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China's gloomy economic outlook   [Copy link] 中文

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Post time 2011-12-23 13:13:59 |Display all floors
Study unveils growing concern over rising costs, slowing markets
BEIJING / SHANGHAI - Business confidence fell in the fourth quarter, the second consecutive drop, amid growing concern over a slowdown in the world's second-largest economy.
The business confidence index was down 6 percentage points more than the third quarter to 41.7 percent, the People's Bank of China, the central bank, said in a statement on Thursday.

A reading above 50 expresses optimism; anything beneath that figure indicates pessimism.

Of 5,000 companies surveyed, 24.8 percent believe that the economy's temperature is "relatively cool", while a decreasing number believe that things are still going well. The amount holding the latter viewpoint has dropped from 74.3 percent in the first quarter to 67.1 percent now, according to the central bank.

Fang Qi, general manager of Ningbo Shentong Electrical Co Ltd, said the company's profit margin will probably drop by more than 10 percent this year due to falling sales, rising labor costs and dollar depreciation.

"We are now developing new products to attract customers in emerging markets as demand from Europe and the US continues to fall," Fang said. "But the rising cost of labor and raw materials remains a big challenge for us next year."

As a medium-sized vacuum cleaner manufacturer, Shentong's labor costs have risen nearly 20 percent this year, Fang said.
Her woes are shared by Zhang Beilei, the owner of Wenzhou Gaotian Shoe Co Ltd.

"We're not very positive about the current shoe industry. It has been shrinking a lot due to lower demand from abroad and higher costs at home," Zhang said.

Zhang said that slimmer profit margins for small and medium firms will definitely worsen and more companies and factories will be forced to shut down in the coming year.

Wang Haifeng, director of the International Cooperation Center affiliated with the National Development and Reform Commission, said the global economic slowdown, China's reluctance to launch a large stimulus plan and a falling property market are major reasons for declining business confidence.

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Post time 2011-12-23 13:15:46 |Display all floors
A number of manufacturers in Zhejiang, Fujian and Jiangsu provinces also have property investments and feel the market correction, Wang said.

"Their manufacturing business, in fact, is basically fine. But they need money to save their investments in the property sector," Wang said.

Hou Yunchun, deputy director of the Development Research Center of the State Council, said that the property market will pose the biggest challenge for China's economy in the coming years.

The property bubble should be deflated slowly and not pricked, Hou said.

China's economic growth slowed to 9.1 percent in the third quarter from 9.7 percent in the first and 9.5 percent in the second.
Most economists estimated China's economy will grow at a range between 8.2 percent and 8.6 percent in 2012.

But investment bank Nomura International (Hong Kong) Ltd said the growth is likely to slip to 7.9 percent next year. The last time that China's economic growth was below 8 percent was in 1998 when the financial crisis hit Asia.

The China Index Academy, a real estate consultancy institute, said in a recent report that property prices in the major cities would fall 20 percent next year because the policy restriction on the number of homes a family can purchase will continue.

The price drop in smaller cities, according to the report, will be close to 15 percent. And the fall in even smaller cities will be around 3 percent to 5 percent.

Meanwhile, property was replaced by funds and wealth management products as primary investment choices for residents, according to the central bank survey.

Only 13.9 percent of residents plan to purchase a home in the coming three months, down 0.3 percentage point from the third quarter, the survey showed. The proportion is close to a record low of 13.2 percent in the third quarter of 2008.

Expectations for inflation in China were lower for the first quarter of 2012 versus the fourth quarter of this year, according to the central bank's survey of 20,000 households.

Among households surveyed, 36.8 percent of respondents expected consumer prices to climb in the coming quarter, sharply lower than 49.6 percent a quarter ago.

After a slew of tightening measures by the government this year, including six hikes in the bank reserve requirement ratio and three interest rate rises, the consumer price index, the main gauge of inflation, eased to 4.2 percent in November from the three-year high of 6.5 percent in July.

The central bank reiterated that it will continue to implement a prudent monetary policy in 2012 while making it more "targeted, flexible and foresighted" to support stable and healthy economic growth.

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Post time 2011-12-23 16:07:47 |Display all floors
Chovanec wrote in the Tampa-based Foreign Affairs journal that a real-estate bubble is incipient in China. He mentioned incidences in Shanghai.

Perhaps it is time to put breakers into property development for a fixed period of time. Announce that as a short-term policy measure to cool off over-construction which is a common enough problem faced by many growing economies.  At the same time, banks should be transformed to establish building trust divisions, again for the same fixed period of time, during which they buy up unsold properties at market rates - because banks have greater holding power than individual households.  The challenge is not about unsold properties but time for economies to adjust so that oversupply pressures can be eased over time to regain the normalcy of market forces.

The question is what happens if the situation is prolonged and the banks cannot later sell enough of their property holdings to recoup their investments.  There is an inherent risk here.  But then again the financial sector is primarily state-owned and the market is socialist in nature so that means the government at federal and provincial levels will not only be seen as owning state land but also development on it. That itself should lead to new business models for the economy in years ahead.

There is no problem if one doesn't use the same yardsticks when measuring problems as are used by those trained in the west. In this perspective, Chovanec may want to orientalise his assumptions.

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Post time 2011-12-23 16:35:10 |Display all floors
markwu Post time: 2011-12-23 16:07
Chovanec wrote in the Tampa-based Foreign Affairs journal that a real-estate bubble is incipient in  ...

I also believe that it is time to put the brakes on the real estate industry. But as a country with no pillar industries, a sudden pullout will mean the disaster for Chinese economy. In addition, as labor cost soar these days, China cannot rely on the bloody facotories for its development.

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Post time 2011-12-23 18:07:14 |Display all floors
what's gloomy is the western economic outlook. people are becoming able to liberate themselves from overpriced western crap. now people finally have a choice to choose. there;s nothing keeping the west going except selling weapons, extortion, and blackmail.
看我的

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Post time 2011-12-23 20:33:14 |Display all floors
This post was edited by markwu at 2011-12-23 20:38

The western problems are those of their systems and institutions.  These problems have caused their markets and finances to default which reduce the number of jobs available causing their peoples to be unemployed. At their household levels, there is reduced income for even basics.

What China can offer is a win-win situation for their individuals to come and set up new businesses here while still living with levels of comfort that they have been used to back home - because the cost of living is lower even when the income level may be less. For China, she will get people from an advanced economy who may have the right skills - if their entry is properly filtered - to help China create new types of businesses whose output can help transform the hinterland of China. In other words, offer jobs to the west but require them to contribute to the development of the western provinces of China, including the transfer of language skills.

The world is a global village so there shouldn't be embargo on technology transfers just because the system and philosophy of government are different.  In the end, all governments must deliver the same types and levels of services expected by whoever lives in the country being governed. This is universal enough to reduce differences in government to the common factor of people-centric governance.

Will these foreigners compete with locals? It is hard to say at this juncture. They may well do so at a later stage but initially if they can help create new businesses while acting as if they are locals, then the new businesses will be as if set up by locals only.  

If the US government can send thousands of their students over, then sending thousands of their skilled and knowledgeable but unemployed workers over can relieve them of their biggest problem of unemployment while helping China gain friends and make new contacts.

Perhaps this will be Chinamerica in effect, applicable as well for europeans. There will be some positive spinoffs. Besides win-win's, there will be a reduction of tension and mistrust, and an increase of what is already happening all the past thirty years. The US economy will also depressurize from having to make too many internal adjustments on social welfare, giving it time and more disposable resources to right-size its own future competitiveness.  Maybe China can pay them working here in US dollars but at optimized local rates, thereby reducing her foreign reserves.

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Post time 2012-1-3 16:58:22 |Display all floors
so long ,and so many people

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