China Economic Scan Weekly Economic Review - 7 June 2009

China Economic Scan Weekly Economic Review - 7 June 2009

7/06/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Last week in the Chinese economy, aside from the visit by US Treasury Secretary Timothy Geithner, there were a few interesting economic developments. Among data releases were the official PMI, and industrial profits, there were also inflation forecasts and statements from government bodies.

The official Purchasing Manager’s Index (PMI) was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said. A reading of the PMI above 50 indicates an expansion.

Chinese industrial profits in the first 4 months in 22 provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, the National Bureau of Statistics (NBS) said. In April, 23 out of 39 sectors saw their profit growth rebound or their losses narrow, the NBS said in a statement on its website (www.stats.gov.cn).

China's banking regulator and the Finance Ministry warned banks against issuing risky loans, saying they must step up their risk management. Banks extended 5.17 trillion yuan ($757.2 billion) in loans in the first 4 months of 2008, exceeding the government's minimum target of 5 trillion yuan for all of 2009 and fanning fears that banks are taking undue credit risks.

A Bank of Communications report said China’s CPI is likely to set a fourth consecutive drop in May and to remain negative in the first half of 2009. BoCom expects food prices to drop slightly in May. The report indicated a range of –1.8% to –1.2%, based on data from the Ministry of Agriculture and Ministry of Commerce.

The Chinese Ministry of Commerce said it would seek to actively encourage foreign investment in China, China's actual foreign direct investment fell 22.5% on year in April to $5.89 billion, bringing actual FDI in the first 4 months of this year to $27.67 billion, down 21% from a year earlier.

There were roughly 666,000 foreign-invested companies in China as of end April. These foreign-invested firms contributed to 29.7% of China's overall industrial output in 2008.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

China Economic Scan Weekly Economic Review - 31 May 2009

China Economic Scan Weekly Economic Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the week that was, the Chinese government revealed more statistics about spending of the stimulus package, and encouraged its local governments to match spending. Elsewhere growth forecasts were raised, energy prices were touted to increase and signs of gold fever stirred.

China's central government has allocated 270 billion yuan (US$39.7 billion) for infrastructure investment so far this year, according to the National Development and Reform Commission (NDRC). The spending is part of a planned total of 367.6 billion yuan in the 2009 central budget and brings the total already allocated since Q4 2008 to 300 billion yuan.

China has urged its local governments to cough up funds so that projects in its 4-trillion-yuan ($586 billion) stimulus plan can be completed on time. Estimates are that local governments will need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan. Previously a National Audit Office report found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

That said, China’s growth prospects have apparently improved from three months ago, this is in spite of drops in steel and electricity output and the risk of a manufacturing contraction this month. The world’s third-largest economy will expand 7.5% this year, according to a median estimate of 14 economists surveyed by Bloomberg News, up from an earlier forecast of 7.1% in February this year.

Internationally, China is looking to increase investment from multinational corporations, Vice Premier Li Keqiang said. "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment. Li said the government is trying to foster the development of high-tech and strategic emerging industries.

China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10% by next weekend. “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” said Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong.

In signs of gold fever hitting China, gold prices quoted on the Shanghai Gold Exchange (SGE) increased by an average 6.74% in the past month to the current level of about 209 yuan a gram. "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the World Gold Council. The report also noted that global demand for gold rose 38% year-on-year to 1,016 tons. China is the world's second largest gold consuming country after India.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

China Economic Scan Weekly Economic Review - 22 May 2009

China Economic Scan Weekly Economic Review - 22 May 2009

22/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

During the past week a number of commentators highlighted issues in the Chinese economy, including interest rate movements and foreign trade. There were also some data releases such as SOE revenue, foreign financial asset holdings, and Hong Kong GDP figures.

Former Chinese ambassador to Brazil, Chen Duqing, said that the two countries have huge potential to expand trade. Bilateral trade rose 63.2% year on year to $48.98 billion in 2008, according to data released by the General Administration of Customs.

Brazil imported $268 million worth of farm produce from China, up 125.2% year on year. China imported vegetable oil, cotton and fruit worth $8.79 billion from Brazil last year, an increase of 82.4% from a year ago.

China's foreign financial assets rose 23% in 2008 to reach a total of $2.92 trillion, the State Administration of Foreign Exchange (SAFE) said. Of that amount, nearly $2 trillion, or 67%, were foreign exchange and gold reserves. Outbound direct investment, however, was just $169.4 billion, accounting for 6% of the total foreign financial assets.

London based economist Mark Williams said the deflation in China means that “real rates have risen sharply,” and that “If the recovery disappoints, further interest-rate cuts could resume from the middle of the year.” The key one-year lending rate is 5.31% after 5 cuts in the final 4 months of last year. Williams predicts 81 basis points of cuts in lending and deposit rates by the end of 2009 on the back of falling CPI.

Operating revenues of China's state-owned enterprises (SOEs) fell 7.3% year on year to 5.97 trillion yuan (854 billion U.S. dollars) in the first 4 months of 2009, the Ministry of Finance said. Profits of the 115,000 SOEs totaled 323.64 billion yuan in the first 4 months, down 32.3% from a year earlier. The fall was 4.5 percentage points lower than that of the 1st quarter.

China's Ministry of Land and Resources announced a 30% cut in the minimum purchase price of industrial land to boost investment. The national average industrial land price was 721 yuan per square meter in Q1 2009, down 1.08% from Q4 2008, and down 1.1% year on year. Land prices in China ranged from 60 yuan ($8.77) per square meter in northwestern Xinjiang Uygur, to 840 yuan per square meter in Shanghai.

Hong Kong's GDP for Q1 2009 fell 7.8% after a 2.6% drop Q4 2008. GDP for 2009 as a whole is now forecast to contract by 5.5 to 6.5% in real terms, down from the forecast decline of 2 to 3% earlier put out in the government budget. However there are positive signs e.g. a pick-up in the mainland economy and global stock markets. While on the downside is a sharp plunge in global demand and a fall-off in intra-regional exports.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

Source: http://www.chinaeconomicscan.com/weekreview22may09econ.html

China Economic Scan Weekly Economic Review - 15 May 2009

China Economic Scan Weekly Economic Review - 15 May 2009

15/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the past week a number of key indicators of economic activity came out, painting a positive picture for economic growth in China, but CPI and PPI stats showed prices continued to fall. Among those data released were output, retail sales, food exports, and urban fixed-asset investment.

China's consumer price index (CPI), fell 1.5% year on year in April 2009, according to the National Bureau of Statistics (NBS). Food prices (comprising a 3^rd of CPI) dropped 1.3%, dragged down by a 28.6% decline in pork prices as demand plummeted on pig flu fears. Non-food prices fell 1.5%. The index was down 0.2% since March, and the YTD fell 0.8% from the same period last year.

China's producer price index (PPI), a major measure of inflation at the wholesale level, also fell 6.6% in April year on year, according to the NBS. The decline compared with a 6.0% year on year drop in March and 4.6% in Q1 2009. Prices of production materials fell 8.1% in April year on year, the NBS said, and PPI for January-April fell 5.1% over the same period last year.

Meanwhile, China’s output rose 7.3% from a year earlier, according to the NBS, after gaining 8.3% in March, and less than analyst estimates of 8.6%. In another positive sign, retail sales grew 14.8%, above estimates of 14.5% (and 14.7% in March). The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries.

On a similar note, Morgan Stanley raised its forecast for China economic growth to 7-8% from 5% for 2009. Morgan Stanley Asia Chairman Stephen Roach said growth could fall back to 5.5 to 7% in 2010, as external demand will remain weak. "It's premature to say China is enjoying a V-shaped recovery. I think the outcome is going to be closer to the letter W." he said.

New orders placed with China’s shipyards fell 95% during the first four months of this year, the Ministry of Industry and Information Technology said. Orders from January to April dropped to 990,000 deadweight tons. While new orders last month reached 200,000 deadweight tons, taking total order books to 195 million deadweight tons at the end of April - 7% higher than a year earlier.

Another key indicator, China’s urban fixed-asset investment, climbed 30.5% in the first four months from a year earlier compared with a 28.6% increase in the first three months and analyst estimates of 29.1%. “Fixed-asset investment is the most important driver for economic growth this year,” said Sun Mingchun, chief China economist at Nomura Holdings.

China's food exports reached US$2.62 billion in March 2009, up 8.9% from a year earlier, presenting the first year-on-year growth in the last five months, said General Administration of Customs (GAC). Exports of fruit led growth, rising 23.5% in March, and Seafood was up 16.2% year on year. Food exports totaled US$7.17 billion Q1, down 5.5% year on year.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com