China Digital Times

CHINA NEWS SECTION: Economy

• China’s Commodity Buying Spree

  

  From the New York Times:

  Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable.

  Commodities and shipping executives describe Chinese stockpiling in recent months of a range of other commodities as well, including aluminum, copper, nickel, tin, zinc, canola and soybeans. Starting in April, China began stockpiling significant quantities of crude oil.

  China’s goals vary by commodity. Chinese companies have bought iron ore heavily on the spot market in anticipation of higher prices in annual contract talks now nearing completion. The Chinese government has been stockpiling oil and some metals for strategic reasons, and bought huge quantities of aluminum and canola to insulate domestic producers of these goods from falling global prices over the winter.

  Those extra purchases beyond China’s daily needs have helped reverse the price collapse in commodities that followed the economic downturn, but could also limit the scale of the rebound.

  » Read more
  • June 11, 2009 1:18 AM

• China to Push Ahead With ‘Go Abroad’ Policy - Ministry

  

  After being blocked from purchasing an Australian mining company, China has decided to push forward. From Reuters:

  China will steadily push its long time policy of ‘go abroad’, despite risks caused by the financial crisis, its Commerce Ministry said on Thursday, a week after Rio Tinto scrapped a planned tie-up with Chinalco.

  ‘Opportunities to invest in high-quality enterprises and assets have increased, investment costs have declined and transaction conditions have improved,’ the ministry said in a statement posted on its website.

  Industry players and analysts are worried Rio’s decision to scrap the deal would dampen the interest of Chinese companies in overseas expansion.

  See also the anger sparked by the rebuff from the Wall Street Journal and from Radio Australia, that states discrimination against Chinese companies from these large overseas deals.

  See also Reuters for more details about Rio/Chinalco merger.

  » Read more
  • June 11, 2009 12:43 AM

• China’s Exports Dropped Again in May

  

  From Wall Street Journal:

  The decline in China’s exports continued to deepen in May, new data show, emphasizing how hopes for a recovery in the world’s third-largest economy remain pinned on the effectiveness of the government’s stimulus program.

  Merchandise exports in May fell 26.4% from a year earlier, China’s Customs agency said Thursday, accelerating from April’s 22.6% decline as global demand remained weak. China’s imports also extended their fall, dropping 25.2% in May from a year earlier after shrinking 23% in April.

  The weak export performance is shrinking China’s trade surplus, which at $13.39 billion for May is more than a third smaller than in the same month last year.

  » Read more
  • June 10, 2009 11:49 PM

• China’s Consumer Prices Decline 1.4%, Aiding Recovery

  

  From Bloomberg:

  China’s consumer prices fell for a fourth month, making it easier for the government to keep interest rates low and boost spending to revive the world’s third-largest economy.

  Prices dropped 1.4 percent in May from a year earlier, after falling 1.5 percent in April, the statistics bureau said today. The median estimate in a Bloomberg News survey of 16 economists was for a 1.3 percent decline. Producer prices fell 7.2 percent, the most on record.

  Inflation may return as the economy recovers and commodity prices climb from last year’s lows. The central bank triggered an explosion in credit this year by scrapping restrictions on growth in new loans and keeping the one-year lending rate at a four-year low of 5.31 percent.

  » Read more
  • June 10, 2009 11:13 PM

• China Issues Rules To Allow Resumption Of IPOs

  

  From Reuters:

  China’s securities regulator has issued new rules reforming initial public equity offers, paving the way for an immediate resumption of a backlog of stock IPOs that had been halted since last September.

  More than 30 companies, including Everbright Securities, a top-10 brokerage, and China State Construction Engineering Corp, the biggest home builder, have won regulatory approval and have been waiting for up to a year to go public after a slumping stock market in 2008 spurred the regulator to quietly suspend IPOs last autumn.

  An IPO resumption could push at least 100 billion yuan ($15 billion) in new shares onto the market this year, according to Reuters calculations based on the waiting list, but China’s stock market has generally been rising after the regulator hinted in late May that it would soon resume such offerings.

  » Read more
  • June 10, 2009 10:56 PM

• Chinese Art Prices Show Signs of Stabilizing

  

  From New York Times:

  In May 2007, “The Sisters (Grand Family No. 7),” an oil painting by Zhang Xiaogang, sold for $1.16 million at Christie’s New York. Last month, it went under the hammer there again — this time for $722,500.

  That sale sent mixed signals. The 27 percent price fall mirrored the overall state of the contemporary art market; still, bidding was active, and the painting came through as the top lot of the afternoon’s offering of postwar and contemporary art, beating works by Damien Hirst, Keith Harding and Richard Prince. After its initial collapse, as the economic crisis struck, the Chinese contemporary market may be bottoming out.

  At the Christie’s Hong Kong spring auctions, also last month, 34 of 38 lots offered in an evening sale of Asian contemporary and Chinese 20th-century art sold for a total $19.9 million, more than double the low end of the pre-sale estimate — which was pitched conservatively to avoid scaring off possible bidders.

  » Read more
  • June 10, 2009 1:45 AM

• Concerns About Cost of China’s Stimulus Grow

  

  From Wall Street Journal:

  The cost of China’s stimulus program is turning out to be much larger than official figures indicate, raising the stakes for the government’s attempt to restart high growth through massive borrowing.

  The spending spree has helped steady China’s economy while other major nations remained mired in the global downturn. It is one of the largest stimulus programs adopted by any government in the world — yet China plans to hold its budget deficit to just 3% of gross domestic product this year. That’s about where the U.S. hopes its deficit can end up in a few years after it scales back its stimulus spending.

  » Read more
  • June 10, 2009 1:36 AM

• China Car Sales Jump Most Since 2006 on Government Stimulus

  

  From Bloomberg:

  China’s passenger-vehicle sales rose 47 percent in May, the biggest jump since February 2006, as tax cuts and government subsidies helped extend the country’s lead over the U.S. as the world’s biggest auto market this year.

  Chinese drivers bought 829,100 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall vehicle sales rose 34 percent to 1.12 million.

  China has cut retail taxes on vehicles and handed out subsidies in rural areas after auto sales slowed on the global economy and job concerns. The moves helped General Motors Corp., the largest overseas automaker in China, to boost sales in the country 34 percent in the first five months of the year even as plunging U.S. demand forced it into bankruptcy.

  » Read more
  • June 10, 2009 1:22 AM

• Hummer Puts China’s Tengzhong On the Map, Almost

  

  As Sichuan Tengzhong Heavy Industrial Machinery Co. is set to buy Hummer, a General Motors unit that filed for bankruptcy recently, several perspectives have emerged about the gas-guzzling behemoth and the little known machinery company buying it. From Reuters:

  Even in the southwest Chinese home base of Sichuan Tengzhong Heavy Industrial Machinery, residents are more familiar with the gas-guzzling Hummer brand that it is looking to buy from bankrupt General Motors (GMGMQ.PK) than with the heavy machinery maker itself.

  “I think Hummer is a famous brand,” said Zhang Youyi, an engineer who wasn’t initially sure if Tengzhong was even located in Chengdu, the capital of Sichuan, a farming and industrial powerhouse.

  “It would be good news for Chengdu,” said Zhang, referring to recent tragedies that have struck the province — from a mystery bus fire that killed 27, a landslide that buried over 80 people and last year’s earthquake that killed more than 80,000.

  The Mail and Guardian offers criticism from Chinese analysts on Tengzhong as a company:

  “Tengzhong is just a privately owned company that has no experience in the car industry and Hummer is a niche brand that suits a small group of people,” said Zhu Junyi, an auto analyst with Shanghai Information Centre, a think tank.

  Even China’s state-owned media have been quick to point out that Tengzhong, based in south-west China’s Sichuan province, specialises in making machinery to build roads and bridges, as well as equipment for the energy industry.

  Tengzhong “has no experience in producing passenger vehicles, adding difficulties for the company to manage the brand,” Xinhua news agency quoted Zuo Xiaolei, an economist with China Galaxy Securities, as saying.

  The headline of a recent commentary printed in the English-language Global Times said “China’s Hummer fever should come to a stop.”

  Xujun Eberlein, a writer from China living in the states, also wrote about the Chinese people’s reaction to Hummer on her blog:

  Yesterday, my sister Maple sent me an email from Shanghai,saying the news that a Sichuan private enterprise is purchasing Hummer sparked a huge reaction in China, even students in her art class kept commenting on it. “‘America is finished,’said one. ‘That [Sichuan] enterprise surely will produce a Hummer brand steam roller,’ said another. et cetera. I don’t know what Hummer’s status is in the mind of Americans; in China it represents the life style of the highest-level bourgeoisie. It seems that, to car lovers, owning a Hummer is like owning the entire world.”

  Reactions on the internet are varied. Here are a few views:

  From cd.qq.com: For a long time, China’s automobile industry has been under constraints of Western countries’ big brands. Now Tengzgong dares to acquire a big brand, no matter what the result, it shows private enterprises is leading the revitalization of Chinese automobile industry.

  Sina.com reruns a Chinanews.com report that says the registered capital of Tengzhong is only 300 million RMB (about US$ 44 million), and some people suspect this whole thing is hype.

  A skeptical report from xinhua.net raises the question whether this is a two-man show played by Tengzhong and Hummer.

  Randy Cohen from the New York Times also writes about not saving the Hummer, but killing it:

  Last Tuesday, one day after General Motors filed for bankruptcy, the automaker announced the sale of its Hummer line to Sichuan Tengzhong Heavy Industrial Machinery Company in China. Instead of selling this massive, ecologically destructive gas guzzler, should G.M. have it sent to the scrap heap? Or do the financial needs of the corporation and the prudent use of taxpayer money — thanks to the G.M. bailout, the American public owns 60 percent of the company — trump other considerations?

  Determining what products are too hazardous to market — fen-phen? bite-sized toys? Stinger missiles? — should be a matter of public policy, not a series of moral conundrums posed to individual companies. Nor is it the place of government to micromanage a company’s lawful operations. But it is appropriate for public officials to promote the general welfare; that’s the rationale for the G.M. bailout. The collapse of G.M. provides an opportunity to reconsider transportation policy, including from a moral perspective, an analysis that urges not merely discontinuing the Hummer but significantly reducing our reliance on the private car.

  Most disconcerting, cars kill. If you introduced a transportation system by announcing: it’ll kill only 40,000 people a year, it would be unlikely to gain widespread popularity. And that’s just accidents. Cars also kill in slow motion — by polluting the air and thus contributing to respiratory disease and global warming. (Auto emissions also degrade the facades of buildings and bridges, via acid rain and other chemical reactions, at enormous public expense.)

  » Read more
  • June 9, 2009 1:42 AM

• China Eastern, Shanghai Air to Combine After Losses

  

  From Bloomberg:

  China Eastern Airlines Corp. will combine with Shanghai Airlines Co. after joint losses of 16.5 billion yuan ($2.4 billion) last year prompted the government to bail out the two state-controlled carriers.

  “We just got approval from the government” on June 6, Shanghai Airlines Vice President Feng Xin said late yesterday by phone from Kuala Lumpur.

  The combined group would have 306 planes and more than 600 routes, giving it a 50 percent share of air travel in China’s financial capital. Airlines worldwide may lose $9 billion this year as the recession and swine flu hurt travel demand, the International Air Transport Association forecast today.

  » Read more
  • June 9, 2009 12:58 AM

• Specter Of Investment Protectionism Stalks China

  

  From Reuters:

  Please, please buy our bonds — and bits of our bankrupt car companies, if you like — but keep your hands off our big natural resource companies.

  After events last week, that is what China must be making of the stance of rich countries to its overseas investment plans.

  No sooner had Treasury Secretary Timothy Geithner returned home from a trip to Beijing in which he repeatedly assured his hosts of the safety of U.S. debt, Anglo-Australian miner Rio Tinto (RIO.AX) (RIO.L) jilted Chinalco, the Chinese state-owned metals firm it had been courting to help it out of a debt trap.

  » Read more
  • June 8, 2009 2:06 AM

• Russia Says Yuan Could be Reserve Currency in Decade

  

  Russian Finance Minister Alexei Kudrin has announced that the Chinese yuan could become a world reserve currency over the next ten years: 

  “I think the shortest route would be if China liberalised its economy and allowed the convertibility of the yuan,” said Finance Minister Alexei Kudrin, a close ally of Prime Minister Vladimir Putin.

  “This could take 10 years but after that the yuan would be in demand and it is the shortest route to the creation of a new world reserve currency and I think China needs to think about this,” Kudrin said at a panel discussion at the St Petersburg International Economic Forum.

  China and Russia, the world’s No. 1 and No. 3 biggest holders of foreign exchange reserves, have expressed unease about the volatility of the U.S. dollar and called for discussions on ways to create rival reserve currencies.

  See also past CDT posts on the yuan.

  » Read more
  • June 7, 2009 11:13 AM

• China’s Hidden Bankruptcy

  

  From Economic Observer Online:

  Throughout 2008, only 3,500 enterprises formally filed for bankruptcy in China. Hiding behind this tiny number however is the approximately 800,000 businesses that exited the market by either cancelling their registration or having their business license revoked.

  The rise in the number of these hidden bankruptcies has emerged since a new bankruptcy code came into force in China on June 1, 2007.

  In order to solve problems that have emerged since the introduction of the new legislation, the Supreme People’s Court has accelerated it’s timetable to release judicial interpretations of the law.

  » Read more
  • June 7, 2009 12:54 AM

• China, Japan Ministers Meet For Key Economic Talks

  

  From AFP:

  Top ministers from China and Japan were to meet on Sunday to discuss the global financial crisis and ways to boost trade ties between the world’s number two and three economies.

  The one-day Japan-China High-Level Economic Dialogue in Tokyo brings together a Beijing delegation led by Vice Premier Wang Qishan with senior Japanese officials headed by Foreign Minister Hirofumi Nakasone.

  “This meeting is designed for the chiefs from the economic and other fields to get together and have cross-sector talks on how they should develop bilateral relations,” a Japanese government official said.

  » Read more
  • June 6, 2009 8:03 PM

• China Construction Bank Opens First Branch in US

  

  From china.org.cn:

  China Construction Bank Corporation (CCB), the world’s second largest bank by market value, opened its New York branch on Friday.

  The New York branch, CCB’s first branch in the United States, extends CCB’s global presence and marks a significant milestone in CCB’s global strategy, said CCB’s Chairman Guo Shuqing to Xinhua after the opening ceremony.

  [...]The New York branch will engage in wholesale banking activities, including lending, acceptance of wholesale deposits, trade finance, U.S. dollar clearing and treasury, according to the CCB.

  » Read more
  • June 6, 2009 12:51 PM

CDT BOOKSHELF

FROM CHINESE CITIZEN BLOGGERS 公民博客:

Support CDT - Buy a Grass Mud Horse T-shirt!