China Housing Bulls Stay Positive
With home sales improving and average sales prices skyrocketing, the Chinese property market looks like it is recovering.
Category: China
Driving the Silk Road with China
China has accepted that its newfound economic clout as the world’s largest economy (in purchasing price parity terms) comes with responsibilities for economic leadership. Within two years, the Asian Infrastructure Investment Bank grew from a proposal put on the table by China alone to a US$100 billion multilateral agreement supported by 57 countries. This is evidence of China’s willingness and capacity for economic leadership among a swathe of countries from South Korea to Portugal.
The Growing Influence of China in Asia
The world’s second largest economy, China made headlines when it became a part of two new banks in the Asia-Pacific region. The two new banks are a five member initiated BRICS-bank called ‘New Development Bank’ (NDB) and Beijing-led bank called ‘Asian Infrastructure Investment Bank (AIIB). A look at the purpose of these banks (see table below) can make one wonder if they share a common goal – infrastructure development in Asia-Pacific region. But the structure and number of members in these two banks reflect otherwise.
Outside the Box Reforms for China’s SOEs
SOEs contribute to 23.4 percent of industrial revenue and 21.6 percent of profits — a significant drop from more than 80 percent of both industrial revenue and profits at the start of the reform and opening up in the late 1970s. In 2014, 88 Chinese SOEs were included in Fortune Global 500, Fortune magazine’s annual list of the top 500 corporations worldwide by revenue.
SOEs now make up just 4.9 percent of firms in China’s mining, manufacturing and utilities sectors. However, there are still a few long-term problems that must be resolved.
The Implications of Defining China as a Market Economy
There is a potential mega-battle brewing over trade rules and the provision of market economy status for China that could reach the World Trade Organization (WTO) in 2016.
Whether particular countries grant China market economy status has important implications for the adjudication of anti-dumping cases. In international trade, dumping occurs when a country exports a product at a price below the normal cost of production or price paid in the exporting country.
China anti-dumping case
Cooperating with China on Their Terms
In late October 2013, the Chinese Communist Party Central Committee held a conference of Diplomatic Work with Neighbouring Countries in Beijing, where it unveiled new priorities under its New Neighbourhood Diplomacy guidelines. The new approach makes China’s neighbourhood, covering both continental and maritime Asia, the top strategic priority for the first time. The key message of the conference was to reassure to the region that China will step up its proactive engagement with its neighbours.
China Presses Vietnam with Oilrig Redeployment
The redeployment of a Chinese oilrig in the South China Sea (SCS) shows an inconsistency in the rhetoric and practice of China’s policy in the disputed waters. Together with its mass land reclamation activities, these actions are part and parcel of coercive diplomacy. It affirms China’s territorial ambition in the highly strategic sea. But is it likely to escalate into regional conflict?
Analyzing China’s Cloaked Currency Reserves
China has amassed one of the largest pools of capital. It was in the form of central bank reserves. At its peak, it was around $4 trillion. The composition of these reserves is a closely guarded secret. However, if the yuan is going to be including the IMF’s SDR, it is anticipated that China report will have to report the currency allocation of its reserves. China would not necessarily publish these though IMF would include them in its aggregations process that it publishes quarterly.
China’s Government Proves it Cannot Defy Market Forces
The economic progress of China over the past 40 years or so has been remarkable. Part of that success has been due to the role that the state has played in creating a stable, long run environment for business to grow and flourish, able to take advantage of the globalisation of economic activity.
The Chinese government has just seen confirmation that it is far harder to marshal the competing forces in financial markets.
The Debt-Deflation Trap Facing China
At a time of slowing economic growth and massive corporate debts, a deflationary spiral would be China’s worst nightmare. In addition, the risk is mounting. The producer price index (PPI) has been in negative territory for 39 consecutive months, since February 2012.
The growth of China’s consumer price index (CPI), though still positive, has also been falling steadily, from 6.5 percent in July 2011 to 1.2 percent in May 2015. If experience is any indication, China’s CPI will turn negative very soon.
