China
China Avoids Jackson, But Not Gathering Economic Gloom
The world’s monetary policy elite is gathering in Jackson Hole, Wyoming for their annual symposium. Federal Reserve Chairman Ben Bernanke is topping the bill and is expected to confirm a downbeat outlook for the U.S. and world economy. China is not normally well represented at the meeting and the expectation this year is that no one from China will appear on the roster of speakers. But present or not, China won’t escape the implications of the gathering gloom. With prospects for growth in the U.S. and Europe increasingly shaky, investment banks have been rushing to downgrade their forecasts for growth in China. Downgrading Growth China growth forecasts for 2011 and 2012. Click for larger image. Ma Jun at Deutsche Bank sums up the reason for the move to downgrade: “We believe that in the near term, the single most important shock to the Chinese economy will be the likely slowdown (or even recession) of the EU and US economies.” Deutsche Bank has downgraded its China growth forecast for 2011 to 8.9% from 9.1%, and for 2012 to 8.3% from 8.6%. “Much weaker growth prospects in developed economies” have also prompted Wang Tao at UBS to lower forecasts for growth in China to 9% from 9.3% in 2011, with a sharper drop to 8.3% from 9% in 2012. The path from lower growth in the U.S. and Europe to lower growth in China lies through exports. Mr. Ma explains: “The key transmission mechanism is that for each 1 percentage point slowdown in EU/US growth, China’s export growth slows by about 6-7 percentage points… which in turn should reduce China’s GDP growth by 1 percentage points, including the ripple effect on investment slowdown in related sectors.” With politicians in the U.S. lambasting China’s exporters as the source of all their woes, it might be expected that the impact would be greater. In fact, the share of exports in China’s GDP dipped from 35% in 2007 to 27% in 2010. Even that 27% figure overstates the importance of exports to China’s growth. That’s because a large part of China’s exports are composed of parts imported from other Asian countries. Lu Ting, China economist at Bank of America Merrill Lynch explains: “Domestic value added, which strips out the imported components from exports, accounts for about half of headline value of exports in China. This means that the true weight of exports in China’s GDP could decline from 17.5% in 2007 to 12.5% in 2011.” From Construction to Consumption? Fears of a global slowdown have reinforced the belief among many economists that China’s inflation has peaked, and that opens up room for a shift in policy to support growth. But expectations for a second stimulus are muted. “Further monetary tightening is unlikely, so is policy reversal,” says Citi’s Shen Minggao. If there is an easing of policy it is likely to come through increased public spending rather than a rolling back of monetary tightening. Mr. Shen says: “The current budget envisages a deficit of about 2% of GDP, and up to July the general government achieved a surplus of over 3% of GDP. This would allow a significant spending capacity for the rest of the year if a proactive fiscal policy stance is fully implemented.” In other words, in contrast to governments in the U.S. and Europe, China’s tight-fisted rulers have been taxing more than they spend. If Beijing turns that around and spends more than it taxes, the government can support growth in the closing months of the year. A second stimulus would likely work by supporting consumption rather than boosting investment. That choice to favor consumption has its drawbacks because investment spending has a bigger and more immediate payback in boosting growth. Deutsche’s Ma Jun does the math: “Every RMB1 that is spent by the government on investment, it boosts GDP by RMB1.4 almost instantly; but for every RMB1 transferred by the government to households, it only increases GDP by RMB0.4, and with a time lag.” But with diminishing returns to further investment, the rail crash raising concerns about the safety of major infrastructure projects, and the banks’ capacity to support another lending binge limited , China might have little choice but to turn from construction to consumption as the driver of growth. If consumers in the U.S. and Europe take another battering, it might be Chinese households’ time to shine. – Tom Orlik
The world’s monetary policy elite is gathering in Jackson Hole, Wyoming for their annual symposium. Federal Reserve Chairman Ben Bernanke is topping the bill and is expected to confirm a downbeat outlook for the U.S. and world economy. China is not normally well represented at the meeting and the expectation this year is that no one from China will appear on the roster of speakers.
But present or not, China won’t escape the implications of the gathering gloom. With prospects for growth in the U.S. and Europe increasingly shaky, investment banks have been rushing to downgrade their forecasts for growth in China.
Downgrading Growth
- China growth forecasts for 2011 and 2012. Click for larger image.
Ma Jun at Deutsche Bank sums up the reason for the move to downgrade: “We believe that in the near term, the single most important shock to the Chinese economy will be the likely slowdown (or even recession) of the EU and US economies.” Deutsche Bank has downgraded its China growth forecast for 2011 to 8.9% from 9.1%, and for 2012 to 8.3% from 8.6%.
“Much weaker growth prospects in developed economies” have also prompted Wang Tao at UBS to lower forecasts for growth in China to 9% from 9.3% in 2011, with a sharper drop to 8.3% from 9% in 2012.
The path from lower growth in the U.S. and Europe to lower growth in China lies through exports. Mr. Ma explains: “The key transmission mechanism is that for each 1 percentage point slowdown in EU/US growth, China’s export growth slows by about 6-7 percentage points… which in turn should reduce China’s GDP growth by 1 percentage points, including the ripple effect on investment slowdown in related sectors.”
With politicians in the U.S. lambasting China’s exporters as the source of all their woes, it might be expected that the impact would be greater. In fact, the share of exports in China’s GDP dipped from 35% in 2007 to 27% in 2010.
Even that 27% figure overstates the importance of exports to China’s growth. That’s because a large part of China’s exports are composed of parts imported from other Asian countries. Lu Ting, China economist at Bank of America Merrill Lynch explains:
“Domestic value added, which strips out the imported components from exports, accounts for about half of headline value of exports in China. This means that the true weight of exports in China’s GDP could decline from 17.5% in 2007 to 12.5% in 2011.”
From Construction to Consumption?
Fears of a global slowdown have reinforced the belief among many economists that China’s inflation has peaked, and that opens up room for a shift in policy to support growth. But expectations for a second stimulus are muted. “Further monetary tightening is unlikely, so is policy reversal,” says Citi’s Shen Minggao.
If there is an easing of policy it is likely to come through increased public spending rather than a rolling back of monetary tightening. Mr. Shen says: “The current budget envisages a deficit of about 2% of GDP, and up to July the general government achieved a surplus of over 3% of GDP. This would allow a significant spending capacity for the rest of the year if a proactive fiscal policy stance is fully implemented.”
In other words, in contrast to governments in the U.S. and Europe, China’s tight-fisted rulers have been taxing more than they spend. If Beijing turns that around and spends more than it taxes, the government can support growth in the closing months of the year.
A second stimulus would likely work by supporting consumption rather than boosting investment. That choice to favor consumption has its drawbacks because investment spending has a bigger and more immediate payback in boosting growth. Deutsche’s Ma Jun does the math: “Every RMB1 that is spent by the government on investment, it boosts GDP by RMB1.4 almost instantly; but for every RMB1 transferred by the government to households, it only increases GDP by RMB0.4, and with a time lag.”
But with diminishing returns to further investment, the rail crash raising concerns about the safety of major infrastructure projects, and the banks’ capacity to support another lending binge limited, China might have little choice but to turn from construction to consumption as the driver of growth.
If consumers in the U.S. and Europe take another battering, it might be Chinese households’ time to shine.
– Tom Orlik
Cumulative appreciation of the renminbi against the US dollar since the end of the dollar peg was more than 20% by late 2008, but the exchange rate has remained virtually pegged since the onset of the global financial crisis.
Deterioration in the environment – notably air pollution, soil erosion, and the steady fall of the water table, especially in the north – is another long-term problem.
China is the world’s fastest-growing major economy, with an average growth rate of 10% for the past 30 years.
Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.
The two most important sectors of the economy have traditionally been agriculture and industry, which together employ more than 70 percent of the labor force and produce more than 60 percent of GDP.
A report by UBS in 2009 concluded that China has experienced total factor productivity growth of 4 per cent per year since 1990, one of the fastest improvements in world economic history.
The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.
The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.
In this period the average annual growth rate stood at more than 50 percent.
China reiterated the nation’s goals for the next decade – increasing market share of pure-electric and plug-in electric autos, building world-competitive auto makers and parts manufacturers in the energy-efficient auto sector as well as raising fuel-efficiency to world levels.
Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.
Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production.
China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.
China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork).
Oil fields discovered in the 1960s and after made China a net exporter, and by the early 1990s, China was the world’s fifth-ranked oil producer.
There are large deposits of uranium in the northwest, especially in Xinjiang; there are also mines in Jiangxi and Guangdong provs.
In the 1990s a program of share-holding and greater market orientation went into effect; however, state enterprises continue to dominate many key industries in China’s socialist market economy.
Since the 1980s China has undertaken a major highway construction program.
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China Avoids Jackson, But Not Gathering Economic Gloom
China
China’s November 2024 Economy: Navigating Mixed Signals and Ongoing Challenges
In November 2024, China’s economy exhibited mixed results: industrial production rose by 5.4%, while retail sales grew only 3%, below forecasts. Fixed asset investment also faltered. Policymakers are anticipated to introduce measures to stimulate domestic demand and combat deflation.
China’s economy showed mixed performance in November 2024, with industrial production and exports showing resilience, while retail sales and fixed asset investment underperformed, amid ongoing challenges in the property sector. Policymakers are expected to implement targeted fiscal and monetary measures to boost domestic demand and address deflationary pressures.
The National Bureau of Statistics (NBS) has released China’s economy data for November 2024, revealing a mixed performance across key indicators. Retail sales grew by 3 percent year-on-year, a significant slowdown from October’s 4.8 percent growth and well below the 4.6 percent forecast. Industrial production, however, showed resilience, rising by 5.4 percent and exceeding expectations of 5.3 percent growth.
The property sector continued to drag on the broader economy, with real estate investment contracting by 10.4 percent for the January-to-November period, further highlighting the challenges in stabilizing the sector. Fixed asset investment also fell short of expectations, growing by 3.3 percent year-to-date, down from 3.4 percent in October.
In November, China’s industrial value added (IVA) grew by 5.4 percent year-on-year (YoY), slightly accelerating from the 5.3 percent recorded in October. This modest improvement reflects continued recovery in key industries, supported by recent stimulus measures aimed at stabilizing the economy.
The manufacturing sector led the growth, expanding by 6.0 percent YoY, while the power, heat, gas, and water production and supply sector grew by 1.6 percent. The mining industry posted a 4.2 percent YoY increase. Notably, advanced industries outpaced overall growth, with equipment manufacturing and high-tech manufacturing rising by 7.6 percent and 7.8 percent YoY, respectively, underscoring the resilience of China’s innovation-driven sectors.
Key product categories showed robust output gains in November:
From January to November, IVA increased by 5.8 percent YoY, maintaining steady growth over the year despite headwinds from a slowing property market and external uncertainties.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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China
Ukraine war: 10% of Chinese people are willing to boycott Russian goods over invasion – new study
Since Russia’s 2022 invasion of Ukraine, some Chinese citizens express dissent through potential boycotts of Russian goods, reflecting a complex relationship despite government support for Russia.
Since Russia invaded Ukraine in 2022, the Chinese government has been criticised for its refusal to condemn the war. In 2024, the economic and diplomatic relationship between the two nations appears stronger than ever.
Because of strict censorship and repression imposed by the Chinese Communist Party (CCP), it is difficult to know the extent to which the general public shares their government’s support of Putin’s regime. But a newly published study I carried out with colleagues found that more than 10% of Chinese people surveyed were willing to boycott Russian goods over the war in Ukraine.
This is a surprisingly large figure, especially since existing surveys indicate that Chinese people hold a broadly positive view of their neighbour. We used a representative sample of 3,029 Chinese citizens for this research, to dig into public attitudes to Russia. The survey was done in 2022 after the Ukraine invasion.
We were aware that due to widespread censorship, our participants might not be willing to give honest answers to questions about Russia’s actions in Ukraine. They might also not feel safe to do that in a regime where disagreement with the CCP’s position is often met with harsh punishment. This is why we asked them to tell us if they would be willing to boycott Russian products currently sold in China.
We felt this question was a good indicator of how much the participants disapproved of Russian foreign policy in Ukraine. More importantly, we were also curious to find out whether Chinese citizens would be willing to take direct political action to punish Russia economically for its aggressive behaviour.
In our study, we split respondents into the three different ideological groups in China: “liberals”, who support the free market and oppose authoritarianism; “the new left”, who sympathise with the policies pursued in China under Mao Zedong; and “neo-authoritarians”, who believe the Russian-Ukrainian conflict is an extension of the rivalry between authoritarian China and the liberal United States. These groups were based on the main political beliefs in China.
We found that liberals were most likely to say they were willing to boycott Russian products. Liberals believe that China should work with, rather than against, western democracies. They also place a high value on human rights and democratic freedoms. Because of their beliefs, they are likely to think that Russia’s actions against Ukraine were unprovoked, aggressive and disproportional.
Chinese and Russian economic and diplomatic relations seem closer than ever in 2024.
American Photo Archive/Alamy
The new left and neo-authoritarians we surveyed were more supportive of Russian products. The new left see Russia as a close ally and believe that Nato’s expansion in eastern Europe was a form of aggression. Neo-authoritarians, on the other hand, believe that supporting Russia, an allied autocracy, is in China’s best interest.
Boycotting Russian goods
Asking Chinese participants if they are willing to boycott Russian products might seem like a simple matter of consumer preferences. However, our study reveals a great deal about the way in which regular citizens can express controversial political beliefs in a repressive authoritarian regime.
Boycotting products of certain companies has long been studied in the west as a form of unconventional political action that helps people express their beliefs. However, in the west, boycotting certain products is simply one of many ways people are able to take political action. In a country such as China, boycotting a Russian product might often be the only safe way to express disagreement with the country’s actions.
This is because citizens do not have to tell others they chose not to buy a product, and their actions are unlikely to attract the attention of the authorities.
Since Russian goods are readily available to Chinese consumers and China is encouraging more Russian exports to reach its market, the Russian economy could be significantly affected by an organised boycott campaign in China. The considerable level of support for a boycott expressed by some of our participants, as well as previous acts of solidarity with Ukraine in China, suggest that such a campaign could already be taking place in the country.
This could harm Russia because it regularly exports a number of different products such as meat, chocolate, tea and wine to China. These goods made up 5.1% of China’s total imports in 2023 – and this figure is likely to increase if Russia becomes more isolated from the west, and therefore more dependent on China for its trade.
While 5.1% of the Chinese market might seem like a low figure, China is home to over 1.4 billion people. In this context, even a small boycott could result in a serious loss to Russian companies.
Our research shows that Chinese citizens don’t always support the official position of the communist party. It also shows that many people there will express even the most unpopular political opinions – if they can find a safe way to do it.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
China
Australia Can Enhance China’s Credibility in the CPTPP
In early 2024, China sought to join the CPTPP, potentially offering modest economic benefits to Australia. Key reforms include limiting state-owned enterprise subsidies, enhancing data flows, and banning forced labor.
China’s Interest in the CPTPP
In early 2024, China expressed a keen interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement involving eleven Pacific Rim economies and the United Kingdom. This move is anticipated to yield modest economic benefits for Australia. However, it also opens the door for vital reforms in areas such as the control of subsidies for state-owned enterprises, allowing free cross-border data flows, and prohibiting forced labor practices.
Economic Implications for Australia
A May 2024 report from the Australian Productivity Commission indicated that China’s accession to the CPTPP might raise Australia’s GDP by only 0.01%. This modest gain isn’t surprising, given Australia’s existing preferential trade arrangement with China through the Regional Comprehensive Economic Partnership. Nonetheless, the CPTPP encompasses more than just tariff reductions, focusing on broader trade principles and standards.
Reform Commitments Required from China
For China to become a CPTPP member, it must demonstrate adherence to high-standard rules initially developed with the country in mind. This commitment will help alleviate concerns among member nations like Japan and Canada, particularly regarding China’s economic practices and geopolitical tensions, such as those with Taiwan. Membership would necessitate reforms, including limiting SOE subsidies, enabling freer data flows, and banning forced labor, with significant penalties for non-compliance.
Source : Australia can encourage China’s credibility in the CPTPP
- China’s November 2024 Economy: Navigating Mixed Signals and Ongoing Challenges
- Ukraine war: 10% of Chinese people are willing to boycott Russian goods over invasion – new study
- Australia Can Enhance China’s Credibility in the CPTPP
- Gordonstoun Severs Connections with Business Led by Individual Accused of Espionage for China
- China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
- China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
