Market Information

SHANGHAI’S consumer prices continued to accelerate by posting a 5.9-percent increase in January, fueled mainly by food costs, said the Shanghai Statistics Bureau yesterday. The growth was slower than the national average of 7.1 percent, but 0.5 percentage point faster than the city’s figure in December which settled at 5.4 percent. “The rise of food prices remains the main driver of the city’s CPI growth,” said Liu Hui, an official with the bureau. Last month, food prices in Shanghai jumped 14.9 percent from a year earlier, contributing 4.9 percentage points to the overall index growth. In sub-categories, the cost of edible oil climbed 34.1 percent year on year, growing for the ninth straight month, while vegetable prices rose 12.9 percent from a year earlier. “Oil prices were boosted by increased demand during the Spring Festival and higher prices on the international market,” said Liu. “Vegetable price increases were mainly due to the unexpected snowstorms,” Liu added. To stabilize food prices, the city’s government has helped farmers to replant vegetables after the snowstorms and offer them more subsidies to cover the losses. Unlike previous analysis which said inflationary pressure was confined to food sectors, more products saw their costs rise last month except for traffic and telecommunications, entertainment and education. “It is worthy of attention that inflation is spreading into other parts of the economy than food,” said Li Maoyu, an analyst with Changjiang Securities Co. The costs of clothes grew 1.4 percent year on year in January, household appliances jumped 6.6 percent while house rentals increased 6.2 percent, the bureau said.

Source: Increase in food costs raises city CPI to 5.9%

via Shanghai Daily: Business by Wang Yanlin on 2/26/08

Macau saw its value of retail sales in 2007 grow 33 percent compared with 2006, according to official statistics released on Wednesday. With notable increases in the sales of watches, clocks and jewelry (up 54 percent), adults’ clothing (up 39 percent), goods in department stores (up 30 percent), and motor vehicles (up 30 percent), the total value of retail sales for the whole year of 2007 reached 14.2 billion patacas (US$1.8 billion), said the Statistics and Census Service of the Special Administrative Region.

Source: Macau boom

via Shanghai Daily: Business by on 2/22/08

China is an increasingly important player in the world economy. However, nearly 40 percent of executives in Asia say their companies do no business in China today, according to a McKinsey survey, and a third say that even if the country’s growth rate fell to zero their company’s revenue would not be affected.

Executives also see significant threats to China’s continued growth; these include a shortage of talent and weak enforcement of commercial laws and regulations. But many respondents say that the country can address its challenges sufficiently.¹

Assessing and addressing the threats

When respondents are asked to consider how quickly China should respond to the threats to its continued growth, more than 80 percent say China must address those threats within five years. The majority (60 percent) say China is likely to be able to do so, although only 12 percent see it as “very likely” (Exhibit 5). Respondents in China are the least likely to be optimistic; less than half say the country is very or somewhat likely to be able to address the problems sufficiently. Executives whose companies are currently generating revenue in China but whose offices are located elsewhere are somewhat more optimistic: 69 percent see it as very or somewhat likely that China will sufficiently address the threats it faces.

Notes

¹ The McKinsey Quarterly conducted the online survey in January 2007 and received 253 responses from C-level executives in Asia.

Source: Doing business in China: A McKinsey Survey of executives in Asia

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CHINA’S domestic consumption has replaced investment to become the biggest driver of economic growth for the first time in seven years. Last year, domestic consumption contributed 4.4 percentage points to the 11.4-percent increase in the nation’s gross domestic product, compared with 4.3 percentage points of investment and 2.7 percentage points of net exports, said China Securities Journal yesterday, citing unidentified official with the National Bureau of Statistics. Data released earlier showed the nation’s retail spending rose 16.8 percent to 8.92 trillion yuan (US$1.24 trillion) in 2007, up 3.1 percentage points from a year earlier. Fixed asset investment expanded 24.8 percent to 13.72 trillion yuan, 0.9 percentage point higher compared with a year ago, while the trade surplus grew 47.7 percent to US$262.2 billion, 26.3 percentage points slower in pace. “The rise of domestic consumption is the result of many years of efforts to support spending while curbing investment, with a goal to reduce dependence on external factors,” said Ba shusong, a researcher with the State Council Development Research Center. Since the Asian financial crisis in 1997, China has earmarked a strategy to reduce reliance on investment and exports and turn to consumption through tax cuts, minimum wage rises and improved education, welfare and health care. But investment had still remained a leading driver of economic development despite various efforts in the past decade. In 2006, investment contributed 4.6 percentage points to GDP growth, 0.3 percentage point higher than consumption. Zhang Xinfa, an analyst with China Galaxy Securities Co, estimated consumption will contribute more to the economic growth in the future. However, some analysts suggested that higher consumption growth does not mean a weakened investment sector. “In five years at the minimum, investment and exports will still be major contributors to China’s economic growth, at least of parallel importance to consumption,” said Li Maoyu, an analyst with Changjiang Securities Co. Last year, disposable income for city dwellers jumped 17.2 percent to 13,786 yuan and earnings for rural households rose 15.4 percent to 4,140 yuan, according to official data.

Source: Domestic consumption drives GDP for 1st time

via Shanghai Daily: Business by Wang Yanlin on 1/31/08

New Zealanders rank products imported from China below other imports but have noticed that Chinese imports are fast improving, according to a Massey University consumer survey.

Marketing researchers in the University’s College of Business surveyed Aucklanders on their attitudes towards imports from Australia, China, German, Japan and the United States. Japanese goods got the top rating for product performance.

The research team, led by senior marketing lecturer Dr Gurvinder Shergill (pictured), set out to investigate consumer attitudes towards products and marketing practices of different countries in order to shed more light on how consumers perceive imported products – depending on their country of origin. The study found the three common factors on which consumers evaluate imported products were quality, design and whether they were improving.

Dr Shergill says there has been little research on New Zealanders’ attitudes to imported products. The researchers also wanted to compare the attitudes of consumers towards the way products from the five countries were marketed.

Source: Massey news - Press releases Chinese imports rank low but consumer perceptions improving

The economy is in for a bumpy ride this year, economists say, as fears mount about the global impact of a US recession.

The belief that the United States is heading for recession, or may even be in one already, has led to carnage on world sharemarkets since the new year and a dramatic interest-rate cut of three-quarters of a percentage point by the US Federal Reserve.

Because of the time such moves take to work, economists see it more as a bid to reassure the markets and shorten and reduce the severity of a US recession than to stave one off altogether.

How great the impact of a US slowdown on New Zealand is will depend on how long it lasts and how much validity there turns out to be in the idea of “decoupling”.

Decoupling is the theory that the Asian economies, which have generated most of the world’s growth in recent years, have enough momentum of their own to shrug off at least a short drop in their exports to the US.

If they do, the impact on commodity prices, whose current strength underpins the growth prospects for New Zealand and Australia, our largest export market, should be modest.

Bank of New Zealand chief economist Tony Alexander expects the economy to grow at a weak rate of below 2 per cent this year.

“There will definitely be an impact but there is some insulation,” he said, citing the dairying boom, infrastructure spending, job security and wage growth, the prospect of tax cuts and businesses investing.

Any fall in local fixed-term mortgage rates would be limited, Mr Alexander said, when US interest rates began to rise again later in the year as concerns about inflation came to the fore again.

ANZ National Bank chief economist Cameron Bagrie said the world economy was less reliant on the American consumer than it had been 10 years ago.

But economies had become more interdependent because of intricate interconnections of markets, making it impossible to quarantine the kind of problems the US banking system was grappling with as a result of lax lending practices in the “subprime” mortgage market.

With the banks looking sideways at each other, wondering what losses had yet to be disclosed, credit while still available had become more expensive, he said.

“For an economy such as New Zealand, which is very reliant on offshore capital, this is probably the worst possible scenario. We are still managing to tap overseas capital markets but it is far more difficult and is costing more,” Mr Bagrie said.

“That is a cost borrowers will have to face, whether it is for housing or in the corporate world.”

He is dubious about the decoupling theory.

“If it’s just a US problem, the overall prognosis for New Zealand is reasonably good. But growth is fading in Japan and Europe looks sluggish. They are very big shoes for the rest of Asia and emerging markets to fill.”

New Zealand Institute of Economic Research chief executive Brent Layton is more optimistic.

He does not believe the US slowdown will amount to a recession. “I don’t think Asia will slow a lot, hence the impact on Australia will not be so great, helping New Zealand.”

Sharemarkets’ volatility reflected uncertainty, Dr Layton said. They were not always a reliable barometer of the economic outlook.

“It is only a very small proportion of the total value of equities that gets traded on any day,” he said.

“You can have large movements which affect the value of the market but only a small proportion of players are participating.”

In overnight trading, London’s FTSE 100 had fallen 0.8 per cent.

After three weeks of falls, the New Zealand sharemarket closed higher yesterday - though only just.

Source: New Zealand Herald via: Asia markets key for NZ

SHANGHAI pledged to increase gross domestic product to more than two trillion yuan (US$276.3 billion) in the next five years, the city mayor said today. Per capita GDP is expected to surpass 100,000 yuan by 2012, Mayor Han Zheng said at the annual plenary meeting of the Shanghai People’s Congress this morning. The service industry, which will be the heart of the city’s economy by then, is expected to account for more than 80 percent of GDP in urban areas, Han said. The added value of the service industry aims to exceed 1.1 trillion yuan by 2012, Han said. The city will also continue providing financial support for innovation and scientific research to boost economic development, Han added. Research expenditures will increase to three percent of the city’s total GDP, Han said.

Source: City’s GDP to surpass 2 trillion yuan in 5 years

via Shanghai Daily: Metro by Lydia Chen on 1/24/08

New Zealand is close to a free-trade agreement with China and Trade Minister Phil Goff is confident a deal will be signed in April after final details are worked through.

Source: Goff confident of China trade deal

via: NZ Herald

Big news for all NZ exporters.

Formal talks for a free trade deal between New Zealand and China have been completed and all the contentious issues resolved, New Zealand Trade Minister Phil Goff said Monday.“I believe that we will become the first developed country in the world to sign a free trade agreement with China, which within 20 years could well be the world’s largest economic power,” Goff told Radio New Zealand.

There was still a lot of work to be done to finalise the drafting of the 1,000-page trade agreement, he said.

The New Zealand government has previously said it hopes to complete the deal by April.

Fifteen rounds of talks have been held between the two countries on the trade deal, with the last being held in December.

Prime Minister Helen Clark previously identified New Zealand’s dairy exports as a sticking point in the talks.

Trade between the two countries is worth about NZ$6.2 billion (US$4.7 billion) annually.

Source: New Zealand says FTA talks with China completed
Posted: 21 January 2008 0832 hrs