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China’s next boom tipped to be led by retail spending
Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing
[Image: 477947-f9838c50-73dc-11e5-b19b-c7bb6212b90a.jpg]
Retail consumption in China is expected to rise sharply in the next five years Source: Supplied
[b]In Beijing’s fashionable Sanlitun district last week Mrs Wang, 34, was shopping and unknowingly part of China’s emerging rich.[/b]
ANZ and Credit Suisse have forecast that retail consumption will grow strongly in China over the next few years, effectively providing the next leg of growth and replacing the export boom that has driven the economy over the last decade.
Retail spending will make up a strong part of the China’s GDP numbers, released today, and economists and investors will be watching how much consumption has risen in the past few years.
China likely grew at its slowest pace since the depths of the global financial crisis in the third quarter, an AFP survey of economists has found, confirming investor fears following stock market turmoil and a currency devaluation.
Signs that the world’s second-largest economy — a key driver of global growth — is struggling will add to pressure on Beijing to do more to head off a hard landing.
Output rose an annual 6.8 per cent in the July-September period, according to the median forecast in a poll of 19 analysts.
That figure would be the worst since early 2009 and follows a raft of weak data that has fanned concerns Chinese growth is slowing sharply. The Credit Suisse report, published last week, said China’s next consumer boom would be driven by people aged between 20 and 35, who are effectively independently wealthy because they are working and perhaps live at home.
Mrs Wang was outside Uniqlo, the Japanese retailing chain, last week waiting for the store to open so she could return a purchase but said she liked to shop. “I don’t like shopping online, because I can’t try the clothes on so it’s hard to find suitable ones,” she said.
“I have found that the prices of clothing in China keeps going up and up but it hasn’t stopped me from buying clothes.
“I don’t buy luxury items, but just clothes I can wear ever day.”
Song Meyu, 32, was shopping in the area at the time and said she too was still buying despite the higher prices. Inflation in China during the third quarter rose 1.6 per cent, but prices were mainly driven by higher food costs.
ANZ last week forecast that retail consumption could almost double, but in Beijing dozens of malls and shops are facing tough times. A major supermarket in Dongzhimen, an area with expats near the Australian embassy, closed within two weeks of opening and a number of shops around it have closed.
Ms Song said she was keen to spend but hesitant to do it online.
“Online shopping is convenient but I can’t try clothes on,” she said. “The prices now are nearly double what they were in the past but that does not stop me, I still like to go shopping.”
Another young woman, Miss Liu, 23, said shopping was a necessity despite the higher prices. “The prices are soaring but for me clothing and shoes are vital,” she said. “I usually go shopping two or three times a week and spend maybe 200 yuan ($45) each fortnight on clothing. I live with my parents and spend my salary on stuff. I don’t have many cost-of-living pressures.”
Independent Chinese retail analyst Lai Yongjun said traditional outlets like malls were suffering because of the strong growth in online retail across China. “The economic situation has made things worse,” he told The Australian.
“Retail consumers are more prudent so consumption across the board has been affected.”
China has already cut interest rates five times in a year and slashed the amount of cash banks must hold to boost lending, but that stimulus has yet to be seen substantially driving real economic growth.
Additional reporting: Wang Yuanyuan, AFP
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New dynsaty... new frontiers?
- Oct 15 2015 at 12:55 PM
China overtakes US in billionaire stakes
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/5/n/u/c/image.related.afrArticleLead.620x350.gk9mmw.png/1444891488178.jpg[/img]Wang Jianlin, chairman of Dalian Wanda Group, tops the list with a fortune of $US34.4 billion ($47.4 billion).Getty Images
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by Lisa Murray
China has more billionaires than the United States for the first time after the ranks of the mainland's wealthiest, led by real estate mogul Wang Jianlin, swelled by 242, according to the latest rich list from Shanghai-based research firm Hurun.
There are now 596 US dollar billionaires in mainland China, Hurun said in a report released on Thursday. That number jumps to 715 if Hong Kong, Taiwan and Macau are included and compares to 537 American billionaires, based on Hurun's calculations.
However, China's richest tycoons have some way to go before they catch up to their American counterparts as Mr Wang's US$34.4 billion ($47 billion) fortune is less than half the wealth of Bill Gates or Warren Buffett.
Still, the chairman of Dalian Wanda Group, which owns cinema chain Hoyts and is one of the leading Chinese investors in Australian real estate, has seen his wealth grow more than 50 per cent from last year. That increase follows a string of overseas deals and the strong performance of the group's newly-listed cinema chain, placing him ahead of e-commerce giant Alibaba's Jack Ma and beverage king, Wahaha Group's Zong Qinghou.
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The IT sector is the fastest-growing source of wealth in China, according to the Hurun research, with its number of rich-listers jumping 43 per cent from last year. They include Cheng Wei, a former Alibaba executive who left to co-found ride-hailing app Didi Kuaidi, which is locked in a fierce battle with Uber to win over commuters and dominate the Chinese market.
Mr Cheng, 32, is one of the country's younger billionaires along with Frank Wang Tao, the 35 year-old founder of Dajiang Innovation Technology, which dominates the consumer drone market.
Elsewhere in the IT sector, Lei Jun, founder of China's biggest smart phone company Xiaomi, doubled his wealth to US$14.4 billion from a year ago and moved up to fifth rank.
Hurun's chairman Rupert Hoogewerf said the list, which is in its 17th year, was a snap shot of the country's wealthy on August 14. They benefited from big jumps in the Shanghai and Shenzhen stock markets compared to 2014, although by the time Hurun's calculations were finalised, shares had already fallen 30 per cent from their June peak. Mr Hoogewerf said it was important to note since the list was put together, stock markets are down another 14 per cent.
The cut-off to make China's richest 100 is now $US3.2 billion, triple that of five years ago and more than 50 times that of 15 years ago, Hurun said in the release.
"For every billionaire we have found, you can bet your bottom dollar that we have missed at least one if not two, meaning that there are as many as 1800 dollar billionaires in China today," Mr Hoogewerf said in a statement.
The expanding rich list comes despite China's economy being on track to grow 7 per cent this year, its slowest pace in a quarter of a century. However, it is consistent with the march of the country's middle-class. Credit Suisse said in a report this week that China's middle-class, with 109 million adults, has outnumbered the American middle-class, which has 92 million adults, for the first time.
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Demystifying the China investment puzzle
No country can have a fixed exchange rate, an open capital account and enjoy an independent monetary policy regime at the same time, writes Tracey McNaughton.
NaN of
[img=620x0]http://www.afr.com/content/dam/images/1/3/6/y/w/e/image.related.afrArticleLead.620x350.gk2j18.png/1444714666023.jpg[/img]The People's Bank of China is using a variety of tools to maintain liquidity in the system. Bloomberg
by Tracey McNaughton
In communicating its decision not to raise interest rates last month the US Federal Reserve raised the importance of international economic and financial market developments.
The last time the parochial authority allowed international market turbulence to halt a domestic tightening cycle was 17 years ago. Back then the focus was on the failure of US hedge fund LTCM, the Asian financial crisis and the Russian debt default. Now, it is China.
Having been rocked by yet another tantrum in August and September, investors are assessing the data for any structural damage.
Since the decision by the Chinese authorities to devalue the renminbi on August 11 markets have been reflecting on just how abruptly the pace of growth is slowing in China.
Perversely, doubts about slower growth can become self-fulfilling. Questions about the pace of slowing have led to a rise in private capital leaving China; this has put downward pressure on the currency, causing the Chinese authorities to intervene in support by selling US dollars and buying renminbi. This intervention creates a tightening of financial conditions which in turn weighs on economic growth.
The PBOC has attempted to offset this tightening by cutting official interest rates (five times in nine months). Yet financial conditions in China are still as tight as they were back in October 2008.
This circularity highlights an impossible trinity: no country can have a fixed exchange rate, an open capital account and enjoy an independent monetary policy regime at the same time.
CURRENCY WAR
The end game requires China to do something more – re-introduce capital controls to stop the bleeding from its foreign reserves, introduce more domestic stimulus measures to support growth, or let the currency adjust more freely to market forces (and potentially raising fears of a currency war).
This latter option is the most difficult, most politically contentious, and therefore the least likely in the near term.
On capital controls, however, the PBOC plans to impose a 20 per cent reserve requirement on financial institutions' forward FX purchases. The reserves will be held for one year with no remuneration, thereby helping to reduce FX speculations and related outflows.
On domestic stimulus, key support measures already announced in recent months fall into four broad categories: ongoing monetary easing to contain real financing and debt servicing costs; fiscal funding and public-private partnership programs to support infrastructure and public works investment; accelerating local government debt swaps and bond issuances to alleviate financial pressures for local governments; and rolling out initiatives to support private sector development and consumption such as lowering taxes and fees for SMEs, reducing deposit requirements for first and second home purchases, and expanding pension and health care insurance coverage.
Given the government's explicit willingness to do whatever it takes to stabilise growth between 6.5 and 7 per cent, we think these measures will revive growth in China in the coming months. This, in addition to evidence of a stabilisation in the property market, will provide at least a key (though not complete) counterbalance against China's ongoing heavy industry downturn.
Our base case for global asset allocation therefore remains that China is slowing, but in a stable fashion. This weaker growth profile is more than offset by a strengthening growth profile in the United States, Europe and Japan. This leaves us cautiously overweight on equity markets, particularly those in Europe, Japan and north Asia.
Tracey McNaughton is head of investment strategy at UBS Global Asset Management.
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Infrastructure investment, is still one of the key drivers for growth, amid the transition to consumption-driven economy...
Beijing must speed up infrastructure investment to stabilise growth: State adviser
BEIJING — Increased infrastructure investment is key to stabilising China’s economic growth, a top state adviser said yesterday, while calling on the central bank to lower the cost of financing for companies and increase overall credit.
“Keeping relatively high growth of infrastructure investment is key to stabilising economic growth” since property and manufacturing investment remains weak, said Mr Yu Bin, Head of the Micro-Economy Research Department at the State Council’s Development Research Centre.
China needs to speed up its 172 hydropower projects, develop 53 million hectares of high-standard agricultural land and increase investment in rural roads, Mr Yu said.
Mr Yu’s comments come a day before the Chinese government is due to release third-quarter gross domestic product (GDP) growth figures, and were published in the government-owned Economic Daily on Sunday.
...
http://www.todayonline.com/business/beij...te-adviser
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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China GDP growth falls to 6.9pc in third quarter
- MARK MAGNIER
- DOW JONES
- OCTOBER 19, 2015 4:47PM
Up Next
China's growth figures stumble lower
[Image: 247580-eb581ee4-7606-11e5-9022-b1fac89549f0.jpg]
A woman at a supermarket in Beijing. Source: Reuters
[b]China’s once world-beating economy sputtered further in the third quarter, decelerating to its slowest pace since the global financial crisis, adding to concerns about the world economic outlook.[/b]
The 6.9 per cent growth rate for the third quarter, announced today, clouds China’s prospects for reaching the official targeted growth rate of about 7 per cent for the year. It also renews pressure on Beijing to enact more pro-growth measures.
“Overall it’s pretty disappointing,” said Société Générale CIB economist Klaus Baader. “Investment continued to slow pretty sharply despite efforts by the government to support the economy. It doesn’t seem to be sufficient.”
“China’s economic growth is still sluggish with many risks remaining unresolved,” ANZ Banking Group chief economist for Greater China Liu Ligang said. “We should not be overoptimistic. China’s economic growth will continue to slow down,” he said, adding he estimated GDP would expand 6.4 per cent next year.
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However even in slowdown, China continues to grow at a pace that is envied by other major economies.
The better-than-expected result — a Wall Street Journal survey of 13 economists forecast a median 6.8 per cent gain — is likely to renew debate over the accuracy of China’s growth statistics.
As the world’s biggest trader in goods and a giant market in itself, China is a key driver of the global economy, and stock exchanges around the world have been pummelled in recent weeks by concerns over its future.
Today’s figure is the first official confirmation of investors’ fears over GDP since a Chinese stock market slump over the northern summer, followed by a surprise currency devaluation in August.
“Continued downward pressures from real estate and exports caused GDP growth to drop,” said Louis Kuijs of Oxford Economics. “But robust consumption and infrastructure prevented a sharper slowdown.”
A National Bureau of Statistics spokesman described the decline as a “slight slowdown” but said the economy was still running within a “proper range”.
The spokesman said in a statement that “internal and external conditions are complicated”, acknowledging that “downward pressure for economic development still exists”.
Other economic data released today showed disappointing results in investment and industrial production. Earlier this month, China pledged to start following a stricter global standard in calculating its data.
China’s economy is nearly twice the size it was just six years ago, meaning at lower growth rates it remains a major engine for global consumption and production.
Still, the deceleration has been faster than expected by the Chinese leadership, which at times has fumbled as it tries to restructure the economy to rely more on consumer spending and services. That effort, which economists say is key to nurturing long-term growth, is making headway. But Beijing’s appetite for reform appears to be slowing as it moves to shore up the economy in the near term.
Industrial production, which measures output at factories, workshops and mines, rose 5.7 per cent year-on-year in September, the NBS said, a sharp drop on the 6.1 per cent increase recorded in August.
Retail sales, a key indicator of consumer spending, increased 10.9 per cent in September, marginally ahead of expansion the previous month.
Fixed asset investment, a measure of government spending on infrastructure, expanded 10.3 per cent on-year in the January-September period.
Analysts now widely expect Beijing to further boost fiscal spending and ease monetary policy before the end of the year to prevent a sharper slowdown in growth.
China has already cut interest rates five times in a year and reduced the amount of cash banks need to hold to boost lending, but that stimulus has yet to be seen substantially driving real economic growth.
Dow Jones, AFP
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Few believe China's economic growth figure
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[Image: 1426118157768.png]
by Angus Grigg
In the highly choreographed world of China's economic statistics, there was an unforseen event on Monday.
A local media outlet delivered news in direct contrast to the prevailing government narrative of stability and mild economic recovery across China.
The state-run National Business Daily told its readers the country's biggest glass maker, Farun, had gone broke. It would suspend production from Tuesday and 8,000 workers would be out of a job.
This is all about the property market, which looks uglier with every new set of numbers.
[img=620x0]http://www.afr.com/content/dam/images/g/j/s/z/s/9/image.related.afrArticleLead.620x350.gkcf9a.png/1445238461135.jpg[/img]While few believe the overall economy did actually grow at a surprisingly strong 6.9 per cent in the third quarter, as reported on Monday, it suggests the much talked about transition is happening. Getty Images
The National Bureau of Statistics said property investment rose by just 2.6 per cent over the first nine months of the year, down from 12.5 per cent during the same period last year.
As property accounts for around half of China's steel consumption, it shows why few are optimistic on the outlook for iron ore prices.
But the collapse of Farun, which was China's biggest glass maker for the last 13 years, can also be seen as a positive.
It shows a willingness by the government to allow market forces to eliminate some excess capacity from the system. While one example does not make a trend, it is noteworthy the local government did not engineer a bail-out given the jobs and tax revenue the company was providing.
This suggests authorities are sufficiently confident employment in other areas of the economy is strong enough to counter such a large hit to jobs.
At its brief press conference on Monday, the National Bureau of Statistics said the government's job creation target for 2015 had already been met.
That means around 10 million new jobs were created in the first nine months of the year, more than for all of 2014.
While such claims are hard to independently verify it does suggests the job market is holding up despite the slow-down in property and manufacturing.
This is supported by growth in disposable incomes, which was up 9.2 per cent over the first three quarters of the year according to the NBS.
While few believe Monday's headline number showing the economy grew at a surprisingly strong 6.9 per cent in the third quarter, the jobs data and income growth indicate the government is so far managing the slow down.
Capital Economics made this point in a note to clients. While it was quick to say it does not believe the headline GDP number, it said underlying conditions in the economy are "subdued but stable".
Stability is the key word here. If the government believes the economy is not falling into a deep hole, it should allow a gradual slow down of over the coming years.
This is exactly what needs to happen if China is to wean itself away from an economy which is overly reliant on construction and investment to one driven by the service sector and consumption.
And the world should not be surprised or complain about this slowing, as it's exactly what global institutions have been calling for over the last decade.
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China economic growth beats estimates
NaN of
[Image: 1426118157768.png]
by Angus Grigg
China's production of steel, cars and electricity declined rapidly in September as its industrial economy struggles with slower rates of growth, while the service sector is proving surprisingly resilient.
The National Bureau of Statistics said on Monday China's economy grew by 6.9 per cent in the third quarter, which was better than expected, but still the slowest pace in six years.
While many economists were quick to cast doubt on the headline number, the underlying data showed two divergent sectors emerging across China.
[img=620x0]http://www.afr.com/content/dam/images/g/j/n/k/6/t/image.related.afrArticleLead.620x350.gkcf62.png/1445237480440.jpg[/img]The GDP reading was down from 7 per cent in the second quarter. AP
The old industrial economy is in deep trouble, while the services sector is growing strongly.
Activity data showed pig iron production fell 4.9 per cent in September from a year earlier, while power output was down by 3.1 per cent and the number of passenger cars produced fell by nearly 22 per cent.
In contrast retail sales rose a better than expected 10.9 per cent in September from a year earlier.
"The Chinese economy is really diverging so you have the old traditional economy where industries such as aluminium, cement, steel manufacturing are declining and you would expect that to happen," said Gary Rieschel, longtime venture capitalist and co-founder of Shanghai-based Qiming Venture partners.
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"If you are in the new economy -- healthcare or services -- you're probably seeing 10 to 12 per cent growth."
The NBS said services made up 51.4 per cent of the economy over the first nine months of the year, up 2.3 percentage points from the same time last year.
Consumption's contribution to the economy is also growing strongly, making up 58.4 per cent in first 9 months of the year, up 9.3 percentage points from last year.
The GDP reading was down from 7 per cent in the second quarter, which was boosted by trading activity on the share market after it rallied then collapsed during the first half.
The headline number is the slowest quarterly pace since the 6.1 per cent recorded in the first quarter of 2009, when China was battling the Global Financial Crisis.
The market had been expecting growth as low as 6.5 per cent for the quarter and so many will once again question the better than expected result.
"The continued stability of the official GDP figures will further cement concerns over their credibility," said Julian Evans-Prichard from Capital Economics.
"We do think the official figures are currently overstating growth by a wide margin, we nonetheless have reason to think that actual growth was indeed broadly stable last quarter."
One of the weakest readings came from fixed asset investment (FAI), which grew at 10.3 per cent in the first nine months of the year, down from 16.1 per cent during the same period last year.
The FAI reading was the slowest since December 2000 and its weakness is being attributed to sluggish property construction as the country battles to digest an apartment glut.
Industrial production was also weak, growing at 5.7 per cent in September, the slowest pace in since November 2008.
One of the major reasons cited for the slowing Chinese economy is the vast stock pile of unsold apartments, which has resulted in sluggish new construction even as sales pick-up.
Property investment grew by just 2.6 per cent in the first 9 months of the year, down from 12.5 per cent during the same period last year.
There are now fears the apartment stock pile will take longer than expected to digest. UBS estimates it will take 20 months to work through the oversupply in so called third tier cities (smaller provincial centres), 18 months in second tier cities and 10 months for the likes of Shanghai, Beijing and Guangzhou.
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(18-10-2015, 11:06 PM)greengiraffe Wrote: China’s next boom tipped to be led by retail spending
Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing
[Image: 477947-f9838c50-73dc-11e5-b19b-c7bb6212b90a.jpg]
Retail consumption in China is expected to rise sharply in the next five years Source: Supplied
[b]In Beijing’s fashionable Sanlitun district last week Mrs Wang, 34, was shopping and unknowingly part of China’s emerging rich.[/b]
ANZ and Credit Suisse have forecast that retail consumption will grow strongly in China over the next few years, effectively providing the next leg of growth and replacing the export boom that has driven the economy over the last decade.
Retail spending will make up a strong part of the China’s GDP numbers, released today, and economists and investors will be watching how much consumption has risen in the past few years.
China likely grew at its slowest pace since the depths of the global financial crisis in the third quarter, an AFP survey of economists has found, confirming investor fears following stock market turmoil and a currency devaluation.
Signs that the world’s second-largest economy — a key driver of global growth — is struggling will add to pressure on Beijing to do more to head off a hard landing.
Output rose an annual 6.8 per cent in the July-September period, according to the median forecast in a poll of 19 analysts.
That figure would be the worst since early 2009 and follows a raft of weak data that has fanned concerns Chinese growth is slowing sharply. The Credit Suisse report, published last week, said China’s next consumer boom would be driven by people aged between 20 and 35, who are effectively independently wealthy because they are working and perhaps live at home.
Mrs Wang was outside Uniqlo, the Japanese retailing chain, last week waiting for the store to open so she could return a purchase but said she liked to shop. “I don’t like shopping online, because I can’t try the clothes on so it’s hard to find suitable ones,” she said.
“I have found that the prices of clothing in China keeps going up and up but it hasn’t stopped me from buying clothes.
“I don’t buy luxury items, but just clothes I can wear ever day.”
Song Meyu, 32, was shopping in the area at the time and said she too was still buying despite the higher prices. Inflation in China during the third quarter rose 1.6 per cent, but prices were mainly driven by higher food costs.
ANZ last week forecast that retail consumption could almost double, but in Beijing dozens of malls and shops are facing tough times. A major supermarket in Dongzhimen, an area with expats near the Australian embassy, closed within two weeks of opening and a number of shops around it have closed.
Ms Song said she was keen to spend but hesitant to do it online.
“Online shopping is convenient but I can’t try clothes on,” she said. “The prices now are nearly double what they were in the past but that does not stop me, I still like to go shopping.”
Another young woman, Miss Liu, 23, said shopping was a necessity despite the higher prices. “The prices are soaring but for me clothing and shoes are vital,” she said. “I usually go shopping two or three times a week and spend maybe 200 yuan ($45) each fortnight on clothing. I live with my parents and spend my salary on stuff. I don’t have many cost-of-living pressures.”
Independent Chinese retail analyst Lai Yongjun said traditional outlets like malls were suffering because of the strong growth in online retail across China. “The economic situation has made things worse,” he told The Australian.
“Retail consumers are more prudent so consumption across the board has been affected.”
China has already cut interest rates five times in a year and slashed the amount of cash banks must hold to boost lending, but that stimulus has yet to be seen substantially driving real economic growth.
Additional reporting: Wang Yuanyuan, AFP
China just might be able to spend its way out of trouble
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/7/o/l/r/image.related.afrArticleLead.620x350.gkcg67.png/1445239862559.jpg[/img]Retail spending in China is encouraging and there are enough jobs to go around. Bloomberg
[Image: 1435901920075.png]
by Philip Baker
More spending from consumers as Chinese factories scaled back their production and the economy slowed.
That's the key takeaway from the latest deluge of data from the world's second-largest economy and all up, it's probably not a bad combination for policymakers trying to engineer one of the greatest rebalancing acts of all time.
For sure, China hasn't expanded at such a low growth rate since 2009. But if there was one bright spot in the latest deluge of data, it was the increase in retail sales. Indeed, it was the fastest pace of growth in retail sales in nine months.
There's bound to be the usual suspicion about the latest third-quarter growth numbers, given 6.9 per cent was better than expected and, as always, not that far off the 7 per cent target rate.
It was also well above the 6.4 per cent some of the perma-bears had been forecasting.
But although the economy is slowing, there are still enough people spending. So despite all the noise – worries about a shadow banking crisis, a glut of apartments that can't be sold and a near 30 per cent fall in the Shanghai Composite during the third quarter that combined to spook global investors – the economy didn't fall in a heap.
When the third quarter began, much was made of the 90 million sharemarket investors that outweighed the number of communists for the first time.
The sell-off in the Shanghai Composite sparked concerns it would lead to a slow-down after the financial services sector earlier this year initially boosted gross domestic product on the back of all the commissions from the sharemarket.
But it didn't eventuate and it looks like there was still plenty of spending going on as the sharemarket tanked.
Spending now accounts for almost 60 per cent of China's GDP.
NOT AS BAD AS FEARED
There are also enough jobs to go around at the moment, with the services sector providing enough new jobs to offset all the lost jobs in the manufacturing sector. The unemployment rate stands at around 5.2 per cent.
If China's real challenge is to make sure its economy can grow while shifting away from the manufacturing-led model that has fuelled its growth in recent decades – and it is – then the latest numbers aren't too bad.
Not great, but not as bad as many had feared.
Financial markets were definitely fearing the worst ahead of Monday's numbers and despite the result, economists at Westpac still think the Chinese economy will need some help, which they think will be delivered at some stage.
Any sort of switch can be tough to execute but if China does manage to transform itself from a manufacturing colossus to a more consumer-led economy, it will provide an avenue of growth for other countries around the world at a time when there is not much growth around.
If there has been a trend of the past few years from financial markets, it has been that the China pessimists don't waste any time highlighting signs of weaker economic growth.
But they also seem to ignore the fact that overall growth is still solid – and broadly in line with what the Chinese authorities are targeting.
Over the past week or so, a number of high-profile US companies, including Hugo Boss and Yum! Brands, owners of Pizza Hut and KFC, have 'fessed up during the current reporting season that they are finding it tough in China.
But others, such as sporting megabrand Nike, show it can be done if the right strategy is rolled out.
Many analysts continue to hammer home the statistic that there are now 109 million people in the so-called Chinese middle class, more than in the US, which has around 92 million.
That will continue to grow.
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Exports fear as China growthfalls below 7pc
Adam Creighton
[Image: adam_creighton.png]
Economics Correspondent
Sydney
Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing
[Image: 860346-2d714616-763e-11e5-b19b-c7bb6212b90a.jpg]
Source: TheAustralian
[b]In a worrying sign for Australia, China’s economic growth rate has fallen below Beijing’s 7 per cent target for the first time since the global financial crisis, as its heavily resource-dependent industrial sector continues to sputter.[/b]
The world’s second-biggest economy — which contributes almost half of the world’s economic growth — grew by 6.9 per cent over the year to September, down from 7 per cent the previous quarter.
The announcement by China’s National Bureau of Statistics nevertheless reassured observers, because the outcome was a little better than most economists had expected (6.8 per cent), and came after weeks and months of disappointing news that suggested China, Australia’s biggest trading partner, was slowing dramatically.
The Australian dollar bounced immediately after the announcement by around half a US cent to US72.9c, as investors pared back the likelihood that the Reserve Bank would cut interest rates further this year.
NBS spokesman Sheng Yunlai said China was suffering from the slow growth being recorded across the world. “The world economic recovery is not as good as we expected,” Mr Sheng said.
“In the Chinese economy, our country is still in a critical stage of structural adjustment.
“The traditional industries are not only cutting inventory, but also are eliminating excess capacity, like steel, cement, building materials and their growth is dropping.”
While spending on services rose by 8.6 per cent over the year to September, reflecting China’s transition away from investment to consumption, Chinese industrial production increased by only 5.7 per cent over the year to September, compared with 6.1 per cent growth in the year to June — bad news for Australia’s exporters of iron ore and coal.
Commonwealth Bank economist Wei Li said her outlook for China had not changed.
“China’s economy has been slowing for more than five years, and we think there is further slowing to go. Structurally speaking, the economy will have to continue grappling with oversupply and excess leverage,” she said.
The IMF and World Bank have downgraded their global growth forecasts over the past month, in large part because of weakness in developing countries.
Asia-Pacific and Australian equity markets rallied in marginally positive territory as the Chinese economic growth numbers missed some forecasts.
In Australia, the S&P/ASX 200 gained only 1.5 points to close at 5269.7 and the All Ordinaries also rose marginally.
Mr Sheng said Chinese economic growth was in line with government forecasts and was on track to meet the official 7 per cent target this year, even though retail sales and inflation have flatlined over the past few months.
“The previous growth was too fast, such as industries like cars, mobile phones,’’ he said.
“The market capacity entered into a period of adjustment.
“The international and domestic factors worked together and increased the downward pressure of the economy in the third quarter, which is a very important reason for the drop of the third-quarter economic growth rate.”
This is the last year of the current 12th five-year plan, which included an annual growth target of 7 per cent. Until now that target has easily been beaten every year.
The authorities are expected to release the 13th plan in coming months and economists believe it will have an annual growth target of 6.5 per cent, or even a range.
Capital Economics chief China economist Julian Evans-Pritchard said he was suspicious of the Chinese economic growth figures.
“The continued stability of the official GDP figures will further cement concerns over their credibility,” Mr Evans-Pritchard said.
“While we do think the official figures are currently overstating growth by a wide margin, we have reason to think that actual growth was indeed broadly stable last quarter.’’
Bank of Communication chief executive officer Loan Ping said China’s economy was under pressure: “The decline in investment growth is the main reason leading to the increasing pressure of current economic downturn.
“The economic downward pressure is mainly burdened by the traditional secondary industries, which are suffering overcapacity.”
Minsheng Securities strategist Zhun Zhenxin said domestic demand could struggle over the next few months, despite the government’s aim to ramp up consumption and retail spending.
“Demand has been stable but not strong from the domestic perspective,” Mr Zhun said.
“There has been a series of policies for steady growth that have been introduced in the second quarter. They still need time to digest.”
Pundits believe China has ample scope still to boost its growth rate through fiscal and monetary stimulus.
In August, the People’s Bank of China cut the reserve ratio requirement to 18 per cent and lowered the official interest rates to 4.6 per cent.
While economic growth is slowing, the government claims it is well ahead of schedule in its plan to create 10 million new jobs this year.
Additional reporting: Wang Yuanyuan
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US softens criticism of China’s undervalued yuan
- WILLIAM MAULDIN
- THE WALL STREET JOURNAL
- OCTOBER 20, 2015 7:59AM
[Image: 108353-456ba23a-76a6-11e5-98bf-217dbc548dd3.jpg]
The US says it’s carefully monitoring China’s new exchange-rate policy approach. Source: AFP
[b]The Obama administration softened its criticism of Beijing’s currency management, citing a shift in global economic winds as well as China’s moves to allow market forces a greater role in setting the value of the yuan.[/b]
The US Treasury Department, in its semiannual report on currencies, said the yuan is “below its appropriate medium-term valuation.” In the previous report it said the currency was “significantly undervalued.”
The shift in Washington’s tone comes after Beijing in August adjusted its currency policy to let the yuan, also known as the renminbi, move more easily with market forces. That change, accompanied by a sharp depreciation, triggered immediate concern on Capitol Hill and Wall Street, since many worried China would devalue its currency further to gain a trade advantage.
The International Monetary Fund has commended China’s recent moves, but officials in Washington said they will watch Beijing’s next steps closely. “Treasury is carefully monitoring the implementation of the new exchange-rate policy approach and how it will work in practice — specifically, whether China will allow the renminbi to respond to market forces for appreciation as well as for depreciation,” the report said.
Besides China’s policy steps, the Treasury Department pointed to the shifting global economic outlook and market forces as a new, more complicated backdrop to judge the yuan.
“The near-term trajectory of the renminbi is difficult to assess,” Treasury said in the report. “However, our judgment is that the renminbi remains below its appropriate medium-term valuation.”
China’s latest economic twists have put the Obama administration in a tough spot. On the one hand, the US, like the IMF, has been pressing Beijing to let market forces play a bigger role in setting the yuan exchange rate.
But when Chinese authorities did allow more freedom for the yuan in recent months — at a time when investors grew more concerned about slowing economic growth — the currency weakened sharply against the dollar, conflicting with Washington’s longtime calls for a stronger yuan.
The IMF earlier this year said the yuan was no longer undervalued. But US officials maintain it is still undervalued against the currencies of its trading partners and expect it to strengthen over time — if China allows the same flexibility when the yuan is strengthening as when it weakens. Since June 2010, the yuan has strengthened nearly 30 per cent, based on its inflation-adjusted effective rate.
A weak yuan tends to make Chinese imports more competitive compared with American-made goods. US imports from China in the first eight months of the year were quadruple the level of exports to China, generating a trade deficit with Beijing of $US237.3 billion, compared with $US216.7 billion in the same period of 2014.
China’s surprise move in August to change its exchange-rate policy was followed by currency depreciation in other countries, from Vietnam to Kazakhstan. Japanese officials also discussed the need to weaken the yen, feeding worries that Beijing’s depreciation could lead to a dangerous round of competitive devaluations.
Chinese officials expect the yuan to move little in either direction in the near term. A still-healthy growth rate “suggests that the renminbi will be more or less stable at a rate more or less close to its equilibrium level,” said People’s Bank of China’s Deputy Gov. Yi Gang at the IMF’s annual meeting this month in Lima, Peru. China’s move in August to let the yuan fall against the dollar, then prop up the local currency didn’t represent a reversal of market-friendly reforms but rather an attempt to stamp out market volatility, Mr Yi said.
The IMF last month said China had begun reporting its currency reserves to the international organisation, a milestone as Beijing seeks to have its currency included in the IMF’s basket of reserve currencies.
Beyond China, the Treasury cited economic imbalances — in South Korea, Germany, the Netherlands and other major exporters — that are limiting the ability of other economies to recover. “The adjustment process, both within the euro area and globally, would function much better if countries with large current-account surpluses took strong action to boost investment and domestic demand,” the report said.
Oil’s sharp drop is boosting some imbalances further in countries that import the fuel in Europe and Asia, the Treasury Department said.
Japan and other Asian countries have generated major criticism from Congress this year, since many politicians say a major trade agreement the US concluded this month should have included enforceable rules to punish countries deemed to have manipulated their currencies.
While they didn’t agree on enforceable rules that would result in trade sanctions, finance ministers of the dozen countries in the Trans-Pacific Partnership negotiated a currency framework alongside the trade agreement. Under the deal, whose details haven’t been released yet, countries would affirm international standards for exchange rates, agree to be more transparent about their interventions in currency markets and set up annual consultations to deal with concerns, officials say.
Those annual consultations would be analogous to the talks triggered when the Treasury Department declares a country a currency manipulator, a rare step it has not taken in decades.
The devaluation in China — not a member of the TPP trade bloc — and the congressional consideration of the trade agreement ensure the currency issue will be a sensitive one in coming months and during the 2016 election season.
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