“It gets better on weekends,” said a hair-clip vendor flipping through a magazine.

Opened last year amid a nationwide construction frenzy, this sleepy mall may ultimately prove successful. But for now, the project shows why China won’t be spending big in the event of another global recession: It’s still paying for the last one.

To shield its economy from the fallout of the 2008 financial crisis, Beijing orchestrated a massive economic stimulus. It invested billions in infrastructure projects and encouraged banks to open the credit spigot to fund construction of apartments, office towers and retail centers.

The strategy catapulted China past Japan to become the world’s second-largest economy; its growth helped keep the global slump from deepening … But like taking steroids, there were side effects. The burst of credit has fueled inflation, which is proving painful for average Chinese. Soaring prices for pork, vegetables and other staples have authorities worried about the potential for social unrest. So has a property bubble that has put home ownership out of reach of millions, exacerbating the gulf between rich and poor.

See also ‘China can’t – and won’t – save the world‘, from The Telegraph:

As the West contemplates a new bout of financial meltdown, the second biggest economy on Earth might appear to be well placed to ride above the angst ripping through the markets – or even use its wealth to come to the rescue of the richer world.

On the surface, China seems to have many reasons to smile. In the first half of this year, it registered growth of 9.5 per cent, with exports 24 per cent higher than in the same period of 2010. It sits on a $3trillion mountain of foreign reserves, and has become the lender of last resort to the US administration. Foreign governments, meanwhile, have muted criticism of its human rights record: as Hillary Clinton has remarked, “How do you talk tough to your banker?”

Yet the depressing truth is that China finds itself in a series of binds which limit its ability – or its willingness – to play the global role that should go with its economic weight … Since they pulled themselves out of an economic hole in 2008-9 with a £1.3 trillion programme of credit expansion and infrastructure spending, the bureaucrats in Beijing have had two great fears. The first is that the effects of that programme, combined with pressure on food supplies and rising wages, would spawn rampant inflation. The second was that demand for China’s exports would fall as the West went into a double-dip recession.

Sources:

China feels after-effects of economic stimulus – Los Angeles Times
China can’t – and won’t – save the world – Telegraph

© Samuel Wade for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: economic downturn, economic stimulus plan, financial crisis 2008-2009, inflation, pork prices, recession, shopping malls
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China has moved swiftly to fight the financial crisis, adjusting macroeconomic policy to expand domestic demand, and introducing a stimulus package to maintain growth, advance reform and improve people’s lives. By taking these steps, we have overcome extreme difficulties and laid a solid foundation for China’s development.

A notable result of our response to the crisis is that China has maintained steady and fast growth. Between 2008 and 2010, China’s gross domestic product grew at an annual rate of 9.6, 9.2 and 10.3 per cent respectively. The consumer prices index over the same period was 5.9, -0.7 and 3.3 per cent; 33.8m new urban jobs were created. China has maintained sound growth this year ….

There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes. Rapid price rises pose a common challenge to many countries, especially other emerging economies and China. China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily. The output of grain, of which there is now an abundant supply, has increased for seven years in a row. There is an oversupply of main industrial products. Imports are growing fast. We are confident price rises will be firmly under control this year.

© Samuel Wade for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: consumer price, financial crisis 2008-2009, GDP growth, inflation, Wen Jiabao
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Vietnam and China have much in common. There is no country more similar to China than Vietnam, and there is no country more similar to Vietnam than China. They share a Sinitic cultural background, communist parties that came to power in rural revolutions, and current commitments (China since 1978, Vietnam since 1986) to market-based economic reforms. Although the most recent war of both states was with one another, combat ended in 1991 and interaction has flourished since 1999. At present, together with the rest of the world, they both face a sharp increase in global economic uncertainty. What effects will global uncertainty have on the prospects for each country and on their relationship?

Clearly, in 2008 a massive change in the world economy began, requiring that a range of policies and attitudes be rethought. Both Vietnam and China will have to adjust their development strategies. Part of the adjustment is likely to include rethinking regional institutions as well as bilateral relationships.

© Xiao Qiang for China Digital Times (CDT), 2009. | Permalink | 2 comments | Add to del.icio.us
Post tags: financial crisis 2008-2009, Vietnam
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On a steamy saturday afternoon just outside Shanghai, Zhang Yi is in a blessedly cool General Motors showroom, kicking the tires of the company’s newer models. He’s not there to beat the heat. He drives a small Volkswagen now and wants to upgrade. A middle manager at a state-owned steel company, Zhang has no worries about his job or China’s economy. “Things are still pretty good,” he says. “I have no problem now affording one of these,” nodding toward the array of gleaming new Buicks nearby.
(Read “China’s Booming Car Market Shifts into Reverse.”)

There aren’t a lot of places in the world these days where consumers speak with that kind of confidence. With the U.S., Japan and all of Europe mired in the worst global recession in 30 years, China has shown a restorative strength that six months ago many doubted it had. A devastating slump in exports crippled growth late last year, but on the back of a $586 billion government stimulus program — about 13% of GDP, spread over two years — China has snapped back. The economy grew 7.9% in the second quarter and will now probably expand 8% or more this year. Evidence of increasing momentum appears almost every day. Factory production has begun to edge up, in part because Chinese consumers continue to spend money at a healthy pace. Auto sales, helped significantly by government subsidies for small-car purchases, hit an all-time record in April and will easily surpass those in the U.S. this year. Overall, retail sales in China this year are up 16%.

© Xiao Qiang for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: financial crisis 2008-2009, GDP, GDP growth
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A leading defence expert has projected that China will attack India by 2012 to divert the attention of its own people from “unprecedented” internal dissent, growing unemployment and financial problems that are threatening the hold of Communists in that country.

“China will launch an attack on India before 2012. There are multiple reasons for a desperate Beijing to teach India the final lesson, thereby ensuring Chinese supremacy in Asia in this century,” Bharat Verma, Editor of the Indian Defence Review, has said.

Verma said the recession has “shut the Chinese exports shop”, creating an “unprecedented internal social unrest” which in turn, was severely threatening the grip of the Communists over the society.

© Xiao Qiang for China Digital Times (CDT), 2009. | Permalink | 22 comments | Add to del.icio.us
Post tags: Chindia, financial crisis 2008-2009, India
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The big first-half rebound in Chinese stocks was closely in step with improving economic fundamentals, though uncertainties still cloud the outlook, the country’s top securities regulator was quoted as saying by official media on Wednesday.

Shang Fulin, chairman of the China Securities Regulatory Commission, said that the government’s stimulus spending, a pick-up in business momentum, flush liquidity and strengthening expectations all underpinned the stock market in the first half, when the country’s benchmark index soared 63 percent.

But he added that it would take ‘quite a long time’ to overcome the difficulties in the wake of the global financial crisis and that China’s economic recovery was still not firmly grounded, Xinhua news agency reported.

© Xiao Qiang for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: China stock market, financial crisis 2008-2009
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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.

© jleung for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: commodities, financial crisis 2008-2009, stockpiling
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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.

© jleung for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: Australia, financial crisis 2008-2009, foreign investment, mining, natural resources, overseas investment, Rio Tinto
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GM has a tenatative agreement to sell its rugged Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. of China, said a person briefed on the deal.

The Detroit automaker announced Tuesday morning that it had a memorandum of understanding to sell the brand of rugged SUVs, but the buyer’s identity was not released. A formal announcement of the buyer was to be made Tuesday afternoon.

Sichuan Tengzhong deals in road construction, plastics, resins and other industrial products, but Hummer would be its first step into the automotive business, said the person briefed on the deal, who spoke on condition of anonymity because the details have not been made public.

© dwang for China Digital Times (CDT), 2009. | Permalink | One comment | Add to del.icio.us
Post tags: financial crisis 2008-2009, GM, Sichuan Tengzhong
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China expects fewer students to participate in the upcoming three-day annual college entrance exam this year, according to Sunday version of China Daily.

[...]Minister of Education Zhou Ji had predicted that the overall number of applicants would exceed 10 million — last year’s total was 10.5 million — but figures from local governments suggest the number of students taking part may be far fewer, the newspaper said.

[...]“Since the financial crisis last year, the grim employment situation has broken the ‘employment myth’ for those with a college degree. Some students changed their minds about getting a good job through higher education. They simply quit (from taking the exam),” an anonymous recruitment officer with the Beijing Institute of Technology was quoted as saying.

Mark at Mark’s China Blog is unsurprised by this phenomenon, and points out that a similar disenchantment with higher education is underway in the U.S.:

This kind of news isn’t surprising. I hear all the time from young people in Xi’an about graduates from last year’s university class who still can’t find work. There are about to be several more million fresh graduates entering the job market in a few weeks also looking for jobs. Times are looking bleak for educated Chinese young people trying to find work doing what they studied at university.

This phenomenon of people questioning the value of high-level education is not limited to China. America is currently undergoing a similar debate.

An article from last week’s New York Times’ Magazine – “The Case for Working With Your Hands” – does a great job talking about the more academic life young Americans have been molded for and the more labor intensive jobs that they are told to avoid.

© dwang for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: Chinese students, college entrance exam, college graduate joblessness, financial crisis 2008-2009, unemployment
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