China cuts rates again to Induce Economic Growth

Central bank of China decrease interest rates last Friday. This the 6th time they cut it in less than a year. They also lowered the level of cash that banks are required to hold as reserves in an attempt to spur growth in its slowing economic growth.

Monetary policy easing in China which is the 2nd largest economy in the world is at its most aggressive since the 2009 financial crisis, as growth looks set to slip to a 25-year-low this year of under 7 percent.

The People's Bank of China (PBOC) said they lowered its benchmark lending and deposit rates to stimulate borrowing and spending without squeezing banks' ability to profit from the spread between two rates.

The change, which Beijing had promised to deliver for months, will in theory allow banks to price loans according to their risk, and remove a distortion to the price of credit that analysts say fuels wasteful investment in China.

China's policy loosening came a day after the European Central Bank said it could give a bigger policy jolt to the economy as soon as December to fight falling prices.

China is the latest of the world’s big economies to turn to its central bank to stimulate flagging growth. The Federal Reserve, with rates already near zero, expanded its holdings of government and mortgage bonds through last year to push down long-term interest rates. Now it is grappling with the timing to raise short-term rates.

China’s announcement came one day after European Central Bank chief Mario Draghi signaled the ECB could do more to stoke growth and inflation in the euro-zone as early as December.

China is now the top destination for foreign direct investment (FDI) Overtakes US

China is now the top destination for foreign direct investment (FDI) overtaking the United States, for the first time since 2003.

In 2014, foreign direct investment to China reached $128bn (£84,8bn), while $86bn in the US, according to the United Nations Conference of Trade and Development.

The growth in China's foreign investment has helped the services sector while the manufacturing slowed down due to falling orders. Globally, foreign investment fell by 8% to a total of $1.26tn last year.

That was the second lowest level since the start of the financial crisis, partly due to the "fragility" of the global economy last year amid geopolitical risks.

In the United States foreign investment dropped. The FDI flows to developed countries is down by 14% to about $511 billion, significantly affected by a large divestment in the United States.

US investment fell by two-thirds last year, mainly due to US firm Verizon buying back $130bn worth of shares in a joint venture from Vodafone in the UK.

The US is now third in the world for foreign investment, behind China and Hong Kong.

Its foreign investment fell by 63% last year, compared to 2013.

Top destinations for foreign direct investment in 2014
Source: UNCTAD PDF
China	$128bn
Hong Kong	$111bn
US	$86bn
Singapore	$81bn
Brazil	$62bn
UK	$61bn
Canada	$53bn
Australia	$49bn
Netherlands	$42bn
Luxembourg	$36bn

IMF: America Slipped to No. 2

The United States of America is no longer the top economy, the country has slipped to number 2. China has just overtook the US economy to become the largest in the world. This is the first time that it happened since Ulysses S. Grant was president, the US is no longer the leading economic power on earth. This is a major shift in world affairs.

The International Monetary Fund (IMF) announced the latest numbers for the world economy. They use the measurement of national economic output in “real” terms of goods and services, China this year produce $17.6 trillion against $17.4 trillion of the US.

China now is responsible for 16.5% of the global economy when you use the real purchasing-power measure, compared with 16.3% for the U.S. This is a major economic earthquake. In 2013, China overtook the US for the first time in terms of global trade.

This was already reported by economist that China will overtake the US but it came sooner than expected. Chinese Government has recently decided to bring gross domestic product calculations in accordance with international standards this has revealed economic activity that had previously gone uncounted.

The IMF used the well-established and widely used economic measure known as purchasing-power parity (or PPP).

IMF reports

Manufacturing Growth in China Falls in October Unexpectedly

BEIJING, November 1 - China's manufacturing growth fall to a five-month low in October along with a slowing economy and a weak global demand. The official Purchasing Managers' Index (PMI) fall to 50.8 in October from September's 51.1, according to a survey from the National Bureau of Statistics that was released on Saturday. They also noted that it is still above the 50-point level that separates growth from contraction on a monthly basis.

The PMI showed foreign and domestic demand fall to five- and six-month lows, respectively, with overseas orders shrinking slightly on a monthly basis.

China's growth fell to 7.3% in the third quarter, its lowest level since the 2008 and 2009 global financial crisis, as the housing market sagged and domestic demand and investments are down.

Chinese government have said that full-year economic growth may fall short of their 7.5% target, but that it would be acceptable as long as inflation stays low and the economy continues to produce jobs.

The World Bank has said that China's growth could possible go down to about 7% next year, they said that Beijing should found a way to promote competition and efficiency through reforms in their labor and real estate markets along with its state-run financial system.

China's Surging Trade Growth

BEIJING, Aug. 9 (Xinhuanet) -- China's trade surplus used to be the focus of global attention. But it is now the country's surging trade growth that is in the spotlight.

After a 3.1 percent fall in June, exports rose 5.1 percent year-on-year in July, while imports soared by 10.9 percent year-on-year compared with a 0.7 percent year-on-year drop in June.

The stronger-than-expected growth rates have overshadowed the contraction in the country's monthly trade surplus, which dropped to 17.8 billion U.S. dollars in July, down 29.6 percent on a year ago.

But while the strong growth in both exports and imports points to a mild improvement in both external and internal demand, with domestic activities strengthening in a reassuring manner -thanks to the country's targeted measures to stabilize economic growth - it is apparent that foreign demand remains weak and domestic economic activities are still at low levels.

However, the morale-boosting figures were released at a time when the global economy is struggling with a slow and volatile recovery - among the other major economies, only the US economy has been showing signs of solid growth - so it is no surprise the data have been welcomed as a possible prelude to an eagerly awaited economic recovery in the world's second-largest economy.

After dipping to as low as 7.5 percent in the second quarter, the figures have raised expectations that China's economic growth might have bottomed out, as the government's efforts to boost growth amid economic restructuring start to take effect.

The increasing manufacturing and services activities, signaled by the rising official Purchasing Managers' Index for July, also suggest a gradual improvement in economic fundamentals.

Yet it would be rash to anticipate any strong surge in China's economic indicators.

An alarm was rung by the HSBC manufacturing PMI, which mainly tracks small enterprises in the export sector, as it dropped to 47.7 in July from 48.2 in June, signaling possible trade volatility in the coming months.

In particular, the sub-indexes measuring new export orders in both the official and HSBC PMI revealed contraction in July.

Therefore, more data, including inflation, industrial output and retail sales, need to be monitored before it can be confidently asserted without fear of contradiction that the Chinese economy is solidly on the up again.

(Source: China Daily)

China Growth Outlook Cut by IMF as 'Decisive' Reforms Urged

The IMF (International Monetary Fund) has lowered its forecasts for China’s growth and they said that they are making “decisive” policy changes that would put the economy on a more sustainable path.

The expansion will be 7.75 percent this year and next, David Lipton, first deputy managing director of the IMF, said at a press briefing in Beijing after concluding an annual review of China. In April, the IMF forecast growth of 8 percent this year and 8.2 percent expansion in 2014.

China has assured the IMF that reining in credit is a priority, said Lipton, the No. 2 official at the Washington-based fund.

Rapid growth in financing raises questions over the quality of investment and the repayment ability of companies and local governments, Lipton said.

Curbing credit expansion may slow growth in the short term while putting the economy on a more sustainable path, Lipton said.

Read Latest Breaking News from Newsmax.com http://www.moneynews.com/Markets/china-growth-outlook-IMF/2013/05/29/id/506830#ixzz2UglvRGs1

China Home Prices Increase

China’s new home prices rose including Beijing and Shanghai as buyers defied the government’s latest round of property measures. Prices increased in 68 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today.

Thirty-five provincial-level cities have issued details of property curbs by an April 1 deadline in response to the central government’s measures imposed in March. Only the capital city of Beijing issued the toughest measures, raising the down payment on second homes and strictly enforcing a 20 percent capital gains tax on existing homes, according to Centaline Property Agency Ltd., the country’s biggest real estate agency.

“Home prices continued to climb because the direct impact of the curbs is hitting on home sales, while it’ll take several more months to slow the prices,” said Lan Shen, a Shanghai-based economist at Standard Chartered Plc. “Policies haven’t been strictly enforced on the local level.”

http://www.bloomberg.com/news/2013-05-18/china-home-prices-climb-as-buyers-defy-government-curbs.html

Japanese Car Sales in China Down

Japanese automakers are suffering plunging sales in China this month after violent anti-Japanese protests in which Japanese-brand cars were targeted. The violence stemmed from the island dispute between the two countries.  

Honda sales had fallen 40 percent; Nissan sales were down 35 percent; Toyota sales is down by 49 percent; Mazda sales had fallen 35 percent.

source nytimes