China tightens belt but keeps eye on social rifts
By Simon Rabinovitch
and Zhou Xin
Posted 2010/03/05 at 3:03 am EST
BEIJING, Mar. 5, 2010 (Reuters) — China will seek to heal social rifts
and spur home-driven growth with more public welfare and rural
spending even as the government tightens its belt after a burst of
feverish spending, Premier Wen Jiabao said on Friday.
China's President Hu Jintao (2nd L) and Premier Wen Jiabao (2nd R)
attend the preparatory meeting for the National People's Congress
(NPC) at the Great Hall of the People in Beijing March 4, 2010.
REUTERS/China Daily
Wen told the country's parliament that China's economy faced a clouded
international outlook in 2010 and would stick to a steady policy
course this year, shifting tack if needed to counter the lingering
impact of the global credit crunch.
China would maintain an appropriately easy monetary stance and an
active fiscal policy, he added, showing no sign of a break from
current settings.
"We must not interpret the economic turnaround as a fundamental
improvement in the economic situation," Wen said in his annual "State
of the Union"-style report to the National People's Congress.
Financial markets showed little reaction to the widely anticipated
message. Despite the lack of change in any of the key wording,
analysts noted that Wen's increased emphasis on controlling inflation
showed the government was trying to mop up excess cash in the economy
after last year's extraordinary credit boom.
He also signaled continued caution toward the yuan, reiterating
standard language that Beijing would seek to keep the currency steady
as it has done since the financial crisis struck in mid-2008, to the
chagrin of its trade partners.
Speaking to the nearly 3,000 legislative delegates gathered in the
cavernous Great Hall of the People, Wen unveiled increases in spending
for China's poorer citizens and 700-million strong farming population
that outstripped the planned rise in military outlays.
Still, the projected growth in welfare and agriculture spending was
much slower than in 2009 when the financial crisis was raging.
SLOWER SPENDING, LENDING
China wants to slow spending and bank lending after pumping out cash
to counter the global downturn, but Wen said improvements in social
welfare, healthcare and rural services were needed to secure the
nation's economic health and the ruling Communist Party's hold over an
increasingly fractured society.
China escaped the worst of the global slump by ramping up credit,
slashing interest rates and launching a 4 trillion yuan ($585 billion)
infrastructure program in late 2008.
The economy grew 8.7 percent last year as a result, by far the fastest
pace of any major country, but Wen played down the achievement.
More domestically-driven growth, fueled by consumers increasingly
confident about their health, incomes and welfare protection, was
needed to keep the world's third-biggest economy growing at a solid
pace, he said.
"There are insufficient internal drivers of economic growth," he
added, reading aloud the 36-page report in a practiced, steady voice,
occasionally pausing for effect and applause.
Wen said China was targeting 8 percent growth in gross domestic
product -- the goal it traditionally sets every year -- and an
inflation rate of about 3 percent, a relatively low number given the
build-up of price pressures.
"Beijing wants to send a clear message to the local governments that
the policy focus for this year has already been shifting away from
supporting growth at all costs to balancing the need to maintain
steady growth while managing inflation," Qu Hongbin, chief China
economist at HSBC, said in a note.
GROWING DOUBTS
Wen announced increases of 8.8 percent on social spending and 12.8
percent on rural outlays -- more than the rise of 7.5 percent in the
military budget -- to narrow the yawning wealth gap that economists
blame for dampening domestic consumption.
China's parliament is a Communist Party-run spectacle that affirms
policy, rather than making or challenging it.
But the gathering offers an opportunity for the leadership to sell
their policies, which face growing doubts from wealthier taxpayers and
from local officials who see little wrong with the country's
traditional recipe of industrial growth.
"We will continue to give preference to agriculture, farmers and rural
areas, and to improving people's well-being and developing social
programs," said Wen, whose second and final five-year term running the
Chinese government ends in 2013.
Wen has staked much of his legacy on spreading wealth to those left
behind by China's booming economy, especially rural citizens, but
income disparities have grown wider on his watch, a worry for leaders
bent on maintaining social peace.
Reflecting the conservatism of China's financial planners, the budget
deficit will again be kept below 3 percent of national income, Wen
said. The U.S. deficit, by contrast, will hit 10.6 percent of gross
domestic product this year, according to White House projections.
Last year China's deficit was just 2.2 percent of GDP despite massive
government spending on infrastructure and job creation.
To the dismay of Washington and Brussels, China has frozen the yuan's
exchange rate at around 6.83 per dollar since mid-2008 to help its
exporters stay competitive.
Many economists think China will resume yuan appreciation in the
coming months as inflation climbs. It would have been unrealistic to
expect Wen to flag any such move, said Tom Orlik, a Stone & McCarthy
analyst in Beijing.
"If you send the signal to the markets that you are going to
appreciate the yuan, then you are going to attract hot money inflows,
so signaling does not make any sense," he said.
(Additional reporting by Eadie Chen and Ben Blanchard; Writing by Alan
Wheatley and Chris Buckley; Editing by Ken Wills and Tomasz Janowski)
Copyright Reuters 2008
http://www.newsdaily.com/stories/tre62405q-us-china/
China parliament examines growth, living standards
By Chris Buckley
Posted 2010/03/03 at 8:22 am EST
BEIJING, Mar. 3, 2010 (Reuters) — The Chinese leadership's efforts to
engineer a trouble-free succession and push both economic growth and
improved living standards in coming years move to the national
parliament from Friday.
China's President Hu Jintao (second row, 3rd R), Premier Wen Jiabao
(second row 2nd L) and other delegates sing national anthem during the
opening ceremony of the Chinese People's Political Consultative
Conference (CPPCC) at the Great Hall of the People in Beijing March 3,
2010. REUTERS/Jason Lee
The annual full session of the National People's Congress (NPC) will
open with a report by Premier Wen Jiabao, who with President Hu Jintao
is entering the last stretch of a second five-year term steering the
world's third-biggest economy. They are due to make way to a new
generation of leaders from 2012.
Wen's speech in the Great Hall of the People will be as cautious as
the Communist Party-controlled parliament, whose 3,000-odd delegates -
officials, executives and workers and farmers -- are chosen and
trained to keep their criticisms muted.
Yet Wen's report and the 10 or so days of discussions will also
address strains worrying China, including fast-rising property prices,
income inequality and a skewing of loans and investment to projects
favored by local governments.
The attention and the backstage lobbying will give Hu and Wen, and a
younger generation of aspiring leaders, chances to put their stamp on
policy and consolidate influence, said Zheng Yongnian, director of the
East Asian Institute in Singapore.
"This year and next year are going to be very important for succession
politics and the two meetings are part of that," Zheng said, referring
to the NPC and the Chinese People's Political Consultative Conference,
an advisory body meeting alongside the parliament.
"The NPC is not that powerful, but it allows people to see what the
agenda is and who is setting that agenda," Zheng said. "Who controls
the policy agenda will enjoy a political advantage when it comes to
succession issues."
"YOU CAN'T GET AWAY FROM GROWTH"
Attention will fall on Vice President Xi Jinping and Vice Premier Li
Keqiang, the favored successors to Hu and Wen respectively.
Li is leading efforts to improve health care and food safety and his
influence could be boosted by extra attention to - and possible
spending on - those issues.
Provincial leaders hoping for a spot in the next central leadership
could also court attention.
They include Bo Xilai, Party chief of Chongqing, who has orchestrated
publicity by cracking down on mafia-like gangs in the southwest city,
and Wang Yang, Party chief of the booming southern province of
Guangdong. Both have cast themselves as forward-looking leaders with a
popular touch.
Hu and Wen will also be looking to secure their influence by pushing
improvements to welfare, health care and schooling, especially for
China's 700 million-strong farming population.
"The key is that to fund these plans to improve public welfare you
need to keep increasing government revenues, and that requires
continued fast economic growth," said Mao Shoulong of the Renmin
University in Beijing.
"You can't get away from the need for growth."
The parliament may discuss proposals for spending and policy goals in
the next government five-year development plan from 2011.
Since 2003, Hu and Wen have vowed to transform China's economic model,
easing dependence on heavy industry and exports to focus on grassroots
growth and welfare.
"By ensuring those policy priorities are in the five-year plan, they
can consolidate their influence beyond retirement," said Zheng, the
Singapore-based researcher.
Their results have fallen short of ambitions. Many sectors and
officials are committed to a recipe of industrial expansion they
believe has worked and helped China escape a serious slowdown in the
global economic downturn.
"It is very difficult to get change out of a political system that
seems to be succeeding so brilliantly on its own terms," Barry
Naughton of the University of California, San Diego, wrote recently
for the China Leadership Monitor website.
Wen made a plea for his more populist plans last weekend, sympathizing
with complaints about income disparities, rising housing prices,
graduate unemployment, poor health care and registration rules
hindering movement to and between cities.
"I'll spare nothing in exerting myself on my duties until I die," he
told an online question-and-answer session. "When a society's wealth
is concentrated in the hands of a few, then it is certainly unjust,
and that society will be unstable."
State media reports have indicated that all those issues will receive
attention at the session.
But the parliament affirms rather than makes policy, which is left to
elite Party circles. Delegates suggest tweaks to settled decisions and
China watchers expect few big changes to broad economic policy,
currency management or spending priorities.
"We expect no change in the official macro policy stance, but expect
some expenditure shift in the next budget", Tao Wang, an economist
with UBS in Beijing, wrote in a report.
"We expect an increase in budgetary spending on 'livelihood' items,
including cheap rentals, subsidies to the lower-income population, and
social safety net." (Editing by Benjamin Kang Lim and Ron Popeski)
Copyright Reuters 2008.
http://www.newsdaily.com/stories/tre62219l-us-china-parliament/
Bloomberg
BlackRock’s Doll Says China Stocks Aren’t a Bubble (Update1)
March 05, 2010, 2:05 AM EST
(Adds Wen’s inflation, growth targets in 11th paragraph.)
March 5 (Bloomberg) -- China’s stocks aren’t a bubble and will gain by
the end of the year as the government takes measures to prevent the
economy from overheating, said Bob Doll, BlackRock Inc.’s chief
investment officer for global equities.
“I wouldn’t characterize China stocks as a bubble,” Doll, who helps
oversee about $3.35 trillion at New York-based BlackRock, said in a
telephone interview. “There will be gains predicated on a slowdown in
growth being successful and this will be completed before not too
long.”
Last year’s rally in Chinese stocks and property prices have prompted
analysts including former Morgan Stanley economist Andy Xie to call
the nation’s asset markets a bubble that will burst once the
government curbs credit. The government has raised lenders’ reserve
requirements twice this year to cool an economy that grew 10.7 percent
in the fourth quarter, the fastest pace since 2007, partly because of
record bank lending.
Harvard University Professor Kenneth Rogoff said Feb. 23 that a debt-
fueled bubble in China may trigger a regional recession within a
decade, while hedge-fund manager James Chanos predicted a slump after
excessive property investment. The Shanghai index trades at 31.9 times
reported earnings, compared with 17.98 for the Standard & Poor’s 500
Index and 21.9 for the MSCI Asia ex-Japan index, Bloomberg data shows.
“China’s biggest concern is how it engineers a slowdown, how it deals
with imbalances between classes, how it provides jobs and the
tightening to ward off inflation,” Doll, 55, said. “Inflation is
certainly a risk.”
‘Prominent Problems’
Premier Wen Jiabao warned today of “latent risk” in China’s banks and
promised to crack down on property speculation. The government also
pledged to raise health and social security outlays by more than 8
percent in 2010 and expand pensions, efforts that may help rebalance
the economy toward consumer spending and away from investment and
exports.
“The domestic economy still faces some prominent problems,” Wen, 67,
said in a speech in Beijing to the National People’s Congress, similar
to the U.S. State of the Union address.
The Shanghai Composite Index added 0.3 percent to close at 3,031.07.
The gauge has dropped 7.5 percent this year, the fifth-worst performer
globally according to Bloomberg data, on concern the government will
raise borrowing costs for the first time since December 2007 and
restraint in lending will slow economic expansion. The benchmark
measure jumped 80 percent last year, fueled by a 4 trillion yuan ($586
billion) stimulus package and record lending.
Inflation Target
“Our view is we would not be surprised if there are more rate
increases but we need to see more data,” Doll said.
The nation’s consumer prices probably rose 2.6 percent last month,
compared with 1.5 percent in January, because of the Lunar New Year
celebration on Feb. 14, according to the median estimate from a
Bloomberg survey of 11 economists. Another survey conducted last month
predicts interest rates will be increased by the end of June.
Wen affirmed targets today of 3 percent inflation, 8 percent growth
and a “basically stable” currency. Meeting the inflation goal will be
“a major challenge,” requiring higher rates and a stronger currency,
said Brian Jackson, an emerging markets strategist at Royal Bank of
Canada in Hong Kong.
Doll said China’s stocks are in for some “sloppiness” in the short
term and he has an underweight on the nation’s property stocks.
“China is an emerging economy and it’s going to be bumpy,” Doll said.
“It’s not going to be a straight line.”
BlackRock is the world’s biggest money manager.
-- Allen Wan. Editors: Richard Frost, Linus Chua
To contact the editor responsible for this story: Linus Chua at
***@bloomberg.net;
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HK, China stocks up; Li & Fung hits high on US hopes
Fri Mar 5, 2010 12:51am EST
By Donny Kwok and Claire Zhang
HONG KONG/SHANGHAI, March 5 (Reuters) - Hong Kong shares rose at
midday on Friday with exporter Li & Fung (0494.HK) leading gains on
hopes of a recovery in the U.S. economy, while Premier Wen Jiabao
reaffirmed China's monetary and fiscal policies which aided a recovery
in Chinese banks and lifted China stocks.
Consumer goods exporter Li & Fung, which in January forged a sourcing
agreement with Wal-Mart (WMT.N), surged 4.2 percent on Friday to an
all-time high of HK$40 on hopes that it will benefit from a recovery
in the U.S. economy after better-than-expected retails sales which
pointed to a stablisation in the economy.
"There are not many options available in the market for Li & Fung
types of businesses. Anticipation that it will benefit from a recovery
in the U.S. fuelled demand for the stock," said Alex Wong, a director
at Ample Finance Group.
Chinese banks recovered from a sell-off in the previous session, after
China reaffirmed its loose monetary policy.
China will stick to an appropriately easy monetary stance and a
proactive fiscal policy as it seeks to counter the lingering impact of
the international credit crunch, Premier Wen Jiabao said on Friday.
[ID:nTOE62308M]
China's second-largest lender China Construction Bank (0939.HK) was up
0.50 percent at HK$5.99 by the lunch break.
Top lender ICBC (1398.HK) (601398.SS) was up 0.35 percent at HK$5.77
after rising 1.4 percent in the early session. ICBC said on Friday
that it was not facing pressure to raise new capital, even as many of
its peers announced fundraising plans to bolster their balance sheets.
[ID:nBJB003710]
The benchmark Hang Seng Index .HSI had trimmed gains and advanced 0.87
percent or 178.52 points to 20,754.30 at midday, poised to snap three
straight sessions of losses. The China Enterprises Index .HSCE of top
locally listed mainland Chinese stocks was up 0.72 percent at
11,860.09.
Brokers said investors switching away from disappointed index
heavyweights such as China Mobile (0941.HK) slowed the rise with
shares of the China mobile carrier edging down 0.07 percent to HK
$72.80 at midday. The stock fell 2.4 percent on Thursday after news
that it was in talks to buy a stake in Shanghai Pudong Development
Bank (600000.SS). [ID:nTOE62207B]
"It's hard to regain investors' confidence in the short run. As a fund
manager (point of view), I would delete the stock," Wong said.
Turnover fell to HK$32.75 billion ($4.2 billion) against midday
Thursday's HK$34.35 billion.
PetroChina (0857.HK) rose 2.7 percent to HK$9.01 after its Chairman
Jiang Jiemin said the company expected profit to improve this year
compared with 2009. [ID:nTOE624034]
Selling pressure on Hong Kong Exchanges & Clearing (HKEx) (0388.HK)
remained after the world's second-largest exchange operator by market
value posted lower-than-expected quarterly earnings. [ID:nTOE620077].
The stocks, which fell 2.03 percent on Thursday, lost a further 0.54
percent by the lunch break.
SHANGHAI UP AFTER MONETARY POLICY
China's key stock index edged up 0.07 percent on Friday, with
brokerages boosted by news of an imminent start to stock index futures
trade, while the index stabilised after Premier Wen Jiabao reaffirmed
China's monetary and fiscal policies.
The Shanghai Composite Index .SSEC ended the morning at 3,025.530
points, regaining its footing after a 2.38 percent fall on Thursday,
its biggest one-day fall in five weeks spurred in part by worries over
the possibility of more policy tightening.
"We need to continue to implement a proactive fiscal policy and
moderately easy monetary policy," Wen said in his government work
report delivered on Friday at the annual session of the National
People's Congress, China's parliament. [ID:nTOE62308M] [ID:nTOE6230AE]
Losing Shanghai stocks outnumbered gainers by 438 to 421, while
turnover dropped to 58 billion yuan ($8.5 billion) from Thursday
morning's 74 billion yuan.
"The tone of Wen's speech is generally in line with expectations,"
said Chen Huiqin, senior analyst at Huatai Securities in Nanjing.
"Investors should not be optimistic about a strong rebound given
lingering worries over more share supplies and liquidity."
The brokerage sector was strong, following news of the imminent start
of stock index futures trade and other reforms that will bring new
business opportunities.
Haitong Securities (600837.SS) rose 1.80 percent to 16.97 yuan while
Everbright Securities (601788.SS) advanced 3.69 percent to 27.25 yuan
and CITIC Securities (600030.SS) was up 1.99 percent at 27.16 yuan.
China's top securities regulator said the long-awaited launch of stock
index futures trade was likely in mid-April and a planned pilot
programme for margin trading and short selling of shares would start
before that. [ID:nTOE6230AC]
The index is heading for a 0.9 percent fall for the week, with last
week's 1.12 percent gain not seen supported by improvements in
fundamentals such as the balance of share supply and demand, with
regulators continuing to approve a steady stream of share offerings to
the market, traders said.
The market has also been pressured by policy moves to tighten
liquidity, including two increases in banks' reserve requirements
since the beginning of the year.
They added that the market was expected to remain in a narrow range in
the short term but was likely to test a key psychological support
level at 3,000 points.
FAW Car (000800.SZ), a subsidiary of major Chinese automaker FAW
Group, jumped 5.53 percent to 23.29 yuan after saying its net profit
rose 49.8 percent last year to 1.6 billion yuan.
The property sector was soft, with China Vanke (000002.SZ), the
country's largest listed property developer, falling 0.53 percent to
9.34 yuan after saying its turnover from housing sales in February
fell 35.4 percent on year to 2.51 billion yuan.
http://www.reuters.com/article/idUSTOE62404320100305
Movie review: Last Train Home rides China's economic tiger at New Year
By Katherine Monk, Canwest News Service
March 4, 2010
Chinese citizens on the move in Last Train Home.Photograph by:
Handout, FilesLast Train Home
A documentary by Lixin Fan
VANCOUVER — Moving through Chinese society like a large paper dragon
on parade, economic fortune is not only dividing huge swaths of the
population between rich and poor, it’s also changing the way Chinese
see themselves in relation to both traditional values and the western
world.
It’s a complicated, taboo-laden, and culturally spicy noodle of a
situation to twirl with your mental chopsticks, but Lixin Fan does an
elegant job of grabbing the hydra-headed beast by the throat in his
feature documentary debut, Last Train Home.
A former TV news professional for Chinese state television, Fan
decided to take a close-up look at changing Chinese society through a
very specific portal: the annual migration of 130 million people
during New Year celebrations.
Forget Mecca. This is the largest annual human migration in the world,
as factory workers leave city centres to return to their ancestral
villages and reconnect with family.
It’s a brilliant place to start for a few reasons, and prime among
them are the images. Fan’s camera captures the frenetic chaos at train
stations as hordes of people cram the platforms hoping to get a seat
in oversold coaches.
The density of people as they scurry, laden with luggage, through the
frame makes the reality of living in China undeniable. This is a place
where people are so numerous and so apparently disposable, that
finding personal identity and ego among the millions of other souls is
a sizable challenge.
At times, the sea of people seem to move more like amoebae under a
microscope than any sentient mass of humanity, and using a scientist’s
empirical process, Fan sorts through the specimens by finding ideal
examples, and getting even closer.
The central focus in Last Train Home becomes the Zhang family. A
typical clan from a small, agrarian village, the Zhang parents left
their children for factory work, in the hopes they’d be able to
provide their offspring with opportunities for improvement.
When their eldest daughter decides to turn her back on the family’s
larger plan, and drop out of school to seek work in a factory for
herself, there’s a crisis of epic proportions.
The moment is captured in all its uncomfortable drama as the father
strikes his daughter in the face, and she — somewhat surprisingly —
fights back like a feral bobcat.
One is never sure just how much the camera’s presence has influenced
or inspired the participants in this verite exploration, but it
doesn’t really matter if the whole movie is contrived, acted, or even
scripted.
The reel derives a sense of authenticity from the way it’s made. The
camera becomes our window to a whole other world, where we’re given
the luxury of simply watching life unfold without overt commentary or
an articulated point of view.
You can’t really tell what Fan is thinking, as he maps the rifts and
crevasses in a monolithic culture. There is no palpable agenda working
here, and that releases the film from any obligation other than to
entertain and enlighten the viewer.
The entertainment factor comes through the pictures of the
metamorphosing Chinese landscape, as well as the soap-opera family
dynamics, but the enlightenment is something the viewer has to create
for herself.
Is economic success the be-all and end-all for a society, or is there
something more to the human experience beneath the emotional
permafrost of cold, hard cash?
The East is just beginning to become fluent in the financial language
of the West, and, as we watch them grapple with a way of life we’re
already far too familiar with, we can see the human effects of a
market economy in a whole new way because, in China, everything is
magnified by scale.
Fan keeps the film open-ended, which only makes the experience richer
for those willing to do a little work, but in the end, this feels like
a small piece of a much larger puzzle.
It can’t give us the big picture, but through great detail and
editorial positioning, Last Train Home takes us on a ride that’s at
once exotic, terrifying and eerily prophetic of what lies ahead.
***@canwest.com
© Copyright (c) The Vancouver Sun
http://www.vancouversun.com/entertainment/Movie+review+Last+Train+Home+rides+China+economic+tiger+Year/2642354/story.html
http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=270701D6-E1DC-14DE-1FA20EBBEF4561F7
Entrepreneur says bubble fears are misplaced
By Jamil Anderlini in Beijing
Published: March 5 2010 02:00 | Last updated: March 5 2010 02:00
Growing international fears about looming economic collapse in China
are misplaced, and any bubbles in the economy are limited and will be
easily managed, according to one of the country's richest and most
influential entrepreneurs.
"China's economy is still growing rapidly so the risks are manageable
and the overall situation is relatively healthy," said Liu Yonghao , a
former pig farmer who founded one of the country's largest private
conglomerates and is the largest shareholder of Minsheng Bank, China's
first and largest privately owned bank.
"While there may be some bubbles, the situation is different in
different industries," Mr Liu told the Financial Times yesterday.
"[Bubbles] may exist but they are not especially serious."
He rejected recent comparisons between China and Dubai's real estate
markets made by commentators such as James Chanos, the hedge fund
manager. Kenneth Rogoff, former research director at the International
Monetary Fund, and Marc Faber, an independent analyst , famous for
predicting the Asian financial crisis, have also sounded the alarm.
Mr Liu said most of China was not experiencing a property bubble.
"That kind of talk is just plain wrong. Dubai doesn't have any
industry, manufacturing or agricultural industries. It only has real
estate and tourism, and relies on massive [external] borrowing," he
said. "China doesn't borrow money from anyone else. It lends money to
others, like the US."
Michael Geoghegan, chief executive of HSBC, this week told the FT he
was also sceptical about the risk of a property bubble. "I believe
these fears are overblown as many property purchases have involved a
large cash payment," he said.
Observers say global sentiment towards China's economy and asset
markets has turned from exuberance a few months ago to alarm over the
potential fallout from last year's credit expansion.
In response to the global financial crisis, Beijing ordered local
governments to speed up infrastructure investment and told state-owned
banks to relax lending criteria to revive growth.
The result was a doubling in the value of new loans issued last year
to Rmb9,600bn, an unprecedented expansion of credit that has led many
analysts to warn of potential inflation , asset bubbles, wasteful
investment and a huge future crop of bad loans in the banking system.
Mr Liu conceded future bad loans were likely as a result of profligate
lending, but said China's banks were healthier than they had ever
been, and that the government had acted appropriately.
"When we throw a punch, it should be heavy, fast and well-timed," he
said.
Mr Liu's scepticism about a looming collapse in the Chinese economy is
widely shared.
"Even someone like me who has been worrying the most over the last few
years about China's balance sheet believes the concerns are being
overdone in international commentary at the moment," said Michael
Pettis, a professor of finance at Peking university and a specialist
in the history of financial crises.
"China has some very important structural problems . . but I think
we'll see a grinding slowdown in growth over several years rather than
outright collapse."
Copyright The Financial Times Limited 2010
http://www.ft.com/cms/s/0/8a931708-27f6-11df-9598-00144feabdc0.html
MARCH 5, 2010, 5:34 A.M. ET.China Says Economy Still Needs
By TERENCE POON, AARON BACK And J.R. WU
BEIJING -- China's government Friday pledged to keep prices stable
this year as it tries to rein in lending and manage consequences of a
massive stimulus program, but said it will continue to support the
economy.
As widely expected, Chinese Premier Wen Jiabao reaffirmed China's
growth target will remain at 8%. China has been seeking annual
economic growth of 8% since 2005; it set a 7% target for 2004.
The government, which last year was determined to revive the economy
amid the global financial crisis, this year is shifting toward
tackling challenges such as surging housing prices and potential bad
debt. Gross domestic product expanded 8.7% last year, helped by a
credit boom and government investments.
"Latent risks in the banking and public finance sectors are
increasing," said Mr. Wen in prepared remarks, adding the government
will curb "the precipitous rise of housing prices in some cities."
China, the world's third-largest economy, has already begun to
restrain credit growth as the economy has rebounded. Despite such
changes in policy, Mr. Wen reiterated in his annual report at the
opening of the National People's Congress that the government will
continue its "active" fiscal policy and "moderately loose" monetary
policy. It will also maintain the "basic stability" of the yuan
exchange rate, he said.
Mr. Wen cautioned that "there is insufficient internal impetus driving
economic growth," and reiterated the government needs to "consolidate
the momentum of the economic turnaround," while restructuring the
economy. Beijing wants to rely more on consumption and services to
drive growth, and encourage Chinese companies to make more advanced
goods.
"Individual countries face difficult choices in phasing out their
stimulus policies; larger fluctuations may occur in the prices of
major commodities and exchange rates among the major currencies; trade
protectionism is clearly reasserting itself," he said.
But the policy wording still gives Beijing room to scale back
stimulus; the central bank has twice ordered banks to keep a bigger
portion of deposits on reserve this year to curb loan growth, without
changing the monetary policy stance. Mr. Wen added: "We need to manage
inflation expectations well and keep the overall level of prices
stable."
Royal Bank of Canada economist Brian Jackson wrote in a note that Mr.
Wen's comments "seem designed to give himself the rhetorical room to
adjust policy as and when he sees fit. His speech seems consistent
both with keeping policy unchanged for now but also with making some
gradual adjustments in the months ahead."
China will aim for around 7.5 trillion yuan (around $1.1 trillion)
worth of new local-currency loans this year, lower than the record
9.59 trillion yuan worth of new loans banks extended last year. It
will also seek to slow growth in broad money supply, or M2, to around
17% this year from nearly 28% in 2009.
The consumer price index, the country's key inflation gauge, is
targeted to rise around 3% this year, Mr. Wen said, after falling 0.7%
last year
The government has grown concerned about potential risks to public
finances from local governments, which aren't allowed to raise debt.
Many, however, set up special investment vehicles that borrowed from
banks, helping to drive the economy's recovery. But such forms of
financing don't show up in the government's balance sheets and
concerns have grown that such debt could turn bad, hurting banks and
straining the central government's finances.
"We will strengthen the fiscal management system at and below the
provincial level, set up a mechanism to ensure basic funding for
county governments and carry forward reforms that place county
finances directly under the management of provincial governments,"
said Mr. Wen.
The Ministry of Finance will issue 200 billion yuan worth of bonds on
behalf of local governments, continuing a similar program as last
year.
China's economic planning agency, the National Development and Reform
Commission, said Friday it is aiming to expand fixed-asset investment
this year by 20% while curbing excess and obsolete capacity in certain
sectors, continuing Beijing's recent policy goals.
The growth target would represent a marked slowdown from nationwide
FAI growth of 30.1% last year, which was boosted by the government's
stimulus program.
Still, Mr. Wen said the government plans to run a fiscal deficit of
1.05 trillion yuan this year, or 2.8% of GDP. The budget suggests
continued fiscal stimulus this year given earlier data showed the 2009
deficit at 2.2% of GDP, though the finance ministry said last year's
deficit was higher, at 950 billion yuan, because of an accounting
move.
"The fiscal deficit in 2010 still needs to be of an appropriate size.
At the same time, in order to promote the sustainable development of
public finances, actively prevent fiscal risk, and leave some leeway
to gradually reduce the deficit in future years, we must keep the
deficit under 3% of GDP," said the Ministry of Finance.
The central government plans to invest more to support the development
of new technologies this year than last year, in line with its goal of
restructuring the economy. But it is budgeting a slight slowdown in
public spending on health care, social security and education this
year, and keeping the share of social spending in its total spending
broadly unchanged from last year.
Economists say China could encourage its people to spend more money by
improving education, health care and social security.
-- Liu Li and Patricia Jiayi Ho contributed to this article
http://online.wsj.com/article/SB10001424052748704187204575102271716152464.html?mod=googlenews_wsj
Overseas media focus on China's development plans
English.news.cn 2010-03-04 23:10:10
BEIJING, March 4 (Xinhua) -- Overseas media have widely reported
China's measures to maintain social and economic development, after
the annual session of the National Committee of the Chinese People's
Political Consultative Conference (CPPCC) opened Wednesday.
The session outlined plans to keep the steady and fast development of
economy, narrow the gap between city and country, and adjust income
distribution pattern.
The AP said that CPPCC National Committee Chairman Jia Qinglin said in
a work report "2010 is a crucial year for China to respond to the
impact of the global financial crisis and maintain steady and rapid
economic development."
The annual session of China's legislature, the National People's
Congress (NPC), which opens Friday, was expected to "give a full
airing to hot-button issues such as soaring real estate prices in many
Chinese cities," it said.
The Chinese government, which released a budget and work plan for the
year, was expected to boost spending on education, pensions and
medical care, continuing a push begun in the past decade to strengthen
a tattered social safety net, it said.
The annual plenary sessions of the NPC and the CPPCC National
Committee are known as China's "two sessions."
The AFP said China opened its annual parliamentary season Wednesday
with a call from the Chinese leadership to keep up economic growth,
maintain social stability and tackle a yawning urban-rural income gap.
The two gatherings were the Chinese leadership's chance to showcase
its efforts to tackle the key challenges facing the country, and
economic concerns looked set to top that list, it said.
Online, The Wall Street Journal Asia Edition said in an article the
NPC's annual session would kick off Friday and this year's theme
"naturally" was the economy.
In a talk with China's netizens last week, Premier Wen Jiabao said
"while it is the government's responsibility to expand the 'pie' of
national wealth, it is the government's conscience to distribute it in
an adequate manner," the article said.
The Yonhap news agency said the Chinese government was speeding up its
economic transformation after the global financial crisis because it
realised it could not overcome future crises with its current economic
structure dominated by cheap exports. China should keep a balanced
development of service sectors and agriculture, and nurture the
domestic market, it said. Economic transformation would be one of the
hot topics of this year's NPC, it said.
Yonhap said, although the Chinese economy was gradually recovering,
China faced some serious problems, such as the widening urban-rural
gap.
China recently focused on migrant workers, eyeing the new generation
of migrant workers born in the 1990s, and would discuss the making of
the medium- and long-term layout for migrant workers.
The Wall Street Journal said, while the 2009 NPC was obsessed with
attaining an 8 percent growth rate, the priority for this year's
session was to ensure a more equitable distribution of national
income.
A commentary on the website of Singapore's Lianhe Zaobao said that,
from the perspective of China's economic development, it was in
accordance with the needs of expanding China's consumption and
transforming its economic growth mode for the country to gradually
annul the dualistic structure between city and countryside, promote
urbanization, scrap social welfare policies that discriminated against
farmers, and ensure farmers' equal rights with urban dwellers.
One of the major reasons for the long-term inequality between city and
countryside was China didn't have a big enough "pie" to ensure the
fair distribution of interests, it said.
Canada's leading public policy magazine Policy Options said in a
commentary that the Chinese leadership was paying more and more
attention to the demands of the poor in remote regions.
From the list of the central government's financial expenditures, it
could be found that the government would heavily invest on
infrastructure development and maintenance, medical reforms, poverty
reduction and education, it said.
Editor: yan
http://news.xinhuanet.com/english2010/china/2010-03/04/c_13197553.htm
China economy faces 'crucial' year: Wen
By Marianne Barriaux (AFP) – 9 hours ago
BEIJING — China's government Friday predicted another year of rapid
expansion while vowing to tame inflation and curb runaway loan growth
to forestall a risky bubble in the world's third-largest economy.
In his annual address to open parliament, Premier Wen Jiabao also
pledged to help ensure the benefits of growth are shared more
equitably among China's 1.3 billion people, in a sign of concern over
a widening wealth gap and its potential to spark unrest.
Wen said China would target eight percent economic growth in 2010,
which he called a "crucial year" in the battle against the global
slowdown.
"This year the main targets we have set for economic and social
development are increasing GDP by approximately eight percent... (and)
holding the rise in consumer prices to around three percent," Wen told
lawmakers.
With the world downturn exposing the volatility of foreign trade, the
agenda for the National People's Congress will be topped by Beijing's
efforts to retool the economy away from its long reliance on cheap
exports.
"This is a crucial year for continuing to deal with the global
financial crisis, maintaining steady and rapid economic development
and accelerating the transformation of the pattern of economic
development," Wen said.
He offered a fresh pledge to boost domestic consumption as a means to
diversify the economy, and vowed to maintain a "proactive fiscal
policy". China launched a 586-billion-dollar stimulus package in 2008.
Related article: Need to rein in property prices: Wen
Wen said China would keep the value of the yuan "basically stable" in
2010, a stance sure to rile the country's key Western trading
partners, which say the currency is kept low to boost exports.
China annually sees thousands of protests -- often violent -- by those
who have missed out on the nation's economic boom, and Wen promised to
expand the social security umbrella.
"We will not only make the pie of social wealth bigger by developing
the economy, but also distribute it well on the basis of a rational
income distribution system," he said.
As such, he promised to reform rules that restrict social welfare
services to people who relocate from their hometowns -- a residency
system known as the "hukou" that is a key grip of China's 230 million
migrant workers.
"We will carry out reform of the household registration system and
relax requirements for household registration in towns and small and
medium-sized cities," he said.
China expects to run up a budget deficit of 1.05 trillion yuan (154
billion dollars), up 10 percent from last year, Wen said, as it
maintains the hefty stimulus plan and upgrades social security.
He also acknowledged government concern over a flood of lending that
has caused inflation fears to spike, saying authorities would slash
new bank loans by about a fifth in 2010 to 7.5 trillion yuan.
The NPC has no real legislative power but meets to rubber-stamp the
decisions of the Communist Party elite in an annual ritual aimed at
putting a veneer of democracy on China's rigid political system.
On the eve of the congress opening, China unveiled the smallest
increase in its military budget for at least 10 years and vowed that
its rapid military modernisation posed no threat to other countries.
Related article: China to keep modernising the military
As is customary during major political events in China, security has
been tightened in the capital to prevent disruption.
Extra police have been deployed and a force of more than 700,000
including civilian volunteers are helping to keep public order,
according to official media reports that dubbed the effort a "great
moat" of security around Beijing. Related article: Corruption battle a
'high priority'
There are up to 3,000 NPC delegates, including many from troubled
minority regions like Tibet and Xinjiang. Related article: Plans to
develop Xinjiang, Tibet
Copyright © 2010 AFP. All rights reserved
Chinese Premier Wen Jiabao delivers his annual work report to the
National People's Congress
http://www.google.com/hostednews/afp/article/ALeqM5jbIhprRfExoT-Wx9EeA_EpDE1Ejg
THE PLOT THICKENS IN THE LABOR MARKET
March 4, 2010
THE CHINA SYNDROME
Big deficits and rising mountains of public debt. Is it a nightmare?
No, it’s the fiscal profile du jour of these United States. Or is it
both? In any case, assuming Congress keeps current laws and policies
intact, the federal budget deficit, as a share of the economy, is on
track for fiscal 2010 to be the second highest since World War Two,
the CBO projects.
“Under current laws and policies, CBO’s projections show that level
climbing to 67 percent by 2020,” the government’s budget watchdog
reports. “As a result, interest payments on the debt are poised to
skyrocket; the government’s spending on net interest will triple
between 2010 and 2020, increasing from $207 billion to $723 billion.”
What’s the solution? Everyone knows what’s required, although the
details of implementation will be messy, which in Washington means
politics, in massive super-sized doses.
Here’s the set-up, once more by way of CBO: “To keep federal deficits
and debt from reaching levels that would substantially harm the
economy, lawmakers would have to significantly increase revenues,
decrease projected spending, or enact some combination of the two.”
Meanwhile, Democratic leader Steny Hoyer in the House of
Representatives earlier this week dropped some clues about how the
majority is thinking on such matters. “"It seems to me that the only
solution that can win the support of both parties is a balanced
approach: one that cuts some spending and raises some revenue while
avoiding extremes in either direction," he said via Reuters. Easy to
say, tough to do, especiall in a mid-term election year.
Spending cuts and taxes on one side vs. rising deficits and the
potential blowback for the bond market on the other. Red ink beyond a
certain level will go over with the fixed-income set like a lead
balloon. But for the moment, all’s calm with bond yields. The
benchmark 10-year Treasury yield remains in the 3.6% range, or more or
less unchanged this year. Can it last in the face of some ugly
choices? The basic alternatives: Raise taxes, cut spending, both, or
risk letting the federal deficit surge into uncharted and potential
destabilizing territory for the economy and the markets.
As problematic as all this is, it’s even worse in the current economic
climate for the simple reason that the outlook for growth is modest,
at best. Meanwhile, the demand is exploding for spending on a range of
fronts, from Medicare and Social Security to the war on terror to
fighting the recession to the pet project du jour. The toxic
combination of high spending and low growth threatens to complicate an
already sour political atmosphere in Washington. You think you've got
gridlock now? Brother, you haven't seen anything yet. History suggests
as much. As the book The Presidency and Economic Policy reminds, “When
revenues grow at a slower rate than the rate of increase for federal
spending, the resulting deficits make it more difficult for
politicians to divide up the fiscal pie among competing programs, let
alone promise the voters new benefits.”
How does all this factor into the relationship with America’s two
largest creditors? Japan and China together hold about 12% of U.S.
Treasuries outstanding, according to economist Michael Cosgrove.
Writing in an op-ed piece today for Investor’s Business Daily, he
advises:
The Chinese can lecture the administration about excessive federal
outlays, but nothing would be more effective than dumping Treasuries,
even for a short time. Such action would panic investors, and as a
result the administration may well agree to constrain spending to
placate the Chinese.
No one wants havoc in the capital markets, but the Chinese can do U.S.
taxpayers a major favor by dumping Treasuries just as soon as the
Chinese can buy their put options on U.S. equities. U.S. equities will
quickly recover their lost ground and much more if the administration
would agree to constrain federal outlays. Excessive federal spending
and regulatory involvement in the economy are holding back equity
gains.
The sooner the Chinese dump Treasuries, the better. It is a message
that all members of Congress, as well as the Obama administration,
need to hear. The Chinese needed to take such action during the Bush
years, but that is water under the bridge.
The Chinese can see how the Japanese ruined their economy by growing
public debt outstanding to over 225% of GDP in 2010 from 68% in 1991,
according to IMF data. The U.S. outstanding public debt to GDP ratio
was also 68% in 1991. In 2008 it was 70%. At the end of this year it
will be about 94%.
The current Congress and administration seem intent on repeating the
mistakes of Japan that in the end will also ruin the U.S. economy.
In fact, the latest numbers show that China’s appetite for Treasuries
retreated a bit in December. “"In the current climate, China's move to
reduce its U.S. government debt creates a large propensity for
misunderstanding," said Shi Lei, an analyst with the Bank of China's
Global Financial Markets Department via MarketWatch.com. "Even though
China didn't buy [bonds]," Shi said, "there were still many other
countries willing to purchase U.S. Treasury securities."
If that’s supposed to soothe tortured political souls in Washington,
it’s not doing the trick for Eric Anderson, author of China Restored:
The Middle Kingdom Looks to 2020 and Beyond. Writing yesterday for The
Huffington Post, he explains:
Contrary to popular opinion, Beijing could sell that debt with few
long-term consequences for China's economy...and likely her political
reputation. Such a move would cost you and I a fortune the next time
we considered shopping for a car or a house...and would further expand
an already outrageous national debt. Controversy can breed confusion,
but in this case it should simply generate consternation...in every
American household and at 1600 Pennsylvania Avenue.
http://www.capitalspectator.com/archives/2010/03/the_china_syndr.html
China Thinks The U.S. Economy Has Bottomed And Is Buying Real Estate
Using Goldman And BlackRock To Mute Criticism
Vincent Fernando | Mar. 4, 2010, 10:09 AM
While bullish on its own prospects, China is bullish on those of
America as well.
The government has started to heavily invest in America, yet in a
fashion more savvy than that of Japan in the 1980s.
China isn't buying trophy properties that might incite anger from the
American public. They're also using local American partners, in order
to provide even further political cover.
LA Times:
The largest Chinese investments in the U.S. have come from state-owned
firms, primarily a $300-billion fund known as China Investment Corp.
It initially targeted well-known financial companies, spending
billions to buy stakes in private equity giant Blackstone Group and
investment bank Morgan Stanley.
But after getting burned by the financial crisis that emerged in 2008,
the sovereign wealth fund has been shifting to real estate. Its
investments in the last year have included hundreds of millions of
dollars in real estate-related funds managed by Oaktree Capital of Los
Angeles, Goldman Sachs Group Inc. and BlackRock Inc.
The move into real estate appeared to be motivated by bargain prices.
"In the past year, the U.S. real estate market seemed to have hit
bottom and signs of recovery were obvious," said Mei Xinyu, a
researcher at the Ministry of Commerce in Beijing.
...
Chinese companies have learned that allying with partners tends to
draw less attention, said Wenran Jiang, a China expert at the
University of Alberta who has studied Chinese investments around the
globe.
When multiple parties are involved in a deal, he said, the Chinese
buyer's stake gets diluted. "So you can't report that the Chinese are
taking over."
http://www.businessinsider.com/the-chinese-government-is-pouring-into-us-real-estate-using-partners-to-mute-criticism-2010-3
Eye on China
China’s Military Spending Slows
Thursday, March 4th, 2010
Interesting reports out of China on projected defense spending: only a
7.5 percent increase, the smallest in two decades, according to
Chinese officials. The NYT reports that Chinese budget documents peg
2010 defense spending at $78 billion, an increase of $5.4 billion over
last year’s defense budget.
Now, there has always been much debate over the veracity of Chinese
defense spending claims and various sources put the annual amounts
considerably higher than Beijing’s official figures. That same NYT
article says this year is the first time in 21 years that the rate of
defense spending has fallen below double digits. Spending had risen an
average of 12.9 percent annually from 1996 to 2008.
China is investing mightily in its own domestic stimulus package that
has so far gotten the country through the recent economic turmoil in
amazingly good shape. China’s economy grew at around 10 percent last
year. Like most centrally planned economies, when the Chinese want to
stimulate demand they do it through massive infrastructure projects,
the colossal Three Gorges Dam on the Yangtze River being a good
example.
China is spending billions on its high speed rail network, highways,
airports, housing, etc. All of which is to say that the slowed rate of
defense spending increase, may be a one-off phenomenon.
– Greg
Posted in Eye on China, Uncategorized
Underway at Last!
Thursday, May 14th, 2009
“China’s carrier has gone to sea” was the headline of one Asian
newspaper. The event — the story implied — marked the long-awaited
operational debut of the former Soviet aircraft carrier Varyag. In
reality, the ship got underway with harbor tugs providing the power,
moving the ship from a pier in the port of Dalian to a nearby dry
dock, a “voyage” of about two miles.
As of this writing, no major work on the ship has been observed since
she arrived at Dalian in northeastern China on 3 March 2002. The ship
was painted a few years ago, but little other effort has gone into the
unfinished giant despite periodic press claims that the carrier was
being “clandestinely” completed.
While the ship was being towed to the dry dock on 27 April the Varyag
was extensively photographed. Those photos reveal much about the ship:
She rode high in the water and, with the lack of “patches” on her
flight deck, it is obvious that engines had not been installed in the
ship. Her flight deck lacks arresting cables and operational markings,
and her island structure is void of the aerials, electronic domes, and
radar antennas that inundate aircraft carriers.
The question is: Why has the Varyag moved into a dry dock. A number of
reasons are possible for her brief voyage and dry docking. These
include:
(1) Completing the carrier — which was laid down at the Nikolayev
South shipyard as the Soviet Riga in the Ukraine in 1985. This would
involve the complex task of installing engines and other machinery
(assuming that they are now available), auxiliary equipment, messing
and berthing facilities, radars and other electronic equipment, etc.
(2) Carrying out general maintenance on the hulk, including cleaning
her underwater hull, and taking other measures to simply preserve the
Varyag until a definite decision is made concerning her eventual fate.
(3) Permitting naval architects and others to examine the ship’s
underwater hull, possibly to assist in efforts to design and construct
an indigenous Chinese aircraft carrier.
There can be no question but the Chinese Navy’s leadership wants to
acquire aircraft carriers, primarily to provide air cover for naval
operations in the South China Sea, an area of great interest to China
because of offshore oil activities. In long-range planning, the
Chinese may also be considering their increasing political and
economic interests in Africa and South America. However, despite
periodic press reports — some saying that the first Chinese carrier
will be completed this year — there is still no publicly available
evidence that construction of such ships has begun in China. Indeed,
even commercial satellites would have detected such efforts.
Chinese shipyards, which are producing advanced missile destroyers and
nuclear-propelled submarines as well as large merchant ships, can
certainly build a large aircraft carrier. Completion of the ship —
which would take probably four years or more from the start of
construction — would have to be followed by a lengthy working up
period, with extensive ship and then aircraft trials and
qualifications. Thus, with at least a year from the decision to build
such a ship until actual construction would start because of the need
to order components and materials, if that decision were made today
the first Chinese carrier could be ready in about six or seven years.
– Norman Polmar
Posted in Eye on China
Chinese Navy Requires Supercruising Fighter
Tuesday, April 28th, 2009
This article first appeared in Aviation Week & Space Technology.
A supercruising combat aircraft is a high priority of the Chinese
navy, the country’s top admiral says in a revealing official interview
that gives strong clues of perceived shortcomings and future
directions for the maritime force.
Adm. Wu Shengli also says China must step up work on precision
missiles that can overcome enemy defenses, and the nation should move
faster in developing large combat surface ships — probably meaning the
aircraft carrier program that looks increasingly imminent.
Wu’s demand for supercruise — supersonic flight without afterburner —
hints that such performance will be available from the next Chinese
fighter, sometimes called the J-XX.
“One possibility is that the J-XX is being designed for supercruise
and that Wu is trying to build support for a naval version of the
aircraft,” says Richard Bitzinger, a senior fellow at the S.
Rajaratnam School of International Studies in Singapore.
The design of the J-XX is unknown. It could be a new aircraft or
quite possibly a development of the J-10, a fighter now entering
service.
The J-10’s configuration is similar to that of the Eurofighter
Typhoon, which the manufacturer says can supercruise at Mach 1.5,
although it is likely to be somewhat slower with a useful external
load.
For the Chinese navy, one advantage of supercruising would be the
ability to cover a large defensive area in less time — quite useful if
the imagined target is a U.S. carrier group at long range.
Importantly, Wu lists a supercruising fighter among a series of
technological demands that all look quite achievable for the Chinese
navy over the next decade or so, suggesting that he does not regard
such flight performance as a pie in the sky.
“Sophisticated equipment is the key material basis for winning a
regional naval war,” says the admiral, evidently referring to the
possibility of a confrontation in the Taiwan Strait. “We must
accelerate and promote steps to work on key weapons.
Read the rest of this story, check out Turkey’s new AW149, see a
Russian fighter go down and read about the Poseidon’s first flight
from our friends at Aviation Week, exclusively on Military.com.
– Christian
Posted in Eye on China
ChiCom Carrier Killer
Wednesday, April 1st, 2009
This is not the first time we’ve covered this issue…
From the US Naval Institute:
With tensions already rising due to the Chinese navy becoming more
aggressive in asserting its territorial claims in the South China Sea,
the U.S. Navy seems to have yet another reason to be deeply concerned.
After years of conjecture, details have begun to emerge of a “kill
weapon” developed by the Chinese to target and destroy U.S. aircraft
carriers.
First posted on a Chinese blog viewed as credible by military analysts
and then translated by the naval affairs blog Information
Dissemination, a recent report provides a description of an anti-
ship ballistic missile (ASBM) that can strike carriers and other U.S.
vessels at a range of 2000km.
The range of the modified Dong Feng 21 missile is significant in that
it covers the areas that are likely hot zones for future
confrontations between U.S. and Chinese surface forces.
The size of the missile enables it to carry a warhead big enough to
inflict significant damage on a large vessel, providing the Chinese
the capability of destroying a U.S. supercarrier in one strike.
Because the missile employs a complex guidance system, low radar
signature and a maneuverability that makes its flight path
unpredictable, the odds that it can evade tracking systems to reach
its target are increased. It is estimated that the missile can travel
at mach 10 and reach its maximum range of 2000km in less than 12
minutes.
Read the rest of this story on Military.com…
– Christian
Posted in Eye on China
Cross-Strait Situation Changing
Wednesday, January 21st, 2009
In offices in the Pentagon and the State Department, China-Taiwan
experts are scrutinizing the latest reports from the Far East of the
changing relationship between China — officially the People’s Republic
of China — and Taiwan, the offshore island “state.” For more than a
half century the United States has anticipated a possible Chinese
assault on Taiwan. But the situation is changing rapidly.
Taiwan became the Republic of China after 1949. Communist armies had
overrun most of China and the surviving Nationalist troops, led by
Chang Kai-shek, fled to the island, then known by its Japanese name
of Formosa.
There followed several decades of intense animosity between the “two
Chinas.” Initially, there was concern in the West that the Nationalist
armies, rested and rearmed, could invade the mainland, some 100 miles
away. Subsequently, there was concern for several decades that Chinese
armies would cross the Taiwan Strait to invade Taiwan.
During the latter period the United States gave considerable military
assistance to Taiwan in anticipation of a Chinese assault across the
strait. And, U.S. war plans called for defending Taiwan against such
an invasion, although the difficulties of such an amphibious operation
should have been obvious to all parties.
Indeed, China did not build a massive amphibious fleet or a large
airborne assault force. Further, China’s marines — currently two
brigades in strength — are assigned to the South Sea Fleet rather than
to the East Sea Fleet, which faces the Taiwan Strait. While detailed
data are not publicly available, it appears that the East Sea Fleet is
the smallest of China’s three fleets.
While strong words are still voiced by some leaders of both China and
Taiwan, there has been a remarkable rapprochement between the two
entities during the past few years. There is now direct postal
service, commercial air transport, and, most recently, shipping
between China and Taiwan. Also, Taiwan businessmen are investing in
China.
And, in early January the China News Agency announced that
representatives of China and Taiwan were are expected to meet after
the Chinese New Year holidays to hammer out the technical details of
several agreements to be signed during the third round of high-
level, cross-Taiwan Strait talks. According to Straits Exchange
Foundation Chairman Chiang Pin-kung, the new set of agreements will
address issues such as cooperation on financial supervision and
regulation, prevention of double taxation, intellectual property
rights protection, and cooperation on combating crime.
Posted in Eye on China
Gi Zhou Examines the New PLA Corps
Monday, August 25th, 2008
It appears that the structure of the PLA’s New Heavy Corps will be
similar to the British 1 Corps in Northern Germany during the Cold
War. The PLA Corps will be structured around brigades and I believe
the Corps itself will contain a heavy artillery group, a ground
manoeuvre group, an aviation group and a battlefield support group
which would include bridging, electronic warfare and logistics.
An early version of the corps envisioned a total of 500 Model 96 or
Model 99 main battle tanks in two armoured and two mechanised
brigades; 586 ZDB-97 tracked infantry fighting vehicles (IFVs), 126
155mm PLZ-45 self-propelled guns; 96 120mm turreted self-
propelled mortars; 36 Type 89 30 tube 122mm and 27 300mm 12 tube A-
100 multiple rocket launchers; 12 DF-15D tactical missiles and 48
attack, 18 multipurpose and 60 transport helicopters and around 2,000
other types of vehicles.
This was clearly outside what the PLA is currently able to afford with
armored brigades now have three armoured battalions for a total of 99
main battle tanks, one mechanised infantry battalion, one artillery
battalion with 18 self-propelled guns and one air defence battalion
of 18 AAA guns. Each armoured battalion will have three armoured
companies, each of three platoons with each company having 11 main
battle tanks; three in each platoon and two headquarters vehicles.
There are no tanks at the battalion or brigade headquarters. This is a
total of 33 main battle tanks.
The new mechanized infantry brigade is to have four mechanised
infantry battalions, one armoured battalion, one fire support
battalion, one engineer battalion and one communication battalion.
Each mechanized infantry battalion has three mechanized infantry
companies, each of three platoons with each company having 13 infantry
fighting vehicles; four in each platoon and one headquarters vehicle.
A complete brigade contains approximately 4,000 soldiers.
Posted in Eye on China
New PLA Armor and Mech. Infantry Brigade Structures
Tuesday, July 29th, 2008
The Soviet Operational Manoeuvre Group in 1986 was looking at creating
a ‘Shock Division’ of three regiments, with each regiment containing
two tank and two mechanised infantry battalions. Armoured divisions
are too unwieldy in complex terrain and an armoured battle group
(battalion sized) is easier to control and execute its mission.
The Peoples Liberation Army, following on from their experience with
the Operational Manoeuvre Group, can now deploy the new mechanised
infantry division and using modular forces have created a composite
cavalry brigade for use in complex terrain.
Utilising the deep operation theory, they can employ am air mechanised
and/or fast wheeled force as a ‘lance’ followed up by the mobile
force (tank heavy) to exploit the breach in an enemys defences
followed by a holding force (heavy mechanised), that is the dozer
blade.
An article in the 1/2008 issue of Tanke Zhuangjia Cheliang (Tank and
Armoured Vehicle) is titled ‘News From Overseas– Chinese Built Many
Light Type Mechanised Units.’ The article was written to correct the
mistakes that appear in non-Chinese media about the structure and
equipment of these new light mechanised units.
The mechanised infantry brigade has four mechanised infantry
battalions, one armoured battalion, one fire support battalion, one
engineer battalion and one communication battalion. Each mechanised
infantry battalion has three mechanised infantry companies, each of
three platoons with each company having 13 infantry fighting vehicles;
four in each platoon and one headquarters vehicle.
Each armoured brigade has four armoured battalions for a total of 132
main battle tanks, one mechanised infantry battalion, one artillery
battalion with 18 self-propelled guns and one air defence battalion
of 18 AAA guns. Each armoured battalion has three armoured companies,
each of three platoons with each company having 11 main battle tanks;
three in each platoon and two headquarters vehicles. A complete
brigade contains 4,000 soldiers.
Posted in Eye on China
A Grab Bag of New Chinese Weapons
Friday, July 25th, 2008
[Editor’s Note: Our good friend Martin Andrew, who publishes an
investigative blaster chronicling Chinese military development called
the Gi Zhou Newsletter, has some interesting tidbits for us this week.
And please note, the picture at left is an earlier Type 89 self-
propelled gun.]
New 122mm Self-Propelled Gun
In 1966, Luo Ruiqing, the PLA’s then chief-of-staff criticised the
defence industry because it was concentrating on R&D rather than on
production. He was accused in the official Report of Luo’s Mistakes
that, ‘he still frantically attacked our national defence scientific
research work as going from data to data, from design to design,
without completing anything’. Luo believed China was in imminent war
with the United States, and advocated Soviet assistance. His criticism
of the Chinese defence industry could well have applied into the 1990s
as well as today with too many designs that achieve little.
A new 122mm self-propelled gun has been shown in the online version
of PLA Daily. Titled ‘Artillery troops enhance combat effectiveness
with new equipment’, it shows a battery of these guns. The vehicle
uses the chassis from the new ZBD97 infantry fighting vehicle with a
turret, most probably a modified version of the one used on the Model
89 122mm self-propelled gun.
WZ731 Tracked Scout Vehicle
Identified as a xinxihua zhanchang (Informationalised battlefield)
system, the WZ731 tracked scout developed from the ZSD89 hull with a
low profile turret mounting two armoured sights, one with a laser
rangefinder and CCD daylight sight and the other a thermal imager. The
WZ731 had a crew of up to six including a three man scout team. It was
6.62m long, 2.626m wide and 1.88m high at the hull and 2.556m at the
top of the armoured sights. The combat weight was only 8.1t which gave
it a maximum road speed of 80.5 km/hr.
Posted in Eye on China
China Close to Anti-Ship BM
Tuesday, June 24th, 2008
I didn’t really understand it until I noticed the seriousness in the
source’s eyes. I hadn’t given it much thought recently, what with all
the other stuff going on around us … MRAP, Air Force shakeup, body
armor, tanker — you name it.
But when the far-ranging discussion we were having came around to
the subject of aircraft carriers, this guy said (and I paraphrase)
“you think carriers are irrelevant in a contested environment now,
just wait til someone gets an anti-ship ballistic missile
capability. That’ll be a game-changer.“
To me, this seemed implausible. Shooting a ballistic missile at a
moving ship?
“Did you see the ASAT test? That was 10-times more difficult,” he
replied. “And they’re a lot closer than anyone thinks.“
He wouldn’t tell me the country that’s so close to getting this
capability, but it’s not hard to guess which one it is.
From the 2008 Chinese Military Power report:
China is developing an anti-ship ballistic missile (ASBM) based on a
variant of the CSS-5 medium-range ballistic missile (MRBM) as a
component of its anti-access strategy. The missile has a range in
excess of 1,500 km and, when incorporated into a sophisticated command
and control system, is a key component of Chinas anti-access
strategy to provide the PLA the capability to attack ships at sea,
including aircraft carriers, from great distances.
That’s subtle — not a whole lot there. But my guy tells me this
country that he would not mention could plausibly demonstrate that
capability “very soon.“
According to our friends at Globalsecurity.org:
Work is believed to be ongoing to provide this missile with a
sophisticated terminal guidance system. According to some reports the
Mod 2 version of the CSS-5 will be comparable to the US Pershing II
IRBM, employ advanced radar guidance to achieve extremely high
accuracy.
Posted in Eye on China
Who’s Afraid of the Big, Bad Dragon?
Sunday, January 13th, 2008
DT editor emeritus Noah Shachtman send us a heads up on a cool post at
his current gig, The Danger Room. Here’s an excerpt:
For years, the American armed forces have worried about an attack on
US satellites; this could be how it begins. The United States military
has become increasingly dependent on space. It uses photo-
reconnaissance satellites to observe potential adversaries, GPS
satellites to guide munitions with pin-point accuracy,
communications satellites to handle the flow of information into and
out of a theater of operations, and early warning satellites to detect
and track enemy missile launches to name just a few of the better
known applications. Because of this increasing dependence, many
analysts have worried that the US is most vulnerable to asymmetric
attacks against its space assets; in their view US satellites are
sitting ducks without any sort of defense and their destruction would
cripple the US military. Chinas test of a sophisticated anti-
satellite (ASAT) weapon a year ago, Friday — 11 January 2007, when it
shot down its own obsolete weather satellite — has only increased
these concerns. But is this true? Could a countryeven a powerful
country like China that has demonstrated a very sophisticated, if
nascent, ability to shoot down satellites at all altitudesinflict
anything close to a knock-out blow against the US in space? And if
it was anything less than a knock-out, how seriously would it affect
US war fighting capabilities?
So is China a valid space threat or not? Read Noah’s three part
series, starting with Part I here.
– Ward
http://defensetech.org/category/eye-on-china/
PLAYBOOK: Watch Out For This Indicator If China Tightens Lending
Tonight
PrintJoe Weisenthal | Mar. 4, 2010, 12:40 PM | 1,006 | 2
Tags: China, Stock Market, Economy, Interest Rates
As you know tomorrow could be a big day from China, as regulators
might announce further loan tightening.
Past tightening events jolted global markets.
Everyone will be focused on the Shanghai Composite. But as Waverly
Advisors notes, you shoud also watch the short-term SHIBOR (their
equivalent of the LIBOR), which is a reasonable proxy for margin debt.
More loosely it's an indicator of so-called "hot money" that finds its
way into the stock market.
Last year, when this spiked, the market tanked soon thereafter. In
February, when China hiked rates, there was no tank. But now we're
coming off last night's big fall, so the jitters are real this time.
If China hikes, and SHIBOR spikes, we could get a real selling
stampede.
Battle stations!
Image: Waverly Advisors
http://www.businessinsider.com/playbook-watch-out-for-this-indicator-if-china-tightens-lending-tonight-2010-3
MARCH 4, 2010, 7:44 A.M. ET.
2nd UPDATE: CIC: Unclear Global Trend To Make 2010 A Tough Year
BEIJING (Dow Jones)--China's $300 billion sovereign wealth fund
on Thursday said this year will be a more difficult year for the fund
to make investments because the global economic trend lacks clarity.
China Investment Corp. Executive Vice President Jesse Wang said said
the global economy this year will be challenging because of swings in
foreign exchange movements and the unclear direction of resource
prices.
"Unlike in the past years when the situation (amid the global crisis)
had been very difficult but the trend had been clear, this year the
trend is unclear," Wang said on the sidelines of the annual session of
the Chinese People's Political Consultative Conference, an
advisory body to the government.
Wang said, for instance, it has become much harder to predict where
global energy and resources prices may head this year, unlike last
year, when a recovery from the financial crisis drove asset prices
up.
Wang also made CIC's first official comment on speculation that
China would help bail out Greece, noting that the onus on such
bailouts should come from the European Union, rather than institutions
such as CIC.
CIC's main mission is to have sound financial returns. "Aiding
Greece looks like a policy goal...If the EU is unwilling to help, how
can you expect others to act as a white knight and save Greece," he
said.
He said the debt crisis that four European countries - Portugal,
Italy, Greece, and Spain - are facing may not be as serious as some
people have speculated. "Perhaps the market has exaggerated the
problems. We need to monitor the situation," he said.
In January, news agencies reported that China may buy a large amount
of Greek debt. The Greek finance ministry subsequently denied that it
had reached a deal to sell Greek bonds or state-linked assets, such as
Greece's largest bank, to Chinese investors, or that it had
mandated any investment bank to negotiate a sale on its behalf.
Wang said CIC has little exposure to the debt crisis related to the
European nations. Instead, CIC focuses more on other risks, such as
the impact foreign exchange swings are having on its global
investments, he said.
He said as a passive financial investor that doesn't seek
management control in any entities it invests in, CIC recorded
"relatively good" investment returns last year. He said a recent
Caijing Magazine report that CIC's overseas investment net profit
for last year was $7 billion wasn't accurate enough, but
wouldn't elaborate beyond saying its annual report to be released
later would have more details. He didn't say when the report will
be published.
This year, he said, CIC would have to be more "flexible" adding
investment will be "highly diversified, balanced, and looking for
undervalued assets". It won't be concentrated on any single
industries, such as resources or the financial sector, nor would it
focus on a single region, such as Africa, he said.
Still, CIC announced over US$8.15 billion worth of acquisitions last
year, with lots of them in the resource space, including a 15.8% stake
buy in AES Corp. for US$1.58 billion, the US$1.5 billion investment in
a 17.2% of Teck Resources in June and the US$856 million purchase of a
15% stake in Singapore-listed Noble Group Ltd. in September.
Citing political risks as well as concerns about an immature legal
system in Africa, Wang said CIC has been treading carefully in the
continent, although it had set up investment funds along with other
unspecified institutions.
CIC, a sovereign fund that manages a portion of China's foreign-
exchange reserve, isn't allowed to invest directly in China, one
of the fastest growing emerging economies, he said.
However, CIC has taken account of "China factors" while making
investments, he said. For example, he said, CIC has invested a lot in
Australia, whose economy is closely linked to the Chinese demand for
its rich resources.
"If China's economy hadn't grown so strongly,
Australia's economy wouldn't have been able to grow so
fast," he said.
Wang said he didn't know whether CIC would, as speculated in the
market, receive another $200 billion cash injection from Beijing.
Whether or not such an investment happens, CIC will continue to adjust
its asset allocation strategy, Wang said.
"We invested most of our funds in 2009, but now we need to rebalance
and adjust the portfolio and manage it," he said.
-Victoria Ruan contributed to this article, Dow Jones Newswires; 8621
6120-1200; ***@dowjones.com
http://online.wsj.com/article/BT-CO-20100304-707131.html?mod=WSJ_World_MIDDLEHeadlinesEurope
Will China's Economy Collapse?
Posted by Michael Schuman
Thursday, March 4, 2010 at 7:56 am
Investors have recently focused on some of the problems potentially
facing the Chinese economy, and they're getting worried. The concerns
are that China might be facing a destabilizing property price bubble
and rising bad loans at its banks due to last year's recession-busting
credit boom. I've offered a word of caution myself.
The message from Jing Ulrich, chairman of China equities and
commodities at JPMorgan, however, is: China won't collapse.
In a note to investors, Ulrich tried to debunk concerns about a
possible China crisis. Here's what she said:
The worst-case fears concerning China's property market are based upon
a layer of truth and we ourselves have highlighted the untenable
nature of price increases in some big Chinese cities…However, there
are crucial differences between China's real estate markets and those
of the U.S. (and indeed Dubai), which require that we view the
apparent building bubble through the lens of China's unique
circumstances.
The Chinese housing market is less risky than that of the U.S., she
contends, since Chinese tend to have less debt and more savings than
their American counterparts. Nor does the financial sector suffer with
the type of subprime excesses witnessed in the U.S. Ulrich continues:
We share many of the concerns about flawed incentives and overheating
in the Chinese property market – but even if property prices were to
undergo a correction, this would not trigger the type of economic and
financial devastation that might arise in an over-leveraged economy.
She is also not so concerned about the potential problem of large
debts at China's local governments, which have been built up by
investments in infrastructure projects.
Chinese bank loans for public sector investment projects carry
implicit or explicit sovereign guarantees, and are thus almost akin to
a bond issuance for a public works project… Looking ahead, while
certain local administrations might struggle to service debt, the
magnitude of public sector debt risks do not appear as severe as some
have suggested.
She concludes:
While we agree that certain vulnerable areas of the economy deserve
closer monitoring, we find little support for the skeptics' views of
an imminent crisis.
I agree that China is unlikely to face some kind of monstrous meltdown
anytime soon. At the same time, I find the whole argument that China
is “different” than other countries a bit hard to swallow. The
mathematics of economics is the same in every part of the world. If
Chinese are investing in property based on the idea that prices will
continue to surge, and they don't, many might find themselves
underwater. If local governments struggle to pay their debts, someone
else has to, and the solution could be akin to a bank bailout by the
central government. Perhaps such developments (if they ever happen)
won't spark a major crisis, but they do have a cost, and they could
dampen investor sentiment, both at home and abroad, and that's not
good for the Chinese economy.
Comments (6)
1I was in China recently and outside the main cities, a lot of the
building is based on North American style condo towers. They are
razing old fashioned cinder block two story houses and putting up
glass clad apartment blocks with marble hallways.
Thats a hell of a leap in the quality of housing (arguably) and one
which I struggled to fathom as being affordable for those whose houses
were going under the bulldozer.
The issue may not be that they are building too much, rather that they
are building too expensive for the market to be supported by buyers
rather than speculators.
However, if the Yuan revalues by 20%, who cares if your apartment
block in Nanjing is half empty for 2 years? i suspect a lot of foreign
money is underpinning the market on that rationale.
ladyhamilton1
March 4, 2010
at 8:34 am
2in short: yes, China will collapse: There will be much more hardship
soon with a looming Chinese collapse bigger than the Soviet Union's.
And your insights are just once more corroborating my findings, I
believe.
crisismaven
March 4, 2010
at 10:49 am
Reply 3/sigh
I would always agree 110% that China's economy will collapse, exactly
in 5 days 4 hours and 41 minutes, if anyone brings it up.
Why do people want to argue about this?
busuan
March 4, 2010
at 2:01 pm
4Both the analyses of Michael and Jing were pertinent. The element of
fear for imminent collapse has been there for some time, but the good
thing is the authorities know what happens and display deep concerns.
The current CPPCC in Beijing appears to be very determined in
addressing and tackling the possible property price bubble burst and
the problem of bad loans via effective multi-prong approaches.
Rest assured, China will continue to stand firm and tall, and its
economy would stay healthy.
tanboontee
March 4, 2010
at 9:28 pm
5tanboomtee:
Those 'effective multi-prong approaches" would be what exactly? We
need to know because we need them in USA.
timothydillian
March 5, 2010
at 12:52 am
6australia is more likely a bublle...china just has a few hot spots
geaugaillumina…
March 5, 2010
at 3:33 am
http://curiouscapitalist.blogs.time.com/2010/03/04/will-china%E2%80%99s-economy-collapse/
March 4, 2010 China: Economy Update
•China to have world's largest high-speed railway network
http://business.globaltimes.cn/china-economy/2010-03/509761.html
•China can manage inflation: PBC vice governor
http://business.globaltimes.cn/china-economy/2010-03/509732.html
•US may take China to WTO over Google saga
http://business.globaltimes.cn/china-economy/2010-03/509710.html
•Henan rolls out coal industry reform
http://business.globaltimes.cn/china-economy/2010-03/509565.html
•Housing prices top agenda at sessions
http://business.globaltimes.cn/china-economy/2010-03/509640.html
•Environmental tax
http://business.globaltimes.cn/china-economy/2010-03/509576.html
•Basically steady yuan
http://business.globaltimes.cn/china-economy/2010-03/509575.html
•US imposes tariffs on China-imported salts, coated paper
http://business.globaltimes.cn/china-economy/2010-03/509389.html
•Chinese govt to reign in provincial debts
http://business.globaltimes.cn/china-economy/2010-03/509290.html
•CPPCC member urges open market for natural gas
http://business.globaltimes.cn/china-economy/2010-03/509235.html
http://sinobusinessnews24-7.posterous.com/china-economy-update-14
...and I am Sid Harth