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Because of its rapid economic growth over the last 30 years, it’s easy to forget that China is a communist country. The Chinese, like everybody else, love money. But the Communist party is clearly in control.
One of the areas controlled with an iron communist fist is China’s media. The main TV station, China Central Television or CCTV, is owned, operated, and controlled by the government. Unlike the U.S., Chinese government officials can’t spout off their own opinion. Instead, they must speak the ‘company line’ of the ruling Communist Party and carefully choose their words.Frankly, I don’t pay too much attention to any government official, Asian or not, when they boast about how wonderful everything is. I do, however, pay very careful attention when they start talking about trouble. You see, glowing words be can true or a complete lie. But whenever the talk turns negative, you can take those warnings to the bank. And the ‘talk’ coming out of China has turned very, very negative. Just last week, five very knowledgeable insiders had some not-so-pretty things to say about the Chinese economy.

Negative Talk #1: Li Yizhong, head of the Ministry of Information and Technology, said this:

“The international financial crisis is having a severe domestic impact.
“We don’t think we’ve bottomed yet.
“Just about every industry has overcapacity.”

Negative Talk #2: China’s economic and social goals are based upon a series of Five Year Plans. The head of that planning body, Zhang Ping, described the economic outlook from his office’s perspective:
“The global crisis has not bottomed out yet. The impact is spreading globally and deepening in China.
“Some domestic economic indicators point to an accelerated slowdown this month.
“Excessive bankruptcies and production cuts will bring massive unemployment, stirring social unrest. Owing to dramatic changes in the international economic and financial environment, the Chinese economy faces growing downside pressure.”

Negative Talk #3: The Minister of Human Resources and Social Security, Yin Weimin, echoed the same warning:

“The current situation is grim, and the impact is still unfolding.”

Negative Talk #4: The biggest cheese of all, Chinese Premier Wen Jiabao, said a mouthful last week, too:

“We must be crystal clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development.
“In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows.”

Negative Talk #5: This last comment wasn’t from a Chinese official. It was, however, from someone who should be on top of things since his country is one of the key suppliers of natural resources to China. I’m talking about Glenn Stevens, head of the Australian central bank, who said:
“The most striking real economic fact of the past several months is not continued U.S. economic weakness, but that China’s economy has slowed much more quickly than anyone had forecast.
“There is every chance that the rate of growth of China’s (gross domestic product) is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009.”

Those five insiders have good reason to talk cautiously because the Chinese economy, while still growing at a healthy pace, is getting pulled down.

Consider these three pieces of economic news from last week …

Chinese exports fell by 2.2% in November, the first time in seven years …

Imports fell by eight times as much, dropping 17.9% in November, and …

Manufacturing output shrunk by a record amount

Information taken from: Tony Sagami, Money Markets

Picture of Beijing’s urban development: Photo by Joe

China has rewritten both the theory and history of economic development. In just 30 years, it has gone from the brink of economic collapse to the cusp of a newfound prosperity.

The current economic crises is only part of the economic cycle and is sceen as a new phase in China’s economic growth.

“The world is hardly coming to an end. At work are the time-honored forces of the business cycle - driven in this case by the US recession that should inevitably be followed by recovery.”

However painful, cyclical adjustments are also an opportunity. For China, it underscores the imperative of shifting its growth impetus to private consumption.” Stephen Roach, Chairman of Morgan Stanley Asia.

taken from: China to Deal With Global Slowdown

The meat industry is targeting China as an emerging market for lamb.

Alliance Group chief executive Grant Cuff told a meeting of shareholders last week that the industry had also looked at the potential of Russia and India but found China to be the most promising.

High import tariffs ruled out India.

The industry would look at Russia once China had been assessed to identify consumers, product forms, brands and logistics.

“We will look at Russia, but all the stars lined up better for China.”

Cuff said the industry intended targeting high-worth Chinese consumers with high-value products.

It could take six to 12 months of further research to find and work out how to target those consumers.

New Zealand’s recent free trade agreement with China offered little assistance in removing already low red meat tariffs, but Cuff said its real benefit was helping to deal with bureaucratic red tape and establishing distribution networks.

 Via: NZ Herald  China targeted for lamb exports

Here’s a good link for businesses thinking of exporting to China. It includes simple steps to assess if you’re ready for the challenges of China as well as information, case studies and support for those wanting to look at the opportunities China offers. Link

A $1 million Chinese order for socks, hats and gloves from Norsewear is being cited as an early spin-off of the free trade agreement signed last week.

Norsewear says the order, within 48 hours of the signing of the pact, came out of the blue and was a result of the higher profile New Zealand was enjoying in China. The company’s general manager Sandra Shilling said the company has manufacturing links in China but was not marketing its New Zealand-made garments there at all.

“It’s not something we planned on or predicted,” she said.

“The Chinese have ordered three times the annual numbers we currently produce. The good news is that means more jobs for New Zealanders as all the products will be manufactured locally. Already our contract manufacturers are looking for new staff to help fill the order.”

She said if the Chinese were happy they planned to increase the order.

“Goodness knows how we will cope with that! The export potential is absolutely mind boggling. We are talking in the multimillion-dollar region so it’s all systems go for us right now.”

Via NZ Herald: $1M Norsewear deal an early winner

Details on tariff cut programme in trade deal with China.

The deal eliminates tariffs on 96 percent of New Zealand’s current exports to China by 2019.

For other than specified “sensitive” goods - kiwifruit, some meat, sheepskins and dairy products - the following programme will apply:

* When the deal comes into force - probably October 1 - 35 percent of imports from New Zealand which currently face tariffs of up to 5 percent will be duty free;

* Duties in the 6 to 20 percent range will be phased out over five years until 2012; and

* Tariffs greater than 20 percent will be reduced to 20 percent on day one and then phased out by 2013.

Dairy

* Some dairy products - infant milk formula, casein, yoghurt and whey - will be phased out over 5 years;

* China’s tariffs on butter, liquid milk and cheese will be phased out over the 10 years to 2017;

* Skim and whole milk powder will be removed over 12 years; and

* There are mechanisms to delay the tariff reductions if exports exceed certain quantities.

Meat

* Tariffs on beef and sheep meat, and edible offal will be removed over 9 years.

Fruit

* Apple tariffs will be removed by 2012 and kiwifruit over 9 years.

Wool

* A duty free quota of 25,000 tonnes of wool and 450 tonnes of wool tops will be set increasing by 5 percent a year for 8 years. The initial quota is 75 percent of current exports or $122 million a year in tariffs.

Wood and paper products

* China will be bound on the zero tariff on logs and sawn timber and a limited number of pine products will also be given preferential status.

* Some processed wood and paper products accounting for 4 percent of New Zealand’s exports to China will not be covered by the trade deal. This is because under WTO rules is China gives preferential status on the products, they must be applied to all WTO members.

What China Gets from New Zealand.

* All tariffs will be removed by 2016;

* Currently 37 percent of China’s exports to New Zealand are tariff free;

* An additional 2 percent of exports with a tariff of five percent or less will be duty free from October 1;

* Tariffs on most textile, apparel, footwear and carpet products will be phased to zero over seven years or nine years. Tariffs on heavily exported goods in clothing and footwear will be phased out by 2016, lesser traded goods by 2014; and

* Tariffs on all other goods (including steel, whiteware, plastics and furniture) will be mostly phased out by 2012 with the remainder by 2013.

* Ian Llewellyn is in Beijing with the assistance of the Asia New Zealand Foundation.

via:  Details on tariff cuts in China trade deal

3:30PM Monday April 07, 2008

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

International Business Convention (IBC) China Market Focus: Outdo Your Rivals: Branding & Competing in the China Market (24/01/2008)

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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

BEIJING’S economy is expected to grow nine percent or above this year, lower than the growth rate of 12.5 percent which it is expected to have achieved last year, a local development official has said.

The Beijing municipal government also predicts that the per capita gross domestic product will reach US$8,000 this year, up from US$7,000 last year, said Zhang Gong, director of the Beijing Municipal Development and Reform Commission.

Source: Shanghai Daily