Reuters | Oct 9, 2010 | 11:10pm IST
China’s central bank governor Zhou Xiaochuan hit out at rich countries on Saturday, telling the International Monetary Fund that high debts, low interest rates and unconventional stimulus policies were a fundamental global problem and a headache for emerging nations.
"The continuation of extremely low interest rates and unconventional monetary policies by major reserve currency issuers have created stark challenges for emerging market countries in the conduct of monetary policy," said Zhou’s statement to the IMF’s International Monetary and Financial Committee, obtained by Reuters.
Turning the tables on rich countries whose control of the IMF is expected to be diluted under reforms aimed at giving emerging economies more power, Zhou called on the IMF to shift to monitoring advanced countries’ policies, which he said were "more damaging to global economic growth."
"The Fund’s current surveillance framework, which focuses on exchange rate policies, effectively leaves developed countries outside the Fund’s oversight," said Zhou. "Surveillance must be fair and evenhanded," he said, urging the developed countries to step up financial reform.
BBC News | 8 October 2010 | 23:11 GMT
China’s central bank governor Zhou Xiaochuan has come out fighting in response to mounting pressure to allow the country’s currency to rise. China will move to a market-determined exchange rate, but gradually. He said, "There will be no shock therapy". Mr Zhou was speaking in a BBC World News debate at the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington.
Tensions have been rising for months over China’s currency policy. In the last few days, the phrase "currency war" has been used. The IMF managing director Dominique Strauss-Kahn has used it, although in the BBC debate he said "war" was probably too strong a word.
China holds down the value of its currency, the yuan or renminbi, by intervening in the markets, buying dollars and other currencies. To critics, the result is an artificially low yuan, which gives an unfair advantage to Chinese industry. Mr Strauss-Kahn has some sympathy for that complaint. In the BBC debate, he said the Chinese currency is undervalued. This is part of a long-standing IMF view that the global economy is unbalanced.
China, and some other countries, save and export too much. The reverse is true of the US and others. Changing China’s exchange would contribute to rebalancing the world economy by making China’s exports less competitive. But nobody at the debate thought a currency reform would be a "silver bullet" that would fix all the problems. The US and others need to take their own steps to save more.
Reuters | Sep 24, 2010 | 7:29pm IST
Even among emerging market powerhouses, Brazil and China stand out. With enviably strong growth rates, the largest economies in Latin America and Asia have come to represent the shift in global clout from developed to developing economies. And as they’ve grown, the two countries have become more intertwined than ever.
But the relationship, while mutually beneficial, is hardly equal. The sheer size of the Chinese economy means its needs have begun altering Brazil’s, in ways both salutary and worrisome. The lopsided relationship underscores the profound challenges that China’s emergence as an industrial force poses for developing nations.
China, the world’s second largest economy, is now Brazil’s top trading partner, surpassing the United States for the first time last year. Brazilian imports from China jumped 12-fold from 2000 to 2009, and exports went up a whopping 18 times. China consumed almost 14 percent of Brazil’s exports in 2009 — and sent back almost 13 percent of Brazilian imports.
The Middle Kingdom has gone beyond merely influencing the Brazilian economy — the world’s eighth largest — and has begun reshaping it, bringing bonanzas to some industries and burdens to others.
Consider two slices of Brazilian industry: soy and shoes.
In the state of Mato Grosso, the emerald green fields of soy stretch to the horizon. Farmers with thousands of hectares to their name drive late-model pickups and discuss foreign exchange policy, and trucks bearing tonnes of the grain trundle past on their way to port. Cities that comprised only handfuls of families decades ago are bustling, with farmers and city officials talking of ever-increasing crop sizes.
About 1,600 miles (2,575 km) further south, the Vale dos Sinos area in the state of Rio Grande do Sul is struggling. The center of Brazil’s footwear industry, the so-called Valley of the Bells has fought to hold on to jobs and factories, the industry that German and Italian immigrants brought over from the old country more than a century ago. Now, however, the companies headquartered here find themselves changing or dying.
Reuters | Sep 15, 2010 | 3:39pm IST
While businesses worldwide cut their research and development budgets in the economic downturn, China invested heavily in innovation and sought more patents and trademarks, a United Nations agency said on Wednesday. The World Intellectual Property Organisation said U.S. applications for patents protecting new inventions were flat in 2008 and 2009, when recession made capital harder to access and customers harder to find. Filings for patents — which give inventors exclusive rights to profit from novel developments for a limited time — dropped 7.9 percent in Europe and 10.8 percent in Japan last year, with filings from Germany, Britain and France also lower.
But in China, a growing engine of the global economy, WIPO said patent applications jumped 18.2 percent in 2008 and another 8.5 percent in 2009. Chinese filings for trademark protection — affording rights to logos or distinctive signs on an indefinite basis — jumped 20.8 percent last year, when such applications fell 11.7 in the United States, 7.7 percent in Germany and 7.2 percent in Japan. "The post-crisis innovation landscape will invariably look different from that of a decade ago," WIPO Director-General Francis Gurry said in an introduction to the World Intellectual Property Indicators report. Beyond China, other emerging economies also sought to protect their innovations before the recovery, with double-digit growth in patent filings in Belize, Peru, Romania and Turkey in 2008.
Article first published as China Intensifies Drive to Relocate Industries to the Central and Western Inlands on Blogcritics.
The China has been campaigning for more than a decade to “develop the west,” as part of a stated aim to develop the inland region of the Western China. Ever since the China adopted market friendly economy since 1978, the rapid industrialization has been mainly concentrated in southern coastal provinces like Shenzhen, Guangdong and Zhejiang. As a result of rapid urbanization and industrialization, people from western provinces migrated to the coastal provinces in search of job opportunities, thus, providing cheap labor to the factories in the coastal region. The cheap labor thus available majorly due to migration helped the southern region attracting billions of dollars of FDIs.
This was actually a result of the policy preached by the then supreme leader of China Communist Party, Deng-Xiao-Ping. He advocated to “allow first some people to become rich, who would latter provide resources to make the rest of the country rich.” This made southern provinces more crowded and prices of properties, like housing and land, have shot up beyond the reach of even rich middle classes. The western and Northern provinces of the China have been deprived of industries, jobs and related developments due to concentration of industrial activities in southern and eastern coastal provinces.
Inland Relocation of Industries
The worst economic crisis, since the great depression of 1930s, has pushed the Chinese government to drive aggressively for agglomeration of industries towards central and western provinces. The Chinese version of the cabinet, the state council namely “Central People’s Government,” the highest executive organ of State power has issued directives stressing the importance of relocating industries to the central and western inland provinces to keep manufacturing competitive and encourage job growth closer to the homes of China’s vast rural population. "The
Reuters | Sep 2, 2010 | 9:46am IST
Japan’s growing dependence on China for growth rates with concerns over its expanding military reach, deepening a dilemma over how to engage with its giant neighbour even as the two trade places in economic rankings. But while the interdependence raises the risks for the world’s second- and third-biggest economies if relations sour, it also boosts incentives to keep ties on track. "It raises the stakes," said Jeffrey Kingston, director of Asian studies at Temple University’s Tokyo campus. "But … Japan has a clear interest in developing better political and diplomatic relations precisely because of the greater economic interdependence." News that China had surpassed Japan as the world’s second-biggest economy in the second quarter grabbed global headlines in August, underscoring China’s rise and deepening pessimism over whether Japan can even keep third place. Even more telling is Japan’s deepening dependence on China’s dynamism for growth in a mature economy plagued with an ageing, shrinking population and a shortage of policy solutions.
Japan’s exports to China topped those to the United States last year, accounting for nearly 20 percent of all its exports. That figure will probably rise to 35 percent by 2026, when China will likely oust America from the top global spot, said Chi Hung Kwan at Nomura Institute of Capital Markets Research. Japan’s direct investment in China has also soared, exceeding 70 percent of its investment in North America last year, with more and more goods being made for local sale, not export. Sino-Japanese relations, long plagued by China’s memories of Tokyo’s wartime aggression and present rivalry over resources and territory, have warmed since a deep chill in 2001-2006, when then-premier Junichiro Koizumi visited the Yasukuni Shrine, seen by Beijing as a symbol of Japanese militarism. Last weekend, a delegation of Japanese cabinet ministers met their Chinese counterparts in Beijing for high-level economic talks — the third such annual dialogue — and agreed on the need to work together for global growth.
Deutsche Welle | 06.08.2010
In the 19th century China began its slow economic decline. Nearly 200 years later, the People’s Republic is using its abundant currency reserves to buy its way back to economic prominence, raising concerns in the West. China’s fall from and subsequent rise to economic power is a story of extremes. In 1820 the Middle Kingdom accounted for 30 percent of the world’s economic product. By 1978 its share had been reduced to just 5 percent. Three decades after Deng Xiaoping opened his nation’s doors to the global economy, China has become the world’s third-largest economy and its largest exporter.
And China is financing its sprint to the top with swelling foreign currency coffers. An annual 10 percent growth rate coupled with an export surplus of $200 billion (151 billion euros) has allowed the Bank of China to rack up a staggering $2.4 trillion in foreign currency reserves, a significant portion of which is invested in US treasury bonds. While the financial meltdown in the United States has driven much of the world into a deep recession, China has emerged relatively unscathed and is now using its abundant cash – $50 billion in 2009 – to buy natural resources in the developing world as well as potentially lucrative, but currently ailing Western brands.
IANS | Yahoo | Aug 24, 2010 | 02:47 PM
Since Aug 14, thousands of Beijing-bound trucks have choked the expressway. Now traffic stretches for over 100 km between Beijing and Huai’an in Heibei Province and Jining in Inner Mongolia Autonomous Region, China National Radio (CNR) reported. ‘Insufficient traffic capacity on the National Expressway 110 caused by maintenance construction is the major cause of the congestion,’ a publicity officer with the Beijing Traffic Management Bureau told the Global Times. This month there have been more trucks carrying excessive coal or fruit, but the Beijing section of the Beijing-Tibet Expressway is available only to trucks with a weight of less than four tonnes. Traffic congestion and road safety have become major concerns for Chinese motorists.Continue reading
China drew 29 percent more foreign direct investment (FDI) in July than a year earlier, with global firms still flocking to the country to build factories and set up research centres despite a bout of labour unrest. FDI inflows, which surged after the country joined the World Trade Organisation in 2001, have recovered steadily this year after being hit hard by the global economic slowdown. Although China has recently been hit by a series of high-profile labour disputes — notably, at suppliers to Japanese automaker Honda Motor Co — it continues to exercise a magnetic pull on foreign businesses setting up production facilities. In July alone, China attracted $6.9 billion in FDI, up 29.2 percent from July 2009, the commerce ministry said. It drew $58.35 billion in foreign direct investment (FDI) in the first seven months of the year, up 20.7 percent from the same period in 2009.
In the latest example of large-scale investment, German chemicals firm BASF said on Tuesday that it would build a new dispersions plant in the southern province of Guangdong. Chinese wages have been rising, but productivity has been rising even faster in most industries and labour costs remain far lower than in developed economies. Investors are also attracted by the country’s modern infrastructure and the prospect of tapping its fast-growing domestic demand. Much of the investment in the past has been concentrated in China’s export heartland along the coast, but Yao Jian, a commerce ministry spokesman, said that money was starting to flow to the interior where costs are lower. “The western regions are showing greater potential for attracting foreign direct investment,” he told a regular news briefing.
Reuters | Thu Jul 29, 2010 | 2:36am IST
The IMF has softened its criticism of China’s currency regime in recognition of Beijing’s efforts to free up its exchange rate but the move showed a split among the Fund’s member countries. A summary of an annual review of China’s policies described the yuan as "undervalued," a change from "substantially undervalued," which was used by International Monetary Fund chief Dominique Strauss-Kahn as recently as June. The yuan has been a flashpoint in relations between China and old-line industrial powers, some of whom have complained that an undervalued yuan undercuts their exports. Without elaborating, an IMF board statement on Wednesday said several countries on the 24-member executive board believed the Chinese currency was undervalued. But others said a structural reduction in the balance of payments surplus was already unfolding thanks to steps taken to boost consumption, disagreeing with an assessment by IMF staff that the yuan was "substantially undervalued." "This does reflect a softening in the board’s position about the degree of adjustment that is needed in the Chinese exchange rate regime," said Eswar Prasad, a senior fellow at Washington’s Brookings Institution and a former IMF official.
IMF economists calculated the yuan was undervalued somewhere between 5 and 27 percent, depending on methodologies used, Prasad said. A diplomat in Beijing confirmed the range. Beijing dropped the yuan’s 23-month-old peg to the dollar and reverted to a managed float on June 19, since which time it has inched up 0.7 percent against the dollar. Prasad said it was premature for some countries to argue China had made a significant move on its currency regime and was boosting local demand to help rebalance the world economy. Despite the choice of language used by the IMF’s board, the Fund’s mission chief to China, Nigel Chalk, said Fund staff economists found the renminbi remained "substantially below the level that is consistent with medium-term fundamentals." That view was based on staff forecasts that China’s current account surplus, which has fallen to around 4 percent of gross domestic product, will rise to about 8 percent in five years as the world economy recovers and net exports pick up again. Beijing disagreed, arguing the surplus will stay at the new, lower level, Chalk told reporters on a conference call. Among the constraints in assessing China’s economy was the lack of a medium-term policy framework, he said.
Reuters | Fri Jul 23, 2010 | 11:46am IST
China’s Three Gorges dam, the world’s largest hydropower project that was built partly to tame flooding, cannot be counted on to hold back all surges that might hit the Yangtze River, state media reported on Friday. The dam’s own safety would be at risk if floodwaters rushed through at more than 122,000 cubic metres per second, the official China Daily quoted Zhao Yunfa, deputy director of the Three Gorges Corporation’s cascade dispatch centre, as saying. "The dam’s flood-control capacity is not unlimited," he said. Waters near that volume are unlikely to test the dam often. Torrential rains across China brought a peak of 70,000 cubic metres per second flowing into the reservoir earlier this week.
During devastating floods that killed over 4,000 people in 1998, before the dam was completed, the surge was lower. At least 701 people have died since the start of the year as a result of torrential rains which have swept large parts of southern and central China, and another 347 are missing, the government said on Wednesday. Future floods could possibly be worse, with climate change raising that possibility. Melting glaciers and more rain in the southwest could both contribute to unusually high water levels. China’s media have started fretting about whether the Three Gorges project will live up to one of its main long-term objectives. Officials have been toning down claims of the dam’s flood-taming abilities, the China Daily reported. A report released in June 2003 claimed the dam could control the worst flood in 10,000 years. Four years later that claim was down to the worst flood in 1,000 years, and in 2008 it was trimmed again to the worst in 100 years, the paper said.
Reuters | Thu Jul 22, 2010 | 10:22am IST
China is expected to maintain strong growth in the rest of this year and there is no need for a second stimulus, government economists said in remarks published on Thursday. The State Information Center, a think tank under the National Development and Reform Commission, forecast economic growth of 9.5 percent this year, which would be close to the average for the past 30 years and reflect China’s reasonable growth potential, the official China Securities Journal reported. Last November, the centre said it expected the Chinese economy to grow 8.5 percent in 2010 and it repeated that forecast in December. Separately, Wang Yiming, deputy head of the Academy of Macroeconomic Research, also under the powerful economic planner, told the official People’s Daily overseas edition that he expected growth of 9.5-10 percent this year and warned against upside risks of consumer inflation in the second half.
A Reuters poll of economists earlier this month produced a median forecast of 10 percent, but the survey was conducted before the release of second quarter GDP and June output data that came at the lower end of forecasts. China’s growth moderated to 10.3 percent in the second quarter from 11.9 percent in the first quarter as Beijing steered monetary and fiscal policy back to normal after a record credit surge to counter the global crisis. Consumer inflation also eased to 2.9 percent in the year to June, from 3.1 percent in the 12 months to May. The slowdown has fuelled market expectations that Beijing might ease off its tightening of policy or even announce new stimulus measures. However, Yi Xianrong, a prominent researcher with the Chinese Academy of Social Sciences, a top government think tank in Beijing, disagreed.
Reuters | Tue Jun 15, 2010 | 11:51am IST
The global economic recovery is likely to be "slow and tortuous" and China faces risks from a multitude of factors including trade protectionism and bad real estate loans, China’s Banking Regulatory Commission (CBRC) said on Tuesday. "The chances in 2010 of some credit assets forming into substantive risks and losses has increased," the CBRC said in its annual report, published on its website on Tuesday.
Among the risks faced by Chinese banks, it identified quite large risks from "unwise lending" to local government investment units, as well as the sovereign debt crisis and U.S. dollar exchange rates. It said some banks were lending large amounts to local governments units, noting "risk management has been inadequate, and there are quite large latent risks in lending to local investment vehicles." CBRC’s chairman, Liu Mingkang, has repeatedly said the regulator will strictly control the speed of lending and is paying special attention to lending risks in the property sector. The government has also warned of the dangers of China’s red-hot property market, which it has described as one of the country’s most pressing economic problems, and has tried to get banks to rein in property lending.
Reuters | Fri Jun 18, 2010 | 1:09pm IST
China’s economic prospects remain good despite the frailty of the global recovery, while a spate of big pay increases is unlikely to touch off a wage-price spiral, the World Bank said on Friday. In a quarterly economic update, the bank reiterated its recommendation that China raise interest rates and allow more exchange rate flexibility so it can better tailor monetary policy to its domestic needs. A string of high-profile pay rises in southern China, some exceeding 20 percent, was partly a cyclical phenomenon reflecting a strong rebound in the labour market after the financial crisis put a lid on wage growth, the Washington-based lender said. "Viewed over a two-year horizon, these increases are within historical norms," the report said. It said the response to demands for pay rises would vary from company to company. "However, given the flexibility of China’s labour market and the track record of China’s overall manufacturing sector in absorbing wage increases and keeping unit labour cost growth down, this is unlikely to set in motion an unwarranted wage-inflation spiral."
Going further, the bank said manufacturers have been so successful in containing costs, boosting competitiveness and upgrading products that China gained market share and exporters improved their margins during the downturn. In the first five months of 2010 export volumes were an estimated 10 percent higher than two years earlier — before the global crisis, even though partner countries’ imports were still below pre-crisis levels, the bank noted. China’s advance is being helped by strong productivity growth, which has cushioned the impact of downward price pressures for manufactured goods globally, it added. "Indeed, profit margins in sectors that export a large share of output such as textiles and electronics now exceed pre-crisis levels, even though export prices are still down substantially."
BBC News | Friday, 18 June 2010 | 07:37 GMT
Workers at a Chinese parts supplier to Toyota have gone on strike over wages, the second supplier to the carmaker this week to be hit by strike action. Workers at the Toyoda Gosei plant in the northern city of Tianjin began striking on Thursday. Toyota production has not yet been hit by the strike, the carmaker said. Another of Japan’s big carmakers, Honda, was forced to halt production last week at two assembly plants in China after workers went on strike.
"We are aware of the strike at Tianjin Toyoda Gosei. We are checking its impact on production and will continue to closely monitor the situation," said Toyota spokesman Hideaki Homma. A spokesman for the workers said they were still negotiating over pay and did not know when production would resume.
The latest walkout follows a strike at another plastics plant in Tianjin earlier this week. Last week, Honda production was hit by walkouts at exhaust-maker Foshan Fengfu Auto parts. This was the second time in two weeks that its Chinese production had been hit by a walkout over pay at a local supplier. The strikes come as labour disputes over pay are growing in number in China.