China Economic News

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Rising Chinese incomes defy GDP slowdown

Greater share of output is going to country's citizens; this explains govt's restraint in eschewing broad-based stimulus

22 Oct5:50 AM
Beijing

CHINA'S economy is slowing. Yet for the person on the street, incomes are rising, jobs are secure and inflation is restrained, helping explain the government's restraint in eschewing broad-based stimulus.

Obscured among the avalanche of data accompanying Tuesday's report that China's economic growth slowed to the weakest pace since 2009 in the third quarter are income statistics. They showed a rising share of output in the world's second-largest economy is landing in the pockets of its citizens.

Urban resident's disposable incomes rose 9.3 per cent in the first three quarters from the same period a year ago, while rural resident's cash income jumped 11.8 per cent, the National Bureau of Statistics said.

Monthly wages of the 176 million migrant workers who fill factories and construction sites are also rising, the statistics agency added.

"It's part of the new normal that people benefit more from economic growth," said Su Hainan, a vice-president with the China Association for Labor Studies, a research unit in Beijing that advises the government. "So it's becoming less necessary for the government to stimulate growth."

China's middle class - more populous than the combined peoples of France and Germany - is leading a surge in consumer power that's creating billionaires like Alibaba Group Holding Ltd's chairman Jack Ma. Rising incomes and spending are also underpinning an economy weighed by a property slump.

Consumption contributed 48.5 per cent to gross domestic product (GDP) growth in the first three quarters, statistics bureau data showed, from 45.9 per cent in the same period last year.

Despite the economy's slowdown, the surveyed jobless rate in Chinese cities remained about 5 per cent through the January to August period, Premier Li Keqiang told a forum in Tianjin last month. China's consumer-price index rose 1.6 per cent in September, data showed last week, below estimates for a 1.7 per cent gain and down from August's 2 per cent increase.

Labour authorities in Guangdong, China's manufacturing powerbase, said the benchmark guideline for wage increases was 9 per cent for 2014. In Hebei province, which reported the second-lowest GDP growth in the first half, the government last week announced it will raise minimum wages by an average of 12 per cent this year.

Inequality is the downside of the incomes story: per-capita cash income of 8,527 yuan (S$1,771) for the nine months through September in rural China was less than half of the 22,044 yuan urban disposable income. Bloomberg

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Growth in 'expected range': Beijing
BRETT COLE WITH DOW JONES NEWSWIRES OCTOBER 23, 2014 12:00AM

Chinese Finance Minister Lou Jiwei said the country's 7.3 per cent third-quarter growth was "within our expected range."

"We are no longer a planned economy," he said at a news conference following a session of the Asia-Pacific Economic Cooperation forum, and so China didn't need to hit a specific target.

China's growth target this year is "about 7.5 per cent" -- leaving open the question of what China means by "about." China hasn't missed its growth target since 1998. There was rarely any focus on the adjective used before the target number because China routinely beat the target by a wide margin.

No longer. China's economy grew 7.4 per cent in the first nine months of the year compared with the year before, and fourth-quarter growth is widely forecast to be below that figure.

Mr Lou said APEC finance ministers at the meeting said focusing on a single GDP number wasn't economically advisable. He also pointed to growth in the service sector and in private investment as indicators that the Chinese economy is changing.

Separately, finance ministers from Pacific Rim nations said the global economy "still faces persistent weakness in demand" and they looked to infrastructure spending to boost growth.

Private capital would play an important role in financing infrastructure construction, according to a statement issued Wednesday by the finance ministers.

APEC is a loose confederation of 23 economies, including the US, China and Russia. China is the APEC host nation this year and has been prodding the group to focus on infrastructure construction as a way to boost flagging global growth.

Top leaders of APEC nations are scheduled to meet in Beijing on November 10 and 11. The leaders' meeting is the hardest to script, given the tensions between many of the APEC members. One question is whether Chinese leader Xi Jinping will meet with Japanese Prime Minister Shinzo Abe amid tensions between the two nations.

On economic issues, trade and infrastructure are likely to dominate.

"Infrastructure development plays an important role in realizing growth potential and meeting development goals," said the finance ministers' statement. The group said there is a "large funding gap" in financing such projects that could be met, in part, by joint government-private sector projects, known as private-public partnerships.

APEC doesn't carry out projects and can't order its members to do anything. Rather it functions as a kind of club at which members bat around ideas and try to come up with ways to pursue common goals. APEC staff is putting together studies, for instance, of how best to structure such private-public partnership, which sometimes end in cost-overruns and accusations by each party that the other is at fault for the problems.

"How to design liability" for the government and private sector parties is critical, said Alan Bollard, executive director of the APEC Secretariat in Singapore.

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Chinese consumer sentiment worst in 3 years
MICHAEL RODDAN OCTOBER 29, 2014 2:45PM

Chinese consumer sentiment hit a three-year low in October, as consumers downgraded their views on employment, the housing market and their personal finances, according to a private survey.

The Westpac MNI China consumer sentiment indicator tumbled by 2 per cent in October to 110.9, just a fraction above the all-time low of 110.8 in September 2011.

Third-quarter GDP data came in slightly above the market expectation at 7.3 per cent, but it was the slowest pace of growth in five years.

All five components which make up the index fell significantly, but consumers' willingness to buy large household goods hit a series low.

The outlook for the job market continued to deteriorate, with the employment outlook falling for the fifth consecutive month and remaining at the lowest level since February 2009, the height of the global financial crisis.

Chief economist of MNI Indicators, Philip Uglow, said, “while the Chinese authorities have been at pains to emphasise the stability in the labour market, the weakness in our employment component tells a different story and is a growing source of concern".

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World Bank flags lower China growth in 2015
OCTOBER 29, 2014 11:00PM

An economic growth target of about seven per cent, down from 7.5 per cent this year, would be appropriate for China in 2015, the World Bank says.

China enjoyed decades of decades of double-digit increases but its leaders have repeatedly pledged to transform its growth model to a more sustainable one driven by consumer spending rather than state-led investment.

Nonetheless authorities in March set this year's target, which is normally exceeded, at 7.5 per cent, the same objective as for 2013, when gross domestic product grew 7.7 per cent.

"In our view, an indicative target of around seven per cent for 2015 ... is needed to maintain stability in the labour market," senior economist for the bank Karlis Smits told reporters as the institution released its China Economic Update report on Wednesday.

The document also cast doubt on the use of growth targets, saying emphasis on short-term expansion goals "will make it more challenging to implement the policies necessary to shift growth to a more sustainable medium-term path".

"The policy focus should be on reforms rather than on meeting specific growth targets," Smits said.

Market forces were playing a bigger role in China, he added, saying: "Conducting an economic policy by setting a growth target per se would kind of undermine this transition towards a new growth model."

Chinese authorities have ample policy tools "to meet an ambitious target for the next year" if they choose to do so, he made clear.

[Behappyalways]

China’s GDP Growth: Less Than Meets the Eye?
http://blogs.wsj.com/chinarealtime/2014/...s-the-eye/


China Fake Invoice Evidence Mounts as Hong Kong Figures Diverge
http://www.businessweek.com/news/2014-10...es-diverge

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Bank boss bullish on China economy

Asia James Eyers
490 words
1 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

ANZ Banking Group chief executive Mike Smith says in his three decades working as a banker in Asia, he's been asked numerous times about whether China's economy will hit the skids.

"I've been asked about hard landings in China for 30 years and I've yet to see one – I still don't believe it will happen," he said on Friday.

"What people tend to forget about China is that the slowing of the chain we are seeing at the moment is policy-driven – it is what the government wants to happen."

On Thursday, National Australia Bank's new CEO Andrew Thorburn cited a sustained downturn in China as "probably the most significant risk" for the Australian economy.

Mr Smith remains an optimist about the country, where ANZ's revenue has grown by 122 per cent over the past two years. He played down concerns about high government debt levels in China and its shadow (unregulated) banking system. While provincial debt levels were high, Mr Smith said this was ­counterbalanced by the central ­government having virtually no debt. And the Chinese shadow banking ­system "pales into insignificance" when compared with the size of shadow banks in the United States, he said.

One big risk for China was the quality of its mining industry, he said. China is suffering overcapacity, and the failure to reform state-owned enterprises had "led to the proliferation of poor quality mines being maintained, and that's not been particularly good for the country, as they are working at a loss, or the ­environment, because they are high polluting facilities", Mr Smith said in a video interview published on the ANZ BlueNotes site on Friday.

"But that is an opportunity for ­Australia, because eventually those [mines] will be closed down and they will import sources from Australia which are cleaner and better quality and cheaper."

ANZ said revenue in its international and institutional bank was up 13.4 per cent but the margin contracted by 9 basis points. 27pc of revenue from Asia

Revenue growth for the institutional bank in Asia was up 18 per cent, driven by markets. ANZ now earns 27 per cent of its institutional revenue from Asia, while 29 per cent of its global markets revenue comes from the region.

ANZ's Asian strategy has been ­criticised by analysts for taking focus away from the Australian business, but Mr Smith responded to this by saying "the concept that we are somehow starving our core franchises to feed investment in Asia is not only misleading, it's patently wrong.

"We have invested our excess ­capital in Asia to establish a unique competitive position in Asia for ANZ, and that business is now really ­humming.

"It is also producing a return in excess of our cost of capital, with growth rates well above those ­in ­Australia and New Zealand."


Fairfax Media Management Pty Limited

Document AFNR000020141031eab100048

[Behappyalways]

Botched Chinese tuna company IPO has fishy outcome
http://www.cnbc.com/id/102133241?__sourc...=102133241#.

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PAUL HUBBARD
The economic writing on the wall is in Chinese
PUBLISHED: 19 HOURS 26 MINUTES AGO | UPDATE: 10 HOURS 43 MINUTES AGO

The economic writing on the wall is in Chinese
Continued Chinese economic growth requires increased reliance on markets to allocate capital. Photo: Bloomberg
East Asia Forum
PAUL HUBBARD

What can economics tell you about the geopolitical challenges in Asia? Many strategic thinkers focus on defence capabilities, ideology, politics, environmental threats or history to envisage strategic futures. Economics provides a lens to focus on the fundamental drivers of regional power relations. National income limits a country’s capacity to mobilise resources for power projection, and hence influence the regional security order. For example, North Korea may be a security nuisance, but its pockets simply aren’t deep enough to be more than a bit player.

Australian Treasury’s long-term international gross domestic product projections are therefore a good starting point to considering strategic futures. They rely on slow-moving variables, such as labour force and institutional capability, to project regional economic growth out for decades. The results are startling – by about 2020 Asia overtakes the traditionally “advanced” economies on a purchasing power parity (PPP) basis. This is led by China, which by 2030 could be producing a quarter of the world’s output.

For comparison, at the end of the Cold War the United States produced 23 per cent of global output.

Some commentators disagree, pointing to the US’s continued edge in technology. But ideas are easily copied and modern technology and international education means “catch-up” is getting faster. Others believe that GDP at market exchange rates is more relevant than purchasing power parity for projecting power – to buy guns you need foreign currency, not bowls of rice.

Using that measure, China doesn’t overtake the US until 2025. But market exchange rates are subject to market fluctuations, and PPP provides a better indicator of an economy’s underlying potential. Others note the US will still have double China’s GDP on a capita basis by 2050. But this is much less relevant for geopolitics than raw command over resources; Singapore and Brunei both have per capita GDP higher than the US or China. But they won’t decide the regional security order.

China has had a consistently impressive growth record since starting reform and opening up in 1978. But current reforms to financial and capital markets are far more risky and ambitious than shifting workers from agriculture to industry. Continued economic growth requires increased reliance on markets to allocate capital. However, the effects of the Asian financial crisis on Indonesia, and more recently the wash-up of the global financial crisis on Greece, have made the Chinese authorities well aware of the political risks of ceding control.

IMPACT ON DIPLOMACY
So what does this mean for Australian economic diplomacy? It’s hard to overstate Australia’s interest in drawing newcomers into the open, rules-based system. Our commercial and strategic interests should be to see China integrate into world markets and regional institutions.

A little-discussed role for Australian economic diplomacy is engaging its friends and allies on ways to bring China voluntarily into the self-constraining rules-based market system. Part of this is advocating institutions that maintain an open trading and investment environment (such as the IMF) to become more inclusive of emerging countries’ interests. It also means prioritising institutions for the next 50 years, rather than those which consolidate Cold War alliances. This means prioritising Regional Comprehensive Economic Partnership (RCEP) negotiations (which includes India and China) over TPP (which does not).

Another thing economics teaches us is that competition, not cartels, delivers the best value. Upsetting business as usual for the Asian Development Bank (traditionally led by Japan) or the World Bank (based in Washington) isn’t a good argument for shunning China’s first big multilateral initiative in the Asian Infrastructure Investment Bank.

At the highest level, it means encouraging the US towards a regional trade and investment system where it realises its own interests are served through peaceably sharing regional leadership with China. Where possible we should politely, but firmly, rebut US denials of China’s economic rise.

The projections also show that countries that might help balance China’s growth in region, particularly Indonesia and India, are lagging their potential. Australia should be doing all it can to build the institutions of economic governance needed for a prosperous and coherent ASEAN. By contrast, Japan is more of a demonstrative footnote, given its precipitate decline. We should help a fellow democracy to grow old gracefully, not expect a great power renaissance.

Changing economic fortunes need not cause conflict; but misperceptions of national strengths and objectives do. Australia’s geopolitical challenge is not just that for the first time its key strategic ally is different from its principal trading partner. It is that the key players in our region have different interpretations of the economic writing on the wall and haven’t yet realised that it’s in Chinese.

Paul Hubbard is a Sir Roland Wilson scholar at the Crawford school of public policy, the Australian National University. This article is part of a series from East Asia Forum at the ANU.
The Australian Financial Review

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China's slowdown deepens in October
BT_20141114_CHNDATA14_1366577.jpg China's October factory output rose 7.7 per cent, which was higher than August's 6.9 per cent but below September's 8 per cent. PHOTO: REUTERS
14 Nov5:50 AM
Beijing

CHINA's economy lost further momentum in October, with factory growth dipping and investment growth hitting a near 13-year low, testing the government's resolve to avoid stronger stimulus measures.

The soft performance cemented the view that China is on track to grow at its

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http://www.valuebuddies.com/thread-5975-...#pid100375

President Xi says China economic growth to be sustainable, balanced: Xinhua
Asia | Updated today at 02:40 AM
BEIJING (REUTERS) - Chinese President Xi Jinping said on Saturday China's economy will maintain strong, sustainable and balanced growth, state media reported.

Xi also said China will provide more demand and investment opportunities for the global economy as it undergoes structural reforms that foster opportunities for growth, according to the official Xinhua news agency.

China's economy grew in the third quarter at its slowest pace since the global financial crisis, sparking concern that the world's second largest economy is faltering as the government tries to make it more driven by domestic consumption and less by exports and investment.

Xi made the comments while at a two-day meeting of the G-20 in Brisbane, Australia.

Using his latest catchphrase, Xi said China's economy has entered a "new normal", there is plenty of growth momentum and development prospects are bright, Xinhua reported.

China will also adopt the International Monetary Fund's (IMF) Special Data Dissemination Standards, Xi announced.

These standards are applied to the release of economic and financial data, aimed at increasing transparency and openness in order to guide countries "that have, or that might seek, access to international capital markets in the provision of their economic and financial data to the public," according to the IMF website.

China's provinces and regions frequently report economic growth much larger than national levels, causing doubts about the way data is compiled in China.

China's government has vowed to tackle false reporting of economic data at the local level, but the sheer size of the country and the large number of local authorities makes this a daunting task.