need to create some 20 million to 24 million new jobs. If we fail to do this there will be lots of problems," he said.

Meanwhile, a steady depreciation of the U.S. dollar against the yuan has eroded the value of China's massive foreign exchange reserves, much of it in U.S. dollar-denominated securities.

"Sooner or later these losses will affect China's economy," he said.

The yuan's steady appreciation has been attracting inflows of speculative funds in the past seven months, creating uncertainties in China's financial market, he said.

"China's (foreign exchange reserves) will surpass the $2 trillion mark very soon," he said. "It's horrifying, because the direction of cross-border capital can change very fast."

[kennynah]

the same rhetoric...but i want to highlight the last paragraph to show EU's trade deficit vis-a-vis China..

15 Jun 2008 08:51 GMT
Asia, Europe face challenge from prices - French minister

JEJU ISLAND, South Korea (Thomson Financial) - Asian and European economies face severe challenges from soaring fuel and food prices and global financial turbulence, France's finance minister cautioned Sunday.

"Of course, we would all prefer to be triple-A economies but indeed we are facing triple-F challenges," Christine Lagarde told an Asia-Europe Meeting (ASEM) of finance ministers.

Host nation South Korea is grappling with a crippling strike by truck drivers over high oil prices, the latest in a series of global protests against rising food and fuel costs.

"We have important economic and financial challenges in common," Lagarde said in a keynote speech to the two-day meeting on the resort island of Jeju.

"Adverse shocks have affected our economies. So far, Euro area growth has been resilient, and Asia as well, even if the impact of recent turmoil may affect all economies."

Lagarde said there were clear concerns "about prices of food and prices of fuel and social unrest that results from such movements.

"This is indeed amplified and far more dramatic in emerging economies and in the developing world, but clearly this is the issue we share."

The Group of Eight finance ministers meeting in Osaka warned Saturday that high oil and food prices pose "a serious challenge to stable growth worldwide" and may worsen poverty and stoke global inflation.

The Jeju meeting is being attended by finance ministers or their deputies from 27 EU countries and 16 Asian nations, plus officials from six international organisations.

Apart from fuel and food, they are also debating recent global financial turmoil sparked by the U.S. subprime mortgage crisis.

"We certainly want to develop further growth and improve the resilience of the Euro area," Lagarde told the meeting.

"That has been made particularly urgent because of the financial crisis that we have gone through. We want to improve the coordination of regulators."

Lagarde said low interest rates have helped Europe cushion external shocks but she was "anxious and worried" because of inflation.

"We want better supervision and better surveillance generally. We believe that will certainly reinforce the strength of the Eurozone in the face of financial challenges," she said.

Lagarde urged Asian nations to work to persuade their people of the benefits of economic integration, saying Europe had failed to do this effectively.

Irish voters last week rejected the Lisbon Treaty, the latest attempt by the European Union to strengthen its institutions to cope with expansion into Eastern Europe.

"I think that one of the mistakes that we have made in terms of fostering and promoting integration has to do with communication," she said.

"When you move towards better integration, make sure that you always along the way communicate the positive outcome of that integration."

Lagarde said "the man and the woman in the street" were not necessarily aware of the benefits of integration. She cited job creation, greater investment flows and the role which the European Central bank played to ease the global financial crisis.

Europe's huge and growing trade shortfall with China is also expected to be among key topics at the meeting attended by some 400 delegates.

The deficit in 2007 was 159.16 billion euros ($246 billion), according to EU figures, up from 131.07 billion euros in 2006.

[winston]

China Agrees to Shorten Lockup for QFII Investors (Update3)
By Luo Jun

June 19 (Bloomberg) -- China agreed to let overseas fund managers repatriate principal and profits more quickly, a move that may increase the allure of a stock market that's fallen 44 percent this year.

China will reduce the ``initial lockup period'' for investments by certain Qualified Foreign Institutional Investors, the U.S. Treasury Department said in a statement, without providing further details.

``This will certainly stir up more interest from overseas investors,'' said Hu Xiaodong, a Shanghai-based portfolio manager at Martin Currie Investment Management, which oversees about $3 billion, including a $120 million QFII quota. ``But if you're a long-term investor and you really have confidence in China's stock market, the lockup won't be a major obstacle.''

China has been looking at ways to bolster its stock market, the second worst performer in Asia this year, on concern measures to control inflation will erode corporate earnings. U.S. Treasury Secretary Henry Paulson has been pushing China to give more access to its financial services industry since he started the semiannual Strategic Economic Dialogue in 2006.

China has agreed to triple quotas under the QFII program to $30 billion, lifted a moratorium on overseas firms buying into domestic brokerages, and allowed foreign banks to issue yuan- denominated bank cards.

Easier Access

The China Securities Regulatory Commission in 2006 shortened the lockup period for repatriation to overseas pension, insurance and mutual funds to three months from one year previously. Other types of QFII investors are still subject to the one-year lockup. There was no information in today's statement on what the changes will be, who they will apply to and when they will occur.

As of February, QFII investors put $9.8 billion in China's stocks and expatriated $1.2 billion, the China Securities Journal reported in April. They held more than 270 billion yuan ($39 billion) worth of mainland stocks, according to the report.

Paulson and Chinese Vice Premier Wang Qishan are leading the fourth-round of SED talks in Annapolis, Maryland, which concluded yesterday. U.S. business groups representing companies such as Citigroup Inc., the biggest U.S. bank, have urged China to allow a greater role for overseas enterprises.

China also agreed to allow ``qualified'' foreign companies to list on domestic stock exchanges by issuing shares or depository receipts, according to today's statement. The nation will also start a pilot program to allow non-deposit taking foreign financial firms to provide consumer finance.

In addition, the government will ease qualifications for foreign banks to issue yuan-denominated bonds.

[LenaHuat]

China Agrees to Shorten Lockup for QFII Investors (Update3)
By Luo Jun

June 19 (Bloomberg) -- China agreed to let overseas fund managers repatriate principal and profits more quickly, a move that may increase the allure of a stock market that's fallen 44 percent this year.

China will reduce the ``initial lockup period'' for investments by certain Qualified Foreign Institutional Investors, the U.S. Treasury Department said in a statement, without providing further details.
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Inspite of the obstacle, investors are heading for the exit (from The Independent):

China and India lose their appeal for investors on inflation fears
Last Updated: 6:40am BST 19/06/2008

The world's fund managers are pulling their money out of China and India at a record pace on mounting fears of inflation and are now more pessimistic about global equities than at any time in the past decade.

The latest survey of investors by Merrill Lynch shows that Europe has become the most unpopular region, while Britain is still trapped in the doldrums.

But the big surprise is the sudden change in view on the emerging powers of Asia, as overheating and spiralling oil costs spoil the boom.

[winston]

Hi Lena,

I can feel that they want to prop the market up before the Olympics. A very short term trade...

But what would they be doing ?
1) margin trading ?
2) increase QFII quota ?
3) approve more Mutual Fund products ?
4) increase gasoline prices ? This would make Sinopec and Petrochina jump. The index will then go up as these two are heavyweights on the index
5) increase the windfall tax threshold for Petrochina from the current US$40 to say, US$100 ? Propping up Petrochina
6) loosen lending to corporations that want to borrow money to invest in the stockmarket ?
7) using the Social Security Fund to invest in the stock market ?
8) giving a higher quota to life insurance companies to invest in the market ?
etc..

Take care,
Winston

[LenaHuat]

Hi Winston - Trust your excellent mind to think in complete phases

IMHO, most likely :-
(a) (3);
(b) (4); (this is the most interesting possibility as it will have global implication)
(c) (7) (I think that corrupt Shanghai mayor was sentenced to corruptly mis-using social security funds to dabble in the SSE)

[winston]

(c) (7) (I think that corrupt Shanghai mayor was sentenced to corruptly mis-using social security funds to dabble in the SSE)

Not sure about dabbling in the SSE but I did recall reading something in the papers, about him using the Social Security Fund for some real estate projects...

[kennynah]

w : u have become an oracle ??

<<4) increase gasoline prices ? This would make Sinopec and Petrochina jump. The index will then go up as these two are heavyweights on the index>>

china indeed announced raising fuel prices today

[kennynah]

Hi Winston - Trust your excellent mind to think in complete phases

IMHO, most likely :-
(a) (3);
(b) (4); (this is the most interesting possibility as it will have global implication)
(c) (7) (I think that corrupt Shanghai mayor was sentenced to corruptly mis-using social security funds to dabble in the SSE)

hi L : maybe to fund his macau casino account

[LenaHuat]

Hi K - ho, ho.........not surprising. Even that North Korean Kim's son rolled high stakes and lived in Macau until he was spotted.

I'm not certain that China has officially announced reduction in oil subsidies.
Gonna check with oracle Winston