China Shares Rise, Ending Week 10 Percent Higher

The Associated Press via the International Herald Tribune reports on a slight boost to the market with a near 10 percent gain for Chinese shares:

Chinese shares rose Friday, bringing its weekly gain to nearly 10 percent, after regulators denied rumors they would approve new IPOs, which investors worried would dilute the market.

The benchmark Shanghai Composite Index surged 4 percent, or 83.22 points, to close at 2,181.24. For the week, it advanced 9.6 percent, its strongest weekly gain in months.

The Shenzhen Composite Index for China’s second, smaller exchange climbed 4.4 percent to 672.81.

While bonds are down, Bloomberg reports that “Yuan forwards due in a year completed their biggest weekly gain in a decade”:

Yuan forwards due in a year completed their biggest weekly gain in a decade as China said it wants to maintain a stable currency to limit the impact of the global financial crisis. Bonds dropped.

Non-deliverable one-year forwards show traders pared bets for steeper declines in the yuan after Governor Zhou Xiaochuan said this week in Beijing that the People’s Bank of China wants to avoid big currency fluctuations. Premier Wen Jiabao said Jan. 30 in Brussels that a stable yuan will benefit the world economy. Three-month yuan forwards advanced the most in more than eight months this week.

“Senior officials have been consistent recently in speaking for a stable currency,” said Zhu Jianfang, chief economist at Citic Securities Co. in Beijing, China’s biggest brokerage by market value. “For this year, the yuan-dollar rate won’t go too far away from the current level even if we may see relatively larger daily fluctuations in between.”

Many, however, continue to question the real economic strength and sustainability of China writ large. There has been continuing speculation over the official Chinese figures, as reported by The Associated Press:

The difference lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.

But experts say that compared to the previous three months — the system used by most other major countries — China’s growth fell to as low as 1 percent or possibly zero.

“The recent weakness is much worse than the long-term trend,” said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was “close to zero.”

In addition, growing unemployment continues to be an enormous social and economic concern. From The New York Times:

Beijing authorities disclosed Monday that based on an agriculture ministry survey of villages just before the Chinese New Year holiday last week, about 20 million of the nation’s 130 million migrant workers are unemployed.

In the factory city of Dongguan, adjacent to Guangzhou, many plants have deferred reopening for up to three weeks for lack of orders from the United States and Europe, said Eddie Leung, the chairman of the Dongguan Association of Foreign Invested Enterprises.

At Fortunique, a manufacturer of hospital gowns and other protective wear on the southern outskirts of Guangzhou, about 50 men and women showed up early Thursday morning looking in vain for jobs. More came to the gate through the day.

“I haven’t seen that since the early 1990s,” when China’s economic boom was still in its early stages, said Charles Hubbs, the company’s owner.