Tagged: China economy

France President Woos India Against the United States

Article first published as French President Woos India Against the United States on Blogcritics.

France President Nikolas Sarkozy is now on India tour along with his wife Carla Bruni for fourSarkozy days from November 4 to November 7. The US president Barack Obama began his India visit with India’s business hub Mumbai. Sarkozy chose India’s technology hub to start his India tour. He brought 50 member business community and top cabinet officials including Economy minister Christine Lagarde along with him. Sarkozy seems to have come on a top mission along with signing some business contracts.

Strategic and Business Goals

During his speeches on November 4 and his interview to Times of India newspaper, Sarkozy outlined his top political and trade related priorities on global arena of his India tour. Very important offers extended to and requirements sought from India are as follows:

  • Supporting France’s G20 agenda to reform global monetary system during its G20 presidency in 2011
  • Improvements in global governance
  • Help maintain greater stability in commodity prices

In return, to the help in achieving the above-mentioned France’s goals, Sarkozy offered following package.

  • Helping Rupee to become one of the major currencies in the world
  • Support India’s long standing demand of securing permanent seat in UN Security Council

Some business contracts will be concluded during Sarkozy’s visit. Major one is a memorandum of understanding signed between a French nuclear group Areva and India’s Nuclear Power Corporation of India Limited (NPCIL) to supply at least two water-pressurised reactors worth 7 billion euros ($9.4 billion or Rs 43,240 Cr). France is competing with the US company Boeing to supply 126 fighter jets. France’s defence electronics group Thales is hoping to gain a contract to modernise 51 mirage 2000 planes.

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China tops Japan as second biggest economy in Q2

Reuters | Aug 16, 2010 | 7:33pm IST

Growth in Japan’s economy slowed to a crawl in the second quarter and analysts see more weakness ahead. The government is considering new stimulus measures including boosting graduate employment and the corporate sector, Kyodo News Agency said late on Monday, after data that testified to slowing growth in Japan’s main export destinations such as the United States and China and a stimulus-driven domestic recovery that has petered out. Against a backdrop of concerted efforts to talk down the yen after it surged to a 15-year high against the dollar last week, quarterly gross domestic product grew just 0.1 percent. That was well below the median market forecast of 2.3 percent and the United States’ 2.4 percent annualised growth in the same quarter. It followed revised 4.4 percent annualised growth in the first quarter, when both exports and a stimulus-driven recovery in consumption contributed to overall growth.

In the April-June quarter the stimulus effects have worn off, leaving exports as the sole engine of growth and with its contribution to growth halved to 0.3 percent. Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa are expected to meet later this week o discuss possible policy responses. Citing government sources, Kyodo said the growth-boosting government measures are expected to include stimulating personal consumption of eco-friendly products, helping new graduates find jobs and revitalizing small and midsize companies, Kyodo quoted the sources as saying.

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China overtakes Japan as No.2 economy – FX chief

Reuters | Fri Jul 30, 2010 | 3:04pm IST

China has overtaken Japan to become the world’s second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty. Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others. China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China’s chief currency regulator mentioned the milestone in passing in remarks published on Friday. "China, in fact, is now already the world’s second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange. Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan’s or America’s. "China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.

CAN IT BE SUSTAINED?

China’s economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi. China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said. If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces. In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world’s largest energy user. If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history. The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.

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China economy slows, still in Beijing’s comfort zone

Reuters | Thu Jul 15, 2010 | 12:09pm IST

A migrant worker at a construction site in Guangzhou China’s economy cooled in the second quarter, a slowdown that is likely to extend over the rest of the year as Beijing steers monetary and fiscal policy back to normal after a record credit surge to counter the global crisis. Annual gross domestic product growth moderated to 10.3 percent from 11.9 percent in the first quarter, the National Bureau of Statistics (NBS) said on Thursday. The reading was slightly below market forecasts of 10.5 percent growth. Other data suggested that curbs on lending to home buyers and local authorities, along with an ebbing of government stimulus spending and an end to inventory rebuilding, were biting with greater force as the quarter drew to a close. Particularly striking was a sharper-than-expected drop in factory growth to 13.7 percent in the year to June, below forecasts for 15.3 percent and May’s 16.5 percent reading. But the government showed no sign of being perturbed, partly because the slowdown reflected a high base of comparison in 2009. Sheng Laiyun, an NBS spokesman, said the GDP growth rate remained high, in line with the average of the past decade and well within Beijing’s comfort zone. "The slowing will help our economy avoid overheating and assist in the transformation of our economic model," he said. Economists polled by Reuters ahead of the data saw full-year growth of 10 percent this year, slowing to 9.0 percent in 2011.

POLICY TO MARK TIME

Most economists expect no dramatic policy response to Thursday’s figures, which included a drop in consumer inflation to 2.9 percent in the year to June from 3.1 percent in May. Markets had forecast a 3.3 percent rise. With growth slowing and inflation cresting, HSBC and Barclays Capital said they no longer expected interest rates to rise this year. Ting Lu said the chances of an increase in required reserves were fading, too. Beijing was likely to keep up its campaign against property speculation while ramping up spending on public housing to stabilise growth. "Despite the slowing growth, we think the chance for double-dip in China is quite small as China’s pragmatic policymakers are quite flexible on policy stance. And they still have a deep pocket to buffer any big slowdown," Lu said. One risk emphasised by Sheng, the NBS spokesman, stems from the euro zone’s debt woes and its belt-tightening plans. Chinese exporters have not suffered so far because they are filling a backlog of orders, but pressure on them in coming months could be quite significant, he said. Market reaction was muted, perhaps because most of the figures were leaked earlier in the week. Asia-Pacific shares outside Japan were down 0.4 percent, back to their opening levels after a brief spike, while the Shanghai stock market shed 0.3 percent. Offshore yuan forwards were little changed.   

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World Bank sees no wage-price spiral in China

Reuters | Fri Jun 18, 2010 | 1:09pm IST

High speed railway work 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."  

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