Archive for the ‘China’ Category
Wednesday, March 3rd, 2010
Yesterday, the Reserve Bank of Australia raised interest rates from 3.75% to 4.0%, which is the fourth increase in rates since last October. Yes, I did say ‘raised’ interest rates. While the rest of the world has been digging itself out of recession the Australian economy grew at 2.7% during 2009. This is at a time when other major economies were contracting at anything up to 5%.
In fact, Australia only saw a reduction in GDP in the last quarter of 2008 and as it requires two consecutive quarters of negative growth to give rise to a recession, this means that Australia never fell into recession and has been doing quite nicely, thank you very much.
How has it managed to do so well? Firstly, like many other countries, the Australian government put in place a multi-billion set of fiscal stimulus packages and increased their infrastructure spending. They also put more money into the hands of consumers in order to boost spending. However, they have also benefited from their proximity to China as they provide many of the resources and raw materials which China requires.
Glenn Stevens, Governor of the Reserve Bank of Australia summed up the reasons for another hike in interest rates as follows:
“In Australia, economic conditions in 2009 were stronger than expected, after a mild downturn a year ago. The rate of unemployment appears to have peaked at a much lower level than earlier expected. Labour market data and a range of business surveys suggest growth in the economy may have already been at or close to trend for a few months. There are some signs that the process of business sector de-leveraging is moderating, with the pace of decline in business credit lessening and indications that lenders are starting to become more willing to lend to some borrowers. Investment in the resources sector is very strong. Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year.”
Tags: Australia, economic growth, Interest rates, recession
Posted in Australia, China, Interest rates, economic growth, recession | No Comments »
Friday, January 22nd, 2010
The Chinese economy grew by 10.7% year-on-year in the final quarter of 2009. This was the fastest growth for two years and meant that there was a growth in output for 2009 as a whole of 8.7%. The official growth target had been 8.0%.
Gross Domestic Product totalled £3,020 billion in 2009 which put China’s output just below the level expected in Japan. This means that it is very likely that during 2010 China will overtake Japan to become the world’s second largest economy. In fact, Goldman Sachs, the US investment bank, expects China to overtake the US in terms of GDP by about 2027.
Industrial production rose by 18.5% in the fourth quarter of 2009 in China and fixed capital investment rose by an incredible 30.5%. Ma Jiantang, commissioner of the National Bureau of Statistics told a press conference that: “China has become the first, on the whole, to achieve recovery and stabilization in its economy.”
However, not everything in the economy is entirely rosy. China has just seen a rapid rise in inflation levels. Consumer price inflation rose from 0.6% in November year-on-year, to 1.9% in December. Food prices were responsible for 90% of the December increase, largely due to the extreme cold weather experienced in Northern China.
 China may allow the Yuan to appreciate, to help reduce import prices and offset inflation.
Will inflation get out of control? The Chinese government has operated a very loose monetary policy and there has been a huge stimulation of bank credit. In fact, the M1 measure of the money supply rose by a staggering amount of nearly 35% in 2009.
But, there is still a great deal of overcapacity in the economy, and observers believe that this will help to contain inflation, with most forecasts anticipating an inflation level of about 3.0% this year. It is also expected that the government may start to create an appreciation in the value of the Yuan. This would help to reduce import prices on commodities and other goods but would obviously make exports more expensive. However, given the fact that exports grew by 17.7% in December compared with the same month in 2008, this may not be a huge problem.
Tags: China, currency appreciation, economic growth, GDP
Posted in China | 1 Comment »
Wednesday, September 23rd, 2009
Developing Asia, which excludes Japan, Australia and New Zealand, is set to expand growth by 3.9% in 2009 and 6.4% in 2010, according to the Asian Development Bank (ADB). These growth figures have been raised from the forecast last March of 3.4% and 6.0% respectively.
“Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown,” said ADB Chief Economist Jong-Wha Lee.
According to the ADB’s newly published Asian Development Outlook (ADO) 2009, there are several reasons for Asia’s enhanced growth prospects. These include: the firm action taken by many governments and central banks in the region; the relatively healthy state of financial systems before the global crisis hit; and, the rapid turnaround in the larger, less export-dependent economies in the region.
The expected rapid growth is being led by China and India. The massive fiscal stimulus package and aggressive monetary easing put in place in the People’s Republic of China has led to growth forecasts of 8.2% in 2009 and 8.9% in 2010. Also, the ADB expects India to grow by 6.0% this year as a result of a large fiscal stimulus announced in July and a recovery in business confidence.
Other areas in the region are not faring quite so well. Hong Kong and Taipei are expected to shrink sharply due to a severe drop in demand for exports and countries like the Maldives have been hit by a drop in tourism.
However, Dr Lee warned that: “The improved regional outlook should not make developing Asian economies complacent. A protracted global slowdown or the hasty withdrawal of stimulus packages can degrade the region’s ongoing recovery.”
The ADB warned that if the area was to develop more resilient economies it would have to broaden the scope and structure of its openness. This would include reducing its vulnerability to external shocks by tackling the geographically unbalanced structure of its trade, capital flows and movement of workers.
The report concluded that: “By promoting closer economic linkages within the region and a more balanced internal economic structure with a bigger role for domestic demand, policy makers in developing Asia will be able to achieve rapid yet stable growth for the region.”
Tags: Asian Development Bank, China, India, world economy. development
Posted in Asia, China, Development, World Trade | No Comments »
Thursday, September 3rd, 2009
The good news according to the Organisation for Economic Co-operation and Development (OECD) is that the global economy is now expected to recover earlier than previously forecast. The bad news is that the UK is not going to be part of it.
In fact the OECD now believes that the UK economy will shrink by 4.7% in 2009, which is now worse than their previous forecast of 4.3%. Our own Treasury has predicted a contraction of only 3.5%. By contrast, the OECD believes that the eurozone will grow by 0.3% in the third quarter of this year, whilst the US will grow by 1.6%. Their forecast for the UK is a fall in the third quarter of 1.0% and zero growth in the final quarter.
The OECD notes a raft of favourable news which has influenced their more bullish forecast. They point to: falls in the cost of money market funding, although they still hold concerns about the banking system in general; stabilisation in the US and UK housing markets as far as prices and turnover are concerned; lowering of inventories this year is beginning to stabilise and we may see an increase here which will help raise economic growth; and, global trade has reached a low and is ready to accelerate.
 China is growing strongly again, but the UK economy will shrink further according to the OECD.
There is also positive news from emerging-market economies, with GDP in China estimated to have risen by over 14% in the second quarter allied to a strong rebound in other Asian emerging-market economies.
Is all this complete guesswork? Are things going to be worse than Treasury forecasts? Is it possible that our own dear government could have got things wrong? We will soon know.
Tags: China, eurozone, gdp growth, OECD
Posted in China, US economy, economic growth, eurozone | No Comments »
Tuesday, May 19th, 2009
For those of you who are keeping up with environmental issues, the World Bank has just published its “Little Green Data Book 2009”. This latest edition points out that the world’s cities are the main drivers of global warming because most economic activity takes place in urban areas. Since cities have become hubs of relative affluence, their greenhouse gas emissions have risen. This has been one of the reasons that developed countries have produced more greenhouse gases than developing countries.
However, the World Bank notes that this level of economic activity is spreading as urbanisation is spreading throughout the world, and it is estimated that by 2050 no less than 70% of the world’s population will live in cities. Unless there is a change in the use of energy greenhouse gases will rise significantly, as cities obtain about 72% of their energy from coal, oil and natural gas. On the other hand cities are the main users of renewable energy but this is still from a very small base. One interesting point is that where populations are living in more dense city centres they are producing, on average, 30-50% less greenhouse gas emissions that those living in outlying suburbs.
The World Bank also notes that the increasing urbanisation which is will be continuing in India and China in the coming years will result in an increase in emissions of carbon dioxide, although their per capita levels will be lower than those of developed countries. Also, lessons will be able to be learned from the successes of countries such as Germany and Sweden which have made dramatic reductions in their emissions over the last 40 years.
The Bank has also warned that 360 million people live in low-elevation coastal zones, making them exposed to potential rises in the sea level. This can be seen in the graphic below.
It is noted that scientists have estimated that sea levels rose by 0.17 meters during the 20th century and could rise by a further 1 meter during this century, especially if there is a major melting of the Antarctic ice sheet. If this happens it will be far more difficult for developing countries to respond to the changes.
Tags: carbon dioxide, Environment, flooding, Global Warming, Greenhouse Gases, urbanisation
Posted in China, Environment, Global Warming, Greenhouse Gases | 1 Comment »
Tuesday, March 17th, 2009
China, which is now the world’s third largest economy, saw its exports drop by 25.7% in February compared to a year earlier. Imports also fell by 24.1%. This meant that the country’s trade surplus fell from $39.1 billion in January to $4.8bn last month.
China is very dependent on its manufactured exports, and the sudden global recession has seen the demand for these goods hit a wall. The Chinese commerce minister was quoted as saying that the slump in exports is unlikely to end soon and he warned that there would be a “grim picture” for trade in the coming months.
 The picture will be "grim" over the coming months.
The country has approved a fiscal stimulus composed of tax cuts and increased spending on the infrastructure amounting to $586 billion. In fact, latest figures show that investment in roads, railways and power grids actually rose by 26.5% in the first two months of this year compared to the same period in 2008.
Some good news is that February saw a 25% increase in the sale of new cars compared to the same month last year. This is because the government has made large cuts in sales tax on small, fuel-efficient cars.
However, prices in China actually fell for the first time in over six years in February, raising the spectre of deflation. The consumer price index actually fell by 1.6% in the month compared to a year earlier, which followed on from a rise in prices of 1% in January. In fact, in February last year the index recorded a rise of 8.7% which reflects a very sharp turnaround in inflation. Also, factory gate prices fell by 4.5% in February. The official statistical agency claimed that it was too early to start talking about deflation and that the falls in prices were mainly due to lower raw material prices and statistical distortions.
Tags: China, Deflation, exports, trade surplus
Posted in Balance of Trade, China, Deflation, Fiscal stimulus, Inflation, World Trade | No Comments »
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