China Export Growth Plummets Amid Fake-Shipment Crackdown
By Bloomberg News – Jun 8, 2013 10:01 AM MT
China’s export growth plummeted to a 10-month low in May and imports unexpectedly fell as a crackdown on fake trade invoices exposed weakness in global demand.
Overseas sales rose 1 percent from a year earlier, the General Administration of Customs said in Beijing yesterday, trailing 35 of 38 analyst estimates in a Bloomberg News survey and down from April’s 14.7 percent pace. Imports dropped 0.3 percent, leaving a trade surplus of $20.4 billion.
The report reflects a government campaign to root out illegal capital inflows disguised as trade that had inflated figures and added to appreciation pressure on the yuan. It also underscores the challenges Premier Li Keqiang faces as overseas demand stalls while rising home prices, financial risks and overcapacity at home limit his room to boost the economy.
“This shows the real state of the Chinese export situation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. The data show a “pretty depressed” picture, with weak external demand and a yuan that has appreciated substantially against a trade-weighted basket of currencies, said Shen, who previously worked at the European Central Bank.
The slowdown in May’s figures was partly the result of “arbitrage trade” with Hong Kong being curbed, the customs administration said in a statement yesterday. Appreciation in the yuan and the worsening trade environment, as well as a domestic slowdown, weak external demand and high business costs, also contributed, the agency said.
The State Administration of Foreign Exchange last month started a campaign to curb money flows disguised as trade payments that had inflated export data.
China’s exports to Hong Kong fell to $28 billion in May from $39.5 billion in April, according to yesterday’s customs data. Growth in sales through bonded zones, which lie within China’s borders and handle shipments as international trade, slumped to a year-on-year pace of 45.8 percent in May from April’s 253.5 percent.
Data due today on industrial production and retail sales for May and fixed-asset investment for the first five months are forecast to show little change from April’s growth rates. Analysts last month trimmed economic-expansion forecasts for the April-June period to a median projection of 7.8 percent from an 8 percent pace forecast in April.
Li, who took office as premier in March, has resisted adding stimulus to the economy as the new leadership tries to make growth more sustainable and avoid stoking financial risks.
The trade figures reflect a “normalization,” said Hu Yifan, chief economist at Haitong International Securities Co. in Hong Kong, the only analyst to forecast declines in exports and imports. “We expect export growth to remain modest but import growth to pick up along with implementation of supportive policies,” she wrote in a note yesterday.
The trade slump adds to concerns that the global recovery is losing momentum even as the U.S. shows signs of strengthening. The ECB last week forecast the 17-nation euro area will contract 0.6 percent this year, more than its March estimate of 0.5 percent. In the U.S., employers added more workers than forecast in May.
Even so, China’s exports to the U.S. fell 1.6 percent in May from a year earlier and imports from the U.S. dropped 1.5 percent, the first time since 2009 that both showed a decline in the same month.
Exports “may remain weak in the near term” as the U.S. economy softens, which is likely to shift expectations for a strengthening yuan, said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. The yuan has risen 1.6 percent this year against the U.S. dollar and about 14 percent against the yen, the most among Asian currencies tracked by Bloomberg.
Analysts had median estimates of 7.4 percent for May export growth, 6.6 percent for import gains and $20 billion for the trade surplus.
Part of China’s broader import drop resulted from falling commodity prices. The volume of inbound iron ore shipments rose 7.4 percent in May from a year earlier while the value increased about 1 percent, based on previous data. Average prices in the first five months were down 4 percent, the customs agency said.
The customs administration in April acknowledged concerns that export data may be overstated after March shipments to Hong Kong jumped 92.9 percent from a year earlier, the most in at least a decade. A Bloomberg News survey last month showed analysts estimated January-April export growth was overstated by 4 to 13 percentage points.
Trade friction may also hamper exports this year. The European Union last week said tariffs of as much as 67.9 percent could be imposed on solar panels from China in the largest EU commercial dispute of its kind, affecting Chinese companies like Yingli Green Energy Holding Co. and Wuxi Suntech Power Co.
China’s exporters are losing competitiveness “because of a strong yuan and rising protectionism,” Liu Li-Gang, Australia & New Zealand Banking Group Ltd.’s head of Greater China economics in Hong Kong, said in a note yesterday. That trend “will gradually show up in China’s export data in the following months, which will have dire consequences to China’s already weak job markets.”
Statistics: Posted by yoda — Sat Jun 08, 2013 10:19 am
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What in the world is China up to? Why are the Chinese hoarding so much gold? Does China plan to back the yuan with gold and turn it into a global reserve currency? Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet? Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show. But that isn’t the case at all. The truth is that China doesn’t just want to compete with the United States. Rather, China actually plans to replace the United States as the dominant economic power on the planet. In fact, China already accounts for more global trade than the United States does. So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade? It would cause a financial shift so cataclysmic that it is hard to even imagine. Most of those that write about the “death of the U.S. dollar” usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned. China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States. Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative. But a gold-backed yuan would change all of that very rapidly.
And without a doubt, the Chinese government has already been very busy promoting the use of the yuan in international trade. In a recent note, John McCormick of RBS Group stated the following…
Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago.
A number of factors suggest that the Chinese authorities want to make RMB internationalisation happen by 2015.
For China, having a global reserve currency is not just about economics. It is also about power.
McCormick ended his recent note this way…
China’s new leadership faces a number of problems. The country’s economy is slowing and, although we would expect the rate of GDP growth to pick up a little, it is unlikely to be a steep rebound.
But promoting RMB as a global reserve currency, with all the economic benefits that will bring in addition to exerting more political influence on the global stage, clearly remains high on their agenda.
Similar sentiments were echoed in a recent article in the Wall Street Journal…
Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China’s State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People’s Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.
We don’t hear much about these sorts of things in the western media, but the convertibility of the Chinese yuan is a very big deal. Up until recently, the yuan was only directly convertible into dollars and yen. But now that is rapidly changing. So far this year, the Chinese government has entered into currency convertibility agreements with Australia and New Zealand.
So instead of having to change yuan into U.S. dollars to trade with Australia and New Zealand, now China can cut U.S. dollars completely out of the process.
But right now there is nothing that really gives the Chinese yuan a significant competitive edge over the U.S. dollar. If Chinese authorities truly want the yuan to end up replacing the U.S. dollar as the primary reserve currency of the planet, they need to do something that will make the rest of the world want to use it.
And they could do that by backing the yuan with gold. In fact, there are persistent rumors that China has been busily preparing for that.
For example, the Economic Policy Journal recently pointed out that Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush, is claiming that China has plans to turn the yuan into “a hard, gold-backed currency” that will have a distinct competitive edge over the rapidly depreciating paper currencies that the rest of the globe is currently using…
The most interesting piece of the puzzle is that the Chinese have emerged as the biggest buyers of gold, mainly off-market. They want the yuan to emerge as a hard, gold-backed currency in a world where everyone else has chosen to inflate and devalue.
The recent bilateral currency deals with Australia, France, Russia and Singapore, and many others, reflect this desire to displace the USD as the world’s reserve currency.
It may be an interesting and long race between the Chinese reaching for convertibility and the Western central banks straining credibility.
Other analysts are also fully convinced that the goal of the Chinese is a gold-backed yuan. The following is what money manager Stephen Leeb told King World News recently…
Countries have been battling each other in order to cheapen their currencies. The problem with a cheaper currency is that commodities cost more. So China has decided to opt for a higher currency.
The move in the yuan overnight was one of the most significant upticks I have seen. Like I said, the yuan moved to an all-time high. The yuan has advanced roughly 5% against the US dollar in just nine months. China also imported over 200 tons of gold for the most recent month. That is an extraordinary number. At that rate that’s over 2,400 tons of gold per year on an annualized basis.
This simply speeds up the point at which China will be the largest gold holder in the world. China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them. And, again, you see the yuan going up so that is making the price of gold even cheaper for the Chinese.
It’s only a matter of time before the Chinese back the yuan with gold. This will push the yuan front and center as a key element in terms of being part of the world’s reserve currency basket. China gets the message. They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena. Their currency is flying and they are importing as much gold as they possibly can.
And without a doubt, China has been hoarding massive amounts of gold. Everyone agrees on that. But what nobody knows is exactly how much gold China currently has stockpiled, because China is not telling anybody.
One recent estimate put China’s gold reserves at more than 7,000 tons of gold, but it could potentially be far higher than that. When China does finally tell the rest of us how much gold they have, they will probably be just a move or two away from checkmate.
What we do know is that China is importing absolutely enormous amounts of gold right now even though China is also the number one gold producer on the planet.
According to Reuters, more than 223 tons of gold was imported into China from Hong Kong in March. That smashed the previous record of 114 tons in December.
Overall, Chinese imports of gold from Hong Kong tripled in 2012, and the final number for 2013 is going to absolutely smash what we saw in 2012.
Obviously something is happening.
China is massively hoarding gold at the same time that it is trying to substantially raise the international influence of the yuan.
It doesn’t take a genius to see where all of this is headed.
If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar. At that point you could forget about cheap gasoline or cheap Chinese imports. Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively. If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living. Today, most U.S. currency is actually used outside of the United States. If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.
So keep an eye on China, and look out for any news about the yuan.
It won’t happen next week or next month, but eventually we could see China back the yuan with gold.
When that happens, it is going to be a complete and utter financial disaster for the United States.
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BOYCOTT SMITHFIELD HAM !!!
Posted on 2nd June 2013 by Stucky in Economy
I’m not going to mince words. If you knowingly eat food from China you are just plain fucking stupid.
China is fast becoming an environmental basket case, if it’s not there already. God only knows what shit they feed their animals. They have no equivalent to the FDA. No food inspectors. Manufacturers get away with whatever the fuck they can to save costs. Even their pet foods have killed American dogs and cats.
And do NOT believe all the bullshit crap about how this is good for the company and that quality won’t suffer. Even if the meat is still grown and cured in the USA …. it is still a fucking Chink owned company. Don’t be a dumbass by refusing to believe their management won’t have a say in cutting costs … and fucking up your meat.
I have already sent them an email at email@example.com. It was short and simple and to the point. They probably don’t read long ones.
“To Whom It May Concern: I’ve been made aware that your company will soon be owned by China. Effective immediately I will forevermore boycott your products. Furthermore, I will email the several hundred names in my address book to do likewise, and encourage them to email to their entire address book, and so on. You should be ashamed for selling out a once great AMERICAN company. Blow me.”
Well, I didn’t actually say “blow me”, but I wanted too.
VIRGINIA HOCKS ‘HAM CAPITAL OF THE WORLD’ AS CHINA SNAPS UP LEADING PORK PRODUCER FOR RECORD $4.72 BILLION
In what would be the largest ever takeover of a U.S. company by a Chinese firm at $4.7 billion, Smithfield Foods has agreed to be purchased by China’s largest meat producer.
Now residents of the small town of Smithfield in southeastern Virginia that was built by and still revolves around the ham company wonder what the purchase means to their community. You can’t go far in this historic southeastern Virginia town without seeing a pig and reception to the news is as mixed as whether the locals favor salt-cured or sugar-cured ham.
A herd of life-size swine statues lines its downtown, an ornament of a piglet wearing a bandanna adorns a front lawn, hams hang in storefronts and a pickup truck flaunts the license plate ‘PIG TIME.’
Smithfield Foods Inc. agreed to the multi-billion dollar offer from Shuanghui International Holdings Ltd., the majority shareholder in China’s largest meat processor. The deal still faces a federal regulatory review and Smithfield shareholder approval.
Steps from the site where the company was founded in 1936, residents in the ‘Ham Capital of the World’ greet each other on a main street lined with white picket fences and Victorian-style homes, and welcome a neighbor back from a recent trip out of town. Just down the road, workers shuffle into the company’s packing plants for their shifts.
Looking out on the street that’s lined with antique cars every weekend, locals frequent Smithfield Gourmet Bakery and Beanery, grabbing their morning coffee and pastry. Some are shocked that ‘China would own our Smithfield,’ said Carolyn Burke, a longtime resident who owns the eatery.
‘It’s Smithfield ham, it’s not China ham,’ Burke said.
And she’s right: Pork produced here for more than 300 years became so popular that many places in the 1930s tried to pass off their ham as Smithfield ham, which led to branding each ham so customers knew it was authentic. The state even passed a since-revised law in 1926, stating the ‘Smithfield ham’ moniker could only be used for cuts of peanut-fed hogs processed and salt-cured in the town limits.The town also is home to the world’s oldest cured ham from 1902 at the Isle of Wight museum – complete with its own brass collar around the hock.
As important as the pork itself is Smithfield Foods, which employs about 3,800 people in Virginia. In its most recent fiscal year, it brought in sales of more than $13 billion and made a profit of $361 million.
The company, its founding family – the Luters – and those who work there donate time and money to the community, funding parks, public restrooms and other projects.
You either have a family member who works there, or has worked there, or you had a summer job there. It’s just such a part of our community,’ said Sheila Gwaltney, the director of a local arts center and a more-than-40-year resident whose husband’s family has been in the area since 1666. ‘Smithfield has been so good for the town.’
With its namesake and well-being on the line, Smithfield native and Mayor T. Carter Williams, 71, hopes the pending sale doesn’t compromise the town’s identity. They say that everything’s going to stay the same, and we all just hope that it does,’ he said. His wife, Connie, works at Taste of Smithfield, a hometown restaurant the company opened about a year ago to showcase its products. ‘We’ll just see where it ends up, time will tell.’
[Stucky Note: Here come the mega bullshit.] In an interview with The Associated Press, Smithfield Foods CEO Larry Pope said the move showed ‘the globalization of the world and how it affects small-town America.’ ‘But Smithfield, Virginia, has nothing to worry about,’ Pope said. ‘We’re in a mature market … and to continue to grow we have to look at opportunities outside the United States.’ Bob Barnes, who worked as an accountant at Smithfield Foods for about 10 years before retiring, sees only ‘good things happening’ for the company that has had its share of ups and downs over the years.
Pork producers such as Smithfield have been caught in a tug of war with consumers. The company needs to raise prices to offset rising commodity costs, namely the corn it uses for feed. But consumers are still extremely sensitive to price changes in the current economy.
By raising prices, Smithfield risks cutting into its sales should consumers cut back or buy cheaper meats, such as chicken. In 2009, Smithfield Foods posted its first annual loss since 1975, and again in 2010, but has since rebounded. And one of its largest shareholders had been pushing Smithfield to consider splitting itself up in recent months.
‘Somebody’s gotta own it,’ Barnes said. ‘It’s just money. It doesn’t bother me as long as it doesn’t change our philosophy, our life, our politics (and) it doesn’t shut down places.’ Gwaltney agreed: ‘When you think about it, that should be very good economically for the company … and what’s good for the company is good for us.’
There is at least one drawback that residents note: They’ll soon be unable to own Smithfield stock – a tangible piece of the company named after the town that pork built.
Statistics: Posted by yoda — Sun Jun 02, 2013 9:36 am
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China Juggernaut Shows No Signs Of Slowing
Written by Jeff Nielson
Tuesday, 28 May 2013 12:49
Among my many pet-peeves concerning the business news reporting by the mainstream media is the apparent inability among this entire cadre of writers to either perform or even comprehend simple arithmetic. Nowhere is this mathematical illiteracy more-flagrant than with mainstream babble about “China’s slowing economy.”
More and more frequently, this is coupled with suggestions or outright accusations that China’s government is exaggerating its economic data. Let me deal with this second issue before the first.
Sadly, all governments exaggerate their economic statistics to some degree. Indeed few (if any) other writers spend as much time as myself in highlighting this lying-with-numbers. Here the “undisputed Champion” is the U.S. government.
There are too many examples to choose from; however I’ll restrict myself to a single, familiar anecdote. In the same month last year that the World Bank reported that “global food inflation” had spiked to an annual rate of 120%, the U.S. government reported literally “0% inflation” that month in the U.S. (and in June as well). Readers can judge for themselves the plausibility of food-inflation being at 120% “globally” (in our era of “globalization”); while total inflation was supposedly at absolute-zero among the obese U.S. population. Did nobody eat that month – or the month before?
Meanwhile, the inflation-rate is the basis for many other calculations, among them U.S. GDP. Governments must subtract the rate of inflation out of their GDP calculation; or the GDP estimate is exaggerated by the full amount of that inflation. A “garbage” inflation number must result in a “garbage” GDP number – and to precisely the same proportion/degree.
Thus no government in the entire world exaggerates its GDP estimates more than the U.S. government. So when the U.S. media (in particular) piles-on with all of its “China lies” propaganda about Chinese GDP; one might suggest that people who live in glass houses shouldn’t throw stones.
We are left with the premise that while China’s government undoubtedly does exaggerate its economic data; the level of exaggeration is (at worst) no worse than our own – and arguably less. No one is suggesting that China’s economic growth isn’t out-pacing the Western world. Governments with real economic growth have much less need to lie than those simply pretending that their economies are growing.
We can either simply throw out all economic statistics, and be left with no signposts at all in gauging economic performance relatively, between nations, or we can use the data given – adding our analytical “asterisks” where necessary.
In analyzing the growth of any individual economy; the most-relevant number is not the percentage change, but rather GDP expressed as an absolute, dollar-figure. This is the concept which is above the limited mathematical skills of the mainstream media. Why is this a crucial analytical distinction?
The key lies in another analytical concept beyond the ken of the mainstream media: dynamic analysis – including changes over time – rather than the infantile static analysis which is the specialty of these charlatans. This is best illustrated through hard numbers.
I’m choosing 2004 as my “base year” for analyzing China’s economy for several reasons. First of all this was well before any mainstream cacophony had begun about China exaggerating its statistics, thus there should be no quibbling about the numbers. Secondly, it’s rate of growth was almost precisely 10% — a nice, round number for analytical purposes.
At that time, China’s GDP totaled $1.93 trillion (US), and official growth for that year registered at 10.1%. In other words (use your calculators); China’s economy grew by a little less than $200 billion.
Flash ahead to the end of 2012 (a mere eight years later) and we have China’s government estimating GDP at a staggering $8.45 trillion (US); while posting an official growth-rate of ‘only’ 7.8%. This is not credible.
However, what is glaringly fictional here is not the percentage number; the only numbers which the myopic media (deliberately) ever focuses upon. Rather, what is completely absurd is the GDP dollar-figure released by China’s government.
What are we explicitly supposed to believe here? That an economy growing at a rate of (roughly) 10% or less each year has more than quadrupled in size in just eight years (i.e. total growth of well over 300%). Even accounting for the fact that annual GDP compounds itself, we see the numbers don’t and can’t match.
Either China’s economy is growing much, much faster than reported in percentage terms (and why lie?); or its total GDP has been absurdly exaggerated. As previously explained; we already know how governments exaggerate GDP – by hiding inflation. We have now reached a new conclusion.
Yes, China’s government has been telling “big lies” about its economy. But that Big Lie is (as in the West) understating inflation. So when China reports current inflation of “2.4%” – and we know this a gigantic lie – what does that tell us about the credibility of (much lower) U.S. inflation numbers?
China’s estimated GDP of over $8 trillion implies actual (percentage) growth rates of roughly three times what it has actually been reporting. Given the magnitude of economic lies foisted upon us by our governments, this doesn’t “prove” China’s percentage figures on GDP are 100% accurate. However, it certainly implies that they are among the most-realistic of any economic data presented to us.
This is reinforced by the continued, rabid demand from China for commodities and other industrial materials – notably petroleum products. Conversely, as the U.S. government pretends its own economy is “growing”; it’s simultaneously reporting a total collapse in oil-demand, much more severe than what has been reported in Greece during the worst of its economic collapse.
In the mythical American economy; people don’t eat, and neither industry or the people need to use oil (except for the shale-oil industry – which is guzzling millions of barrels per day).
We are left with the inevitable conclusion that while China’s GDP (expressed as an absolute number) is just as absurd as Western GDP figures; when expressed as percentage-growth its numbers rank as the most-conservative (and most-reliable?) in the entire realm of statistical reporting. I can now begin my analysis.
When China reported a growth rate of 7.8% (for an $8+ trillion economy); this implies absolute economic growth of over $600 billion – in one year. Now refer back to the 2004 numbers previously given.
We already saw that in that year of “10% growth” that the economy grew by less than $200 billion. Now the arithmetic is (finally) simple enough for the mainstream media. When China reported it’s ‘mere’ 7.8% growth last year the total growth in the economy was supposedly more than three times as large.
Three times as many new jobs as in 2004. Three times the amount of additional goods bought/sold. Three times the additional number of homes built/sold. Three times the additional quantity of commodities consumed. What part of this equation says “slowing economy” to the mainstream media?
I say “supposedly” since I’ve already indicated that China’s figure of an $8.3 trillion economy has been pumped-up via Western-exported inflation – and the equally large lies about inflation which have been exported with it.
So, for the sake of argument; let’s assume that China’s economy is less than ½ as large as (unreported) Western inflation makes it appear to be: a mere $4 trillion in size. This exceeds the most-rabid accusations of exaggeration by the illiterates of the mainstream media. Now lets crunch the numbers.
At 7.8% growth on $4 trillion; this represents over $300 billion in incremental economic activity. This would represent an actual rate of growth more than 50% higher than in 2004 – when even the mainstream media was raving about “the China Miracle”. That’s not a mere “50% increase” in growth since 2004. Rather, it represents a 50% acceleration in the rate of growth since 2004.
Even in a world where phony, Western inflation numbers exaggerate everything by a factor of two (in absolute terms); China’s economy is (would be?) much more of a “miracle” in 2013 than it was in 2004 (or any other previous year). So any and every time some drone in the Corporate Media engages in more of their simplistic China-bashing; understand that they are establishing only two things.
No one in the mainstream media has the competence to perform or understand simple arithmetic. All our governments are engaging in monstrous lies about inflation.
Should the Corporate Media choose to rebut this assessment of its analytical prowess, or the validity of its conclusions (as the mouthpiece for Western governments); my suggestion is simple. First produce some realistic numbers on inflation – and then we can talk.
Statistics: Posted by yoda — Wed May 29, 2013 7:11 pm
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I’m in Beijing for a conference organized by the International Department of the Central Committee of the Communist Party of China. We have a short but intensive program, with several American and Chinese scholars as well as Chinese political officials. I just hope I will be semi-conscious, since the 12-hour time difference means a flip of day and night.
As we drove into the city I was reminded how much the country has changed over the last two decades or so since my first trip here. We flew in on Air China, which is fully competitive with Western airlines. The airport is modern. Some of the passport clerks actually smile.
Once clearing passport control, there are no further barriers to entry. No one questions you as you head out of customs on to your next flight or into the Beijing. A freeway leads into what looks like a modern city. Colorful advertising showcases Western as well as Chinese products and styles. Kentucky Fried Chicken and Pizza Hut make their appearance.
Some of the office buildings sport their names in English as well as Chinese. We are staying at an older hotel, the Wanshou, which was originally built in 1966 to house foreign guests. It retains the overall feel of old communist construction but has been refurbished, making it quite comfortable. The Wanshou passed my test of serving Diet Coke, but the gym opens at 9—which suggests it doesn’t have a lot of Western guests.
However, quibbles aside, Beijing is a modern city. It was moving in that direction 20 or 25 years ago, but it’s now there.
Perhaps the most dramatic and obvious change is the traffic. Chinese cities once were renowned for their swarms of cyclists, who weaved in and out of what appeared to be constant chaos on the roads. Today the swarms are made up of automobiles. To reduce traffic, Beijing actually bars residents from driving certain days depending on their license plate numbers, but, noted one of my hosts, more Chinese are wealthier and therefore can afford a second car—and thus a second license plate.
Rural China remains poor and underdeveloped, but even that is changing. China poses a serious geopolitical challenge to America, but it is important to keep two basic factors in mind.
First, hundreds of millions of people who once would have died in immiserating poverty now enjoy much better lives. Second, while one should never underestimate the appeal of nationalism, all Chinese now have much at stake in a peaceful regional and global order. While the future remains uncertain, there are good reasons to hope for, and even expect, a productive and cooperative future.
On to the conference!
View full post on Cato @ Liberty
Is China already in a hyperinflation?
Posted on 22 April 2013
Visitors to China these days cannot fail to notice that prices in the local shops for most goods are actually significantly higher than they would pay in the US or Europe. Food prices have doubled in three years. Apartments cost 20 times annual salaries in the big cities.
Has China already experienced a hyperinflation? The money printing of four years ago during the global financial crisis, equivalent to half-a-year of GDP has come back to haunt the nation with a vengeance.
In the provincial city of Xian ArabianMoney visited an average department store and found Clarks shoes – made in China but a UK brand – selling for $220 a pair against $80 in Britain. This was far from an isolated example.
We noted locally-branded short dresses cost about $500 each. That would buy you a good brand in the West End of London. Our guide told us that locals like to go to Hong Kong to shop whenever possible because prices are so high.
They have faced the same hyperinflation in ordinary food items like pork or fresh vegetables. But the hyperinflation has been most notable in house prices. Around $210,000 for a 140-square-metre, three-bedroom apartment in Xian might be less than half the cost iof Shanghai, but then the average salary is less than $4,000 per annum.
People who could afford to buy on a mortgage in 2008 could not afford it now. Rents have also soared through the roof though not by the same amount. Yields of less than two per cent on property are tiny compared to 3.2 per cent paid on cash deposits by Chinese banks.
Indeed, salaries have risen by at most five per cent per annum, so the squeeze on the local economy has been huge. Only the wealth effect has kept spending up among house owners who feel much richer after house price rises and spend all their income.
Classic hyperinflation economies create a bubble that then collapses. We could see in Xian that most of the city’s massive construction sites for apartment blocks are at a standstill.
The market for new apartments has stalled. People cannot afford them so completed apartments are left empty and then the developers run out of money and stop building.
This is what happens with market forces eventually take over in a hyperinflation. Then you have the construction workers with no income and in China there is virtually no social security. Jobless workers do not spend and you get a downward spiral in the local economy.
So why are shop prices so high in China and not yet in the West? Perhaps they are subsidizing exports by charging more at home. If so this is madness because local people are not buying now except when they really have to.
The shops are struggling to find customers, just like the newly built apartments. The luxury stores of Beijng also looked very short of customers to us. These used to be the shops with the largest sales volumes in the world.
That’s going to squeeze shop profits. Xian is also a tourism hot spot with its famous teracotta warriors. But local tourism is also 20 per cent down on last year, and the prices they now try to charge for local products and souvenirs are ridiculous to most visitors.
Hyperinflation usually ends with a nasty crash, and China now appears close to skirting with that fate. You simply have to look at the prices in the local shops to work this out.
Statistics: Posted by yoda — Sun Apr 21, 2013 11:28 pm
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New data reveal scale of China abortions
By Simon Rabinovitch in Beijing
Chinese doctors have performed more than 330m abortions since the government implemented a controversial family planning policy 40 years ago, according to official data from the health ministry.
China’s one-child policy has been the subject of a heated debate about its economic consequences as the population ages. Forced abortions and sterilisations have also been criticised by human rights campaigners such as Chen Guangcheng, the blind legal activist who sought refuge at the US embassy in Beijing last year.
China first introduced measures to limit the size of the population in 1971, encouraging couples to have fewer children. The one-child rule, with exceptions for ethnic minorities and some rural families, was implemented at the end of the decade.
Since 1971, doctors have performed 336m abortions and 196m sterilisations, the data reveal. They have also inserted 403m intrauterine devices, a normal birth control procedure in the west but one that local officials often force on women in China.
The numbers do not directly equate to “missing” births because some couples who violate the one-child rule have also had abortions or been sterilised, while intrauterine devices can be removed.
The Chinese government has previously estimated that without restrictions, the country’s 1.3bn population would be 30 per cent larger.
In the US, where the population is 315m or about one-quarter the size of China’s, an estimated 50m abortions have been performed since the landmark Roe vs Wade Supreme Court decision legalised abortion in 1973.
The Chinese data also show that the number of medical procedures to prevent births has been steady since the late 1990s, despite repeated calls for a softening of the one-child rule. Every year Chinese doctors abort roughly 7m pregnancies, sterilise almost 2m men and women, and insert 7m intrauterine devices.
As China’s working-age population begins to decline, economists have warned that the family planning rules will pose an increasing drag on economic growth. China’s dependency ratio – which compares the potential workforce with the number of children and retirees – rose last year for the first time in 40 years.
“This makes China’s population look more like a developed country than a developing one, which is a key disadvantage in labour-intensive industries,” said Ken Peng, an economist with BNP Paribas who analysed the health ministry data.
The birth restrictions have also led to a severe gender imbalance because of a traditional preference for male children and the selective abortion of female foetuses. There are now 34m more men than women in China.
During the annual session of the Chinese parliament, which concludes on Sunday, the government merged the commission that enforces the one-child policy with the health ministry. Some analysts believe the move could presage a more rapid shift away from strictly enforced birth controls.
“After the ministerial restructuring, the power of the family planning unit will be reduced,” said He Yafu, a Chinese demographer. “It won’t have the ability to design policies and it will have less say in the country’s population strategy.”
According to Mr He, one likely change to family planning rules would be to permit two children for parents who were both single children themselves. The policy, in place on a trial basis in some cities, could be implemented nationwide, he added.
Mr Peng, however, said that even a total abolition of the family planning rules at this point would not be enough to alter China’s demographic structure, and would simply delay the country’s ageing process by a few years.
The calls for relaxation are also meeting resistance.
After supervision of the one-child policy was given to the health ministry, the deputy head of the family planning unit rounded on critics of his department’s work. “The idea of easing the ageing problem by increasing the fertility rate is like drinking poison to quench thirst,” Yang Yuxue said.
Statistics: Posted by yoda — Fri Mar 15, 2013 8:57 pm
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Euromonitor International wrong to see China overtaking the US as world’s largest economy by 2017
Posted on 04 March 2013
Macroeconomic forecasting is notoriously difficult. ArabianMoney recalls how Japan was supposed to ovetake the US economy in the 90s. We just about remember the end of the dollar forecasts of the 1970s. But are the Euromonitor International predictions this month for real?
It has China set to become the world’s largest economy in terms of GDP in PPP terms by 2020 and India roaring up to third slot! Russia will overtake Germany as the fifth largest economy by that date…
Can this forecast be correct? We doubt it, such forecasts are usually wrong. They take the recent past and project it forward. But reality seldom moves in a straight line. It is the reason why economists make such lousy investment advisers.
For China to top the US in 2017 there has to be stagnation or decline in the US economy coupled with continued high growth in China. Euromonitor admits ‘rising labour costs, pollution, a potential real estate bubble and rapid ageing arising from the government’s one child policy’ are problems for China going forward.
We would add a stalling global economy just cannot be good news for the world’s largest exporter. There’s the rub. China cannot rise above us if we are falling in a global recession. We would also not underestimate the US economy’s capacity for self-renewal with the cheap energy of shale gas, for example.
Economies move in cycles, not straight line projections. You might have thought economists would have spotted that by now. Of course they have, but as they cannot agree on the cycles they stick with the straight lines. So you get utter nonsense like India as a great economic power.
You cannot get to the top of the economic league table simply by expanding your population. That is not the way China did it. If you over grow your population then you can end up with a Malthusian crisis and declining per capita GDP. India’s bureaucratic democracy, infrastructure and educational system will simply never support a high income economy.
That said sheer population might well help Russia to overtake Germany in the economic league table. Russia is already a middle income country thanks to its huge hydrocarbon revenues and with twice the population of Germany only a relatively small advance is needed to tip total GDP in its favor.
However, probably what renders these forecasts completely unreliable is that they cannot discount major national crises. For example, the debt ridden Japanese economy looks very vulnerable to a bond crisis, falling exports and internal financial meltdown.
By contrast Russia and China hold huge financial reserves and debts are far lower than in Japan or the US. Then again India most likely holds the most gold of any country and if the gold price roars ahead in an era of high inflation that is another economic wild card.
ArabianMoney’s reckoning for the top nations in 2020 would be, respectively: USA, China, Russsia, Germany and Japan. The advance of Russia would be the biggest surprise. China and India are the past shock, not the future.
Statistics: Posted by yoda — Mon Mar 04, 2013 9:51 am
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US officials restate warning over China wheat crop
US foreign staff have, again, challenged official estimates of a bumper Chinese wheat harvest last year, citing disease damage, and cautioned that ideas of the corn crop may be too high too.
The US Department of Agriculture’s Beijing bureau restated an estimate made in November that China’s wheat harvest fell by more than 9m tonnes last year, to 108.0m tonnes, "due to head blight", or fusarium, outbreaks in major growing provinces such as Anhui, Henan and Hubei.
The estimate is more than 12m tonnes below the USDA’s official estimate, which is in turn in line with the figure from China’s own National Bureau of Statistics of 120.58m tonnes.
And the bureau cited as evidence of the squeeze on wheat supplies a rise in prices of some 9% rise to 2,360 remninbi a tonne in Chinese wheat prices between August and January, quoting data from analysis group JCI.
"This is a strong indication that wheat production and total available supplies are lower than Chinese official production estimates," the bureau said in a report.
Chicago wheat prices fell by more than 10% over the same period.
‘High levels of vomitoxin’
Some commentators have noted, in defending ideas of a higher wheat crop, the relatively low rate of Chinese imports, which the USDA bureau acknowledged could fall nearly 15%, to 2.0m tonnes, in 2012-13.
However, the report also flagged the impact of sales from state wheat reserves in cushioning the impact of last year’s poor harvest, especially on quality shortfalls given that these sales are largely of crop from previous years rather than 2012 crop of which "some still may be infect with head blight".
Indeed, the "possibility of high levels" of vomitoxin – a toxic residue from fusarium infections – in last year’s crop has prompted Chinese officials to order state grain companies "to strictly follow domestic safety standards while purchasing wheat".
The impact of last year’s poor crop may not be felt until further ahead, if the 2013 harvest also disappoints, forcing Chinese authorities to turn to turn to stored 2012 crop, with its vomitoxin risk.
"If 2013-14 production is less than expected or suffers from a similar disease outbreak, depending on how much of the 2012-13 wheat crop may be infected with head blight and comprise current reserve levels, there is a possibility that China may need to further increase imports in order to meet domestic demand."
‘Pests, typhoon and drought’
The data dispute is the latest in a series of wranglings over the accuracy of Chinese harvest statistics, which critics claim tend to offer inflated estimates thanks to a subsidy programme which rewards regional authorities by output, so encouraging over-reporting.
Typically, the spotlight has fallen on discrepancies in corn – in which China’s balance sheet is particularly important to markets given the country’s likely move from being self-sufficient to a perennial importer, and in quantity.
USDA estimates on Monday forecast Chinese corn imports growing from 2.0m tonnes this season to 19.5m tonnes in a decade’s time, overtaking the likes of Japan and Mexico to become the world;s top buyer.
The bureau estimated last year’s Chinese corn crop at 200m tonnes, up 4.2% year on year, but 8m tonnes below the official USDA number.
"According to agricultural sources, yields in some areas were affected by factors such as army worm outbreaks, a typhoon and drought," the report said.
Statistics: Posted by yoda — Wed Feb 13, 2013 2:22 pm
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