Asia stocks up ahead anticipating China stimulus measures
Posted on November 21, 2008
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Bargain hunters helped Asian stock markets stage a recovery on Friday, halting four days of losses. Investors are also anticipating a stimulus package to be announced by China this weekend. By the end of trading, the Hong Kong Hang Seng Index was up 2.9 percent, Japan’s Nikkei was up 2.7 percent. On Wednesday, global stock markets fell sharply amid deepened fears of a recession. The Dow Jones Industrial Average plunged to a five-year low, losing more than five percent in trading. Meanwhile weak demand continues to drive the price of oil lower,sending it under 49 dollars a barrel in Asia on Friday.
Strong Buy on China!!!! Alert
Posted on October 30, 2008
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Strong Buy on China!!!! Alert
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China passenger car sales falling
Posted on September 9, 2008
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China’s passenger car sales fell last month from a year earlier, an industry group said Tuesday, the first monthly drop since early 2005 as the economy slowed and the Olympics deterred car purchases.
Sales of the cars, including sedans, multi-purpose vehicles and sports utility vehicles, fell 6.24 percent year on year for August to 451,300 units, the China Association of Automobile Manufacturers said.
The sales were also down 7.56 percent from July, the association said in a statement on its website.
The last tine monthly sales fell was in February 2005, when the figure dropped 22.8 percent to 213,500 units, mainly due to the seasonal impact of the Lunar New Year holiday.
The decline in August was mainly attributed to a brief closedown of factories due to the Olympic Games, but market growth is likely to continue to slow down in coming years.
The era of single-digit growth is coming closer and closer to us and that could happen in the next two or three years.
China’s passenger vehicle sales rose 13.15 percent to 4.55 million units in the first eight months of the year, compared with an annual growth of 21.68 percent to 6.30 million units in all of 2007.
China’s economy expanded 10.1 percent in the second quarter compared with 11.9 percent in the whole of 2007.
China raised gasoline and diesel prices by nearly 20 percent in late June to close the gap between state-set domestic prices and the soaring world oil market.
China leads gold race
Posted on August 13, 2008
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China go into the sixth day of the Olympics on Thursday ahead of sporting arch-rivals the United States in the medals table despite Michael Phelps’s exploits.
After becoming the all-time most successful Olympian with 11 career golds, American swimming phenomenon Phelps faces a relatively quieter day with just one semi-final to contest.
Topping the medals table is a tangible sign of China’s new global status and Beijing has invested heavily in a sports system that finds potential champions at an early age.
Following another great day for its gymnastic, diving, weightlifting and shooting teams, China headed the overnight medals table with 17 golds to 10 for the United States.
South Korea and Germany followed with six golds while Italy, Australia and Japan had four.
So with American-dominated track events to start at the end of this week, the hosts face an intriguing battle to go one better than their second place in the overall 2004 Athens table.
Chinese fans have roared on their country’s every success in Beijing but are playing down the significance of coming first.
SWIMMING’S SUPERMAN
Half of the American gold medals in Beijing so far have come from one man — or should that be Superman?
Phelps, 23, took two more golds in the Water Cube on Wednesday to make it five so far in Beijing after six in Athens.
“To be the most decorated Olympian of all time … it’s a pretty cool title,” he said.
The 30,000 journalists covering the August 8-24 Games are running out of superlatives for the man who now has passed an elite pantheon on nine golds, including fellow Americans Mark Spitz the swimmer and Carl Lewis the sprinter and long-jumper.
The other two with nine golds are Paavo Nurmi, the “Flying Finn” distance runner, and Larysa Latynina, the Soviet gymnast.
Phelps has the comparatively easy matter of a 200 meters individual medley semi-final on Thursday before continuing his quest to beat Spitz’s record of seven golds in a single Games.
Also in the pool, world record breakers Eamon Sullivan of Australia and Alain Bernard of France will face each other in the showpiece 100 meters freestyle final.
The most decorated Asian swimmer of all time, Japan’s Kosuke Kitajima, seeks a second gold in the 200m breaststroke.
The youngest male athlete in the Beijing Olympics, 13-year-old Dwayne Didon from the Seychelles who only started swimming at nine, competes in the 50m freestyle heats.
Although from an Indian Ocean archipelago of 115 islands, Didon grew up in a highland village and came late to water.
“When my friends at school heard the news (of me going to the Olympics) they thought I was playing a joke on them,” he said.
On land, or rather in the air, Chinese gymnast Yang Wei, unbeaten on the international stage since 2006, is favorite to add to the hosts’ gold medal tally in the all-round final.
With a population of 1.3 billion people glued to the Olympics, pressure on Chinese athletes has been enormous.
The correct course to stem Chinese inflation
Posted on July 2, 2008
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Increasing inflation is threatening social stability in China, elevating from 3.3 percent in March 2007 to 8.3 per cent in March 2008. As a consequence, the People’s Bank of China has stepped up interest rates significantly and increased banks’ reserve requirements. The trick for the Chinese government will be to repress inflation in a way that does not compromise its long-term goal of sustained economic growth.
China’s accelerating inflation reflects a comparable ascension in its GDP growth rate, from 11 percent in 2006 to 11.5 per cent in 2007. The cause of price escalation since mid-2007 is the appearance of production bottlenecks as domestic demand exceeds supply in an increasing number of sectors, such as power generation, transportation, and intermediate-goods industries.
Vigorous growth and rising cumulative demand have also caused production bottlenecks outside of China, most notably in the agricultural commodity and mining sectors. Additionally, two other source factors have created impact - Porcine Reproductive and Respiratory Syndrome (PRRS or “blue-ear disease”) has been culling pork supplies and second, strong storms in January have reduced the supply of grains and vegetables.
Under these conditions, continuing to increase borrowing costs would be an error in policy. To be certain, the extended swift increase in Chinese aggregate demand has been fuelled by an investment boom, as well as a growing trade surplus. Thus, lowering inflation would require quelling the growth rate of these two demand mechanisms. Chinese policymakers should center more on reducing the trade surplus and less on reducing investment spending — that is, they should emphasize Renminbi (RMB) appreciation over higher interest rates to cool the economy.
A considerable reduction in cumulative demand through RMB appreciation is attainable without being imprudent, because the current-account surplus in 2007 was 9.5 percent of GDP. Investment (especially in infrastructure in rural, undeveloped areas and social investments) should not bear the brunt of the expenditure squeeze, because today’s investment is also tomorrow’s growth in production capacity; and the production of more goods tomorrow would reduce inflation.
Using RMB appreciation as the primary tool to fight inflation implies accepting an elevated unemployment rate now in exchange for a permanently lower unemployment rate in the future. This is because manufactured exports are typically more labor-intensive than investment projects. As a result, a RMB1 billion reduction in exports would create more unemployment than a RMB1 billion reduction in investment spending. But tomorrow’s capacity expansion from today’s investment would mean a permanent increase in the number of jobs created from tomorrow onward.
Nevertheless, China must be cautious when implementing RMB appreciation. Policy makers should closely monitor prospective shifts in the economic conditions in the G-7. A prolonged recession in the United States resulting from the sub-prime crisis would appreciably lower Chinese export. It would follow then that a large RMB appreciation undertaken now would be overkill.
In short, substantial RMB appreciation would diminish the joint US-China trade deficit and China’s overall trade surplus notably, but it would do little to reduce the overall US trade deficit. In the absence of a generalized appreciation of all Asian currencies and unchanged American policies, possibly only a deep recession could reduce the overall US current-account deficit. A stronger RMB though can only help the inflamed Chinese economy. And it has the virtue of doing so while preparing for China’s future production capability.
Copper Prices Decline Reflecting China’s Demand
Posted on June 27, 2008
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According to Customs data, imports of refined copper into China has fallen 19 percent in May from a year earlier. London- traded copper has gained 25 percent this year, more than four times the advance in futures contracts for the metal in Shanghai. The Shanghai price still is at a discount to London, which tells us the Chinese are not very active buyers.
Copper for delivery in three months dropped $25, or 0.3 percent, to $8,375 a metric ton on the London Metal Exchange. New York copper futures fell 0.5 percent.
Growth in Germany, Japan and the U.S. is braking as higher oil prices sap demand for products such as vehicles and new homes that contain industrial metals such as copper. Car sales in Europe dropped 7.8 percent in May from a year earlier, reports the Brussels-based European Automobile Manufacturers Association. The Copper Development Association estimates that an automobile contains more than 50 pounds (23 kilograms) of copper.
Tin has led gains in industrial metals on the LME, rising 39 percent this year on increased imports in China, the world’s largest producer of the metal. Aluminum is up 29 percent.
Zinc, which is used to galvanize steel, declined $35 to $1,891 a ton on the LME. Zinc prices in Shanghai have dropped 16 percent this year compared with a 20 percent decline in London.
Lead, the worst performer on the London Metal Exchange this year, extended its slide on expanding inventories.
Lead fell $45 to $1,820 a ton. Inventories of the metal used in car batteries have more than doubled this year, rising another 1,100 tons today to 96,750 tons, according to LME data.
Aluminum dropped $46 to $3,095 a ton, tin fell $800 to $22,525 a ton and nickel decreased $300 to $21,550 a ton.
Investing in Chinese Real Estate: A Red-Tape Parade
Posted on June 4, 2008
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In February, China rang in the new year - the Year of the Rat - with festive ceremonies to ensure good luck and fortune in the coming year. The emerging economic power has much to look forward to with GDP growth ticking along at 11.4 percent. However, with every balloon, there is a pin, and the inflation of the Chinese real estate market poses no exception.
Fueled substantially by a large amount of investments flowing into the real estate market, China’s property sector took off in 1998. It was at that time that Chinese citizens were granted the right to purchase their own homes. According to an online market overview published by Property Frontiers, China’s property sector has seen an average rate of growth of 22 percent per year since.
This growth phenomenon sparked conservative anxieties that a property bubble was being created in China. In response, the Chinese bureaucracy placed conditions on foreign investment in July 2006 as part of an overall effort to control the escalating appreciation.
In order for foreign investors to acquire non self-use property in China, they must incorporate and capitalize an onshore entity in China, or foreign-invested real estate enterprise (FIREE), to acquire and hold investment properties.
Foreign individuals who work or study in China for more than one year can purchase self-use property, or property for their own use or residence. Foreign entities with branches or representative offices in China in operation for more than one year may also purchase self-use property.
Although restrictions have made it more difficult for foreign non-resident private individuals to invest in China’s real estate market, large institutional investors are working within the rules of the system to provide a steady flow of foreign capital to China’s property sector.
“Various institutional investors…such as Morgan Stanley, JP Morgan and Goldman Sachs are actively investing in China’s real estate market via their local vehicles or taking stakes in renowned Chinese development companies through pre-IPO investment”.
Additional restrictions have been placed on specific segments of the real estate industry, such as development of whole tracts of land, construction and operation of luxury hotels, resorts, office-buildings and exhibition centers. While these developments are not prohibited, investors must cut through the red-tape to obtain approval from authorities on a case-by-case basis.
Declining demand and tighter regulations on the property market may have already started to take effect. The shutdown or downsizing of major real estate agencies and concurrent drop in urban housing sales could be indications of an overall slowdown in the real estate market.
One important note is that China’s Special Administrative Regions (SARs), Hong Kong and Macau, are not subject to the restrictions placed on real estate in mainland China.
Until China’s real estate market sufficiently reigns in, it is unlikely that the Chinese government will lift restrictions on foreign property investment.
Quake in China leaves over 70,000 dead or missing
Posted on May 27, 2008
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China announced this week it has raised the number of dead or missing from a devastating earthquake to more than 70,000. A government statement said the number killed had now topped 40,000, and state news agency Xinhua reported that a further 32,000 were missing.
Authorities had previously said they expected the final death toll to exceed 50,000. More than 247,000 have been injured.
Eight days after the huge tremor hit, rescuers were still finding more survivors. Xinhua reported a 60-year-old woman was rescued in Pengzhou, subsisting on rainwater to survive her 196 hour ordeal.
Living within the epicenter of the quake, in Wenchuan county, Ma Yuanjiang, 31, was one of those to be counted among the fortunate to be found alive. His body was “as fragile as that of a newborn baby,” Chongqing Xinqiao hospital president Wang Weidong said, according to Xinhua.
Additionally, nearly 9,000 people were evacuated from the base of Shiziliang Mountain near Guangyuan city over concerns about significant fissures developing along its slopes. Beichuan, one of the worst hit towns, was closed off after official warnings of impending tremors.
Aftershock Alarm
In the provincial capital of Chengdu, tens of thousands of people were preparing to sleep another night in the open air. In the midst of the community’s displacement come the television predictions pointing to another on-coming powerful earthquake.
That report, along with fresh aftershocks and forecasts of heavy rains, compounded the difficulties for military, government and private workers trying to ensure the homeless are fed and housed.
Among the chaos, there is a still a resiliency among the people.
“Last night the predicted aftershock didn’t happen,” said Wang Jun, as she set up a tent in the city. “Anyway it’s nicer outside, it’s better for your health.”
Whole towns have been flattened in mountainous areas north and west of Chengdu, and about 5 million people are homeless, prompting the government to seek foreign help in the form of tents.
The quake has prompted a huge outpouring of public charity both at home and abroad, with 13.9 billion yuan raised to date.
($1=6,990 Yuan)
Automotive Industry in China
Posted on May 20, 2008
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In the examination of the potential growth of the automotive industry in China, despite possible problems facing the Chinese economy, the outlook for growth is unparalleled on the stage of the world’s marketplace.
Kevin Wale, President of General Motors China, predicts that “China’s automotive growth will exceed that of all other major markets combined.”
The problems facing China’s economy - inflation, tightening credit, stock market volatility and the carry-over effects of the US financial crisis – it is believed will be overridden by the sheer buying power of millions of emerging Chinese consumers.
Wale continues that even if America’s financial woes do slow China’s growth, the Asian nation will still expand by a remarkable 8 to 10 percent this year. He feels the coming years will be a potential bonanza for automakers in China because so many millions of Chinese are reaching the car buying stage.
In China, extended family members have been known to combine money together in order to buy a car. The vehicle affordability point in the country is a household income of $3,000, which compares to a global benchmark of $5,000.
Another indicator of Chinese market potential is vehicle density. China has a scant 23 vehicles per 1,000 people, versus 784 in the U.S.
There is also a rapid development in China of tier two and three markets, meaning cities of 10 to 15 million people, away from the wealthy coastal cities like Shanghai.
Inflation may be leveling as China permits certain price increases
Posted on April 17, 2008
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The top economic planning agency in China, the National Development and Reform Commission, has begun allowing Bright Dairy & Food Co., China’s second largest listed dairy company, and Wilmar International Ltd., the nation’s biggest vegetable oil supplier, to increase their prices. This move suggests that that Chinese government may expect the current 11-year high on inflation to lessen.
This past January, the Commission stated that China’s largest suppliers of staple goods must first seek government approval prior to any price increases. This marks the first increase since January. As a result of consumer prices swelling to 8.7% in February, Premier Wen Jiabao designated inflation as one of China’s top challenges for 2008.
”The authorities consider inflation may trend down from the peak in February, so allowing companies to raise prices would give food makers more incentives to increase supply,” said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong. ”Price controls can temporarily limit prices, while ultimately measures to boost supply will bring prices down.”
Following the most awful snowstorms to plague central and southern China in nearly 500 years, transportation was at a stand-still interrupting both food and power supplies throughout the region. As a result, the prices of pork and vegetable rose 63% and 46%, respectively, from February 2007 to February 2008.
There are signs that the price increases may be leveling off as the cost of wholesale price have been decreasing. On a weekly basis since mid-February, an index of agricultural products, gathered by the Ministry of Commerce, exhibits wholesale prices have fallen consecutively. Working with the top planning agency since late 2007, the Ministry of Commerce has begun to release weekly price monitor information on key agriculture products and consumer goods in an effort to manage market opinions.
“As food inflation eases, there is room for the government to address companies’ concerns about rising costs from raw materials and labor,” said Shen Minggao, an economist at Citigroup Inc. in Beijing.
A survey conducted last month by a central bank found that 49% of the 20,000 Chinese families, the highest since records began in 1999, believe that price levels are already “too high to bear”. In addition, these families expect prices to continue to rise in the upcoming months compared to three months ago.