Beijing, China (FT.com) -- PayPal, the world's largest online payment platform, is planning an expansion in China, a move that could strengthen its parent Ebay in the expanding e-commerce market.
Through a co-operation agreement with the government of Chongqing, China's largest municipality, PayPal plans to offer a range of services -- including, for the first time, a foreign exchange settlement solution -- to Chinese entrepreneurs selling to consumers overseas.
China's online payment market had a transaction volume of Rmb725.5bn in the first nine months of this year and is expected to hit Rmb1,000bn ($151bn) for the whole year, according to Analysys, a Beijing-based internet research firm.
Chinese authorities have set a ceiling for individuals to convert foreign currency into local currency of $50,000 a year. PayPal said this regulation hindered small businesses and entrepreneurs from building a cross-border e-commerce business, and its payment platform would help small merchants get quick access to an export licence, which allows a higher conversion ceiling.
"The Chongqing government will be working with the relevant local authorities, like the Safe Administration of Foreign Exchange, to get the necessary regulatory approvals," said Dickson Seow of PayPal Asia Pacific.
The service has begun testing, and PayPal hopes to offer it to merchants all over China in the second half of 2011.
If successful, the platform should attract small Chinese vendors, the main customer base of Alibaba, the world's largest online marketplace for trade between companies, which had proved the nemesis for Ebay on its first foray into the Chinese market. The country has the world's largest online population with 440m users.
Ebay initially entered China with an auction site closely resembling its international service. After losing most of its market share to Taobao, the unlisted affiliate of Alibaba Group which dominates China's consumer-to-consumer e-commerce market, the US group changed strategy in 2006 and offered a platform for cross-border online trade.
Over the past year, Alibaba and Ebay have worked on opportunities for co-operation. However, AliExpress, a site launched by Alibaba this year that allows small online transactions between merchants and customers overseas, again put Alibaba in competition with Ebay's business in China.
Alibaba also has its own online payment service, Alipay, which dominates the Chinese market.
The Chongqing government's partnership with PayPal is an attempt to attract services linked to China's booming e-commerce industry to set up in the city. Hangzhou, the city where Alibaba's headquarters is located, has already succeeded in attracting services such as logistics, boosting the local economy and creating service sector jobs.
PayPal and Chongqing said that, in additional to the foreign currency settlement platform, they would set up five international e-commerce centres providing services such as training and verification to merchants.
The alliance comes as China prepares to regulate its third-party payment services more clearly. Providers of such payment platforms are required to apply for a licence by September next year, according to the central bank.
Source: CNN
http://edition.cnn.com
Thursday, December 30, 2010
Wednesday, December 29, 2010
China will cut rare earths export quotas
China has said it will cut exports of rare earth minerals by 10% in 2011.
World manufacturers are heavily reliant on China for these minerals, which are essential for making many electronic goods, such as TVs and PC monitors.
China has 97% of the world's known supply of the goods. The US mined none last year.
Rare earth minerals have been a thorny trade topic for some time, and China has previously promised not to cut supplies drastically.
Rare earths are a collection of seventeen chemical elements in the periodic table: scandium, yttrium, and some fifteen lanthanides.
Shares in two Australian companies, which are planning to mine rare earths, jumped more than 10% on the news.
Australia's Lynas Corp , which owns the richest known deposit of rare earth outside China, rose 10.8% while its rival Arafura rose 11.1%.
The US last week said it was "very concerned about China's export restraints on rare earth materials, antimony and tungsten" and could still file a case on that at the World Trade Organisation.
In September, China blocked exports of rare earths to Japan after a territorial row but later resumed them.
The US does have some rare earth supplies and is hoping to start production.
There uses also include the manufacture of wind turbines and hybrid cars.
Growing demand
China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home.
A Commerce Ministry spokesman has also said that China is cutting its supply side too, reining in exploration, production and exports because of what it says are environmental concerns.
The country also plans to raise duties on some rare earths and set up a trade association of suppliers.
China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011.
Japanese manufacturer Sony said Beijing's move was a hindrance to free trade - adding it would work to reduce its reliance on the minerals.
The firm said it was crucial to producing items including magnets, condensers, and abrasives for polishing glass on LCD screens.
Source: BBC
www.bbc.co.uk
World manufacturers are heavily reliant on China for these minerals, which are essential for making many electronic goods, such as TVs and PC monitors.
China has 97% of the world's known supply of the goods. The US mined none last year.
Rare earth minerals have been a thorny trade topic for some time, and China has previously promised not to cut supplies drastically.
Rare earths are a collection of seventeen chemical elements in the periodic table: scandium, yttrium, and some fifteen lanthanides.
Shares in two Australian companies, which are planning to mine rare earths, jumped more than 10% on the news.
Australia's Lynas Corp , which owns the richest known deposit of rare earth outside China, rose 10.8% while its rival Arafura rose 11.1%.
The US last week said it was "very concerned about China's export restraints on rare earth materials, antimony and tungsten" and could still file a case on that at the World Trade Organisation.
In September, China blocked exports of rare earths to Japan after a territorial row but later resumed them.
The US does have some rare earth supplies and is hoping to start production.
There uses also include the manufacture of wind turbines and hybrid cars.
Growing demand
China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home.
A Commerce Ministry spokesman has also said that China is cutting its supply side too, reining in exploration, production and exports because of what it says are environmental concerns.
The country also plans to raise duties on some rare earths and set up a trade association of suppliers.
China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011.
Japanese manufacturer Sony said Beijing's move was a hindrance to free trade - adding it would work to reduce its reliance on the minerals.
The firm said it was crucial to producing items including magnets, condensers, and abrasives for polishing glass on LCD screens.
Source: BBC
www.bbc.co.uk
Tuesday, December 28, 2010
Japanese factory output rises for first time in year
Japanese industrial production rose for the first time in six months in November, largely thanks to government assistance programmes.
Factory output was 1% up on October, with much of the lift coming from an increase in car production.
That has been underpinned by an official programme providing incentives to buyers of hybrid cars, such as Toyota's Prius.
Output of various electronics and machinery parts also lifted production.
The Ministry of Economy, Trade and Industry, which released the figures, said it expected factory production to continue rising - by 3.4% in December and 3.7% in January.
Separate data showed less positive news on the Japanese economy.
Consumer prices fell for the 21st month in a row in November, down by 0.5% on a year ago.
Consumer spending also remained weak, with household expenditure falling by 0.4% November, according to the Internal Affairs Ministry. The general expectation was for a 0.2% gain.
Last week, the government forecast economic growth for 2011 would be less than half the pace of 2010, at 1.5%, down from this year's 3.1%.
Source: BBC
www.bbc.co.uk
Factory output was 1% up on October, with much of the lift coming from an increase in car production.
That has been underpinned by an official programme providing incentives to buyers of hybrid cars, such as Toyota's Prius.
Output of various electronics and machinery parts also lifted production.
The Ministry of Economy, Trade and Industry, which released the figures, said it expected factory production to continue rising - by 3.4% in December and 3.7% in January.
Separate data showed less positive news on the Japanese economy.
Consumer prices fell for the 21st month in a row in November, down by 0.5% on a year ago.
Consumer spending also remained weak, with household expenditure falling by 0.4% November, according to the Internal Affairs Ministry. The general expectation was for a 0.2% gain.
Last week, the government forecast economic growth for 2011 would be less than half the pace of 2010, at 1.5%, down from this year's 3.1%.
Source: BBC
www.bbc.co.uk
Monday, December 27, 2010
China raises benchmark interest rates
By Jamil Anderlini in Beijing
(FT) -- China's central bank raised benchmark interest rates on Saturday, the second increase in just over two months, as the government stepped up its battle against persistent inflation.
The People's Bank of China announced a 25 basis point rise in the one-year base lending and deposit rates, taking the lending rate to 5.81% and the deposit rate to 2.75%.
The Christmas Day rate hike came after the central bank raised rates on October 19 for the first time in nearly three years. Although Christmas is not a public holiday in China, the timing of the rate hike announcement -- late on Christmas Day and on a Saturday -- was an apparent attempt not to unsettle global and domestic markets.
Annual consumer price inflation hit a 28-month high of 5.1% in November, up from 4.4% in October, and with real interest rates deep in negative territory, most economists expect China to continue the tightening cycle in the coming months.
"This rate hike demonstrates the Chinese authorities' determination to keep inflation under control up front, or front-loaded tightening," said Wang Qing, China economist at Morgan Stanley.
"The stronger than originally expected outlook for the US economy after the extension of [the] Bush tax cuts should also help remove some concerns about the potential weakness in external demand and make Chinese authorities more likely to tighten earlier and more aggressively, in our view."
The PBoC has also increased the proportion of deposits that banks must hold in reserve with the central bank six times this year in a move aimed at reining in excess liquidity and tackling stubbornly high inflation.
Chinese officials have expressed their preference for such administrative measures because of fears that comparatively high rates could attract flows of "hot money" into the country, especially at a time of extraordinarily loose monetary conditions in still-struggling developed markets.
"We think it is increasingly clear that using quantitative measures -- such as reserve ratios -- to rein in liquidity and credit has not been enough, and that adjusting the price of credit -- that is, interest rates -- is needed to get price pressures under control. So today's move suggests Beijing is also coming around to this view," said Brian Jackson, an economist with Royal Bank of Canada in Hong Kong. "We expect another 75 basis points of rate hikes in 2011."
The main driver of inflation in recent months has been the price of food, which rose 11.7% from a year earlier in November, but the government has claimed some victory in recent weeks in bringing down the soaring cost of vegetables. Officials appear confident in their ability to keep prices under control.
"The recent inflation is completely different from the periods of very high inflation China has encountered in the past," Liu Mingkang, chairman of the China Banking Regulatory Commission, said last week in Beijing. "There is overcapacity for most industrial goods in the Chinese market and it's impossible for upstream inflation to be transmitted downstream."
In early December Beijing said it was switching from its previous "moderately loose" monetary stance to a "prudent" monetary policy to focus efforts on avoiding economic overheating.
The benchmark Chinese stock market index has dropped more than 10 per cent since the middle of November on fears the government would introduce further tightening measures, including raising interest rates.
Source: CNN
http://edition.cnn.com
(FT) -- China's central bank raised benchmark interest rates on Saturday, the second increase in just over two months, as the government stepped up its battle against persistent inflation.
The People's Bank of China announced a 25 basis point rise in the one-year base lending and deposit rates, taking the lending rate to 5.81% and the deposit rate to 2.75%.
The Christmas Day rate hike came after the central bank raised rates on October 19 for the first time in nearly three years. Although Christmas is not a public holiday in China, the timing of the rate hike announcement -- late on Christmas Day and on a Saturday -- was an apparent attempt not to unsettle global and domestic markets.
Annual consumer price inflation hit a 28-month high of 5.1% in November, up from 4.4% in October, and with real interest rates deep in negative territory, most economists expect China to continue the tightening cycle in the coming months.
"This rate hike demonstrates the Chinese authorities' determination to keep inflation under control up front, or front-loaded tightening," said Wang Qing, China economist at Morgan Stanley.
"The stronger than originally expected outlook for the US economy after the extension of [the] Bush tax cuts should also help remove some concerns about the potential weakness in external demand and make Chinese authorities more likely to tighten earlier and more aggressively, in our view."
The PBoC has also increased the proportion of deposits that banks must hold in reserve with the central bank six times this year in a move aimed at reining in excess liquidity and tackling stubbornly high inflation.
Chinese officials have expressed their preference for such administrative measures because of fears that comparatively high rates could attract flows of "hot money" into the country, especially at a time of extraordinarily loose monetary conditions in still-struggling developed markets.
"We think it is increasingly clear that using quantitative measures -- such as reserve ratios -- to rein in liquidity and credit has not been enough, and that adjusting the price of credit -- that is, interest rates -- is needed to get price pressures under control. So today's move suggests Beijing is also coming around to this view," said Brian Jackson, an economist with Royal Bank of Canada in Hong Kong. "We expect another 75 basis points of rate hikes in 2011."
The main driver of inflation in recent months has been the price of food, which rose 11.7% from a year earlier in November, but the government has claimed some victory in recent weeks in bringing down the soaring cost of vegetables. Officials appear confident in their ability to keep prices under control.
"The recent inflation is completely different from the periods of very high inflation China has encountered in the past," Liu Mingkang, chairman of the China Banking Regulatory Commission, said last week in Beijing. "There is overcapacity for most industrial goods in the Chinese market and it's impossible for upstream inflation to be transmitted downstream."
In early December Beijing said it was switching from its previous "moderately loose" monetary stance to a "prudent" monetary policy to focus efforts on avoiding economic overheating.
The benchmark Chinese stock market index has dropped more than 10 per cent since the middle of November on fears the government would introduce further tightening measures, including raising interest rates.
Source: CNN
http://edition.cnn.com
Friday, December 24, 2010
Japan agrees record 92.4 trillion yen draft budget
The Japanese government has approved a record level of spending of 92.4 trillion yen ($1.1tn; £711bn) for the next financial year.
The cabinet agreed the draft budget, which must still be approved by parliament before 31 March.
Japan's economy has suffered from deflation, a high yen that hurts exports, weak domestic demand and poor consumer confidence.
The budget is aimed at boosting the economy, but adds to public debt.
And some analysts have said the programme was unlikely to offer a big economic boost.
Reined in
Debt-servicing costs and social security spending making up about 55% of the budget.
Aid for local authorities accounts for another 18.2% of the budget. The remainder of the spending is split among defence, public works projects, education and technology.
The Democratic Party-led administration has promised to keep new borrowing at 44.3tn, in line with this year's level.
But Japan was forced to raise spending due to higher debt servicing costs.
Japan's public debt is expected to reach 891tn yen, or 184% GDP, by the end of March 2012, the highest among developed nations.
The government said tax revenues would be about 40.9tn yen in the next fiscal year, with another 7.2tn raised by raiding special reserves.
The government has already reined in spending programmes including handouts to fund childcare.
Source: BBC News
http://www.bbc.co.uk
The cabinet agreed the draft budget, which must still be approved by parliament before 31 March.
Japan's economy has suffered from deflation, a high yen that hurts exports, weak domestic demand and poor consumer confidence.
The budget is aimed at boosting the economy, but adds to public debt.
And some analysts have said the programme was unlikely to offer a big economic boost.
Reined in
Debt-servicing costs and social security spending making up about 55% of the budget.
Aid for local authorities accounts for another 18.2% of the budget. The remainder of the spending is split among defence, public works projects, education and technology.
The Democratic Party-led administration has promised to keep new borrowing at 44.3tn, in line with this year's level.
But Japan was forced to raise spending due to higher debt servicing costs.
Japan's public debt is expected to reach 891tn yen, or 184% GDP, by the end of March 2012, the highest among developed nations.
The government said tax revenues would be about 40.9tn yen in the next fiscal year, with another 7.2tn raised by raiding special reserves.
The government has already reined in spending programmes including handouts to fund childcare.
Source: BBC News
http://www.bbc.co.uk
Thursday, December 23, 2010
How will China's economy perform in 2011?
By Jijo Jacob
As the global economy is entering arguably another tumultuous year, spotlight is sharply on the prospects, policies and risks of China's economy, which has all but sailed past Japan's as the world's second largest after the United States.
The following is a look into Chinese economy's prospects in 2011 and the nature and gravity of the challenges it faces.
GDP GROWTH
The fast-growing Asian giant's economy grew an average 10.6 percent in the first three quarters of 2010 though signals of a moderation in the pace of growth have risen of late. A Reuters poll has shown China's growth next year will be marginally weaker. Economists surveyed for the poll said the economy will slow to 8.9 percent in 2011. However, a poll in the previous quarter had shown that growth could be 9 percent next year.
The poll showed Chinese economy will bottom out in the first quarter of 2011, at which point the year-on-year pace of expansion could hit a low of 8.2 percent.
China's slowdown is not an unanticipated development. The government has been scaling back its fiscal stimulus program as well as tightening the extra-loose monetary policy this year as fears that an overheating could lead to asset bubbles and higher inflationary pressures.
The Chinese Academy of Social Sciences (CASS) said in its annual 'Blue Book' on the economy that growth could breach the 10 percent mark in 2011. It put 2010 growth at 9.9 percent.
However, analysts have said though a slowdown in GDP growth is inevitable next year, the economic scene will be more complicated than what statistics show. "The slowdown of China's economic expansion is not only associated with the growth base of last year, but it is the inevitable result of macroeconomic regulation and control initiated this year," according to said Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
He told the People's Daily the direction of the macroeconomic regulation and control should firmly be unchanged and the transformation in the economic development mode should be further advanced.
INFLATION/REFLATION
While the global economy was largely paralyzed by the great meltdown of 2008 China managed to boom back into the mix of things by virtue of a massive 4 trillion-yuan stimulus spending and the adoption of loose monetary policies. But this led to a surge in inflation and fears of an asset bubble.
According to CASS, inflation will remain moderate next year, with the consumer price index (CPI) rising 3.3 percent. However, according to a Goldman Sachs research, inflation rate will surge to 4.3 percent next year.
The Goldman Sachs report says though it's certain that the People's Bank of China will raise interest rates there won't be steep hikes that could result in a deceleration of growth coupled with excessive exchange rate appreciation.
"With official interest rates near zero in major economies and quantitative easing in various disguises continuing at least in the G3, monetary policy looks set to remain super-expansionary and will support the ongoing reflation of the global economy, in our view. "
Wang, Qing, a China economist with Morgan Stanley, said year 2011 will be a year of reflation for the Chinese economy and that tackling inflation will be an overarching policy priority for the country, especially in the first half of 2011. CPI inflation is expected to rise in the first half of 2011 and peak at 5.5 percent year-on-year by mid year and then start to decelerate to the tune of 4 percent by the end of the year, he said.
"Specifically, the lagged effect of massive monetary expansion in 2009-10 is expected to continue to provide strong tailwinds for inflation in the near term, while the headwinds stemming from weak external demand are letting up. Beyond the near term, China's economic rebalancing that features a shift in growth drivers from tradable to non-tradable sectors also points to a higher future secular inflation rate."
On the other hand, if policy makers are focused on fighting inflation aggressively it will result in a thaw in growth, especially in the real estate sector which has been witnessing a bull run.
TRADE FRICTIONS AND REBALANCING
China's competitors and trade counterparts argue that the Asian giant should rebalance its economy to address the global trade imbalances. Critics have pointed out that China should shift gears from being an export-dependent economy and boost its domestic demand.
The Morgan Stanley report paints hope on this front. It says Chinese consumer spending will become the biggest contributor to GDP growth in 2011, accounting for more than half of the forecasted 9 percent growth.
"This ongoing process of rebalancing from export-led to domestic demand-led growth and vice versa has two important implications. First, it requires a shift of resources (capital and labour) from the external to the domestic goods-producing sectors or vice versa, which takes time and thus weighs on growth in the meantime."
A Reuters poll in October showed that China's trade surplus, a nearly constant source of friction with the United States and the European Union, could be gradually declining. According to a median forecast, the surplus could shrink to $180 billion this year and $174 billion in 2011 from $196 billion in 2009.
"The surplus peaked at $295.5 billion in 2008. If the forecasts come true, Beijing will be able to point to the decline as proof that its efforts to power domestic demand and smooth out global imbalances are gaining traction," the report said.
Whether China is on the right track to achieve rebalancing will be known in the coming year. So far there are concerns on areas like wage growth. Wages have still remained too weak to propel a rise in consumer spending. Also it remains to be seen if China will let its currency appreciate significantly to give more purchasing power to the people.
RATES
As a commodity boom, possible rise in labor costs as well as a highly liquid financial system threaten to drive inflation higher next year, the focus is on China's monetary tightening policies next year.
The Chinese Communist Party's politburo announced early this month the country will shift to prudent monetary policy in 2011. It was a marked defection from the professed “moderately loose” monetary policy followed by the government since late 2008.
China had reduced interest rates considerably through a series of moves between September and December 2008 in the wake of the global financial crisis. However, the government has said it will scale back the expansionary policies that propelled the bounce back of the economy after the recession.
It raised key rates in a surprise move in October. The People's Bank of China raised its one-year yuan lending rate to 5.56 percent from 5.31 percent, the first time it has raised interest rates in three years. The central bank also said one-year yuan deposit rate would rise to 2.5 percent from 2.25 percent.
China has also repeatedly told banks to keep away larger deposits as reserves, a move that will cripple banks' capacity to lend. This measure jells with Beijing's broader objective of mopping up stimulus and tightening policy in the long term.
TACKLING OVERHEATING
China has taken several drastic measures recently to keep the commodities boom in check and keep the markets well supplied and the focus will be on how far Beijing will go to clamp down on commodities boom without gravely affecting growth. Measures adopted recently included the State Reserves Bureau selling off stocks of aluminum, zinc and lead, and the government's sell-off of edible commodities like corn, wheat, soy, rapeseed oil, sugar and rice.
China discouraged fertilizer exports by imposing punitive tax rate on exports and asked coal miners to freeze annual prices for the next year. The governments' crackdown on the power consumption of companies in fact resulted in a diesel shortage in November as firms turned to diesel generators.
However, there is also a view that Chinese economy’s commodity-intensity will lessen largely in the coming years and that the commodity boom may not last forever and the prices could likely fall. Julian Jessop, an economist at Capital Economics has said China’s commodity demand in 2025 could be "half the level that a simple extrapolation of the recent trends would suggest" and that the prices of industrial commodities may already have risen to unsustainable levels.
Jessop says the commodity-intensity of China’s economy is likely to fall as the economy undergoes a rebalancing in the coming years. He says China’s GDP growth could slow in the next few years to between 8 percent and 10 percent, compared to the 10 percent and 14 percent recorded from 2003 to 2007 during the last commodity boom.
CURRENCY AND LIQUIDITY
The U.S. has time and again accused China of keeping its currency under valued and of engaging in exclusionary trade policies. Though China managed to stay the course despite repeated efforts by the U.S. and the western bloc to make it appreciate the currency, there is renewed speculation over China acting on the currency front in the next year.
It is argued also that, faced with inflationary pressures, Beijing might go for yuan appreciation earlier than expected. But it still remain to be seen how big an appreciation will be effected. China will also have to deal with the excessive liquidity unleashed on the market by the government’s fiscal measures.
LABOR COSTS AND DOMESTIC DEMAND
Export-dependent China frets a runaway rise in wages. However, a depressed wages scenario, on the other hand, is dampening the domestic demand which in turn makes the rebalancing difficult. It will be a challenge for China in the next year to nicely balance this 'rebalancing act'.
The CASS report says rising labor costs could hit the rapid growth of the economy. "The first challenge comes from the rapid rise of labor costs in the country," Liu Shijin, deputy director of the Development Research Center of the State Council said. "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."
At the same time there are many policy makers in China who believe that an expansion in domestic demand is the key to ensure the country’s economic stability over the long term. "It is critical to begin the research on long-term institutional reforms as soon as possible when implementing short-term policies," Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
Source: www.ibtimes.com
As the global economy is entering arguably another tumultuous year, spotlight is sharply on the prospects, policies and risks of China's economy, which has all but sailed past Japan's as the world's second largest after the United States.
The following is a look into Chinese economy's prospects in 2011 and the nature and gravity of the challenges it faces.
GDP GROWTH
The fast-growing Asian giant's economy grew an average 10.6 percent in the first three quarters of 2010 though signals of a moderation in the pace of growth have risen of late. A Reuters poll has shown China's growth next year will be marginally weaker. Economists surveyed for the poll said the economy will slow to 8.9 percent in 2011. However, a poll in the previous quarter had shown that growth could be 9 percent next year.
The poll showed Chinese economy will bottom out in the first quarter of 2011, at which point the year-on-year pace of expansion could hit a low of 8.2 percent.
China's slowdown is not an unanticipated development. The government has been scaling back its fiscal stimulus program as well as tightening the extra-loose monetary policy this year as fears that an overheating could lead to asset bubbles and higher inflationary pressures.
The Chinese Academy of Social Sciences (CASS) said in its annual 'Blue Book' on the economy that growth could breach the 10 percent mark in 2011. It put 2010 growth at 9.9 percent.
However, analysts have said though a slowdown in GDP growth is inevitable next year, the economic scene will be more complicated than what statistics show. "The slowdown of China's economic expansion is not only associated with the growth base of last year, but it is the inevitable result of macroeconomic regulation and control initiated this year," according to said Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
He told the People's Daily the direction of the macroeconomic regulation and control should firmly be unchanged and the transformation in the economic development mode should be further advanced.
INFLATION/REFLATION
While the global economy was largely paralyzed by the great meltdown of 2008 China managed to boom back into the mix of things by virtue of a massive 4 trillion-yuan stimulus spending and the adoption of loose monetary policies. But this led to a surge in inflation and fears of an asset bubble.
According to CASS, inflation will remain moderate next year, with the consumer price index (CPI) rising 3.3 percent. However, according to a Goldman Sachs research, inflation rate will surge to 4.3 percent next year.
The Goldman Sachs report says though it's certain that the People's Bank of China will raise interest rates there won't be steep hikes that could result in a deceleration of growth coupled with excessive exchange rate appreciation.
"With official interest rates near zero in major economies and quantitative easing in various disguises continuing at least in the G3, monetary policy looks set to remain super-expansionary and will support the ongoing reflation of the global economy, in our view. "
Wang, Qing, a China economist with Morgan Stanley, said year 2011 will be a year of reflation for the Chinese economy and that tackling inflation will be an overarching policy priority for the country, especially in the first half of 2011. CPI inflation is expected to rise in the first half of 2011 and peak at 5.5 percent year-on-year by mid year and then start to decelerate to the tune of 4 percent by the end of the year, he said.
"Specifically, the lagged effect of massive monetary expansion in 2009-10 is expected to continue to provide strong tailwinds for inflation in the near term, while the headwinds stemming from weak external demand are letting up. Beyond the near term, China's economic rebalancing that features a shift in growth drivers from tradable to non-tradable sectors also points to a higher future secular inflation rate."
On the other hand, if policy makers are focused on fighting inflation aggressively it will result in a thaw in growth, especially in the real estate sector which has been witnessing a bull run.
TRADE FRICTIONS AND REBALANCING
China's competitors and trade counterparts argue that the Asian giant should rebalance its economy to address the global trade imbalances. Critics have pointed out that China should shift gears from being an export-dependent economy and boost its domestic demand.
The Morgan Stanley report paints hope on this front. It says Chinese consumer spending will become the biggest contributor to GDP growth in 2011, accounting for more than half of the forecasted 9 percent growth.
"This ongoing process of rebalancing from export-led to domestic demand-led growth and vice versa has two important implications. First, it requires a shift of resources (capital and labour) from the external to the domestic goods-producing sectors or vice versa, which takes time and thus weighs on growth in the meantime."
A Reuters poll in October showed that China's trade surplus, a nearly constant source of friction with the United States and the European Union, could be gradually declining. According to a median forecast, the surplus could shrink to $180 billion this year and $174 billion in 2011 from $196 billion in 2009.
"The surplus peaked at $295.5 billion in 2008. If the forecasts come true, Beijing will be able to point to the decline as proof that its efforts to power domestic demand and smooth out global imbalances are gaining traction," the report said.
Whether China is on the right track to achieve rebalancing will be known in the coming year. So far there are concerns on areas like wage growth. Wages have still remained too weak to propel a rise in consumer spending. Also it remains to be seen if China will let its currency appreciate significantly to give more purchasing power to the people.
RATES
As a commodity boom, possible rise in labor costs as well as a highly liquid financial system threaten to drive inflation higher next year, the focus is on China's monetary tightening policies next year.
The Chinese Communist Party's politburo announced early this month the country will shift to prudent monetary policy in 2011. It was a marked defection from the professed “moderately loose” monetary policy followed by the government since late 2008.
China had reduced interest rates considerably through a series of moves between September and December 2008 in the wake of the global financial crisis. However, the government has said it will scale back the expansionary policies that propelled the bounce back of the economy after the recession.
It raised key rates in a surprise move in October. The People's Bank of China raised its one-year yuan lending rate to 5.56 percent from 5.31 percent, the first time it has raised interest rates in three years. The central bank also said one-year yuan deposit rate would rise to 2.5 percent from 2.25 percent.
China has also repeatedly told banks to keep away larger deposits as reserves, a move that will cripple banks' capacity to lend. This measure jells with Beijing's broader objective of mopping up stimulus and tightening policy in the long term.
TACKLING OVERHEATING
China has taken several drastic measures recently to keep the commodities boom in check and keep the markets well supplied and the focus will be on how far Beijing will go to clamp down on commodities boom without gravely affecting growth. Measures adopted recently included the State Reserves Bureau selling off stocks of aluminum, zinc and lead, and the government's sell-off of edible commodities like corn, wheat, soy, rapeseed oil, sugar and rice.
China discouraged fertilizer exports by imposing punitive tax rate on exports and asked coal miners to freeze annual prices for the next year. The governments' crackdown on the power consumption of companies in fact resulted in a diesel shortage in November as firms turned to diesel generators.
However, there is also a view that Chinese economy’s commodity-intensity will lessen largely in the coming years and that the commodity boom may not last forever and the prices could likely fall. Julian Jessop, an economist at Capital Economics has said China’s commodity demand in 2025 could be "half the level that a simple extrapolation of the recent trends would suggest" and that the prices of industrial commodities may already have risen to unsustainable levels.
Jessop says the commodity-intensity of China’s economy is likely to fall as the economy undergoes a rebalancing in the coming years. He says China’s GDP growth could slow in the next few years to between 8 percent and 10 percent, compared to the 10 percent and 14 percent recorded from 2003 to 2007 during the last commodity boom.
CURRENCY AND LIQUIDITY
The U.S. has time and again accused China of keeping its currency under valued and of engaging in exclusionary trade policies. Though China managed to stay the course despite repeated efforts by the U.S. and the western bloc to make it appreciate the currency, there is renewed speculation over China acting on the currency front in the next year.
It is argued also that, faced with inflationary pressures, Beijing might go for yuan appreciation earlier than expected. But it still remain to be seen how big an appreciation will be effected. China will also have to deal with the excessive liquidity unleashed on the market by the government’s fiscal measures.
LABOR COSTS AND DOMESTIC DEMAND
Export-dependent China frets a runaway rise in wages. However, a depressed wages scenario, on the other hand, is dampening the domestic demand which in turn makes the rebalancing difficult. It will be a challenge for China in the next year to nicely balance this 'rebalancing act'.
The CASS report says rising labor costs could hit the rapid growth of the economy. "The first challenge comes from the rapid rise of labor costs in the country," Liu Shijin, deputy director of the Development Research Center of the State Council said. "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."
At the same time there are many policy makers in China who believe that an expansion in domestic demand is the key to ensure the country’s economic stability over the long term. "It is critical to begin the research on long-term institutional reforms as soon as possible when implementing short-term policies," Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
Source: www.ibtimes.com
Wednesday, December 22, 2010
Japan cuts view on exports as Asia slows, yen rises
By Kaori Kaneko
TOKYO, Dec 22 (Reuters) - Japan's government cut its view on exports and business sentiment on Wednesday due to a slowdown in Asia's economic recovery and a persistently strong yen.
But the government kept its overall view of the economy unchanged in its economic report for December, saying the economy is at a standstill and in a difficult situation with a high jobless rate.
In its monthly report for October, the government lowered its overall economic assessment for the first time since February 2009.
Many economists are forecasting that Japan's economy will contract in the fourth quarter of this year as the expiry of government stimulus measures hits factory output. The economy is likely to resume expansion next year as exports and domestic demand slowly recover, economists say.
"Exports are decreasing moderately," the government said in its monthly economic report, downgrading its view on exports for the first time in two months due to slowing shipments of electronic parts to Asia.
In the previous monthly report, the government said exports had been weakening.
Data showed Japan's export growth picked up in November for the first time in nine months due partly to the yen's pullback from 15-year highs, but analysts said signs of softening demand overseas clouded the outlook.
DRAFT BUDGET
The government is set to present a draft budget on Friday for the next fiscal year starting in April, the first budget compiled from scratch by the Democratic Party-led government since it ousted the long-ruling Liberal Democrats in August 2009 and a test of the government's ability to maintain fiscal discipline.
Should the overall economy deteriorate more than the government is expecting, policymakers may have little leeway for pump-priming given a large fiscal debt burden.
In its report for December, the government also downgraded its view on business sentiment for the first time since April 2009, saying it was showing "signs of caution".
Previously, it said firms' judgment on business conditions was improving but cautious views were spreading.
The government left unchanged its views that industrial production has been decreasing recently and that private consumption is picking up but showing some weakness.
"Some weakness is seen in factory output and private consumption due to a slowdown in Asian demand and the end of the government subsidies for purchases of fuel-efficient cars," said Fumihira Nishizaki, director for macroeconomic analysis at the Cabinet Office.
"On the other hand, income is solid and overseas economies as a whole are in a moderate recovery. Once a hit to consumption runs its course and if overseas economies continues their recovery, Japan's production is expected to recover."
In the monthly report, the government said the economy was expected to pick up on the back of improvement in overseas economies and the effects of various policy measures, although some weakness was expected for a while.
The government also retained its caution about spillover from a possible slowdown in overseas economies and fluctuations in the currency and stock markets.
The government also repeated that it would work with the Bank of Japan to beat deflation as a top priority.
Source: www.reuters.com
TOKYO, Dec 22 (Reuters) - Japan's government cut its view on exports and business sentiment on Wednesday due to a slowdown in Asia's economic recovery and a persistently strong yen.
But the government kept its overall view of the economy unchanged in its economic report for December, saying the economy is at a standstill and in a difficult situation with a high jobless rate.
In its monthly report for October, the government lowered its overall economic assessment for the first time since February 2009.
Many economists are forecasting that Japan's economy will contract in the fourth quarter of this year as the expiry of government stimulus measures hits factory output. The economy is likely to resume expansion next year as exports and domestic demand slowly recover, economists say.
"Exports are decreasing moderately," the government said in its monthly economic report, downgrading its view on exports for the first time in two months due to slowing shipments of electronic parts to Asia.
In the previous monthly report, the government said exports had been weakening.
Data showed Japan's export growth picked up in November for the first time in nine months due partly to the yen's pullback from 15-year highs, but analysts said signs of softening demand overseas clouded the outlook.
DRAFT BUDGET
The government is set to present a draft budget on Friday for the next fiscal year starting in April, the first budget compiled from scratch by the Democratic Party-led government since it ousted the long-ruling Liberal Democrats in August 2009 and a test of the government's ability to maintain fiscal discipline.
Should the overall economy deteriorate more than the government is expecting, policymakers may have little leeway for pump-priming given a large fiscal debt burden.
In its report for December, the government also downgraded its view on business sentiment for the first time since April 2009, saying it was showing "signs of caution".
Previously, it said firms' judgment on business conditions was improving but cautious views were spreading.
The government left unchanged its views that industrial production has been decreasing recently and that private consumption is picking up but showing some weakness.
"Some weakness is seen in factory output and private consumption due to a slowdown in Asian demand and the end of the government subsidies for purchases of fuel-efficient cars," said Fumihira Nishizaki, director for macroeconomic analysis at the Cabinet Office.
"On the other hand, income is solid and overseas economies as a whole are in a moderate recovery. Once a hit to consumption runs its course and if overseas economies continues their recovery, Japan's production is expected to recover."
In the monthly report, the government said the economy was expected to pick up on the back of improvement in overseas economies and the effects of various policy measures, although some weakness was expected for a while.
The government also retained its caution about spillover from a possible slowdown in overseas economies and fluctuations in the currency and stock markets.
The government also repeated that it would work with the Bank of Japan to beat deflation as a top priority.
Source: www.reuters.com
Tuesday, December 21, 2010
Expert: China will reshape global economy
The governance and structure of the global economy is undergoing a fundamental transformation as the power of the emerging markets while that of developed economies wanes, said a noted Chinese economist in an interview with People's Daily. In that context, China has a bigger role than ever to play in the process, he said.
Developed countries can hardly restore their potential growth to the level it was at before the global financial crisis. Emerging markets, though they also face the pressure of a slowdown in potential growth, enjoy a prospect of much higher growth compared with the developed countries and will continue to be the driving force for the global economy.
To reflect that change, reform has been high on the agenda of the bodies responsible for international political and economic governance. Ba believes that new progress will be made soon. The IMF, for example, is considering quantitative rules for its members' economic indicators, such as trade surplus, foreign exchange rate and forex reserves.
Two opposite actions will be the keystone of the global economic restructuring. While developed economies need to boost their savings, export and manufacturing, emerging economies need to expand their consumption and imports.
Given that, Ba said increasing imports makes sense not only for trade balance, but also — and more importantly — for the rebalancing of China's macro-economy and the restructuring of the whole national economy.
That principle has been enshrined in the blueprint for 2011 as a decision made by the central economic meeting early this month.
However, external adjustments are as important, if not more, as internal ones. Global economic and trade balance cannot be possible without fundamental transformations in different economies.
Developed economies like the United States have to fix the problems on the balance sheets of their financial institutions, companies and households alike, Ba said.
The next five years will be the stage when China begins and expands its engagement in the global economic restructuring, he said.
By Li Jia, People's Daily Online
Source: People's Daily Online
http://english.peopledaily.com.cn
Developed countries can hardly restore their potential growth to the level it was at before the global financial crisis. Emerging markets, though they also face the pressure of a slowdown in potential growth, enjoy a prospect of much higher growth compared with the developed countries and will continue to be the driving force for the global economy.
To reflect that change, reform has been high on the agenda of the bodies responsible for international political and economic governance. Ba believes that new progress will be made soon. The IMF, for example, is considering quantitative rules for its members' economic indicators, such as trade surplus, foreign exchange rate and forex reserves.
Two opposite actions will be the keystone of the global economic restructuring. While developed economies need to boost their savings, export and manufacturing, emerging economies need to expand their consumption and imports.
Given that, Ba said increasing imports makes sense not only for trade balance, but also — and more importantly — for the rebalancing of China's macro-economy and the restructuring of the whole national economy.
That principle has been enshrined in the blueprint for 2011 as a decision made by the central economic meeting early this month.
However, external adjustments are as important, if not more, as internal ones. Global economic and trade balance cannot be possible without fundamental transformations in different economies.
Developed economies like the United States have to fix the problems on the balance sheets of their financial institutions, companies and households alike, Ba said.
The next five years will be the stage when China begins and expands its engagement in the global economic restructuring, he said.
By Li Jia, People's Daily Online
Source: People's Daily Online
http://english.peopledaily.com.cn
Monday, December 20, 2010
Asia steering world economy in 2011
SHANGHAI, December 19 (AP): The prolonged weakness in the U.S. and Europe may be the least of Asia’s troubles in 2011, economists say, as the region fights potentially destabilizing inflationary pressures. Asia will lead global growth in 2011, with China, now the world’s second largest economy, steady at about 10 percent growth, the government-affiliated Chinese Academy of Social Sciences forecasts.
With a strong rebound in the U.S. or Europe just as unlikely as a relapse into a “double-dip” recession, Asia is easing its way out of stimulus programs launched during the financial crisis. But the U.S. Federal Reserve’s effort to nurture job creation through fresh “quantitative easing” has governments across the Pacific maneuvering to keep price pressures from spiraling out of control. “The inflation outlook is really critical at this point,” UBS economist Duncan Wooldridge said in a recent conference call, noting that excluding Japan, consumer price inflation in Asia has been averaging about 5 percent.
“From my perspective there’s really only one thing that matters at this point: inflation,” he said. China’s consumer price inflation surged to a 28-month high of 5.1 percent in November. The government raised interest rates in October for the first time since the financial crisis struck and has shifted to a “prudent” monetary policy for 2011 from one that was “relatively loose,” signaling its intent to tighten credit as it fights price hikes.
Focusing on the politically sensitive food prices that are said to account for up to three-quarters of the latest inflationary spike, the Chinese government ordered a crackdown on commodity speculation, price caps for edible oil and subsidies for the poor. It is already claiming some success in bringing prices for some vegetables and fruits lower. Meanwhile, the weather problems – like drought in south China and floods in Pakistan and Thailand – that have pushed food prices higher should moderate by midyear, according to most forecasts.
But inflation remains a threat, especially for emerging economies that are attracting large inflows of money from investors seeking higher returns than they can get from U.S. Treasurys and shares. The surging liquidity is adding to pressures on Asian economies to either raise interest rates or let currencies that already have gained substantially against the weak U.S. dollar appreciate further.
“Emerging economies can stop inflation if they are determined,” says Shanghai-based independent economist Andy Xie. But he figures that an effective strategy would require raising exchange rates by up to 50 percent and interest rates by 10 percent. “There is almost zero chance for them to pursue such a contractionary policy,” he says. Those options, while unpalatable, reflect the region’s relative strength compared with the U.S., EU and Japan, says a report by Macquarie Securities.
“Treading the fine line between growth undershoot and inflation overshoot is a challenge that is particular to Asia,” it says. Japan, now the world’s No. 3 economy after it was overtaken by China this year, faces no such dilemma. Though its economy gained momentum in the third quarter, that is fading as slowing overseas demand and the strong yen bite into exports, while deflation continues to stymie growth.
With recession-stricken Americans unable to resume the kind of freewheeling spending that powered growth for much of the past two decades, the recovery increasingly hinges on Asian resilience. “Asia is depending on demand in this part of the world,” says David Cohen, a regional economist for Action Economic in Singapore. “That’s where it’s going to have to come from.” So far, China’s rebound has largely been powered by massive bank lending in support of government stimulus, backed by steady, double-digit growth in consumer spending. The benefits spill across the region, from coal and iron ore miners in Australia and Indonesia, to semiconductor makers in South Korea and Taiwan.
As they launch a new five-year economic plan and prepare for a leadership transition in late 2011, China’s leaders have signaled their determination to keep growth at a steady pace with a recent announcement that they will stick to a “prudent” monetary policy for the coming year, says Ye Tan, a popular economic commentator in Shanghai. “In my view, they are sending the message that once the government curbs inflation, it will carry on with another round of investment to ensure it can meet its growth goals for 2011,” Ye says.
Source: The morung express
www.morungexpress.com
With a strong rebound in the U.S. or Europe just as unlikely as a relapse into a “double-dip” recession, Asia is easing its way out of stimulus programs launched during the financial crisis. But the U.S. Federal Reserve’s effort to nurture job creation through fresh “quantitative easing” has governments across the Pacific maneuvering to keep price pressures from spiraling out of control. “The inflation outlook is really critical at this point,” UBS economist Duncan Wooldridge said in a recent conference call, noting that excluding Japan, consumer price inflation in Asia has been averaging about 5 percent.
“From my perspective there’s really only one thing that matters at this point: inflation,” he said. China’s consumer price inflation surged to a 28-month high of 5.1 percent in November. The government raised interest rates in October for the first time since the financial crisis struck and has shifted to a “prudent” monetary policy for 2011 from one that was “relatively loose,” signaling its intent to tighten credit as it fights price hikes.
Focusing on the politically sensitive food prices that are said to account for up to three-quarters of the latest inflationary spike, the Chinese government ordered a crackdown on commodity speculation, price caps for edible oil and subsidies for the poor. It is already claiming some success in bringing prices for some vegetables and fruits lower. Meanwhile, the weather problems – like drought in south China and floods in Pakistan and Thailand – that have pushed food prices higher should moderate by midyear, according to most forecasts.
But inflation remains a threat, especially for emerging economies that are attracting large inflows of money from investors seeking higher returns than they can get from U.S. Treasurys and shares. The surging liquidity is adding to pressures on Asian economies to either raise interest rates or let currencies that already have gained substantially against the weak U.S. dollar appreciate further.
“Emerging economies can stop inflation if they are determined,” says Shanghai-based independent economist Andy Xie. But he figures that an effective strategy would require raising exchange rates by up to 50 percent and interest rates by 10 percent. “There is almost zero chance for them to pursue such a contractionary policy,” he says. Those options, while unpalatable, reflect the region’s relative strength compared with the U.S., EU and Japan, says a report by Macquarie Securities.
“Treading the fine line between growth undershoot and inflation overshoot is a challenge that is particular to Asia,” it says. Japan, now the world’s No. 3 economy after it was overtaken by China this year, faces no such dilemma. Though its economy gained momentum in the third quarter, that is fading as slowing overseas demand and the strong yen bite into exports, while deflation continues to stymie growth.
With recession-stricken Americans unable to resume the kind of freewheeling spending that powered growth for much of the past two decades, the recovery increasingly hinges on Asian resilience. “Asia is depending on demand in this part of the world,” says David Cohen, a regional economist for Action Economic in Singapore. “That’s where it’s going to have to come from.” So far, China’s rebound has largely been powered by massive bank lending in support of government stimulus, backed by steady, double-digit growth in consumer spending. The benefits spill across the region, from coal and iron ore miners in Australia and Indonesia, to semiconductor makers in South Korea and Taiwan.
As they launch a new five-year economic plan and prepare for a leadership transition in late 2011, China’s leaders have signaled their determination to keep growth at a steady pace with a recent announcement that they will stick to a “prudent” monetary policy for the coming year, says Ye Tan, a popular economic commentator in Shanghai. “In my view, they are sending the message that once the government curbs inflation, it will carry on with another round of investment to ensure it can meet its growth goals for 2011,” Ye says.
Source: The morung express
www.morungexpress.com
Saturday, December 11, 2010
China raises bank reserve requirements
Beijing (FT) -- China has again raised the amount of reserves that commercial banks must keep with the central bank after the economy recorded another large trade surplus last month and exports and imports both grew strongly.
The central bank's move on Friday to lift reserve requirements for commercial banks by 50 basis points marked the sixth time this year that it has used this policy tool to drain liquidity from the financial system in an effort to slow the economy.
The latest tightening move came after trade figures heightened concerns that the economy could be at risk of overheating.
Exports grew by 34.9 per cent in November over the same month the year before, much more quickly than forecast and potentially a sign of increasing demand from developed economies. In October, exports rose 22.9 per cent.
Imports to China were also well ahead of forecasts, increasing by 37.7 per cent over the year before, compared with a rate of increase of 25.3 per cent in October.
The trade surplus was $22.9bn in November, down from the $27.15bn registered in October, but ahead of forecasts and still one of the biggest recorded.
The strong surge in exports and large surplus come amid continued international pressure for China to appreciate its currency more quickly, especially as the renminbi has actually been getting weaker against a basket of its main trading partners' currencies in recent weeks, economists said.
Brian Jackson at RBC Capital Markets in Hong Kong said: "It is increasingly difficult to argue that China's export sector cannot tolerate some currency appreciation, a move which would also help Beijing get price pressures under control.
"The strength of domestic demand also suggests that rate hikes are needed to keep China's economy on an even keel."
Last week, China's State Council formally changed the description of monetary policy from "moderately loose" to "prudent" over the next year. Interest rates have been increased once already and there had been widespread speculation that rates would be raised again on Friday. Inflation in October jumped to 4.4 per cent, well above the government's 3 per cent target.
However, some economists believe that the Chinese authorities have been too slow to tighten policy and control inflation, which could be made worse by the surprising strength in exports.
"Note that exceedingly strong exports growth amid an already overheated domestic economy is not good news as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation," said Yu Song and Helen Qiao at Goldman Sachs.
However, house price inflation, a major worry earlier in the year, continues to fall as a result of a flurry of government policies aimed at cooling the market. Prices rose 7.7 per cent in November in the 70 cities monitored by the government statistics bureau, down from 8.6 per cent in October.
Source: CNN
www.cnn.com
The central bank's move on Friday to lift reserve requirements for commercial banks by 50 basis points marked the sixth time this year that it has used this policy tool to drain liquidity from the financial system in an effort to slow the economy.
The latest tightening move came after trade figures heightened concerns that the economy could be at risk of overheating.
Exports grew by 34.9 per cent in November over the same month the year before, much more quickly than forecast and potentially a sign of increasing demand from developed economies. In October, exports rose 22.9 per cent.
Imports to China were also well ahead of forecasts, increasing by 37.7 per cent over the year before, compared with a rate of increase of 25.3 per cent in October.
The trade surplus was $22.9bn in November, down from the $27.15bn registered in October, but ahead of forecasts and still one of the biggest recorded.
The strong surge in exports and large surplus come amid continued international pressure for China to appreciate its currency more quickly, especially as the renminbi has actually been getting weaker against a basket of its main trading partners' currencies in recent weeks, economists said.
Brian Jackson at RBC Capital Markets in Hong Kong said: "It is increasingly difficult to argue that China's export sector cannot tolerate some currency appreciation, a move which would also help Beijing get price pressures under control.
"The strength of domestic demand also suggests that rate hikes are needed to keep China's economy on an even keel."
Last week, China's State Council formally changed the description of monetary policy from "moderately loose" to "prudent" over the next year. Interest rates have been increased once already and there had been widespread speculation that rates would be raised again on Friday. Inflation in October jumped to 4.4 per cent, well above the government's 3 per cent target.
However, some economists believe that the Chinese authorities have been too slow to tighten policy and control inflation, which could be made worse by the surprising strength in exports.
"Note that exceedingly strong exports growth amid an already overheated domestic economy is not good news as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation," said Yu Song and Helen Qiao at Goldman Sachs.
However, house price inflation, a major worry earlier in the year, continues to fall as a result of a flurry of government policies aimed at cooling the market. Prices rose 7.7 per cent in November in the 70 cities monitored by the government statistics bureau, down from 8.6 per cent in October.
Source: CNN
www.cnn.com
MBA in Asia: Stepping stone into greater China
There are only 55 MBA students in Emmanuel Poupelle's class at Hong Kong University. When he walked into his orientation session earlier this year, the French citizen scanned the room. The majority of his classmates were not Asian. He estimates 60 percent were westerners.
“Probably the first thing we thought is we made the right decision because that’s what we were looking for. That’s what we applied for... to be fully invested in China, fully invested in Asia,” Poupelle remembers. He's among a growing number of MBA students targeting Asia-based programs for their degree. The ultimate goal: landing a job in Asia.
Classmate Stuart Mercier of Canada chose Hong Kong to enroll in business school because he wants, eventually, to go into real estate in greater China. "I think in this region, you see the projections of growth that are five, six, seven-times what they are for the Western world for the next decade. And so this was really the opportunity to follow the growth."
Because of China's growth, the number of MBA programs on mainland China has tripled to more than 250 in the past decade.
Follow the test scores
Most business schools require GMAT test scores as part of the application process so the GMAT is a good measure of where people are applying. There's been a big spike in GMAT scores being sent to business schools in Asia.
"Asia is on almost an exponential growth pattern," says David Wilson, President and CEO of Graduate Management Admission Council which owns and administers the GMAT exam.
It's not just westerners but also an increasing number of Asian test takers who are applying within Asia. Wilson says a majority of Asian test takers (67%) are still sending their scores outside of Asia to international business schools but that number is down 4 percent in the past four years.
Wilson also notes an interesting subtrend. A good number of Chinese applicants are "returnees" – those people from Asia who immigrated to the west and who are now coming back. Since they are bilingual, they are also highly marketable in mainland China.
Salaries: Show me the money!
When applicants research MBA programs, they no doubt want to know how much they can earn with a degree.
Most schools provide data on the average salary an MBA graduate earns after finishing the program.
The Financial Times ranks global business schools every year. Most of the top ten schools ranked by the FT this year show average salaries between $140,000 to 160,000 per year.
The only Asian school in the top ten was Hong Kong University of Science and Technology (HKUST), which is also affiliated with Kellogg in Chicago. The average salary at HKUST was lower than the other ranked schools at $115,000 per year.
The associate dean of HKUST's MBA program, Steve DeKrey, cautions applicants to put this number in perspective. "We send a lot of people (graduates) to China. Salaries haven't caught up yet so our average is going to be a little low. If you stay in Hong Kong? Sure, it'll be a little higher. If you stay in finance? Higher yet. So there's a range."
Source: CNN
www.cnn.com
“Probably the first thing we thought is we made the right decision because that’s what we were looking for. That’s what we applied for... to be fully invested in China, fully invested in Asia,” Poupelle remembers. He's among a growing number of MBA students targeting Asia-based programs for their degree. The ultimate goal: landing a job in Asia.
Classmate Stuart Mercier of Canada chose Hong Kong to enroll in business school because he wants, eventually, to go into real estate in greater China. "I think in this region, you see the projections of growth that are five, six, seven-times what they are for the Western world for the next decade. And so this was really the opportunity to follow the growth."
Because of China's growth, the number of MBA programs on mainland China has tripled to more than 250 in the past decade.
Follow the test scores
Most business schools require GMAT test scores as part of the application process so the GMAT is a good measure of where people are applying. There's been a big spike in GMAT scores being sent to business schools in Asia.
"Asia is on almost an exponential growth pattern," says David Wilson, President and CEO of Graduate Management Admission Council which owns and administers the GMAT exam.
It's not just westerners but also an increasing number of Asian test takers who are applying within Asia. Wilson says a majority of Asian test takers (67%) are still sending their scores outside of Asia to international business schools but that number is down 4 percent in the past four years.
Wilson also notes an interesting subtrend. A good number of Chinese applicants are "returnees" – those people from Asia who immigrated to the west and who are now coming back. Since they are bilingual, they are also highly marketable in mainland China.
Salaries: Show me the money!
When applicants research MBA programs, they no doubt want to know how much they can earn with a degree.
Most schools provide data on the average salary an MBA graduate earns after finishing the program.
The Financial Times ranks global business schools every year. Most of the top ten schools ranked by the FT this year show average salaries between $140,000 to 160,000 per year.
The only Asian school in the top ten was Hong Kong University of Science and Technology (HKUST), which is also affiliated with Kellogg in Chicago. The average salary at HKUST was lower than the other ranked schools at $115,000 per year.
The associate dean of HKUST's MBA program, Steve DeKrey, cautions applicants to put this number in perspective. "We send a lot of people (graduates) to China. Salaries haven't caught up yet so our average is going to be a little low. If you stay in Hong Kong? Sure, it'll be a little higher. If you stay in finance? Higher yet. So there's a range."
Source: CNN
www.cnn.com
Friday, December 10, 2010
Japan's economic growth revised up
Japan's economy expanded faster than initially estimated between July and September thanks to higher corporate spending, official figures have shown.
The economy grew by an annualised rate of 4.5%, compared with the previous estimate of 3.9% announced last month.
Despite the upgrade, economists remain cautious about the economic outlook in Japan, which is suffering from a strong yen and falling prices.
Last month, the government passed a $61bn (£39bn) stimulus package.
This, the latest in a series of stimulus measures, is designed to boost the country's fragile economic recovery by creating jobs.
'Auto slump'
Economists attribute the relatively strong growth posted in the third quarter to one-off factors, such as sales of green cars before the end of government subsidies and smokers buying cigarettes before a tax rise.
Most expect growth to be weaker in the final three months of the year, partly due to reduced exports, which have fallen for the past eight months.
"Given the slump in Japan's auto output and a slowdown in developed economies and China, the economy will remain in a severe situation until the first half of next year," said Takeshi Minami at the Norinchukin Research Institute.
Hideki Matsumura at the Japan Research Institute echoed such sentiments: "This weak trend will continue. Recovery is likely to be delayed until the second half of the next fiscal year."
A drop in demand in the US, Europe and China has hit exports that are already under pressure from the high value of the yen, which makes exports more expensive to overseas customers.
Japan has also suffered 20 straight months of falling prices - known as deflation - which stifles economic growth by undermining consumer demand.
The economy grew by an annualised rate of 4.5%, compared with the previous estimate of 3.9% announced last month.
Despite the upgrade, economists remain cautious about the economic outlook in Japan, which is suffering from a strong yen and falling prices.
Last month, the government passed a $61bn (£39bn) stimulus package.
This, the latest in a series of stimulus measures, is designed to boost the country's fragile economic recovery by creating jobs.
'Auto slump'
Economists attribute the relatively strong growth posted in the third quarter to one-off factors, such as sales of green cars before the end of government subsidies and smokers buying cigarettes before a tax rise.
Most expect growth to be weaker in the final three months of the year, partly due to reduced exports, which have fallen for the past eight months.
"Given the slump in Japan's auto output and a slowdown in developed economies and China, the economy will remain in a severe situation until the first half of next year," said Takeshi Minami at the Norinchukin Research Institute.
Hideki Matsumura at the Japan Research Institute echoed such sentiments: "This weak trend will continue. Recovery is likely to be delayed until the second half of the next fiscal year."
A drop in demand in the US, Europe and China has hit exports that are already under pressure from the high value of the yen, which makes exports more expensive to overseas customers.
Japan has also suffered 20 straight months of falling prices - known as deflation - which stifles economic growth by undermining consumer demand.
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