Declining Trade Surplus

Posted by jesse on May 11, 2011 in Blog | 0 comments

Declining Trade Surplus, Yuan Appreciation and Internationalization

China’s currency Renminbi (RMB), known as the Yuan, strengthened to an all-time high of 6.5671 per US Dollar in early March.  The ‘redback’ has appreciated 3.81 % against the greenback since last June when the People’s Bank of China (PBoC), China’s central bank, unfastened a de facto peg to the Dollar in place since the financial crisis.  The Yuan’s record rise coincided with the smallest trade surplus in 10 months, down to $4.9 billion in February from $6.5 billion in January.  Trade analysts suggest the drop coupled with a downward trend over the past two years may help support China’s contention that its trade with the rest of the world is becoming more balanced.  They estimate that China’s annual surplus may drop to $160 billion from $183 billion last year.

Premier Wen Jiabao, talking to netizens during an online session recently, reiterated China’s policy of gradual appreciation, citing predicaments of exporters, difficulties in employment generation, and concerns for social stability.  He emphatically ruled out a sharp one-off hike as demanded by US lawmakers, saying that millions of migrant workers would be laid off.  In early 2009 at the height of the financial meltdown, more than 20 million migrants lost their jobs and were forced to return to the countryside where under-employment is the norm.  Speaking at the on-going National People’s Congress (NPC) proceedings, the President of the Bank of China said Chinese companies could only tolerate annual gains of 3-5%.

Although committed to slow appreciation of the RMB, the Chinese government is expanding pilot projects to allow more Chinese and foreign companies to settle cross-border trade deals in RMB.  Last June, the PBoC broadened a scheme to allow importers and exporters in 20 provinces to settle transactions in RMB, involving more than 67,000 mainland exporters.  The pilot program proved so successful that settlements topped 506 billion RMB ($77 billion).  HSBC economists forecast that at least half of China’s trade with emerging markets will be settled using RMB within 3-5 years from less than 3% now.

The PBoC is positive on foreign central banks using the RMB as a reserve currency, on allowing overseas investment using RMB, and is mulling the possibility of using RMB for FDI in China.  Channels are being extended through which RMB can flow back into China via foreign bank purchases of bonds in China’s inter-bank market.  Transnational banks such as HSBC and Standard Chartered are among 5 foreign banks allowed to trade in that bond market and Citigroup and Deutsche Bank are preparing to offer RMB settlement products of their own.  Finally, the government has signed bilateral currency swap deals with a number of countries totalling 803.5 billion RMB ($122.24 billion) by the end of 2009.

– Global Times, Xinhua, Shanghai Daily, and Bloomberg

China Stats

Posted by jesse on May 11, 2011 in Blog | 0 comments

China’s Population

China’s population topped the 1.341 billion mark according to a sample survey conducted late last year as part of the National Bureau of Statistics’ official 2010 census, suggesting that China’s population rose only slightly over 2009.  The final official tally, the first in more than a decade, will be announced later this year.  The census results surprised few, falling on the low end of the government’s expectations, indicating that China’s population growth has been slowing steadily since 1987.

Experts say the strict one-child policy, particularly as practiced in urban areas, China’s rapid urbanization that is adding more than 15 million urban residents a year, and changing values due to growing affluence and economic prosperity, help explain the decline.  Nevertheless, China’s family planning authorities are keeping close tabs on birth rates, making it a priority during the 12^th Five Year Plan period (2011-2015).  A Tsinghua University demographer calculated that the growth rate slowed to 4.7 people per thousand in 2010, down from 5.5 a year earlier.  The US Census Bureau sees China’s population peaking at just under 1.4 billion by 2026, to be surpassed by India’s burgeoning masses.

Of special significance for the social-economic transformation of China is the gargantuan ‘floating population’ that now exceeds 221 million, made up of mostly migrant workers.  Speaking at a recent conference on managing this human tide, the head of the National Population and Family Planning Commission revealed that nearly 43% of migrants are young people born after 1980.

Importantly, these young workers are no longer flocking only to economically dynamic coastal cities but venturing inland in search of jobs and other opportunities, signalling regional transfers of industry and the restructuring of national and provincial economies.  Over the next 2-3 decades, another 300 million people will be moving into the cities, leading to calls for the scraping of the antiquated ‘hukou’ (household registration system) that deprives migrants of basic resident rights, including subsidized healthcare, welfare benefits, and the education for their children.

–       Xinhua and AP

China as No.2, for Now

In mid February, China leapfrogged over Japan to take the coveted No.2 position in the world economy, a spot that Japan had held for over four decades.  China’s spectacular growth, registering nearly double digits over 30 years coupled with Japan’s two ‘lost decades’ lead to the dramatic trading of places.  Japan’s real GDP slipped by annualized 1.1% in Q4 of 2010 to $5.474 trillion while China’s grew by 10% to $5.879 trillion.  Just five years ago, China’s GDP was a mere $2.3 trillion, about ½ of Japan’s at the time.  In contrast to Japan’s rapidly aging population and stagnant mature economy, China is in the throes of the world’s greatest urbanization process with much more room to grow both geographically and in terms of per capita incomes.

Indeed, going by the IMF’s figures for 2010, China remains a poor country just entering the middle income bracket with nominal per capita GDP hovering around $4,500, on par with other developing countries such as Thailand, Iran, Maldives and Algeria.  Japan remains 9.4 times richer at $42,325 and US 10.4 times at $47,132.  In nominal terms, the Hong Kong SAR has reached nearly $32,000 and Taiwan about $18,300.  However, measured by purchasing power parity (PPP), mainland China’s per capita income surges to $7,500 while Japan’s drops to $33,828 (4.5 times) and the US remains the same (6.28 times).  In PPP terms, Hong Kong’s GDP tops $45,277, a little behind the US, and Taiwan climbs to $34,743.  Comparatively, therefore, mainland China has a long way to go.

China’s seemingly unstoppable growth has led to much speculation about when it will ultimately surpass the US to become top economic dog.  The World Bank, Goldman Sachs and others have forwarded their forecasts for when China overtakes the US to 2025; a prominent Japanese economist puts the cross-over period at between 2021 and 2027; while an economist at Washington’s Peterson Institute for International Economics puts the tipping point at around 2030.  But, even when that happens, perhaps within 15 years, China’s per capita GDP will still be 4 times less than the US, simply because China has 4 times the population.

China is already reshaping the globe by virtue of its trade dominance, voracious appetite for all kinds of resources, accumulation of forex reserves, massively underwriting US debt, and belching pollutants.   At the same time, China’s booming economy has been a boon for many countries, whether spurring higher-value exports from Japan, Germany and the US or commodities from Russia, Brazil, Canada, and Australia.  It’s no coincidence that Germany has been able to climb out of the worldwide recession quickly on the back of exports to China and although eclipsed by its giant neighbour, Japan has benefitted immensely by tapping into China’s large and increasingly lucrative market.

–       AFP, NYT, WSJ, and IMF

In the fallout of the global financial tsunami, the Chinese government introduced its unprecedented $586 billion stimulus package while bringing in proactive fiscal and relatively loose monetary policies to help lift the economy out of the ‘Great Recession’.  Launched aggressively, these initiatives helped to maintain a healthy clip of the economy at 9.1% for 2009, sweeping more Chinese companies into the 2010 Fortune 500 ranking.  Three Chinese companies, Sinopec, State Grid, and PetroChina, climbed in the top ten, placing 7^th, 8^th and 10^th respectively.   51 smaller companies, including Taiwan based, also made the list, a giant leap of 43 over the previous year.

–       China Daily and Chinahourly

China’s US Treasury Holdings, CIC Investments and Total Forex Reserves

While most of America’s $14+ trillion in debt is held by private banks in the US, the US Treasury Department and Federal Reserve stated that, as of last December, about $4.4 trillion in Treasuries was held by foreign governments with three of top 10 debt holders being Greater China.   A February survey of foreign portfolio holdings revealed that mainland China’s holdings rose sharply by $268.4 billion to $1.16 trillion.  Analysts say China has been buying Treasuries through broker-dealers in Britain, suggesting increased Chinese commitment to financing the American current account deficit.  By the same token, it also means that China has even more vested interest in Washington’s debt control and reduction measures and in avoiding a major decline in debt prices.

As America’s second-biggest creditor, Japan’s holdings declined slightly to $882.3 billion while the oil exporting countries, the third-biggest holder, fell by $6.1 billion to slightly under $212 billion.   Surprisingly, Russia’s holdings jumped sharply to $151 billion from $106.2 billion, placing it eighth behind Taiwan, whose holdings also increased by $23.2 billion.  At the end of H1 last year, China’s holdings of all US securities – Treasuries, stocks, asset-backed securities along with other long-term and short-term debt, rose to a total of $1.61 trillion, up from $1.46 trillion a year before.   US securities holdings by all foreign countries rose 11% to $10.701 trillion from $9.641 trillion with investors fleeing to US assets as the European sovereign debt crisis set in.

Meanwhile, China Investment Corp. (CIC) , which manages China’s $300 billion sovereign wealth fund, announced that it had made a 11% return on its overseas investments in 2010, slightly down from 11.7% in 2009, reversing losses incurred in its first year of operations.  CIC was set up in 2007 with a mandate to reap higher returns for China’s massive forex reserves.  Over the past three years, CIC’s unaudited return on investment has averaged 6.345%.  CIC executives have repeatedly called on the central government to inject and additional $100 to $200 billion of China’s $2.85 trillion forex reserves to boost CIC’s investment fund but there has been no substantive progress.  CIC officials project that China’s total forex reserves could top $3 trillion by the end Q1 this year.

–       Reuters, Yahoo Finance, brecorder.com, NPR Planet Money

Canada-China Friendship Association加中友好协会温哥华分会

Posted by ccfa on Sep 15, 2010 in Blog | 0 comments

Canada China Friendship Association.

Since 1973, the CCFAs have served as a special conduit for communication and exchange between interested Canadians and their Chinese counterparts under the auspices of the Chinese People’s Association for Friendship with Foreign Countries (CPAFFC)自1973年以来，加中友好协会温哥华分会作为一个特殊的交流渠道连结着加拿大和中国的友好人士，中国方面的组织者是中国人民对外友好协会(CPAFFC)。