China sees first quarterly trade deficit in seven years

China has posted its first quarterly trade deficit in seven years, as it continues efforts to rebalance its economy.

The deficit for the first three months of the year stood at $1.02bn (£622m), according to the latest data by the General Administration of Customs.

For the month of March, the country reported a tiny trade surplus of $140m.

China's Hu Jintao: Currency system is 'product of past'

Chinese President Hu Jintao has said the international currency system dominated by the US dollar is a "product of the past".

Mr Hu also said China was taking steps to replace it with the yuan, its own currency, but acknowledged that would be a "fairly long process".

The remarks to two US newspapers come ahead of a state visit by the Chinese leader to Washington this week.

They reflect continuing tensions over currency issues between the two powers.

The remarks to the Washington Post and Wall Street Journal came in the form of written responses to questions. Mr Hu also reiterated criticism of a decision by the US Federal Reserve to inject $600bn into the economy, which some argue will weaken the dollar at the expense of other countries' exports.

"The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level," President Hu said.
'Important contribution'

Meanwhile, he disagreed with suggestions that letting the yuan appreciate in value would help China to combat inflation.

He said inflation, which reached 5.1% in November - its highest level in 28 months - was "on the whole moderate and controllable".

"We have the confidence, conditions and ability to stabilise the overall price level," he said.

Beijing has previously come under pressure over its currency from the US, which has accused China of manipulating the yuan to help boost Chinese exports.

On Sunday night, three Democratic senators announced they would introduce a new bill to increase penalties the US considers to be "currency manipulators".

However, the move is unlikely to receive support from senior Republicans - who recently took control of the House of Representatives.

The new House speaker, John Boehner, voted against another bill that failed last year that would have helped US companies challenge currency subsidies.
Currency reservations

Despite criticism of the current system, Mr Hu said he believed it would be a long time before the yuan - or renminbi (RMB) - was accepted as a global currency.

"China has made important contribution to the world economy in terms of total economic output and trade, and the RMB has played a role in the world economic development," he said.

"But making the RMB an international currency will be a fairly long process."

Some economists suggest that China's growth strategy - with its focus on exports and state-led investment - may be incompatible with Mr Hu's currency ambitions.

In order for the yuan to oust the dollar as a global reserve currency, international central banks and investors would need to be able to get their hands on huge amounts of the currency.

Yet neither of the ways in which China could supply the world with more yuan is at all appealing to Beijing, according to Michael Pettis, economist at Beijing University.

He says the country could start running big trade deficits with the rest of the world - just as the US has been doing - and finance them by selling their currency to their trade partners.

Or it could allow foreign investors to pour their money into Chinese financial assets - like shares, bonds or yuan bank accounts - matched by similar Chinese investments in the rest of the world.

But Mr Pettis warns that for the numbers to add up, China would need to do these things on an unprecedented scale, which is likely to be unpalatable to the authorities.

Either of these moves is likely to go with an increase in the yuan's value, making Chinese exporters less competitive.

And they may also fuel speculative asset bubbles in China - something that Beijing has been trying to clamp down on of late.

Source: http://www.bbc.co.uk

China sees trade surplus narrow as imports rise

China's trade surplus shrank to an eight month low in December, official figures show.

Imports increased by 25.6% on the same month a year earlier, leaving China with a surplus of $13.1bn ($8.4bn).

Exports were up 17.9%, much slower than November's 34.9% rise.

Analysts said the data may give Beijing grounds to fend off US pressure for faster currency appreciation ahead of Chinese President Hu Jintao's visit to the United States next week.

"Imports are much stronger than we have expected, indicating that the domestic investment and internal demand are mainly pushing up domestic consumption," said Wang Han, an economist at advisory firm CEBM in Shanghai.

Figures showed that the surplus for 2010 as a whole had fallen for a second consecutive year, down 7% on 2009 levels to $183.1bn.

Many US politicians and economists accuse China of manipulating the value of the yuan in order to boost its net exports at the expense of its trading partners.

A bill is set to go before the Senate that would call for retaliatory trade sanctions against countries such as China that intervene to weaken their currencies.

China relaxed the yuan's fixed exchange rate against the dollar in June, but since then it has been allowed to appreciate by less than 3%.

Source: http://www.bbc.co.uk

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

Asian Stocks Advance as Japan Machinery Orders, Intel Sales Beat Estimates

Asian stocks rose, sending the regional equity benchmark to its biggest gain in five days, as reports from China, Japan and Australia showed the economic recovery is strengthening.

Fanuc Ltd. in Tokyo and Anhui Conch Cement Co. in Hong Kong gained at least 2.3 percent after Japanese machinery orders rose more than expected and the Chinese government said it will promote sales of construction material in rural areas. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, advanced 3.5 percent as Intel Corp. predicted fourth-quarter sales that beat analysts’ estimates. Chinese banks in Hong Kong gained after data showed lending last month unexpectedly increased.

The MSCI Asia Pacific Index rose 0.6 percent to 129.50 as of 7:28 p.m. in Tokyo, with all 10 industry groups increasing. About two stocks advanced for each that fell on the nearly 1,000-member gauge. The measure has advanced 2.4 percent this month on speculation central banks around the world will increase efforts to boost economic growth.

“The Asian market is determined by the stability of China’s economy and the data seems to suggest that China’s economy in the fourth quarter will be stable, so the outlook overall for Asia is pretty good,” said Steve Tse, a Hong Kong- based research manager at BEA Union Investment Management, which oversees $4.5 billion.

Hong Kong Advances

The S&P/ASX 200 Index gained as much as 0.8 percent in Sydney after Australian consumer confidence rebounded in October, according to a Westpac Banking Corp. and Melbourne Institute survey today.

Japan’s Nikkei 225 Stock Average climbed 0.2 percent while the broader Topix index declined 0.2 percent toward the end of the trading session as pessimism over Japan’s domestic economic outlook overshadowed gains by exporters on expectations the U.S. Federal Reserve will act to shore up the economy.

Hong Kong’s Hang Seng Index rose 1.5 percent to the highest level since June 2008 as China’s central bank showed the country’s banks extended 595.5 billion yuan ($89 billion) of new loans last month. The gauge fell by as much as 0.4 percent earlier, led by developers, after Chief Executive Donald Tsang said the city would act to make housing more affordable.

Futures on the Standard & Poor’s 500 Index climbed 0.5 percent. The U.S. equity benchmark rose 0.4 percent to 1,169.77 yesterday after minutes of the Federal Reserve’s meeting last month showed the central bank was prepared to buy more government debt to stabilize the recovery.

Machinery Orders

“If the Fed takes more steps to spur the U.S. economy, it will also boost the export-driven Asian economy and markets in the region,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $65 billion globally.

Fanuc, Japan’s No. 1 maker of industrial robots, gained 2.3 percent to 11,010 yen. Komatsu Ltd., a maker of heavy machinery, climbed 0.9 percent to 1,909 yen.

Japanese machinery orders rose 10.1 percent from July, the largest increase since December, the Cabinet Office said today in Tokyo. The median forecast of 28 economists surveyed by Bloomberg News was for a 3.9 percent decline. The data is an indicator of business investment in three to six months.

Anhui Conch Cement, a Chinese maker of construction materials, rallied 7.8 percent to HK$36.50 in Hong Kong. China National Building Material Co., a producer of fiberglass and dry wall, jumped 10 percent to HK$19.92.

China Exports

China will start trials of a program to promote sales of construction materials in rural areas, the Ministry of Housing and Urban-Rural Development said in a statement on its website yesterday. The trials, focusing on cement, are taking place in the provinces of Shandong and Ningxia, according to a statement dated Sept. 29 and posted to its website today.

Exports in China, the world’s fastest growing major economy, rose 25.1 percent from a year earlier and imports climbed 24.1 percent, the customs bureau said on its website today.

Hynix increased 3.5 percent to 23,400 won in Seoul and Advanced Semiconductor Engineering Inc. rose 3.3 percent to NT$24.75 in Taipei. Tokyo Electron Ltd., the world’s No. 2 semiconductor-equipment maker, gained 1.3 percent to 4,550 yen.

Intel, the world’s biggest chipmaker, said revenue for the fourth quarter will be $11.4 billion, plus or minus $400 million. Corporations and households in less developed markets bought more computers, helping the company weather slumping demand among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.

‘Sustainable Rally’

Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, gained 1.3 percent to NT$114.50 in Taiwan. The Commercial Times reported that the company raised manufacturing prices from this month for its largest clients including Apple Inc., Nokia Oyj, Microsoft Corp. and Sony Ericsson Mobile Communications AB.

The MSCI Asia Pacific Index has risen 7.5 percent this year on speculation growth in profit will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks in the gauge trade at 14.2 times estimated profit on average, compared with 13.9 times for the S&P 500 and 12 times for the Stoxx Europe 600 Index.

Chinese banks rose in Hong Kong today after the People’s Bank of China said new local-currency lending was 595.5 billion yuan last month. That compared with the median 500 billion yuan forecast in a Bloomberg News survey of 18 economists.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, rose 2 percent to HK$6.05. China Construction Bank Corp., the country’s second-largest bank, advanced 2.6 percent to HK$7.17. Bank of China Ltd., the nation’s fourth- largest bank by assets, increased 2.6 percent to HK$4.36.

“The growth in the Chinese lending data helped boost sentiment in the banks,” said Derrick Tan, a sales trader at Citic Securities Hong Kong Co. “The rally in Hong Kong looks sustainable even with the index above 23,000 due to prospects of further quantitative easing.”

Source: www.bloomberg.com