China Economic News

[swakoo]

Sharing an article from Reuters. China's Zhou Xiao-Chuan is facing a very important, yet very difficult task...

Impossible trinity gives China a difficult choice
By Reuters / Reuters   | August 27, 2015 : 12:17 PM MYT  

The impossible trinity is also not helped by...

the exodus of the "regulatory turtles"...
http://www.reuters.com/article/2015/08/2...8H20150827

and the Western "hype" over it's economic slowdown...
http://www.reuters.com/article/2015/08/2...JJ20150827

[BlueKelah]

Sharing an article from Reuters. China's Zhou Xiao-Chuan is facing a very important, yet very difficult task...

Impossible trinity gives China a difficult choice
By Reuters / Reuters   | August 27, 2015 : 12:17 PM MYT  

The impossible trinity is also not helped by...

the exodus of the "regulatory turtles"...
http://www.reuters.com/article/2015/08/2...8H20150827

and the Western "hype" over it's economic slowdown...
http://www.reuters.com/article/2015/08/2...JJ20150827

Hype or not, china is experiencing an economic slowdown as we speak.

Company earnings are deterioting and their attempt at switching to a consumer based economy is not working out too well.

as mentioned before, the very low growth in their energy consumption last quarter and monthly contraction from the various PMI coming out from china, is more than enough evidence that things are not what they seem to the rest of the world. There is much Beijing is not being transparent with.

With about a month to go before their big fancy national day celebration, Beijing will try their best to make everything look good even if things are not that good.

CCP cannot lose face one...

[cfa]

With foreign reserve of more than USD3 T and a trade surplus of USD600B , China should be able to overcome present difficulty. Even a GDP of 5% also not bad for a 1.3B market.

[CityFarmer]

The DBS CEO view on China economic...

China economy is "not falling off a cliff": DBS CEO

SINGAPORE (Auh 28): China's economy may be slowing but it is "not falling off a cliff", the chief executive of Southeast Asia's biggest bank said Friday.

DBS Bank ( Financial Dashboard) chief executive Piyush Gupta also said he does not see a repeat of the 1997-1998 Asian financial crisis arising from the turmoil in Chinese markets because the region is on a far stronger footing than it was 18 years ago.

A slowdown in the Chinese economy, a sharp fall in share prices and the devaluation of the yuan against the US dollar have hammered financial markets worldwide, underscoring China's rising role as a global economic growth engine."We're not seeing the country, the economy or demand falling off a cliff," Mr Gupta said during a luncheon with the Foreign Correspondents Association in Singapore, referring to China.
...
http://www.theedgemarkets.com/sg/article...ff-dbs-ceo

[BlueKelah]

With foreign reserve of more than USD3 T and a trade surplus of USD600B , China should be able to overcome present difficulty. Even a GDP of 5% also not bad for a 1.3B market.

GDP of less than 6% will be a big blow to the CCP's "face"

In a propaganda state, perception of omnipotence of the leaders is very important. Once that is lost, its easy  to get dissent and uprisings. A lot of valuation done on China financial market is also based on GDP projection of 6.5%++ If really 4.5%-5% level comes out, reaction in markets will be very big.

on the topic of reserves : China cuts rates to stem crisis, but doubts grow on foreign reserve buffer

[greengiraffe]

I think these are hard facts that the western world and logical person will deduce but does anyone has an inside track on how to rule and govern China? How to keep China united just like what PAP is doing to hold Singapore together? SG50 and 70 yrs of WWII conclusion - any difference?

• Aug 28 2015 at 1:32 PM 
   
  
  
•  Updated Aug 28 2015 at 4:33 PM S
  

China's shaky economic policy bows to ideology in Beijing

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As China's sharemarket crashed, the Communist Party seemed more interested in showing off its military might than managing the economy, writes Angus Grigg and Lisa Murray.

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• Angus Grigg
   
  
  
•  Lisa Murray
  

As the world panicked about China's sharemarket crash this week, there was one number that received only moderate attention.
Amid a solid rebuttal of those forecasting the end of days in China, BHP Billiton chief executive Andrew Mackenzie bowed to the inevitable and cut a forecast that the miner had so emphatically clung to just four months earlier.
In delivering its full-year results, BHP quietly acknowledged that China would never achieve peak annual steel production above 1 billion tonnes in the years after 2025.
This once-hallowed number had been banished.
[img=620x0]http://www.afr.com/content/dam/images/g/j/5/d/0/y/image.related.afrArticleLead.620x350.gj997p.png/1440743621707.jpg[/img]The "peace rally" will include 12,000 soldiers and 500 pieces of Chinese military hardware. Thirty heads of state will attend, including Russian President Vladimir Putin and South Korean President Park Geun-hye. DAMIR SAGOLJ
It was a sizeable admission, as the miner had been touting the projection to investors for much of the past five years.
In downgrading BHP's long-term steel forecast by about 10 per cent, Mackenzie finally capitulated to the story that economists and policymakers have been telling us for years. 
GRADUAL SLOWDOWN
China is slowing down.

[img=620x0]http://www.afr.com/content/dam/images/g/j/9/m/g/y/image.imgtype.afrArticleInline.620x0.png/1440739494524.jpg[/img]President Xi Jinping may have admitted the enormous task facing China in an article believed to channel his views that expressed the complexity of implementing reform. Getty Images
But in contrast to the sudden plunge in Chinese equities this week, the economic slowdown has been gradual and is largely unconnected to the sharemarket.
"Around the world, collapses in stock markets have coincided with economic recession. In China, the two are divorced," says Julian Evans-Pritchard, the China economist at Capital Economics.
"Investors lost confidence not in the economy but in the market. Chinese investors lost faith in the government's ability to defend the market." 
Still, the five-day 25 per cent plunge in the Shanghai Composite Index through to Wednesday this week brought out all the old fears on China.
[img=620x0]http://www.afr.com/content/dam/images/g/i/s/k/y/z/image.imgtype.afrArticleInline.620x0.png/1440739489721.jpg[/img]BHP has quietly acknowledged that China will never achieve peak annual steel production above 1 billion tonnes in the years after 2025. Reuters
Fears that the economy is carrying too much debt, that official economic data is fabricated – growth is actually much slower than 7 per cent – and that a hard landing is inevitable.
Some fund managers are even drawing historical parallels between China today and the United States in 1929, noting the similar behaviour of property and sharemarkets.
But as compelling as these comparisons may be, China's economic story did not change this week.
Growth has been decelerating since 2010 as the manufacturing sector, racked by overcapacity in industries such as steel and cement, slows sharply.

At the same time, the property market has cooled after two decades of construction left regional cities like Inner Mongolia's Hohhot, with 10 years' worth of inventory.
What has changed, though, is perception.
INVESTORS WORRIED
After the government's flawed handling of the sharemarket crash, investors are increasingly worried about Beijing's ability to manage a difficult economic transition and shield the global economy from any fallout.
This change in perception is linked to fears China's that Communist Party has strayed from its focus on the economy.
Exhibit A for this theory would be next week's celebrations in Beijing to mark the 70th anniversary of World War II's conclusion or as it is being billed in China, "the victory of the Chinese People's war of resistance against Japanese aggression as well as the World Anti-fascist War".
The "peace rally" will include 12,000 soldiers and 500 pieces of Chinese military hardware. Thirty heads of state will attend, including Russian President Vladimir Putin and South Korean President Park Geun-hye.
On show will be strategic ballistic missiles, helicopter gunships and long-range bombers.
It is a naked display of military might, even if China insists otherwise, and to ensure blue skies, authorities have shut down factories in surrounding provinces, banned half the cars from roads in the capital and closed businesses.
At a time when the value of the sharemarket has halved in just 2½ months, the preparations for the parade give the impression the Communist Party is more concerned about projecting power and showing off its military kit than managing the economy.
Global investors are already nervous and for them Beijing is putting out all the wrong messages.
"When you add up all of the signals that have been coming out about the economy over the past 12 months, it paints a fairly grim picture," says Nick Bisley, executive director of La Trobe Asia at La Trobe University in Melbourne.
"Put on top of that, this pretty old-school and unsophisticated set of messages around the war and national greatness, the combination doesn't fill you with confidence."
At the very least, the party looks distracted, as it lurches from one policy position to another.
REAL TROUBLE
On the sharemarket, at the first sign of real trouble in early July, the government launched a multibillion-dollar intervention to prop up shares but then abandoned this policy just six weeks later, insisting instead it would only step in when there was "unusual volatility" or "systemic risk". 
Most economists viewed this policy as a return to reason but the abrupt about-turn was poorly communicated and caused wild gyrations in trading as investors were forced to second-guess the government's intentions.  
Beijing's currency policy has been equally confusing.
Without notice on August 11, the central bank declared its support for a more market-driven exchange rate, and allowed the yuan to depreciate by about 3 per cent.
But this policy of referencing the market before setting the currency's daily mid-point soon lost credibility.
After declaring its love of markets, the central bank then resumed its heavy interventions and in recent days has been pushing the currency higher to acceptable levels before the market's daily close. In so doing it has spent an estimated $US200 billion of China's foreign reserves.
Writing in Foreign Policy, Arthur Kroeber,  chief economist at GaveKal Dragonomics, said Beijing's policy schizophrenia showed it was only prepared to embrace markets when the outcomes were to its liking.
"The result is the mish-mash we saw this [northern] summer, when celebration of 'market forces' turned instantly to massive intervention when markets delivered results not to Beijing's liking," he wrote.
"If growth is to revive, a convincing and consistent embrace of market mechanisms – whatever their short term outcomes – will be required."
This lack of a "convincing" embrace of reform is the bigger issue spooking global markets.
GROWTH TARGETS
While most mainstream economists believe growth of about 7 per cent can be achieved this year, the medium-term outlook is looming as a big concern.
That's because the only way to stop growth sliding sharply, thereby preventing the hard landing many are forecasting, is to move quickly on economic reform.
"For the next year you should pay less attention to the data and more attention to the signals on reform," says ANZ's chief China economist Liu Li-gang.
After a burst of activity earlier in the year, which allowed more room for the private sector in areas like financial services and sought to encourage the development of the technology sector, the reform process looks to have hit some significant political obstacles.
This is what has really spooked some, as they worry the party cannot open up the economy quickly enough to keep growth at elevated levels.
The most worrying signal that all is not going well in this area came via the website of China's national broadcaster CCTV.
On August 19 it ran an article under the byline of "Guoping", a pseudonym that is believed to channel the views of President Xi Jinping.
It said the "difficulties ... extent of opposition, stubbornness, ferocity, and complexity" of implementing reform went "far beyond what most people imagine".
This suggests Xi's factional rivals are pushing back and making it hard for the President to deliver the reforms outlined in a key party document published after the so-called Third Plenum in November 2013.
While declaring the state sector would continue to play a "dominant role" in the economy, reformers said the statement that markets would play a "decisive role" was far more critical.
But so far, there is little hint that big-ticket items like state sector reform or opening up of protected areas of the economy including telecommunications and energy will happen any time soon.
"Markets are panicking precisely because people are worried these guys don't have a plan B," says Bisley from La Trobe.
So the party, in the absence of a big reform message to sell, looks to be returning to chest-thumping nationalism as a way to bolster popular support.
Tuesday's edition of the People's Daily supports this view.
Despite the sharemarket falling 8.5 per cent the previous day – the biggest one-day drop since 2007 – the party's mouthpiece didn't contain a single mention of the Shanghai Composite Index in its 24-page edition.
Nor was there any reference to supporting growth or pictures of hard working party officials ensuring the wheels of commerce continued turning.
Instead, much of the front page and two inside pages were devoted to the heroes of the "anti-Japanese" war along with associated propaganda on Tibet's "galloping progress".
So much for money trumping ideology in modern China.
LOST FOCUS
Global investors, accustomed to following the signals from Beijing, are reading these tea leaves and concluding the party has lost focus.
As growth slowed over the summer, Beijing seemed more concerned about locking up human rights lawyers, reclaiming land in the South China Sea and preparing for its first military parade in six years.
And to ensure there's no loss of face for President Xi during the festivities due to heavy pollution, the party has been prepared to virtually shut down the economy in north-eastern China.
The disruption is significant enough for Mysteel, a consulting firm, to be forecasting a drop in steel production during August due to forced shutdown of factories.
The associated loss in economic activity from closing subways, roads and business is likely to be far greater.
In the larger scheme of things, the dip will be minor, but it has contributed to the general concern on the outlook.
On this front, the worst of the sharemarket volatility looks to be over.
"At this level, the market is starting to stabilise," says Arthur Kwong head of Asia-Pacific equities at BNP Paribas Investment Partners.
"Now there can be a focus on the underlying economy, on continuing to do reforms and on the allocation of resources."
And on the broader economy, the data suggests a moderate pick-up lies ahead.
According to Capital's China Activity Monitor, an alternative index which looks at activity across the economy, growth may have dropped back in July but the pullback was still above the low point in April.
"The sharp fall in early 2015 seems to have been arrested," it said in a note to clients this week.
"There is no sign in the recent data of a deepening economic crisis. With policy support gathering force, a rebound in growth still looks the most likely outcome for the next couple of quarters."
One of many complications to this outlook is the surprising strong performance of the US economy, which expanded at an annual rate of 3.7 per cent in the June quarter, according to data released on Thursday.
That presents the Federal Reserve with a quandary on whether to begin raising interest rates from near zero next month, which could cause further instability for financial indices in emerging markets like China.
But according to Trade Minister Andrew Robb, Australia should not lose faith in China's long-term prospects, as it remained "a juggernaut".
"It will have problems. It might not go as fast as people think or hoped but it's still going to keep going."

[greengiraffe]

Yuan's slide increases debt risks for Chinese companies including Baosteel
DateAugust 28, 2015 - 9:11AM

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Bloomberg News

[Image: 1440723398447.jpg]

One-year implied volatility surged 470 basis points since the devaluation to 7.655 per cent. Photo: Bloomberg

The yuan's devaluation is a wakeup call for Chinese companies that rarely hedge overseas debts, according to BlackRock and Aviva Investors Global Services.
China's second-biggest steelmaker Baosteel Group, its largest auto rental company Car and developer Country Garden Holdings said they're considering hedging after the August 11 devaluation. Rising demand pushed up the cost of such trades, with the extra interest payments to lenders of yuan in five-year cross-currency swaps jumping 0.53 percentage points in two weeks to 3.18 per cent.
"Until recently lots of Chinese companies had regarded the dollar-yuan exchange rate as a one-way bet, therefore there was little need to hedge," said Tim Jagger, a Singapore-based portfolio manager at Aviva. "Clearly that relationship has changed and companies now need to do more hedging. But hedging costs have also gone up so I expect only more conservative management will do that."
Companies already face more than $US17 billion in extra costs on overseas liabilities after the yuan slid 3.3 per cent this month, according to calculations based on Bloomberg data. JPMorgan Chase & Co forecasts further declines of up to 5 per cent in the currency in the next 12 months.
"We will focus more on foreign-exchange rate risk management and will make more use of foreign exchange management tools including spot, forwards and financial derivatives to hedge," said Chen Ying, vice president in charge of corporate finance at Baosteel. "We will also adjust settlement currencies for imports and exports to reduce foreign-exchange risks."
Car is also seeking short-term hedging for interest payment of offshore debt, mostly through forwards, according to its chief financial officer Wilson Li. Country Garden's investor relations manager Ma Ziling also said the company will closely monitor its forex status in the future.
Costs for forwards or swaps can be as high as 3 per cent, according to Gregory Suen, investment director, fixed income at HSBC Global Asset Management Hong Kong.
Twelve-month non-deliverable yuan forwards traded at a 4.7 per cent discount to the spot rate on August 24, the most since December 2008. One-year implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 470 basis points since the devaluation to 7.655 per cent.
"The recent yuan volatility will be a call for Chinese companies with significant foreign debt or imports to start focusing more on hedging," said Suanjin Tan, portfolio manager for China bonds at BlackRock in Singapore. "Any competent business manager would want to hedge if there is significant mismatch between revenue, cost and liabilities."
The currency mismatch is the most evident among Chinese developers following restrictive onshore borrowing rules. Their forex assets cover less than 25 per cent of foreign liabilities, according to Bloomberg Intelligence.
China Overseas Land & Investment's 63 billion yuan ($US10 billion) foreign currency liabilities at the end of 2014 were matched by just 8 billion yuan of forex assets, a coverage ratio of 12 per cent. The figure is as low as 2 per cent at Agile Property Holdings and 8 per cent at Country Garden, according to a Bloomberg Intelligence report.
"If the yuan continues to depreciate further, Chinese companies with material foreign currency borrowings would see their financial metrics deteriorate," said Franco Leung, credit analyst at Moody's Investors Service in Hong Kong.
A better way to manage a weakening yuan is to issue bonds on the mainland as a natural hedge, said HSBC's Suen. Chinese developers have sold 134.1 billion yuan of notes this quarter, exceeding the total in the previous four quarters.
Geely Automobile Holdings, founded by billionaire Li Shufu, has been employing some natural hedging strategies including selling foreign-currency debt for overseas parts purchases and when investing in production outside of China, said Lawrence Ang, executive director at the company.
"Without considering the hedging costs, Chinese companies hedging their forex exposure would be positive to their credit profile in general," said Leung of Moody's.

[thor666]

As markets drop, question is: will the Chinese still shop?

http://bigstory.ap.org/article/cc114cd38...still-shop

Not really on china market, but more on Chinese tourist impacting overseas markets.. Think this is somewhat suitable to share here.




BICESTER, England (AP) — The designer outlet mall of Bicester Village is set in the English countryside near Oxford, but it might as well be in China.

Quiet Mandarin chatter fills the air. Most of the shoppers are Chinese — and so are half the sales assistants.

In the Burberry store, many try on the brand's signature trench coats, which go for at least 600 pounds ($925) after discounts. Some punch numbers into their smart phone calculators to work out the exchange rate; more take photos of the goods on offer, likely to message friends at home for a nod of approval.

"I don't know too much about designer labels. My friends tell me what to get," says Andy Cao, clutching about six shopping bags. He came from Shanghai to Europe with a group of about 30 colleagues to shop and do some sight-seeing.

Over the past decade, Chinese customers — at home but most crucially abroad — have become a powerful market force in the global trade in expensive clothes, jewelry, watches, perfumes, drinks and handbags.

But the stock market plunges of the past few days on the Shanghai exchange have raised the question: Will the drop in the Chinese economy be worse than expected? And how will it affect the Chinese shopper?

John Guy, a luxury goods analyst at financial services group MainFirst in London, says there has been some shift in demand away from the very high end of prestige brands, for example for watches. A government anti-corruption campaign has played a role by leading many people to avoid conspicuous consumption.

"The crackdown on gift-giving means you're no longer buying gifts, you're purchasing for your own consumption, and that has led to a shift in terms of the selling prices being effectively lower," he said.

But other data, such as increasing outbound travel, suggest "the traveling Chinese consumer is still there."

He noted that the income of the middle class in China is forecast to grow faster than the economy. Chinese authorities are trying to shift the economy's focus on manufacturing and exports toward consumer spending — something that could sustain shoppers' ability to buy Western goods over the longer term.

And while the Chinese economy is slowing, it is doing so from a high level. It was growing seven percent annually at last count, much faster than Western countries.

Gerald Celente, a business consultant who publishes the Trends Journal, takes a gloomier view of China's economic downturn.

"It's going to have the same kind of effect that it has in any nation — retail slows down," said Celente. "You're seeing the people that made it big quick, lose it fast."

Already before the stock market turmoil, demand for luxury goods was waning in China. The Bain & Co. consultancy predicted this spring that China's luxury sales would drop 4 percent this year.

Pernod-Ricard, a drinks firm that owns Glenlivet whisky, Absolut vodka and several champagne and wine brands, this week said its 12-month sales were down 2 percent in China, adding to a 23 percent drop the year before.

French luxury firm LVMH, the maker of Givenchy, Louis Vuitton and high-end drinks, reported destocking of higher quality cognac in China, and described the market there for its wines and spirits as "challenging.

Yet much shopping takes places outside China — in places like Bicester Village and Europe's capitals.

Currency differences, combined with high taxes and markups for imported luxury goods at home, mean that Chinese shoppers are confident they are getting goods for some 30 percent cheaper in continental Europe. The Chinese government has recently cut import tariffs, and producers have lowered prices in some cases, to encourage more spending inside China. But many of the shoppers here say they'd still rather come to Europe.

"It's still cheaper here than back home, even after the government measures to reduce prices," said Cao, who works in logistics.

Chinese spending in Britain is not growing as quickly as it used to, but the Chinese are still the top overseas spenders in the country, according to Global Blue, a Switzerland-based tax refund company that works in over 40 countries. In 2013, Chinese spending in Britain grew a whopping 34 percent compared with the previous year. In 2014, that slowed to a 6 percent growth rate. The company estimates that the Chinese shopper spends 778 pounds ($1,200) per transaction in Britain.

Hong Kong businessman Verdi Cheng, shopping with his family in Bicester, is upbeat despite the stock market turmoil. He's taking some time out with his daughter, who is just about to start at an English boarding school.

"The recent market volatility has burnt me pretty badly," Cheng said. "But it's the nature of markets to go up and down. It's just part of the cycle and it's bound to bounce back. I think the worries are hyped up."

In mainland Europe, a weak euro has served as an added attraction for international shoppers, including the Chinese. LVMH Chief Financial Officer Jean-Jacques Guiony said that "most of our brands are benefiting from a strong momentum from the Chinese client base. It's particularly true for Fendi and Celine." Louis Vuitton has seen stronger demand as well.

In Paris, Amanda Wang, a 34-year-old tourist from Hong Kong, says the stock market crash hasn't affected her and argues that it's probably too early to affect most people.

"It's not going to stop people buying clothes," she says outside Dior's Avenue Montaigne store. "The Chinese love French fashion like Louis Vuitton, Chanel and Dior."

__

Associated Press staff writers Thomas Adamson and Greg Keller contributed from Paris. McHugh contributed from Frankfurt, Germany.



Sent from my D5503 using Tapatalk

[greengiraffe]

http://www.todayonline.com/chinaindia/china/china-can-handle-its-economic-risks-well-premier-li?singlepage=true

没问题, 问题不大

BEIJING — In a bid to reassure both foreign and domestic audiences over the China-led turmoil that has rocked global markets in the past two weeks, Chinese Premier Li Keqiang said the country’s economy is growing at a “reasonable” pace and, despite growing pressure, the government can handle well the risks the country faces.
The Premier, in remarks published after chairing a special Cabinet meeting to discuss global economic developments and their implications for the country, said China is continuing to steadily manage its economy.

Mr Li said international market instability “has increased the uncertainties around the global economic recovery, and the impact on China’s financial market and imports and exports has also deepened, with the economy facing new pressure.”
He defended China’s efforts to steer through a volatile period since mid-June, when China’s stock market plunged. On Friday, Shanghai’s benchmark index was nearly 38 per cent below where it was on June 12.
The Premier reiterated earlier remarks that there is no basis for continued depreciation of the yuan following its devaluation on Aug 11. The yuan “will stay basically stable as a reasonable and balanced level”, he said.

[Behappyalways]

東莞廠商老闆爆走佬潮
http://hk.apple.nextmedia.com/financeest...1440136774

http://www.todayonline.com/chinaindia/china/china-can-handle-its-economic-risks-well-premier-li?singlepage=true

没问题, 问题不大

BEIJING — In a bid to reassure both foreign and domestic audiences over the China-led turmoil that has rocked global markets in the past two weeks, Chinese Premier Li Keqiang said the country’s economy is growing at a “reasonable” pace and, despite growing pressure, the government can handle well the risks the country faces.
The Premier, in remarks published after chairing a special Cabinet meeting to discuss global economic developments and their implications for the country, said China is continuing to steadily manage its economy.

Mr Li said international market instability “has increased the uncertainties around the global economic recovery, and the impact on China’s financial market and imports and exports has also deepened, with the economy facing new pressure.”
He defended China’s efforts to steer through a volatile period since mid-June, when China’s stock market plunged. On Friday, Shanghai’s benchmark index was nearly 38 per cent below where it was on June 12.
The Premier reiterated earlier remarks that there is no basis for continued depreciation of the yuan following its devaluation on Aug 11. The yuan “will stay basically stable as a reasonable and balanced level”, he said.