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Economic restructuring to boost China\’s economy

As China celebrates the arrival of the new lunar year, the Year of the Tiger, the world hopes China\’s economy will roar again in 2010, after it helped pull the global economy out of recession in 2009, the Year of the Ox.
The world\’s third largest economy will become a \”real tiger\” when the Chinese government successfully restructures the nation\’s economy, a task the authorities have made a priority, as evidenced by a string of recent comments by top leaders, analysts say.
In early January, President Hu Jintao called on the whole nation to strive to accelerate the adjustment of China\’s economic development pattern, to promote sound and fast economic and social development.
The transformation of the economic development mode, based on a comprehensive judgement on the international and domestic economic situation, should not be delayed, Hu said at a seminar of provincial and ministerial-level officials.
The key for the transformation is to achieve it \”at an accelerated speed\” and with practical results, he added.
Vice Premier Li Keqiang said China has entered a critical period when adjusting the nation\’s economic structure is the only approach to advance the country\’s sustainable development.
Asia Development Bank economist Zhuang Jian said the repeated call for accelerated reform reflects policymakers\’ determination to put it at the top of the government agenda.
Boosted by a raft of stimulus measures, China\’s economy expanded 8.7 percent in 2009, staging a speedy recovery after being hit by the worst global financial crisis in eight decades.
Even though Chinese exports dropped 16 percent last year, China still overtook Germany to become the world\’s largest exporter.
The January trade data provided solid evidence of growth consolidation, with exports jumping 21 percent year-on-year and imports surging 85.5 percent.
After having sustained the nation\’s fast economic growth for more than two decades, the weaknesses of China\’s export-led growth model were revealed with the onset of the global economic recession which originated in the U.S.
Analysts say China cannot rely on exports for growth as much as it used to anymore. The path for future growth is clear, with the nation\’s top leaders repeated pledges to transform the economic growth model.
\”The past ten, twenty and thirty years have seen China accumulate economic strength in a quantitative way,\” said Wang Xiaoguang, a researcher with the Chinese Academy of Governance.
But in the future it should focus more on quality, he added.
Li Keqiang said that expanding domestic demand is the prime and long-term strategy for economic development.
To offset weak external demand, the government looked to domestic demand to shore up growth in 2009, with the government announcing a raft of policy incentives to spur consumption.
Tax cuts and auto subsidies helped propel China to becoming the world\’s biggest auto market last year.
Wang Xiaoguang said China still has plenty of potential to grow its consumption, with the nation\’s vast rural areas to provide plenty of demand.
In 2009, retail sales in rural areas grew 0.2 percentage points faster than those is urban regions.
In addition to subsidies for auto and home appliance purchases, the government said in the 2009 No. 1 document, which focused on rural development, enunciated policies to help farmers buy building materials.
Demand for building material is growing as the better-off rural residents renovate their houses to live more comfortable lives.
Although details of the new incentives have yet to be released, it will massively stimulate rural demand, Chang Xiaocun, a Ministry of Commerce official, said.
National Statistics Bureau data showed consumption contributed 4.6 percent to GDP growth in 2009, compared with 8 percent for investment and a negative 3.9 percent from exports.
\”Growth will not be a problem this year as the economy has bounced back from a the big slowdown,\” said Wang Xiaoguang.
The blind pursuit of economic rate is not desirable for the Chinese economy, he said, adding that a growth rate between 8 percent and 9 percent is appropriate during the economic restructuring.

China\’s inflation rises modestly, pressure remains

China\’s consumer price index (CPI), a indicator of inflation, rose 1.5 percent year on year in January this year, the National Bureau of Statistics (NBS) announced Thursday.
\”This is a modest rise and it is mainly caused by a hike in food prices,\” Fan Jianping, a senior economist with the State Information Center, told Xinhua Thursday.
Food prices went up 3.7 percent last month year on year, with non-food prices edging up 0.5 percent from a year earlier.
The index in January was up 0.6 percent from December, with food prices up 1.8 percent from the previous month, said the NBS.
China\’s inflation has continued to rise since November, pushed up by a rise in food prices caused by the bleak winter conditions in early January, said Xiong Peng, a senior researcher with the Shanghai-based Bank of Communications (BOC), China\’s fifth largest lender, Thursday.
Figures showed that China\’s CPI rose 1.9 percent year on year in December last year.
\”The year-on-year CPI growth rate did not increase from December. This is the result of a relatively high comparison basis in January 2009, as Spring Festival and annual shopping spree fell in that month,\” Xiong explained.
The producer price index (PPI), an inflation indicator at the wholesale level, rose 4.3 percent in January from a year earlier, increasing from 1.7 percent in December 2009 when the figure ended 12 months of decline.
Analysts said the domestic price reform of major resource products and rising international commodity prices accelerated the PPI growth.
In breakdown, the price of crude oil surged 70 percent, and that of raw coal was up 5.3 percent. Non-ferrous metal price rose by a quarter.
A relatively lower comparison basis in January 2009 also helped push up the PPI last month, according to a Thursday BOC research report.
\”China\’s CPI and PPI are on track for continuing growth on the back of economic expansion. Improving exports may also boost domestic manufacturing demand in the first quarter of this year,\” Xiong said.
China\’s exports grew 21 percent in January as the global economy gradually began to recover, customs data showed on Wednesday.
Possible bad winter weather, Spring Festival and rising accommodation costs in cities may further cause the CPI to rise, according to the BOC report.
China Construction Bank predicted Wednesday that China\’s CPI may climb to 3 percent in 2010 year on year.
This is in line with BOC\’s forecast. It predicted that China\’s CPI would rise between 3 and 4 percent for 2010, with PPI in the range of 4 to 4.5 percent.
\”The government should closely monitor the inflation indicators, especially the rise of the PPI,\” Fan said.
The Chinese government should introduce a series of macro-management measures to keep the inflation rate stable, Xiong added.
Thursday figures showed that China\’s new yuan-denominated lending in January stood at 1.39 trillion yuan (203.5 billion U.S. dollars), down 14.2 percent from a year earlier, dampening market expectations of an interest rate raise in the near future.
Chinese equities closed higher in the morning session of Thursday after releasing the latest economic figures, with the benchmark of the Shanghai Composite Index gaining 0.16 percent, or 4.67 points, to 2,987.17 points.

Costa Rica, China draw up free trade pact

Costa Rican and Chinese negotiators reached a free trade agreement on Wednesday, a key part of the Central American nation\’s drive to extend its web of trade pacts outside the Western Hemisphere.
President Oscar Arias is expected to sign the deal in April and then Costa Rican lawmakers must approve it.
President-elect Laura Chinchilla, who takes over from Arias in early May, will be short of a majority in the single-chamber legislature and will need support from opposition lawmakers to pass the law and make Costa Rica the third Latin American nation to seal a trade deal with China.
One of the two main opposition parties is pro-free trade, but the issue has been a tough sell in the past in Costa Rica, where the CAFTA regional trade accord with the United States narrowly passed in a 2007 referendum.
The pact will lift duties on 99 percent of Costa Rican exports to China, including its high-quality coffee and other farm products.
\”This wasn\’t an easy negotiation,\” Costa Rica\’s chief negotiator Fernando Obando told a news conference. He said China denied Costa Rica\’s request to include the Central American nation\’s sugar in the deal.
Under the agreement 90 percent of Chinese imports, including electronics and appliances, will be exempt from tariffs. Chinese-grown coffee is not included in the pact.
Chinchilla, who won a landslide election on Sunday, has said new trade deals will be a priority for her administration, which begins on May 8.
Costa Rica follows Chile and Peru in reaching an agreement with China as it aggressively pursues new trade deals to open its agricultural and tourism-fueled economy to new markets.
Foreign Trade Minister Marco Vinicio Ruiz said on Wednesday that Costa Rica was focused on forging more deals with Asia.
\”It\’s evident that the United States and Europe, which are still our principal markets, are going to (grow) much more slowly than Asia,\” said Ruiz.
\”Over the next 10 years, there\’s no doubt that Asia will have the importance of Europe and the United States, and that\’s fundamental for our economy,\” he told the news conference.
Costa Rica\’s bilateral trade with China was $1.58 billion in 2008, up from $80.3 million a decade earlier.

China\’s PPI up 4.3 pct in Jan

The producer price index (PPI), a major measure of inflation at the wholesale level, rose 4.3 percent in January from a year earlier, the National Bureau of Statistics (NBS) announced Thursday.
It quickened from 1.7 percent in December 2009 when the figure posted the first monthly rise since December 2008.

China\’s January CPI rises 1.5%

China\’s consumer price index (CPI), a main gauge of inflation, increased by 1.5 percent in January from a year earlier, the National Bureau of Statistics (NBS) announced today.
The increase was 0.4 percentage points lower than the previous month.
Ba Shusong, a renowned economist with the Development Research Center under the State Council, the government\’s think tank, said the central bank might raise the interest rate when the CPI increase exceeds 2.25 percent (the current one-year benchmark deposit rate), according to chinanews.com.cn.

China exports show trade recovery on track

China\’s export growth accelerated in January and imports rose, adding to signs a recovery in global and Chinese demand is on track.
January exports rose 21 percent from a year earlier, up from 17.7 percent growth in December, customs data showed Thursday.
Imports skyrocketed by 85.5 percent due to being compared with a period last year when companies were idled for the weeklong Lunar New Year holiday. The holiday this year falls in February.
Still, growth exceeded forecasts by many private sector economists, suggesting trade was recovering from the global crisis that battered Chinese exporters of shoes, toys and other low-cost goods and wiped out millions of factory jobs.
\”We see China\’s trade has entered a stable stage,\” said Shanghai Securities economist Hu Xiaoyue.\” Unless there\’s another around of the financial crisis, China\’s export recovery is well on track and won\’t see a double dip.\”
The improvement could add to pressure from Washington and other trading partners for Beijing to ease currency controls and let its yuan rise in value.
January\’s trade figures also were boosted by the comparison with unusually weak global demand a year earlier and low oil and commodities prices. The cost of foreign raw materials needed by Chinese industry have risen since then, inflating the import bill.
December marked the first export growth following 13 months of declines.
China overtook Germany last year to become the world\’s biggest exporter due partly to the ability of its adaptable exporters to keep selling abroad amid weak demand.
China\’s global trade surplus in January narrowed sharply to $14.2 billion, down from $39.1 billion a year earlier. The trade surplus with the United States was $10.9 billion and that with the 27-nation European Union, China\’s biggest trading partner, was $11.5 billion.
China\’s domestic consumption has rebounded on the strength of a 4 trillion yuan ($586 billion) stimulus, helping to drive demand for foreign raw materials and consumer goods. That helped to boost economic growth to 10.9 percent in the final quarter of 2009.
Chinese exporters are hiring new workers but analysts say those industries cannot recover fully until major foreign markets rebound.
\”The brutal truth is that China\’s exports will not be able to recover independent of a recovery in consumption in major trade partners,\” Tom Orlik, an analyst in Beijing for Stone &McCarthy Research Associates, said in a report.
\”With high unemployment, high household debt and the end of government subsidies holding back a recovery in consumption in the US, EU, and Japan, that recovery will be a gradual one.\”

China\’s GDP to grow 9.5% in 2010

China has little chance of incurring severe inflation in 2010 and CPI will grow about three percent year-on-year, China Securities Journal reported Wednesday, citing a report from China Construction Bank.
GDP growth is forecast at 9.5 percent, the report also said.
Investment, the major momentum for China\’s economic growth, is expected to expand at a slower pace of 26 percent year-on-year, four percentage points lower than the previous year.
In order to keep the steady growth of social consumption, the government may issue new stimulus measures in 2010. The total retail volume of social consumer goods is predicted to grow 18 percent in 2010 from the previous year.
China\’s real estate sector will face tighter adjustment and control from the government, slowing sales and stabilizing housing prices in 2010, according to the report. The average price of newly-built housing rose about 900 yuan per sq m, or 21 percent year-on-year in 2009.

China\’s CPI to grow 3% in 2010: CCB report

China\’s Consumer Price Index (CPI), a main inflation index, might climb 3 percent in 2010 year on year, according to a Wednesday report released by the China Construction Bank (CCB).
It is not likely for China to see a rocketing inflation in 2010, while China might register a year-on-year gross domestic product (GDP) growth of around 9.5 percent, according to Wednesday\’s China Securities Journal, a newspaper run by Xinhua.
China\’s CPI increased 1.9 percent year on year in December last year. The figure rose sharply from a 0.6 percent growth in November when the index ended nine months of decline.
The government should step up efforts to improve the domestic economic growth efficiency and quality in line with changing situations, said the Beijing-based CCB.

China\’s foreign trade up 44.4% in Jan.

China\’s foreign trade posted a 44.4 percent growth in January 2010 year on year, the General Administration of Customs (GAC) announced Wednesday.
Exports in January stood at 109.47 billion U.S. dollars, up 21 percent from a year earlier, while imports rose 85.5 percent to 95.31 billion U.S.dollars.
The hefty increase was due to lower comparison bases a year ago when China\’s exports were hard hit by global financial crisis and less working days as the Lunar New Year holiday fell in January last year, the administration explained.
The trade surplus contracted 63.8 percent to 14.16 billion U.S. dollars.
The European Union and United States remained China\’s first two largest trading partners.
The Association of Southeast Asian Nations (ASEAN) surpassed Japan to be the third largest as the Sino-ASEAN trade surged 80 percent to 21.48 billion U.S. dollars after the China ASEAN free trade area kicked off on Jan. 1 this year.
Exports of machinery added 27 percent to 62.51 billion U.S. dollars, or nearly 60 percent of the total.
Exports of appliance and electrical products grew 33.1 percent to 24.09 billion U.S. dollars.

China vows new food safety campaign

Following several reports of melamine-tainted milk products resurfacing, Chinese vice premier Li Keqiang on Tuesday vowed a new nationwide campaign in 2010 to ensure food safety.
\”Food is essential, and safety should be a top priority for food. Food safety is closely related to people\’s life and health and economic development and social harmony,\” Li said at the first plenary meeting of the recently-established food safety commission under the State Council.
According to Li, this year\’s campaign will focus on the prominent issues of food additives, edible farm products, food production processing, food circulation and import and export, livestock slaughter, the catering industry and health supplements industry, among others.
\”We should understand the foundation for the country\’s food safety is still weak and the situation is grave,\” Li said. \”We should fully realize that it is a pressing issue to ensure food safety.\”
Media reports said melamine-tainted dairy products have resurfaced in several Chinese provinces, proof that the toxic milk powder recalled in 2008 was not destroyed and has been used.
Melamine is an industrial compound which can give a false positive on protein tests and cause kidney stones. Melamine-contaminated milk products killed at least six children in 2008 and sickened 300,000.
Li stressed responsibility of food producers and vendors while calling on various government departments to strengthen supervision and guidance of these companies.
He urged improvement in food safety standards and the food system production check-ups, risk evaluation, accident prevention and emergency response.
Li vowed to \”thoroughly\” investigate the latest milk scandal, destroy all tainted products and severely punish those responsible.
Two managers from a dairy company and a milk powder dealer in northwestern Shaanxi province were arrested on charges of manufacturing and selling food that does not meet hygiene standards, local police said earlier this month.
Li urged the strengthening of law enforcement by increasing the frequency of inspection and expanding the supervision to clear up potential troubles and ensure people spend a happy and peaceful Lunar New Year, which falls on Feb 14 this year.