REFLECTIONS IN A CHINESE EYE

China’s slowdown: the impact on Africa

A lot of ink has been spilled of late discussing the global impact of China’s slowing economic growth. But there has been little discussion however about how African economies will be affected.

Now, ratings agency Standard and Poor’s has stepped into the gap with a report published this week. It says, in short,  that the China slow down may be bad for metal exporters, but opportunities should present themselves for African manufacturers.

The export of metals, agricultural commodities and petro-chemicals has been the backbone of most of sub-Saharan Africa’s more successful economies over the past decade, and China has been a key customer.

The IMF estimates that it was responsible for almost all of the world’s consumption increases for copper, lead, nickel, tin and zinc between 1995 and 2011. In 2010, it consumed 40 per cent of the world’s base metals. On the back of Chinese demand – which rebounded spectacularly following the 2008 crash – African commodity exporter nations have enjoyed strong growth even as developed markets have remained in a slump.

Read more FINANCAL TIMES

Ancient villages welcome investors

An ancient village in Suzhou, Jiangsu province. Qi Zhenlin / for China Daily
New regulations on the protection of ancient villages will allow more private capital to be invested in historically important sites in Suzhou, Jiangsu province which is home to the largest number of century-old villages in China.

According to the regulations, historical houses in these villages can be acquired from the original inhabitants by the government or State-owned enterprises and then turned over to private investors for either renovation or repurchase.

The regulations state that this system will better protect the houses and allow them to be turned into small enterprises, such as tourist attractions, to raise money for their continual upkeep.

With more than 17 nationally and provincially authorized "ancient villages", Suzhou was, in 2005, one of the first cities in China to open the door to private capital to protect its historical sites. The city government said private investment can make up any financial shortfall to help preserve the ancient villages.

A total of 150 million yuan ($23.5 million) has been spent by the local government on renovation and infrastructure works to preserve the ancient villages over the past seven years.

Read more at China Daily

China Does Capitalism Better Than America

China Does Capitalism Better Than America from Intelligence Squared U.S. Debates on FORA.tv

China Considers Offering Aid in Europe’s Debt Crisis

Prime Minister Wen Jiabao, left, with Chancellor Angela Merkel of Germany, who is on a three-day visit to China.By KEITH BRADSHER and LIZ ALDERMAN

HONG KONG — Premier Wen Jiabao said Thursday that China would consider working with the International Monetary Fund to help shore up Europe’s finances. But he left unclear whether China was willing to drop conditions that so far have made its proposed help unappealing to European nations.

While Chinese leaders have pledged not to link political demands to financial investments, they have sought concessions, such as getting the European Union to relax trade strictures against low-cost Chinese goods. Mr. Wen’s comments came at a Beijing news conference after he met with Chancellor Angela Merkel of Germany on the first day of her three-day visit to China.

Mrs. Merkel is the first of several European leaders scheduled to visit China this month, as China’s huge holdings of foreign exchange reserves have begun to give it financial influence that could potentially rival Washington’s.

Mr. Wen said that Chinese officials were studying whether the country should be “involving itself more” in helping Europe solve its debt troubles by investing in the region’s two big rescue packages: the existing European Financial Stability Facility and the planned European Stability Mechanism. China’s contributions could be channeled through the I.M.F., he said.

Lending money to the I.M.F. to, in turn, relend to Europe would effectively transfer more of the risk of any European debt default to the I.M.F. China has previously made clear that it would need to buffer the risk of lending more money to Europe.

Russia in December embraced the lending approach now being mulled by China, but Moscow was willing to lend the I.M.F. only $20 billion — an amount of limited help as Europe tries to expand its bailout funds by hundreds of billions of dollars.

Britain has also said it would consider sending more money to the I.M.F. to help with Europe’s troubles — but only after the Europeans demonstrated they were finally taking bold steps to stem the contagion.

China had $3.18 trillion in foreign exchange reserves at the end of December, dwarfing the reserves of every other country and potentially giving it the financial firepower to make a significant contribution.

Read more at The New York Times

Publish

Yuan drain as China's rich move west

Up to half of China's millionaires considering emigrating for better education, cleaner air and greater stability

 

A gold-plated Infiniti sports car being tested in Nanjing. China is predicted to become the world's largest luxury goods market by 2020. Photograph: STR/AFP/Getty Images

Sherry Wang misses many things about China. It's taken time to get used to western food, and day-to-day communication is harder; even requesting goods in a convenience store can be a struggle.

But the wealthy entrepreneur has no regrets about her decision to emigrate to North America two years ago.

The education system "makes my son happy every day", she said, by encouraging personal development, in contrast to Chinese schools' rigid focus on grades. And the family no longer fret about the safety of their food.

Wang's choice is part of a much broader trend: China's rich appear to be increasingly keen to go west. Almost half of China's millionaires are considering moving abroad, according to a survey released recently by Hurun – best known for publishing a Chinese rich list – and the Bank of China.

The report found that 46% of the 980 people surveyed had thought about emigrating; 14% had done so already or applied to do so. Most wanted a better education for their children. The findings chimed with research by China Merchants Bank and consultants Bain this spring which suggested that more than a quarter of those with more than 100m yuan (about £10m) had moved abroad and almost half were considering it.

Read more at The Guardian

Will Chinese shoppers save the world?

As economic growth in the US and Europe has stuttered, the world has looked for a new saviour among China’s consumers.

Trouble is, the share of private consumption in China’s GDP is inordinately low – just about 33 per cent. Moreover it has come down in the past decade or so from about 45 per cent of GDP to 33 per cent today. By contrast, in most economies, including some of China’s East Asian neighbours, private consumption is about 50 per cent of GDP.

Yet luxury goods companies, automakers and many other multinationals have seen larger shares of their sales coming from China in the past couple of years than ever before.

How to reconcile this paradox? Arthur Kroeber, managing director of Gavekal Dragonomics, an economic consultancy, has an explanation. He argues that China’s private consumption has actually accelerated from around 7 per cent in the late 1990s to around 10 per cent a decade later (although growth did slow noticeably in 2010). Kroeber declares that China’s real per capita consumption growth in recent years is “the fastest of any country in history”.

Among the many clouds looming over the world’s economy, it is reassuring to have a ray of sunshine to look ahead to. Kroeber goes further, arguing that China’s very high investment rate of 46 per cent, also the highest in recorded history, may also be a precursor to economic super-stardom rather than the precursor to a crash as several sceptical observers believe it is. The US and Germany ( with investment ratios of more than 20 per cent of GDP when they were industrialising rapidly ) and subsequently Japan and South Korea (more than 30 per cent) also invested more as a percentage of their GDPs than ever seen before, he argues. They then went on to be economic behemoths.

Read more at beyondbrics

Is The Chinese Yuan 300% Undervalued Against The Dollar?

You may have heard many times in popular media that the Yuan is manipulated versus the dollar, and if so you have probably heard the number 40-50% tossed around. But is it possible that the Yuan is dramatically more manipulated than anyone has been led to believe? The chart below shows that the Yuan was trading at a 300% premium to today's price in the early 1980s. So, thinking this through logically, can we say that China is more or less economically powerful today or in the early 1980s?

That should be an easy answer. Obviously China is a much larger economic power than it was back then. It also has a more stable government. So this is evidence that the true market-driven value or exchange rate for the Yuan should probably set the Yuan even more valuable than it was set at in the early 80s. In the early 80s it was set at roughly 2 Yuan per dollar, and it is currently set at over 6 Yuan per dollar. Some would argue that the Yuan should be set to a 1 to 1 ratio with the dollar, or close, just as the Euro is. This theory also helps explain the massive rise in the price of gold: namely the Chinese Yuan is at least 300% undervalued versus the dollar!

(Click chart to expand)


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours

 

Seeking Alpha

'The Inevitable Superpower: Why China's Dominance Is a Sure Thing'

By Arvind Subramanian

Arvind Subramanian is senior fellow at the Peterson Institute for International Economics and at the Center for Global Development. This article is adapted from his book Eclipse: Living in the Shadow of China's Economic Dominance (2011).

To debtors, creditors can be like dictators. Governments in financial trouble often turn to the International Monetary Fund as supplicants, and acting at the behest of its own major creditors, the IMF often imposes tough conditions on them. After the Asian financial crisis of the late 1990s, Mickey Kantor, U.S. trade representative under President Bill Clinton, called the organization "a battering ram," because it had served to open up Asian markets to U.S. products. During the 1956 Suez crisis, the United States threatened to withhold financing that the United Kingdom desperately needed unless British forces withdrew from the Suez Canal. Harold Macmillan, who, as the British chancellor of the exchequer, presided over the last, humiliating stages of the crisis, would later recall that it was "the last gasp of a declining power." He added, "perhaps in 200 years the United States would know how we felt."

Is that time already fast approaching, with China poised to take over from the United States? This is an essential question, and yet it has not yet been taken seriously enough in the United States. There, this central conceit still reigns: the United States' economic preeminence cannot be seriously threatened because it is the United States' to lose, and sooner or later, the United States will rise to the challenge of not losing it. China may be on its way to becoming an economic superpower, and the United States may have to share the global stage with it in the future. But, the argument goes, the threat from China is not so imminent, so great, or so multifaceted that it can push the United States out of the driver's seat.

Thus, the economist Barry Eichengreen concludes in his recent history of different reserve currencies, Exorbitant Privilege, "The good news, such as it is, is that the fate of the dollar is in our hands, not those of the Chinese." And in December 2010, as he was leaving the White House as President Barack Obama's national economic adviser, Larry Summers said, "Predictions of America's decline are as old as the republic. But they perform a crucial function in driving the kind of renewal that is required of each generation of Americans. I submit to you that as long as we're worried about the future, the future will be better. We have our challenges. But we also have the most flexible, dynamic, entrepreneurial society the world has ever seen." In other words, if the United States can get its economic house in order, it can head off the Chinese threat.

But such views underestimate the probability that China will be economically dominant in 20 years. And they reveal a one-sided, U.S.-centric perspective: that world dominance will be determined mostly by the actions of the United States, not those of China. In fact, the outcome of this race is far more likely to be shaped by China.

THE WORLD IN 2030

Broadly speaking, economic dominance is the ability of a state to use economic means to get other countries to do what it wants or to prevent them from forcing it to do what it does not want. Such means include the size of a country's economy, its trade, the health of its external and internal finances, its military prowess, its technological dynamism, and the international status that its currency enjoys. My forthcoming book develops an index of dominance combining just three key factors: a country's GDP, its trade (measured as the sum of its exports and imports of goods), and the extent to which it is a net creditor to the rest of the world. GDP matters because it determines the overall resources that a country can muster to project power against potential rivals or otherwise have its way. Trade, and especially imports, determines how much leverage a country can get from offering or denying other countries access to its markets. And being a leading financier confers extraordinary influence over other countries that need funds, especially in times of crisis. No other gauge of dominance is as instructive as these three: the others are largely derivative (military strength, for example, depends on the overall health and size of an economy in the long run), marginal (currency dominance), or difficult to measure consistently across countries (fiscal strength).

Read more at Peterson Institute for International Economics

 

Pigs ‘fly’ from Britain to China in unlikely export deal

Selling pigs to China – live piglets, as well as the trotters, ears and snouts so favoured by Chinese – could significantly help the U.K.’s agriculture industry.

Photograph by: JASON LEE, REUTERS

SHANGHAI – It took five years to negotiate a deal to send British pigs to China, an idea that ranks up there with sending coals to Newcastle and snow to the Eskimos. China already raises half of all the pigs in the world, and the Chinese word “meat” is automatically understood to mean pork unless a different animal is specified.

But selling coals to Newcastle was a profitable enterprise for Timothy Dexter in the 17th century and again for the American National Coal Association in the 1990s.

And selling pigs to China – live piglets, as well as the trotters, ears and snouts so favoured by Chinese – could significantly help the U.K.’s agriculture industry. An agreement signed last November is worth 45 million pounds over the next five years, according to the British government.

“In terms of overall exports, it is a pin prick, but for the companies in this sector in the U.K., it is hugely important,” said Stephen Philips of the China Britain Business Council.

“We have signed several million pounds worth of deals so far,” said Dominic Stanton at the British embassy in Beijing. “And we have more lined up.”

“The Chinese are keen to accelerate the modernization of their agriculture and British pigs need one-third less feed, produce half as much manure and need much less land. They also have more live births in a litter,” he added.

ACMC and JSR Genetics, pig breeders based in Driffield in East Yorkshire, have been the two main beneficiaries of the deals, which have seen 800 pigs sent over so far.

In order to take advantage of the Asian market, some British farms are setting up in Southeast Asia, a move that also offers them a hedge if the U.K. is hit by another wave of disease.

Other British companies, meanwhile, are helping the Chinese improve their yields of soft fruits and modifying crops to be more drought-resistant. “The biggest concern in China is how can farming be more profitable so that people stay on the land,” said Dr Nigel Kerby, the head of Mylnefield Research Services in Scotland. “In poor areas, they want to know how can they grow high value crops.”

After 50 years of collective farming in China, there has been little incentive to improve yields. But as more and more Chinese move to cities, leaving only the elderly to farm the land, the country faces a problem keeping up with the expanding appetites of its people.

With a thinning supply of food, and rising prices, a wave of food safety scandals has emerged in the past few years as farmers try to maximize their profits by using such additives as melamine in milk and clenbuterol in pork.

Read more: http://www.montrealgazette.com/Pigs+from+Britain+China+unlikely+export+deal/5317621/story.html#ixzz1WHDdDEHw

China’s Grassroots Movement Toward Greater Freedom

Article at a glance
Over the last few decades, unorganized and leaderless grassroots • movements in China have led to the bottom-up expansion of civil rights.
A grassroots social revolution is taking place in China through • the rise of entrepreneurship, migration of millions from the countryside to cities, and an explosion of information available to ordinary people.
This grassroots social revolution is moving China towards a more • liberal society, regardless of whether the government remains in its current illiberal mode.

Introduction
In 1987, Deng Xiaoping admitted that the great success of township and village enterprises (TVEs), which first injected market principles into the state-run economy, took him and his Communist Party colleagues by surprise. He said: “The diversity of production, commodity economy, and all sorts of small enterprises boomed in the countryside, as if a strange army had appeared suddenly from nowhere. This is not the achievement of our central government.”1 This “strange army” was composed of millions of farmers whose ingenuity and desire to pursue their own ends freely made their individual entrepreneurial efforts add up to an unprecedented economic advancement of the country as a whole.2
The success of this unorganized, leaderless grassroots movement emphasized fatal flaws of the government’s earlier top-down initiatives, such as the Great Leap Forward. The freedom-seeking spirit of the ordinary Chinese has been driving the country’s economy toward greater openness and reliance on the market over the last three decades.
This spirit remains healthy today, and it has affected many elements of daily life. Whether resisting the old restrictions on freedom of movement or seizing individual liberties gradually conceded by the government, grassroots movements have fundamentally altered key elements of China’s one-party regime and its society at large.
The Chinese Government reacts rather than leads in this transformative process. Whenever the regime is slow to adjust, public dissatisfaction is no longer restricted to low whispers in the back rooms of houses; it takes place on the streets, in online chat rooms, and in courts. A growing number of Chinese constitutional scholars and intellectuals advance the cause of civil rights and continued liberalization by giving various grassroots movements an increasingly louder voice.
The question now is how far this grassroots liberalization can go and what it means for the long-term future of China’s current political and economic system.

Key Elements of China’s Bottom-up Transformation

China’s ongoing bottom-up transformation is about people seeking liberty on a daily basis. In the economic sphere, the result of this pursuit has been phenomenal growth despite single-party rule; but much talk on China’s economic rise as a new state-led development model does not fit reality. The story is simple: when people have liberty, limited as it may be, development occurs. Milton Friedman was right to point out the failure of central planning around the world to achieve development objectives, which is attributable, at least in part, to central planning’s political implications that trample individual freedom and rights.3 Another view useful in explaining China’s economic success is that of Friedrich von Hayek and his theory of spontaneous order. When ordinary people, through a principle of self-organization, share and synchronize personal knowledge, they create local markets and reduce formal power structures of the communist state.
The Chinese grassroots transformation is also evident in the socio-political sphere. Although far from altering the entrenched structures of the state, various movements managed to expose many contradictions inherent in the authoritarian system, which claims to represent “the people.” One avenue for exposing these contradictions is highlighting discrepancies between the letter of the Chinese Constitution and the practice of the state’s conduct. This strategy has become common among grassroots reformers. In May 2003, for instance, three young Chinese legal scholars wrote a petition asking the government “to enforce personal rights that are guaranteed in the Constitution.”4 Chinese people pursuing their rights create a new social milieu – the beginning of grassroots constitutionalism. Individuals bravely fighting for their rights are, in effect, writing a new Chinese Constitution.
Having awareness of constitutional civil rights and economic freedoms and making the government respect both will not be quick or easy; still the Chinese people have made substantial inroads. The tipping point came when millions violated the collectivization and registration laws in search of a better life. More and more Chinese are taking the next step in asserting their rights. They want greater freedom of information and more personal choices and they take government officials to court seeking justice and equal treatment.

Read more at Center for International Private Enterprise

Hamish McRae: We still don't grasp how little we matter to China

As much as David Cameron may try to impress Wen Jiabao, the truth is that China has far more important economic partners than Britain

There is a mismatch. We in Britain perceive that it is our right, even our responsibility, to criticise Chinese human rights. In China such comments are seen as intrusive and offensive. When such matters are raised at a time of trade negotiations, as they have been this week during the talks between David Cameron and his counterpart Wen Jiabao, the disjunction leads to an obvious question. Are we acting in our self-interest to jeopardise exports to China by striking such a tone?

It is an obvious question but surely an overly simplistic one. True, our financial relationships with China are hugely important, both as an inward investor, where we are roughly parallel with Germany, and as an exporter. But there are other relationships that are just as important, maybe more so. There are more students from China in Britain than in any other country, more even than the United States. We have the historic link with China through Hong Kong, which became a model for the Chinese mainland free trade and enterprise zones, which in turn triggered the country's astounding economic take-off.

In any case, all experience of Chinese economic relations, whether in Britain and in other countries, is that politics is not allowed to get in the way of economics. The Chinese will pursue what they feel is their self-interest and that is that. So it is not really a question of our damaging trade relations with them; it is more a question of our still not quite grasping the scale of what is happening in China – or how unimportant our views are to the Chinese.

The economic facts are becoming more generally appreciated. This newspaper yesterday had a report on the new high-speed rail network that China was building: there will be more high-speed links than the rest of the world put together. Many people are aware of the various reports predicting that China is set to become the world's largest economy within 20 years, maybe much sooner. Some people know that China has become the world's largest emitter of carbon dioxide and (I prefer this one) that it produces two-thirds of the world's socks. And most people are aware that China is scooping up natural resources from all over the world, particularly Africa. But while we sort-of understand all this, these are still just statistics. We don't understand the shift in perception and in power.

Two things have happened. One has been the gradual, relentless overhauling of the West by China, passing France, Britain, Germany and last year, Japan in economic size. The other has been the way the recession has speeded up the shift. It changed everything. Not only did China keep growing, unlike the rest of us. Its banks did not need rescuing. Living standards kept on rising. And now, as we stumble out of recession, China's debts are lower than those of any G7 economy, so it is not held back as we all are by the need to pay back debt.

Read more at The Independent

China's Rising Wages Propel U.S. Prices

HONG KONG—Wages are rising in China, heralding the possible end of an era of cheap goods.

For the past 30 years, customers would ask William Fung, the managing director of one of the world's biggest manufacturing-outsourcing companies, to make his products—whether T-shirts, jeans or dishes—cheaper. Thanks to China's seemingly limitless labor force, he usually could.

Now, the head of Li & Fung Ltd. says the times are changing. Wages for the tens of thousands of workers his Hong Kong-based firm indirectly employs are surging: He predicts overall, China's wages will increase 80% over the next five years. That means prices for Li & Fung's goods will have to rise, too.

"What we will have for the next 30 years is inflation," Mr. Fung said. "A lot of Western managers have never coped with inflation."

The issue is likely to hover behind talks Monday, between Chinese and U.S. leaders in Washington at their annual Strategic Economic Dialogue. Currency and debt issues are expected to dominate the agenda. But there are signs that the low labor costs—and cheap currency—that led to China's huge trade surplus with the U.S. could be reaching a tipping point. This comes amid pressure from rising wages as China's working-age population begins to decline.

For decades, plentiful Chinese labor kept down costs of a range of goods bought by Americans. Even as politicians in Washington accused China of hollowing out the American manufacturing sector, cheap DVD players, sweaters and barbecue sets were a silver lining for consumers who grew accustomed to ever-lower prices. China also kept down the value of its currency, giving domestic exporters a competitive edge.

"Inflation has been damped pretty dramatically in the U.S. because it exported work to China and other places at 20% or 30% of the cost," said Hal Sirkin, a consultant at Boston Consulting Group. The years of dramatic reductions in costs are over, the firm says.

Li & Fung traces the start of rising wages to the "Foxconn Effect." Foxconn is the trade name of Hon Hai Precision Industry Co., maker of iPads for Apple Inc., and computers for Hewlett-Packard Co., among others. After a string of worker suicides last year at one of its China plants spurred Foxconn to defend its treatment of employees, the company raised wages 30% or more in a bid to improve worker conditions. That raise came as workers at other factories, including staff at a Honda Motor Co. parts plant, went on strike for higher pay.

read more at  The Wall Street Journal

Can China really dump the dollar?

The U.S. dollar is on our minds these days because it is weak and getting weaker.  We hear reports that Chinese officials are actively cautioning, scolding and remonstrating the U.S. on its profligate ways because China has a few trillion in reserves, much of it invested in dollar-denominated securities.

And, the falling dollar and China’s big stake in dollar-denominated securities raises the question, “Will China dump the dollar?” For investors, I believe a better question is:

Can China really dump the dollar?

In terms of foreign currencies, I believe there are only two other actual currencies — the Euro and the Japanese Yen — that China could look to other than the dollar.  China’s financial reserves are big enough that the Chinese government has to have its foreign assets denominated in a very large, liquid currency. And, there are not too many of those around other than the U.S. dollar, the Euro and the Yen. For a variety of historical and cultural reasons, I doubt if the Chinese would seriously entertain putting most of their foreign currency and foreign assets holdings in the Japanese Yen, so the currency choice is between the dollar and the Euro.

Image source: Wikipedia Commons

The Chinese are investing in the Euro, but that is happening in an incremental fashion.  As long as the U.S. remains a significant trading partner for China’s exports, the dollar will be a major currency for Chinese central bank activities.  There are those who think the Chinese will dump the dollar and buy Euros on a wholesale basis, but that is unlikely.

Read more at MarketWatch

Beer Drinking and What It Says About China’s Economy

The average Chinese adult drank about a half a bottle of beer in 1961, less than the average resident of Iran. By 1991, consumption topped 27 bottles a year, but still lagged behind 117 other nations, according to the World Health Organization.

By 2007, the Chinese were drinking almost 103 beers per adult a year. While that’s still considerably less per capita than in beer gardens like the Czech Republic (where the average adult drinks about 471 beers a year) it’s enough to make China by far the world’s largest market for beer.

That story can be repeated for any number of consumer goods, of course. But what’s interesting about beer is that the trend is not likely to last. A paper by two economists at the University of Leuven, in beer-loving Belgium, finds that people drink more beer as their incomes rise, until they make about $22,000 a year.

Then they start drinking less beer.

Read more at The New York Times

The next 48 hours

By George Chen
The opinions expressed are the author’s own.

What might you do in the next 48 hours in China? A number of things — how about rushing to nearby supermarkets to stock up on soap and shampoo if you are a price-sensitive consumer?

No kidding!

Retail prices for those products are set to rise sharply in China from next month. At least two industry leaders — Procter & Gamble and Unilever — were reported by Chinese media to have decided to lift detergent and soap prices by up to 15 percent next month.

State television on Monday showed images of empty store shelves in some cities as residents raced to hoard P&G and Unilever products before the price rises went into effect.

However, officials and statisticians in Beijing seemed less worried about rising inflation. Last month, we heard that the spokesman of powerful economic the planner, National Development and Reform Commission, said inflation should peak in February. Then Yi Gang, deputy governor of People’s Bank of China, the central bank, assured investors that the government was confident that inflation would not to exceed the 4 percent target for the year.

It’s easy to speak but difficult to act. We know your target but the question is, of course, how will you make it happen? I mean in the market, for Chinese consumers, and not just for the sake of the statistics that are rapidly losing credibility among ordinary Chinese people as real life fails to improve.

In Hong Kong, things are no easier.

Read more at REUTERS

China Increases Down-Payment Requirement for Second Homes

BEIJING—China's cabinet raised the minimum down payment required on second-home purchases to 60% from 50% to further cool the property market amid wide expectation for further tightening measures to curb still high property prices, a statement posted Wednesday on the government's website said.

Apart from the down-payment requirement, however, most other measures listed by the State Council were a reiteration or a formalization of measures that have already been implemented, such as limits on home purchases in some cities.

Analysts said the decision isn't a big surprise, as the Shanghai stock market has also been sluggish in recent weeks because of unabated concerns about more fine-tuning in property-tightening measures, as well as further monetary-tightening measures.

Danny Bao, analyst from Daiwa Capital Markets, said that in the months ahead "fine-tuning in government policy is part of doing business in China's property sector."

At a meeting led by Premier Wen Jiabao, the cabinet claimed initial success in Beijing's move to curb property-market fever since the state council tightened control on home purchases last April. The cabinet said that since then "positive changes have emerged in the property market, with the trend of overly fast rise in property prices having been initially curbed," according to the statement.

Read more at The Wall Street Journal

Lost in China

DEAR CHONGQING,

To address a letter to a city of any kind is folly. To send a letter to a metropolis of your immensity -- 32 million residents! -- shows, as we say here in New York, chutzpah. Also it's a bit weird. And yet I'm writing anyway, because I don't quite know how else to get a handle on the six days I spent with you in October -- six days in which I felt embraced and ignored, beloved and rejected, entrapped and, in the end, liberated. Please let me explain:

When I stepped off the train from Chengdu, the laid-back capital of Sichuan Province 200 miles to the west, I felt (I imagined) just like one of the hundreds of thousands of Chinese migrants who flock from the countryside to your crowded streets every year: at once energized and terrified, awed and optimistic. All over, skyscrapers were rising, with spindly cranes adding new stories by the minute, their windowless walls vanishing in the mist (O.K., smog). Beyond them, when the sunlight strengthened, I could see the craggy outlines of mountains, and sense the distant dips that heralded the conjunction of the Jialing and Yangtze Rivers.

To lighten my load for the first day's wandering, I left my luggage in storage, then went next door to the bus station, where I muscled past the map vendors -- "Don't want," I told them in dicey Mandarin -- to find the No. 601 bus, which would take me into your heart. From my seat at the rear of the vehicle I gaped at your sheer physicality. Your streets curved and climbed, circling around gleaming, Prada-billboarded shopping malls and racing down through construction sites at whose edges I glimpsed neatly terraced vegetable gardens. As the bus crossed a bridge high above the muddy Jialing and curlicued through cloverleaf overpasses and tunnels toward what I took to be downtown Chongqing, I had to admit: You were not pretty, but I was enthralled.

I was also overwhelmed, just as I'd hoped. It had been a very, very long time since I'd felt so dominated by a city -- if I'd ever felt that way at all. Years of living in New York had inured me to the challenges (and wonders) of urban living, but years of travel had taught me that other people were still intimidated by cities: their size and density, their crowds, their dirt and chaos and almost arbitrary rules of conduct. Recently, I'd begun to ask myself: How would it feel to be a migrant abandoning the countryside for the urban unknown, or a small-town tourist facing off against the metropolis?

To find the answer I first had to find the right city -- no, the right mega-city, a place whose very city-ness was its attraction, whose size and structure warped reality like a black hole, whose impenetrability would reduce me to that gawking, dreaming yokel I maybe never was.

And then, last August, I read "Chicago on the Yangtze," an article in Foreign Policy magazine that laid out your brief but impressive history. A century ago, you were but a minor port on the Yangtze, a backwater of south-central China with a slightly different name, Chungking. But by World War II you'd become the Republic of China's temporary capital, and the postwar years saw enough growth that in 1997 you broke away from Sichuan Province to become what's humbly termed a "direct-controlled municipality" -- a heaving, swirling industrial nexus that upends our traditional notions of what constitutes a city. More than 30 million people spread through a mountainous, river-cut, quake-prone area twice the size of Switzerland, and you call yourself a mere municipality? Intrigued, I yearned to lose myself among such multitudes.

And for my first few hours, I did. I got off the 601 ... somewhere, and asked a passing schoolboy where to find lunch. He pointed me down a side street, where I discovered an ad hoc, open-air noodle shop and ordered a bowl, crimson with chili oil, fragrant with numbing, citrusy Sichuan peppercorns, studded with bits of pork and intestine. I added a dash of black vinegar and slurped it down, grateful to have had such a literally warm welcome.

From there I wandered. Up a tower to a defunct revolving restaurant, where I snapped photos of the hazy skyline. Into a shop selling warning signs for construction sites, where I bought a "Danger! High voltage!" placard. Through one of the few neighborhoods of historic and beautiful buildings, where viney-rooted trees scaled brick walls and brass plaques championed the deeds of Communist Party heroes. As afternoon began shading into evening, I arrived by chance at People's Square, a broad plaza where I heard the twanging of guitar and erhu, the two-stringed traditional instrument, and the warbling voice of an amateur chanteuse.

At first, I worried that I'd stumbled into a tourist trap. Then I looked around: there were no tourists. Nor had I seen any all day. The senior citizens making music beneath a sheltering tree were simply locals enjoying their favorite hangout. I sat down, listened to songs from (I think) the 1960s and was utterly charmed. Here in the heart of the sprawl, I'd found, well, heart.

The mood lasted only until the sun went down, which is when I began to make mistakes -- none catastrophic, but together they added up to misery. First, I found a hotel nearby that looked promising -- clean, affordable, well situated -- so I checked in, barely noticing that every other room on my floor was set up to host mah-jongg players.

Hungry, I set off for dinner -- and filled my belly with regret. Down the street, big groups clustered around caldrons of spicy broth, dipping meats and vegetables in to cook them; this was hot pot, Chongqing's specialty, a meal that is absolutely no fun to eat alone. Instead, I ate chili-slathered pork dumplings in the fluorescent glare of a noisy restaurant.

What I needed was new friends, so I grabbed a taxi and asked, in Mandarin, for an area with lots of bars. The glitzy night-life district into which I was deposited was all big, loud clubs (i.e., not my scene), and I resented the expensively dressed youngsters who moved so easily through the neon alleys. At the five-star hotels nearby, I asked concierges about quiet bars where I might meet people; they directed me to places I'd already rejected.

Finally, I returned to the hotel, where I discovered my floormates click-clacking away at mah-jongg. What's more, I could sense a hovering aura of sleaze: you don't play at 2 a.m. without gambling, and the men who bet big often have "company" for the night. (Ah, that explained the condoms in the bathroom!) Trying to make as little contact with the sheets as possible, I slept.

Read more: http://www.post-gazette.com/pg/10359/1113613-37.stm#ixzz19ExqLuMU

The ghost towns of China: Amazing satellite images show cities meant to be home to millions lying deserted

These amazing satellite images show sprawling cities built in remote parts of China that have been left completely abandoned, sometimes years after their construction.

Elaborate public buildings and open spaces are completely unused, with the exception of a few government vehicles near communist authority offices.

Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year in the country's vast swathes of free land.

The photographs have emerged as a Chinese government think tank warns that the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent.

 

Ghost city: Kangbashi was meant to be the urban centre for wealthy coal-mining community Ordos and home to its one million workers, but its roads are eerily empty and the houses stand vacant

 

The mostly empty city of Bayannao¿er, which boasts a beautiful town hall and World Bank-sponsored water reclamation building

Of the 35 major cities surveyed, property prices in eleven including Beijing and Shanghai were between 30 and 50 per cent above their market value, the China Daily said, citing the Chinese Academy of Social Sciences.

Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.

The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said.

Property prices have remained stubbornly high despite the government adopting a slew of measures since April including hiking minimum downpayments to at least 30 per cent and ordering banks not to provide loans for third home purchases.

Prices in 70 major cities were up 0.2 per cent in October from the previous month and 8.6 percent higher than a year ago, official data showed.

The increase came after prices gained 0.5 per cent month on month in September, which was the first increase since May.

Read more: http://www.dailymail.co.uk/news/article-1339536/Ghost-towns-China-Satellite-images-cities-lying-completely-deserted.html#ixzz18UvcYuPR

Does China Face a ‘Peak Coal’ Threat?

 

China’s ravenous appetite for energy puts the country at risk of reaching a point of  “peak coal,” when demand for coal will outstrip domestic production capacity, a growing number of experts believe.

China now consumes approximately 47 percent of coal produced globally but by most estimates has just 14 percent of global coal reserves. Meanwhile, demand has risen by about 10 percent per year for the last decade, putting the country on an “unsustainable” path, according to a recent report by C.L.S.A. Asia-Pacific Markets, a Hong Kong-based brokerage firm.

Coal might be abundant globally, but if China cannot substantially raise its domestic production, increasing imports enough to meet demand may be hard to accomplish in the short-term, putting the country in a potential supply bind.

“I think China is the vulnerable player here — they don’t really have a lot of options,” said David Fridley, a staff scientist at the Lawrence Berkeley National Laboratory and deputy leader of the laboratory’s China Energy Group.

Evidence that China may be nearing an ultimate limit on production can be seen in rapidly growing imports and a recent proposal by a top energy official that the country cap coal production at around 3.6 billion tons per year beginning in 2011. China is on pace to produce nearly 3.4 billion tons of coal domestically in 2010, according to a recent Reuters analysis, and will import about 150 million tons this year.

Read more at The New York Times

Explaining China’s food price dissatisfaction

Many Chinese above the age of 35 who grew up in the countryside can clearly remember the first time they ate meat because it was such a rare and delicious moment.

Quite a few Chinese friends say that the first time they tasted cooked animal flesh, usually at around the age of 10 or so, they vowed they would be content with their lives if only they could eat it once a week. Of course, many of those same people now drive expensive cars, live in large villas and eat seafood and foie gras imported from the other side of the world.

But the digestive memory and the relative poverty of many of the country’s citizens goes some way towards explaining a strange phenomenon revealed in the latest Chinese central bank “price satisfaction” survey.

The survey shows Chinese households are more dissatisfied with inflation than at any time since the survey began in the fourth quarter of 1999, with 74 per cent of respondents saying prices are now “unacceptably high”.

The strange thing is that Chinese households are apparently much more angry about price rises now, when the official monthly inflation reading has just hit 5.1 per cent, than they were back in early 2008, when inflation peaked at close to 9 per cent.

A look at what was driving price rises then and what is driving them now gives a possible clue as to why people seem more upset now, despite the lower headline inflation figure.

Read more at Financial Times

Inflation hits China's most popular instant noodles

Master Kong instant noodle soup hits all the right notes on the Chinese palette: sublimely salty, excessively oily and spiked with dried chilies. It’s the go-to meal for those short of time or money.
But the country's most popular packaged noodle soup has become another symbol of China's worsening inflation.

News reports earlier this week say Kangshifu, as the noodles are known here, were no longer available at Carrefour, the French mega-mart chain and the world's second-largest retailer, which operates 169 stores in China.

The reason? The Taiwanese noodle brand wanted to raise prices about 3 cents to 33 cents to cover the rising cost of raw materials such as edible oils.
Carrefour refused. The company, like its main rival in China, Wal-Mart, have been under pressure from China's central government to hold prices on necessities for fear too much of an increase will spark populist rage.

The soaring cost of food is already a daily lament for many Chinese. Prices of everyday vegetables have more than doubled in some parts of China in recent months. Analysts blame poor harvests, rising demand, speculators and commodity hoarders.

Read more at The Los Angeles Times

Inflation fears bring on China gold rush

At Beijing’s largest gold shop, the queues to buy bullion mini bars have turned into scrums as customers jostle for one of the country’s hottest commodities.

The phone behind the bullion counter rings off the hook as a frantic sales clerk tries to answer buyers’ questions. The electronic chart displayed behind him says it all: the price of gold is rising and Chinese investors, worried about inflation, want in on the trend.

Treasure hunt: a couple shop in a Chinese jeweller. Retail demand for gold has jumped 70 per cent in a year

“We were thinking about giving our daughter Rmb10,000 ($1,500) in cash for her wedding,” says an elderly couple. “But then we thought gold might be better value.”

Others are shopping for themselves. “I’ve been buying gold for about six years as an investment,” says a young man in his early 30s who works for a power company. Like many gold shoppers, he is reluctant to give his name or talk about his finances, but discloses his purchase of a 100g mini bar.

For more than 50 years, the state controlled China’s gold market and domestic gold prices. However, today the shiny yellow metal has re-emerged as a popular hedge against inflation. November’s inflation data revealed prices had risen 5.1 per cent from a year ago, the sharpest increase since July 2008.

Read more at Financial Times

Khrushchev Could Not Bury U.S., China Just Might

Mao Tse-tung and Nikita Khruschev

Wars between major countries are no longer fought on the high seas, or on land with vast armies, but in board rooms and markets. It’s now economic warfare that threatens to alter the global landscape, enriching the winners and creating hardship for losers.

It’s no longer about which country has the largest navy or nuclear arsenal. It’s about which country can win the economic battles.

Someone needs to inform Congress and the Federal Reserve, since they rarely mention China’s oncoming juggernaut.  Congress is currently in a contentious debate over the U.S. defense budget, making sure the country can handle the types of war that threatened in the 1980s. To cut spending on military hardware or increase it, to build more F-22 fighter planes and aircraft carriers, or spend more on unmanned drones and beefed-up ground forces.

While remaining by far the most powerful military presence in the world, the U.S. has not won many battles in the economic war of the last decade. The economic powerhouse has been China.

Read more at Forbe's

China: Shopping mad in Shanghai

A frenzy of buying and selling makes this the most dynamic city in China.

AP High life: Toutists photograph the epic building projects at Pudong

Cross the road in Shanghai's former French Concession and you commit yourself to participating in a form of traffic ballet, the subtleties of which will elude you at first. A red light here is not, as you might previously have assumed, a full stop in a vehicle's onward journey. Instead, the closest it gets to punctuation is as a comma, the briefest of pauses, allowing everyone to assess life-preserving spatial relationships.

For the pedestrian such delicate nuance is everything. In this case, I had clearly misinterpreted the green-man signal shining opposite me as an all-clear to cross the road. And presumably that is what the elderly gentleman explained to me, in unambiguously exasperated Mandarin, after he'd cycled rather painfully into my leg.

Even the threat of traffic wipe-out does not detract from the charm of this enclave of residential back-streets, created in the late 19th century when parts of Shanghai were loaned to foreign powers for trading purposes. The colonial-era influence extends as far as the 1920s low-rise villas that line the roads, and to the plane trees that offer welcome splashes of green against sombre urban grey-brown.

I continued – limping slightly – down Fumin Road, its pavements packed with people, passing shabby local stores selling everything from motorbike parts to cats. At number 87 I stopped to peer in at the mass of well-to-do diners enjoying lunch at a smart eatery called Guyi. The cuisine here is from Hunan, a province south-west of Shanghai that is known for its spicy, chilli-centric flavours. A slogan outside boasted that the restaurant offered a "new concept share with your heart". (Given the notoriously fractious relationship between the Chinese authorities and Google, it seems odd that most of Shanghai's signage appears to have been run through the internet company's "Translate" application for the benefit of Westerners. Perhaps it's no coincidence that the words are rendered strangely meaningless in the process.)

Read more at The Independent

85pc of urban Chinese cannot afford to buy a home as inflation accelerates

China's property bubble has grown so huge that 85pc of Chinese living in cities can no longer afford to buy a home, according to an influential Chinese government think tank.

The Chinese Academy of Social Sciences (CASS) said in its annual Economic Blue Paper that a typical Chinese property now costs 8.8 years of average earnings.

In addition, CASS said that house prices are still rising far in excess of wages, putting property more and more beyond the reach of average Chinese.

CASS estimated that Chinese property prices had risen by 15pc this year, although the rises in some cities have been far steeper.

By contrast, the UK's typical house costs five years of wages to buy, according to the Nationwide Building Society, and the UK's long-term average is four years of earnings.

"House prices have risen steadily for years," said Zhou Linhua, the co-author of the CASS report. "This has inflated investor expectations of a high return, which has brought more money flooding into the market, and fed the bubble."

The Chinese government has repeatedly tried to cool the soaring property market this year, raising deposit requirements, increasing mortgage costs and curbing loans for second homes.

The People's Bank of China, the country's central bank, told lenders to raise the minimum reserves they hold in proportion to deposits by half a percentage point, in an attempt to rein in lending and cool inflationary pressures.

Read more at The Telegraph