China

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China is looking to Germany for inspiration on how to retool its economy. Finance Minister Lou Jiwei twice referred to Germany’s successful transformation from “the sick man of Europe” to an economic powerhouse in the 2000s to make his case for reforms in China, during a panel discussion in Frankfurt Tuesday. “Germany seized the opportunity and pushed through structural reforms,” Lou, 65, said during an annual meeting of the Asian Development Bank. “As we all know, if we do not reform, we’ll fall off the cliff.”

Lou of China Lauds Germany's 'Sick Man' Revival in Reform Push - Bloomberg

One of China's long-term economic plans is to get its workers out of rural areas and into cities. This is part of China's larger goal of transforming the country's economy into one based on services and consumer spending. Ultimately, the government wants to get about 70% of its population into cities. But it seems as if China may actually be on the edge of a reverse migration, as many migrants are returning back home.

Chinese migration flow to cities slowing down - Business Insider

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China’s economic challenges have never been more pressing, and for that reason, PIMCO’s forecast for the official growth rate this year is below consensus at 5.5%-6.5% and below China’s own target of 6.5%. In arriving at our forecast, we focused on four major headwinds to growth.

4 massive obstacles to China's growth - Business Insider

There were more attempted overseas acquisitions by Chinese companies in the first four months of this year than in the whole of last year, which was itself a record, according to Derek Scissors, the resident scholar at Washington think tank the American Enterprise Institute, who tracks overseas investments made by China. This suggests the Chinese economy is maturing. But it also betrays underlying tensions. “China is not a rich country, it is a middle-income country; capital should not be flowing out of it,” says Scissors.

Made by China: the UK is on the frontline of the next industrial revolution

China can boast plenty of relevant experince. Its first high-speed line between Qinhuangdao and Shenyang was opened in 2003. Since then 11,800 miles of high-speed lines have been built (roughly 60pc of the global total). This figure is forecast to reach 18,600 miles – enough to put more than two girdles around the Earth – by 2020.

Made by China: the UK is on the frontline of the next industrial revolution

Chinese government support includes billions of dollars in cash assistance, subsidized electricity and other benefits to companies. Recipients include steelmakers, coal miners, solar-panel manufacturers, and other producers of other goods including copper and chemicals.

China Continues to Props Up Its Ailing Factories, Adding to Global Glut - WSJ

A 63-page “investigation initiation checklist,” filed last year by U.S. Steel Corp., Nucor Corp. and the United Steelworkers union to demand import tariffs on rolled steel, found 44 separate subsidy programs, including seven that give Chinese steelmakers cheap or free land, iron ore, coal, and power; eight that offer discount loans; 15 tax breaks; and 11 programs that give companies money directly. Some of the programs date back years, but others were active in the past 12 months, including subsidized export loans, the document showed.

China Continues to Props Up Its Ailing Factories, Adding to Global Glut - WSJ

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A 63-page “investigation initiation checklist,” filed last year by U.S. Steel Corp., Nucor Corp. and the United Steelworkers union to demand import tariffs on rolled steel, found 44 separate subsidy programs, including seven that give Chinese steelmakers cheap or free land, iron ore, coal, and power; eight that offer discount loans; 15 tax breaks; and 11 programs that give companies money directly. Some of the programs date back years, but others were active in the past 12 months, including subsidized export loans, the document showed.

China Continues to Props Up Its Ailing Factories, Adding to Global Glut - WSJ

Still, it's not clear that any of this is pointing to the "ticking time bomb" that some Western investors have predicted. It will definitely cause some headaches for Chinese lenders in the coming years, but several economists told CNBC that predictions of a financial crisis misunderstand how China's economy and politics are designed to operate. "The primary goal of the financial system as a whole is not to make money, it's to obey instructions: The bulk of it is politics first, and profit second," said Derek Scissors, a scholar for the American Enterprise Institute, who added that he doesn't buy "the collapse argument."

China's debt: Worse than you think, but maybe not be a problem

That is, financial institutions, state-owned enterprises and even many "private" firms act, at the end of the day, as an extension of Beijing. So loans and debts, some argue, are really all items on the same consolidated balance sheet. "It can be netted out to a certain degree," Veron said, adding that China has a history of restructuring the debts in its economy. And because there's a political directive to maintain social stability — a key tenant for Chinese leadership — lenders may likely allow for debt restructuring in a way that the system in the West would not. So the "time bomb" might not explode anytime soon.

China's debt: Worse than you think, but maybe not be a problem

China’s stocks rose for the first time in three days, led by industrial companies, after data showed declines in producer prices slowed. The Shanghai Composite Index added 0.2 percent. Producer prices dropped 3.4 percent in April from year-earlier levels, compared with the median economist estimate for a 3.7 percent retreat. Consumer prices matched forecasts for a 2.3 percent increase.

China Stocks Halt Two-Day Slump as Producer-Price Declines Slow - Bloomberg

Total debt in the world's second-largest economy stands at 280 percent of gross domestic product (GDP), much of it owed by entities owned by or related to the government, potentially leaving Beijing on the hook for a portion of these loans, Moody's said in a report. China's actual government debt is more modest at around 40 percent of GDP with state-owned entities (SOEs) owing 115 percent of GDP, higher than any other rated sovereign, Moody's said. Moody's estimated that that liabilities worth 20 percent to 25 percent of GDP could potentially require restructuring. Not all of this restructuring will strain the government's balance sheet though. The government would potentially support some SOEs though engineering mergers, injecting equity or reducing their size, the ratings agency said.

Moody’s raises worries over China loans as Communist party paper calls debt load original sin

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China delivered a poor batch of data in April, and that has some of the brightest minds in finance making gloomy predictions that the rebound in the world's second-largest economy might be ending soon. Heavy industry is in bad shape and posted a 6% year-over-year growth rate in April, hurt by underperformance of state-owned companies and weak export growth in the country.

Weak April Chinese economic data - Business Insider

Even retail sales — an area that many count on to pick up the slack — grew less than expected at a 10.1% rate. Auto demand in particular was hit hard by the government's gas-price hike. More alarmingly, total social financing, a measure of liquidity in the system, fell in April to its lowest level since June 2013. That can be partly blamed on Chinese banks' sharp pullback on new loans, which dropped to only 556 billion RMB ($85 billion) in April.

Weak April Chinese economic data - Business Insider

The Chinese certainly have the money. With a savings rate of 49 percent of GDP, China has plenty of readily available internal sources of finance to support growing investments in its stock of physical capital. And in the human capital, too, where, oddly, they may have a spot of a problem. The latest population surveys show that the active civilian labor force grew at an average annual rate of only 0.12 percent during the five years to 2015. That was down from 0.27 percent in the previous five-year period. China's productivity challenge The upshot is that China needs an average total factor (labor plus capital) productivity growth of 5.8-5.9 percent to maintain the economy's noninflationary growth potential of 6 percent over the medium term.

Why you should take a broader view of China’s economy

Z-Ben Advisors founder Peter Alexander said Friday it's time to strip out the emotion around China, particularly among a chorus forecasting the country's impending doom, which includes Jim Chanos and Kyle Bass. Investors either herald China as the greatest next market or warn that it's on the verge of collapse, he said. But the reality is it's "an enormous market that has a huge amount of opportunity," he told CNBC's "Squawk Box." Alexander said Chanos, founder of Kynikos Associates, was wrong in predicting that oversupply in the property market would take down the Chinese economy.

Chanos, Bass and the China collapse chorus are wrong: Consultant

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Beijing has announced with some fanfare that it plans to design and implement a new reform program consisting of what are being called ‘supply-side’ policies.” They are being broadly bracketed into five categories: reducing over capacity, reducing real estate inventory, de-leveraging and otherwise strengthening balance sheets, fiscal expansion including tax cuts, and lowering corporate costs directly and by reducing government bureaucracy.

Further, further Pettis on China’s new “supply-side” reforms | FT Alphaville

China's debt is approaching $30 trillion. The fresh credit alone created since 2007 is greater than the outstanding liabilities of the US, Japanese, German, and Indian commercial banking systems combined.

China's Communist Party goes way of Qing Dynasty as debt hits limit

Charlene Chu, a banking analyst who made her name warning of the risks from China’s credit binge, said a bailout in the trillions of dollars is needed to tackle the bad-debt burden dragging down the nation’s economy. Speaking eight days after a Communist Party newspaper highlighted dangers from the build-up of debt, Chu, a partner at Autonomous Research, said she was yet to be convinced the government is serious about deleveraging and eliminating industry overcapacity.

‘Massive Bailout’ Needed in Debt-Saddled China, Analyst Chu Says - Bloomberg

China's authorities may face a bigger worry than slowing economic growth. The jobless rate may be three times the official estimate, according to a new report by Fathom Consulting, whose China's Underemployment Indicator has tripled to 12.9 percent since 2012 even while the official jobless rate has hovered near 4 percent for five years.

China's Hidden Unemployment Rate - Bloomberg

It’s quiet these days on a Sunday afternoon in the streets of Dongguan, where almost every block outside the center is a factory or housing for workers. A red banner advertising for staff above one plant says it has enough orders to keep production lines busy for a year. Locals say the sign has been there at least two years and it’s no longer true. Only a few years ago, things were very different. Even on Sunday, the streets were busy and the chimneys were spewing pollution. The city was the epicenter of China’s export boom. Built largely with money from Taiwan, Dongguan sprang up between Shenzhen and Guangzhou making toys, furniture, shoes, mobile phones, everything.

China’s Factory to the World Is in a Race to Survive - Bloomberg

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China’s exports weakened in May, signaling external demand still isn’t giving a sustained boost to growth in the world’s biggest trading nation. Overseas shipments fell 4.1 percent in dollar terms from a year earlier, the customs administration said Wednesday. Imports slipped 0.4 percent to leave a trade surplus of $50 billion.

China’s Exports Weaken, Signaling More Headwinds for Growth - Bloomberg

China's exports fell more than expected in May, suggesting weak demand overseas for Chinese goods and services as the government attempts to boost the nation's slowing economy.

Chinese exports are in for a gloomy year - Business Insider

The change in China’s headline reserves is actually one of the least reliable indicators of China’s true intervention in the foreign currency market. Valuation changes create a lot of noise. And it is always possible for China to intervene in ways that do not show up in headline reserves. Last fall, for example, much of the intervention came from changes in the banks’ required foreign currency reserves. The change in the foreign assets on the PBOC’s balance sheet, and the State Administration on Foreign Exchange’s (SAFE) foreign exchange settlement data are more useful. Still, there is valuable information in today’s release. The roughly $30 billion fall in reserves to $3,192 billion (not a very big sum) is more or less explained by a $20 billion or so fall in the market value of China’s euros, yen, pounds, and other currency holdings. Actual sales appear to have remained low.

Follow the Money » China’s May Reserves

In China, the decision to let the yuan move on a predictable appreciation path between July 2005 and July 2008 and between June 2010 and January 2014 triggered again large one-way bets on appreciation. These speculative capital inflows were often disguised as export revenues to circumvent inward-bound capital controls. Therefore, the speculative capital inflows showed up in growing current account surpluses. The capital inflows were funnelled either into additional capacities in the export sector (via the state-owned banking sector) or into the property market (often via shadow banks). This has led to overcapacities in industrial production and a real estate bubble.

Guest Contribution: “China Should Rebalance by Following the Fed” | Econbrowser

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In January, the markets panicked about a hard landing in China, accompanied by fears of a sudden devaluation of the renminbi that could spread deflationary pressure throughout the rest of the world. In the event none of that happened, and the markets rallied sharply. Why did China-related risks suddenly dissipate, and might they return? One reason why the risks abated had little to do with China itself, and everything to do with the Federal Reserve. In the midst of the global market melt-down in February, key members of the FOMC, led by Bill Dudley, realised that financial conditions in the US were excessively tight as a result of the rising dollar, and they suddenly adopted a far more dovish tone.

Whatever happened to the China crisis? | Gavyn Davies

China's economic picture is getting uglier. Easy credit is exploding and home prices are shooting up, suggesting a possible bubble. Massive public investment is still one of the government's go-to economic fixes. Policymakers seem to be edging away from the serious restructuring reform that they've promised, and analysts aren't psyched about the buildup of credit risks. That could all change if China chooses another road - a productivity-led model.

China could add more than $5 trillion in GDP by 2030 - Business Insider

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China has suffered from outflows from its foreign reserves for months. Goldman Sachs and Standard & Poor's can't agree why. Capital outflows from the world's second-largest economy have been sizeable recently, as reflected in the country's foreign exchange reserves, which analysts use in the absence of official figures detailing the flow of capital. China's foreign exchange reserves fell to $3.19 trillion in May, the lowest since December 2011, down $27.9 billion from the previous month and the largest monthly drop since February, Reuters reported in early June, citing central bank data. Data for June are due on Thursday.

China economy news: Capital outflows driven by residents, Goldman Sachs says

China just stunned the markets. The People's Bank of China announced on Thursday that its foreign-exchange reserves surged by $13 billion to $3.21 trillion in June — much to everyone's surprise. Economists surveyed by Bloomberg expected reserves to come in at $3.17 trillion, in part because of the weaker pound and euro post-Brexit.

China foreign exchange reserves surprisingly increased - Business Insider

Meanwhile, Reuters' Elias Glenn and John Ruwitch quoted Sue Trinh, Hong Kong-based head of Asia FX strategy at the Royal Bank of Canada, who said: "Capital outflows have been continuing at pace and they are a lot larger than what the authorities would have us believe through the official data." She added that the "over-invoicing of China's imports from Hong Kong, seen as a proxy for speculative outflows, is at record highs."

China foreign exchange reserves surprisingly increased - Business Insider

Yet there are also signs of an imaginative China emerging. In fields from gene editing to big-data analytics to 5G mobile telephony, Chinese experts are now among the world’s best. Sunway TaihuLight (pictured), a supercomputer made using only local computer chips, is five times as fast as the best American rival. Fleet-footed and frugal Chinese firms are coming up with business-model innovations too. WeChat, a social-media and payments platform with 700m monthly active users, is more useful and fun than Facebook, Twitter and WhatsApp put together.

Out of the Master’s shadow | The Economist

China's central bank would tolerate a fall in the yuan to as low as 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year's record decline of 4.5 percent, policy sources said. The yuan is already trading at its lowest level in more than five years, so the central bank would ensure any decline is gradual for fear of triggering capital outflows and criticism from trading partners such as the United States, said government economists and advisers involved in regular policy discussions.

Exclusive: China to tolerate weaker yuan, wary of trade partners' reaction - sources | Reuters

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The new normal over recent months has been gradual RMB depreciation that doesn't create a negative feedback loop involving other currencies or broader market sentiment. This could embolden policymakers to keep pushing the limits of depreciation, especially if speculative positioning stays subdued.

China yuan outflows make no sense - Business Insider

Gibson pointed out that 33 steel manufacturers have gone bankrupt since the 1990s. He also said that, between 2011 and 2015, the Chinese government claimed that 90 million tons of overcapacity in its steel market had been taken care of. In reality, 300 million tons had been added to China's steel output...

That means that the government has to tell its banks — mostly state owned — to keep lending to companies that aren't actually healthy and productive. During the hearing, one witness pointed out that 40% of China's new debt is going to pay down interest on old debt.

The US House of Representatives holds a hearing on China's economy - Business Insider

China’s yuan extended losses in early trading to tumble to the weakest level since 2010, pulled down by cooling property prices, a dollar rebounding on haven demand and a weaker central bank fixing. New home prices rose in fewer cities in June compared with a month earlier, official data showed Monday, raising concern that a real estate-supported economic recovery may be losing steam. China’s monetary authority earlier weakened the yuan’s daily fixing to the lowest since October 2010 after the dollar strengthened Friday following a coup attempt in Turkey. The greenback was boosted Monday also as China said it would hold military exercises in the South China Sea.

Yuan Tumbles to 2010 Low as Property Prices Slow, Dollar Rises - Bloomberg

China’s cabinet fueled speculation that the nation is pressing ahead with bad-loan-to-equity swaps that would give lenders stakes in troubled companies. A brief reference in a statement on Monday to letting financial institutions hold stakes in companies in a trial indicated that the swaps are coming soon, according to China Merchants Securities Co.’s analyst Ma Kunpeng. Caixin magazine reported that the State Council was signaling the start of the program, citing an unidentified person close to the authorities.

China Fuels Speculation Bad-Debt-for-Equity Swaps Starting Soon - Bloomberg

If a currency falls to new lows but no-one pays attention, did it really fall? The renminbi his hit its weakest levels against the dollar for more than five years. Very late on Monday the dollar reached Rmb6.7164 – its strongest versus the Chinese currency since September 2010 and surpassing the January lows which rocked world markets. But unlike January, when the Chinese currency’s fall rocked world markets, this most recent slide has had little effect, writes Jennifer Hughes. “There hasn’t been a negative feedback loop to other EM currencies or broader market sentiment,” said Jason Daw at Societe Generale.

Renminbi depreciates past January lows

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Both economic theory and empirical evidence suggest that premature deindustrialisation in developing countries can be damaging. It blocks the main channel of productivity growth, and therefore reduces the economy's potential growth rate and its prospects of catching up with more advanced economies. "Based on the experience of some Latin American countries, a lack of adequate investment and a tendency of specialising according to short-term, rather than long-term, comparative advantage are common mistakes made by developing countries. "This kind of development strategy can result in an underdeveloped industrial sector and slow productivity growth. Given that China's GDP per capita is only 14% that of the US, we believe it is way too early to shift towards services-led growth.

China is too quick to rebalance its services sector - Business Insider

Agricultural Bank of China Ltd. is planning China’s largest sale so far under a trial program for lenders to offload bad loans by packaging them up as asset-backed securities. The lender plans to sell securities backed by 10.7 billion yuan ($1.6 billion) of nonperforming loans on the interbank bond market, it said July 22 on the Chinese bond clearing house website. The sale price will be the equivalent of 29 percent of the loans’ face value, with the recovery rate on the debt forecast at 41 percent, the lender’s statement showed.

China Bank to Transform $1.6 Billion of Bad Debt Into Securities - Bloomberg

China’s capacity for steel production nearly tripled between 2005 and 2015. Given that capacity increased at a higher rate than production, capacity utilization rates have declined. Both China and the world experienced four consecutive years of falling capacity utilization rates since 2011. China’s utilization rate has been on par with the global level over the past decade; rates for both China and the world fell below 70 percent in 2015. China’s rate in 2015 was 67 percent, compared to the peak level of 89 percent in 2006.

State of Play in the Chinese Steel Industry | PIIE

Researchers at China’s top economic planner called for further monetary easing this year to help lower business costs and boost investment. In a rare public comment on monetary policy, researchers at the National Development and Reform Commission said interest rates and the required reserve ratio for banks should be cut when appropriate, according to a statement on the commission’s website on Wednesday.

China's Top Economic Researchers Call for More Monetary Easing - Bloomberg

Growth in China's services sector cooled in July, with weaker expansions in activity and new work prompting companies to shed staff for first time in four months as they looked to cut costs, a private survey showed on Wednesday. The findings contrast with a more upbeat official survey on Monday, raising concerns that China is still facing hurdles to its plans to transform the economy into one more reliant on domestic consumption than heavy industry and exports.

China Caixin July services PMI declines, employment falls