Chinese economy

[waltky]

Looks like dey got the same kinda politicians we have over here...

ANALYSIS: Local government borrowing in China threatens economy
Mon, Jan 09, 2012 - Local governments across China have borrowed billions of dollars to build bridges, apartments and shopping malls, leaving many insolvent and endangering the country’s financial system, analysts say.

While the central government in Beijing is in good financial shape — it has a relatively small budget deficit, a huge trade surplus and the world’s largest foreign exchange reserves — it is a different picture outside the capital. Local governments had borrowed 10.7 trillion yuan (US$1.7 trillion) — 27 percent of GDP — by late 2010, according to official data, though ratings agency Moody’s believes the figure is underestimated by 3.5 trillion yuan. Several provinces have since published reports showing their debt-to-GDP ratio was higher than the national figure.

Moody’s believes that between 8 percent and 10 percent of loans made by Chinese banks will never be recouped. “Debt across the board is rising very quickly,” weakening the banking system, said Michael Pettis, a specialist in Chinese financial markets at Peking University. “But any attempts to slow its growth results in a rapid reduction of investment and [economic] growth.” China’s total public debt — including the central and local governments — stands at 68 percent of GDP, well below Italy’s ratio of 120 percent or Japan’s, which stands at more than 200 percent.

However, when it comes to local authorities, the key concern is repayment. To meet their commitments, local governments need to generate income from land sales, which is fueling unrest in the world’s second-largest economy as residents increasingly complain that land is being unlawfully seized. Such corruption allegations have culminated in protests, such as the one in Wukan, Guangdong Province, last month, where villagers staged a revolt against authorities they said had been stealing their land for years.

Another source of income is from infrastructure projects, many of which are not profitable or legal. Investment in highways, shopping malls and apartment buildings has been a key driver of the economy in recent years, especially since the 2008 global crisis, when Beijing ordered banks to open the credit valves to spur activity. “Over the past couple of years, more than half of Chinese GDP has been generated by investment in fixed assets” such as factories and roads, Tsinghua University economics professor Patrick Chovanec said. There are “things that make economic sense, but are not commercially viable” such as roads or hospitals that should have been funded by taxpayer money, he said.

ANALYSIS: Local government borrowing in China threatens economy - Taipei Times

 

[Unkotare]

The long-anticipated correction to China's economy may be underway, and it may have very serious consequences.

 

[uscitizen]

No more iPhones!!!

 

[waltky]

Will be interesting to see if this works out...

Analysis: China developers launch funds to bridge finance gap
15 Jan.`12 – China's fledgling real estate investment fund market could see a surge of activity in 2012 as property developers launch their own vehicles in a desperate bid to bridge an estimated $111 billion financing gap in the year ahead.

A government-led clampdown on bank, bond, equity and trust market financing for real estate has left developers with little choice other than to set up their own funds, which have raised barely 10 percent of the sum in the past two years that needs to be found to refinance maturing debt in 2012. On the upside, China's high net-wealth families still favor property investment and funds give them an alternative to buying the physical asset while retaining exposure to the sector. "Of course, it will take time, but in the next decade, you will see the Chinese property market become more institutionalized," Frank Marriott, Savills' (SVS.L) senior director of real estate capital markets for the Asia-Pacific, told Reuters.

Time is not on the developers' side. Slowing sales and falling prices are hitting just as refinancing pressures are soaring. Analysts widely expect industry consolidation to accelerate in 2012 and some players, even big ones, will have to sell assets and quit the market. About $2.2 billion of syndicated property loans and club deals will become due this year, according to Thomson Reuters data, while a further 117 billion yuan ($18.6 billion) needs to be found to repay maturing real estate trusts. Add in the other credit lines that need repaying and developers need to find over 700 billion yuan this year, according to Hua Xia Times, a Chinese business newspaper in Beijing.

Major developers such as China Overseas Land & Investment (0688.HK), Gemdale Corp (600383.SS) and Forte, are among the first firms to have launched their own funds. Others including China Vanke (000002.SZ), the country's biggest listed property firm by sales, chose to set up funds jointly with their peers to help each other survive tough times. And more will follow. "We must make more friends and widen our financing sources. That will help our future growth," Zhu Tong, chairman of Sun Real Estate, a mid-sized developer in Beijing, told an industry forum in Beijing last week.

A total of 29 property funds raised $4.1 billion in 2011, a big improvement on the $2.9 billion raised by 28 vehicles in 2010, according to consultancy Zero2IPO. Industry analysts expect more than $6 billion will be raised in 2012 and that the property fund market will expand at an annual rate of 40-50 percent over the next few years. The funds target wealthy entrepreneurs, with an investment threshold of 10 million yuan and above and are expected to offer annual returns of at least 25 percent, said Fu Zhe, a Zero2IPO analyst in Beijing. "Private investors still have a strong interest in the property sector as there are really not many other options for them," Su Xin, chairman of Go-high Investment, which invests in commercial real estate, told an industry forum last week.

More Analysis: China developers launch funds to bridge finance gap - Yahoo! News

 

[Wiseacre]

Keep in mind they're having a change in leadership at the top this year too. I wouldn't call it an election, the party is going to make he call, but maybe the incoming leaders will make some changes in how they manage the economy. Won't be good if they become more interventionist.

 

[waltky]

Granny gonna move her savings account to China...

China approves more foreign funds as economy slows
10 Mar.`12 - China has approved 23 foreign institutions to invest a combined $2.9 billion in the country's capital markets so far this year, the country's foreign exchange regulator said on Friday, picking up the pace of approvals as the economy shows signs of easing.

China has now approved a combined quota of $24.6 billion in investment by 129 foreign investors under its Qualified Foreign Institutional Investor (QFII) system, the regulator said. China introduced the QFII system in 2003. Beijing has been easing its controls on inbound investment recently as foreign capital inflows slow, in line with broader efforts to liberalize its capital markets.

"With the improvement in our international balance of payments and in order to further support capital market reforms, the State Administration of Foreign Exchange has moderately quickened the pace of approvals for QFII quotas," the regulator said in a statement on its website (»¶Ó­·ÃÎʹú¼ÒÍâ»ã¹ÜÀí¾ÖÍøÕ¾!). But the regulator also said it had cancelled QFII quotas for two foreign institutions and gave no further details.

Domestic media reported in January that China may soon finalize rules governing capital gains taxes on QFII and was soliciting opinions on a draft. China controls capital flowing in and out of the country to protect it against financial turbulence, although Beijing has repeatedly pledged to speed up its liberalization.

Source

 

[sparky]

seems China's one heckova bubble in the making.....~S~

 

[waltky]

China lowers its growth target...

Chinese economy reveals problems
Sat, Mar 24, 2012 - In his official report to the National People’s Congress on March 5, Chinese Premier Wen Jiabao said that China’s economic growth target for this year would be 7.5 percent. This is the first time in eight years that the State Council has set growth below 8 percent and is an indication that the current wave of economic expansion is beginning to ebb.

The yuan has been gradually but steadily gaining value ever since Beijing introduced currency reforms in June 2005. There was a pause in the yuan’s rise between the middle of 2008 and June 2010, following the global financial crisis, but its upward trend has picked up again after that. In the second half of last year, the European debt crisis caused a US dollar liquidity crunch around the world, driving the yuan up against the greenback, which in turn rose against other currencies. China’s exports were severely affected by the strengthening yuan. Exports surged 37.6 percent in January last year, but by December this rate had fallen to 13.4 percent. Exports further contracted in January this year. Although they rose again last month, taking the figures for the first two months of the year together, they only rose 7 percent. In other words, the rate of growth of China’s exports continues to fall.

The European debt crisis, combined with financial adjustments in the form of deleveraging by financial institutions around the world, has led to a tight supply of US dollars in global markets. Since October last year, foreign investors have been pulling out of China. On Nov. 7, the value of the yuan fell and although it rose again toward the end of that month, the fall had already prompted an outflow of “hot money” associated with interest arbitrage. According to unofficial estimates by currency traders, the capital outflow may have been close to US$400 billion. The yuan’s volatility on currency markets has had an impact on the mainly Hong Kong-based offshore yuan market. The market for “dim sum bonds” — ie, yuan-denominated bonds issued in Hong Kong — has been unstable, while the difference between the yuan’s offshore and domestic exchange rate reached 2 percent for a while. The SWIFT international interbank payment network warned of the risks of a yuan market collapse and advised member institutions to set up emergency response mechanisms should anything go wrong.

However, China’s real problems are domestic. Thanks to its longstanding trade surplus, China has accumulated huge foreign currency reserves. Its M2 money supply has grown by an average of more than 17.5 percent per year over the past 10 years, swelling 28.4 percent in 2009 alone. With inflation exceeding 6 percent last year and an average interest rate of 3.5 percent on one-year deposits, the real interest rate is negative. Consequently, market demand for lending is quite high. China’s central bank, the People’s Bank of China, was forced to introduce monetary-tightening measures, raising the reserve requirement ratio for lending institutions no fewer than 12 times to a high of 21.5 percent last year. At the same time, the central bank used bond issues and open-market operations to reduce the upward pressure on foreign currency reserves.

However, the most effective measure was direct credit regulation vis-a-vis banks’ prospective borrowers and loan types. Taking the central bank’s reserve of 79 trillion yuan (US$12.5 trillion) as of October last year, for example, 53.4 trillion yuan of it was lent out, 17 trillion yuan paid over to the state as a deposit reserve and 3.8 trillion yuan in the form of central bank bills, leaving just 4.8 trillion yuan in working capital available to the bank. If foreign investors were to withdraw US$400 billion from China, there would only be 2.3 trillion yuan in accessible funds left within the financial system. That is why Chinese financial institutions started feeling a cash squeeze from April last year onward. Although China has slightly eased its currency policy, it is hardly enough to resolve the money shortage.

MORE

 

[waltky]

Granny says dey oughta be bettin' on our own economy...

US Companies Betting Big On Chinese Economy
28 Apr.`12 - The Chinese economy is still growing far faster than the United States. These American companies are hoping to seize that opportunity to boost their bottom lines.

iPhone fever is finally touching down in China. The country has roughly 1 billion mobile phone subscribers -- the most in the world. It was no surprise then, when in February Apple CEO Tim Cook told investors, "We've been very, very focused on China."

Apple's sales in the country have more than quadrupled over the last year alone, totaling $12 billion in 2011. While U.S. customers still account for more than a third of the company's worldwide sales, China is inching up and now makes up about 12% of Apple's total revenue.

Earlier this year when Apple launched the iPhone 4S, the company had to shut down its Beijing and Shanghai stores as scuffles broke out among hundreds of devout fans waiting in line. That's a far cry from 2009, when Apple's launch of the first iPhone in China was generally regarded as a disappointment.

MORE

 

[waltky]

China feelin' global slowdown...

Downturn catches up to China
May 25,`12 (UPI) -- The global economic slowdown has begun to take a serious toll on the Chinese economy, a senior official said this week.

"The sharp slowdown in the economy has aroused the attention from policymakers," senior economist Zhang Liqun wrote on a government Web site, The New York Times reported Friday. Throughout the economic downturn that hobbled growth in the United States and Europe starting in 2007, the Chinese economy has remained the one most other nations could look upon with envy. But various reports suggest that may change.

A recent survey concluded that more than half of China's 70 largest cities were experiencing falling property values. Both the construction and retail sectors have suffered from slowdowns. Further, the country's purchasing managers index in April fell to 49.3 with figures under 50 representing a contraction -- a sobering statistic for an economy that relies heavily on exports.

A slowdown in China can quickly haunt other economies, as well. China is also a major importer of a long list of raw materials for production and a top buyer of agricultural commodities. China is not just a seller. It is an important customer, too. "We didn't really feel the global financial crisis, but this year, we've really felt it -- I don't see a solution unless people start buying," said Sun Yufang, a wholesale dealer of household appliances in the city of Xian.

Read more: Downturn catches up to China - UPI.com

 

[Trajan]

I said it last year, china's phenomenal growth was basically a never ending stimulus by the commie gov. by fiat...because they provide heavily massaged stats we are left to parse electricity usage and rail car and ship loading to guesstimate their econ. output at times and general level of activity etc etc ...it has been going down for months.With Europe in the cusp of recession and an anemic American econ. picture......I think we are in for our worse year since 09.

 

[ShackledNation]

Chinese economic growth is based on malinvestment and a large bubble economy. It will pop, and do some serious damage to the world economy when it does.

 

[EdwardBaiamonte]

Chinese economic growth is based on malinvestment and a large bubble economy. It will pop, and do some serious damage to the world economy when it does.

in theory this should have been true
but you can't hide the 30 years of 10% growth they have experienced.

What we have to admit is that now we know enough about macro economics to avoid serious very serious recessions and depressions.

If the USA survives this crisis Bernanke will go down in history as the greatest central banks of all time by far and China's 30 years boom will go down as the greatest economic miracle in capitalism short but incredible history .

 

[ShackledNation]

Chinese economic growth is based on malinvestment and a large bubble economy. It will pop, and do some serious damage to the world economy when it does.

in theory this should have been true
but you can't hide the 30 years of 10% growth they have experienced.

What we have to admit is that now we know enough about macro economics to avoid serious very serious recessions and depressions.

If the USA survives this crisis Bernanke will go down in history as the greatest central banks of all time by far and China's 30 years boom will go down as the greatest economic miracle in capitalism short but incredible history .

Chinese is experiencing growth due to the freeing up of its markets. But much of it lately is just fueling a bubble. This isn't simply theory, it is reality. There are ghost towns in China that have been built with government money that have nobody living in them.

It is the lack of sensible macroeconomics that leads to these booms and busts in the first place. To say Bernanke is some savior is absurd. If anything he is delaying the inevitable. Spending 16 trillion dollars bailing out banks and corporations around the world is not the way to prosperity.

 

[mudwhistle]

bump

 

[Middleoftheroad]

Chinese economic growth is based on malinvestment and a large bubble economy. It will pop, and do some serious damage to the world economy when it does.

in theory this should have been true
but you can't hide the 30 years of 10% growth they have experienced.

What we have to admit is that now we know enough about macro economics to avoid serious very serious recessions and depressions.

If the USA survives this crisis Bernanke will go down in history as the greatest central banks of all time by far and China's 30 years boom will go down as the greatest economic miracle in capitalism short but incredible history .

Chinese is experiencing growth due to the freeing up of its markets. But much of it lately is just fueling a bubble. This isn't simply theory, it is reality. There are ghost towns in China that have been built with government money that have nobody living in them.

It is the lack of sensible macroeconomics that leads to these booms and busts in the first place. To say Bernanke is some savior is absurd. If anything he is delaying the inevitable. Spending 16 trillion dollars bailing out banks and corporations around the world is not the way to prosperity.

There is no real bubble in China. If they wanted they could go through and demolish those towns and be right back where they were. Their federal level government has no debt problems at all, in fact, they own more in foreign debt then they owe. They could liquidate all their foreign assets, and pay off all their debts and end up with a surplus. Their local levels have some trouble, but its not really a problem when their federal level is overflowing with cash and securities.
Those were built as a type of Stimulus to negate the downturn in 2008-2009. It worked. China only went through a very mild slowdown in their GDP growth rate. What it accomplished was to negate any fear of a recession in their country, and eliminated any effects of the recession.
Was it a total waste of money and resources? Absolutely. Could it have been better spent? Definetly. Did it really help future growth? Not really.
As for a bubble? I don't see it. A bubble is because something is over inflated in price relative to what it should be at. What is over priced? The answer; nothing. Their government is filthy filthy rich. They had the money to blow, so they blew it. Their government is still filthy filthy rich. So where is the problem?

 

[Unkotare]

http://www.nytimes.com/2011/12/19/opinion/krugman-will-china-break.html

 

[Unkotare]

What Happens When China

 

[Unkotare]

The debate about Chinese asset prices: A bubble in Beijing? | The Economist

 

[Unkotare]

Not Enough Provisions for China Banks Bad Loans - CNBC