Jan sees record import rise

Efforts needed to ensure more balanced trade

Strong internal demand has helped the Chinese central government’s policy of boosting imports, as China reported a record 30 percent surge in import volume in January, along with a massive drop in the trade surplus.

China’s foreign trade volume rose 16.2 percent year-on-year in January to 2.51 trillion yuan ($397 billion), the General Administration of Customs (GAC) said in a press release on Thursday.

January exports grew 6 percent year-on-year to reach 1.32 trillion yuan, while imports surged 30.2 percent to stand at 1.19 trillion yuan, GAC data showed. The trade surplus fell by 59.7 percent in January to 135.8 billion yuan.

In 2017, Chinese exports grew 10.8 percent year-on-year while imports grew by 18.7 percent. The trade surplus in 2017 fell by 14.2 percent to 2.87 trillion yuan.

There is a base figure influence, as the weeklong Spring Festival holidays took place in January in 2017 and reduced economic activity, but the January 2018 trade data still showed some interesting trends, experts said.

Tang Jianwei, chief macro analyst with Bank of Communications, said the data reflected the changes in China’s trade policy.

“The Chinese government intends to boost imports, in order to actively address the trade imbalance between China and its trading partners, and what we see in the January trade data is that this initiative has yielded results, boosted by the strong internal demand,” Tang said, adding that the change will also ease the pressure from rising trade frictions.

At the Central Economic Work Conference held in December last year, the central government said it would lower the import tariffs on some products and expand imports to promote more balanced trade.

Domestic demand

With China’s independent refiners having received larger import quotas, imports of crude oil have surged by 19.6 percent to a record 40.64 million tons since March 2017.

Boosted by the strong demand in the country’s huge livestock sector, the imports of soybeans also jumped in January, increasing by 11 percent year-on-year to 8.48 million tons.

China’s coal imports reached their highest level in four years, as the nation imported 27.81 million tons of coal in January, up 11.5 percent year-on-year.

Tang said the robust internal demand and the rise in the yuan, which strengthened against the US dollar by 3.5 percent in January, had fueled the growth in imports.

The 30.2 percent rise in imports in January was in stark contrast to a forecast made by a Bloomberg survey last year, which predicted a rise of just 5 percent in 2018. Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, noted that the wide difference in the growth rate of exports and imports is worth attention, arguing that the two should be at an equal level.

Bai cited two sets of comparable data from Vietnam and South Korea, which also have trade data that is influenced by the Spring Festival holidays.

Vietnam saw exports rise by 33 percent and imports by 47 percent in January, while South Korea’s January exports rose 22 percent with imports rising 20 percent.

“This means China’s January figures, in which import growth was five times that of exports, are extraordinary. More measures are needed to boost exports,” Bai told the Global Times on Thursday.

Bai said that in addition to the central government’s desire to tame the trade surplus, a number of other factors contributed to the wide gap between imports and exports.

“The changing roles in global labor distribution and the fact that China sticks to an open economy amid a rising trend of trade protectionism globally and shares its growth opportunities with its partners are all contributing to the wide gap between export and import growth,” Bai said.

While a single month’s data is too weak to support any predictions, it can be expected that China’s 2018 trade surplus will decrease marginally, Bai said.

Source: Global Times

US Defense Department plays a little trick by removing Taiwan from its report

The initial version labels Taiwan as part of China.

The updated version removes Taiwan from China.

The US Defense Department played a little trick by removing Taiwan, initially labeled as part of China in its Nuclear Posture Review, from the map of China.

A Pentagon spokesperson told The Japan Times Saturday that there was an “error” printed in the 2018 NPR, a legislatively-mandated review that establishes US nuclear policy, strategy, capabilities, and force posture for the next five to 10 years. The initial version was replaced on the Department of Defense’s website a few hours later with Taiwan removed from China.

The DoD added that its position on and policy toward Taiwan have not changed.

China firmly opposes the US report that presumptuously speculated about the intentions behind China’s development and played up the threat of China’s nuclear strength, spokesman Ren Guoqiang from China’s National Defense Ministry said Sunday.

China’s Foreign Ministry also commented Monday at a regular press conference that the report comes in line with the US National Security report and National Defense Report released not long ago, and called on the US to abandon its Cold War mentality and outdated concept of zero-sum games, and maintain international peace and stability with concrete actions.

Regarding Taiwan, China urged the US to abide by the One China Policy and the principles set forth in the Three Joint Communiqués, and stop “sending the wrong signal” to Taiwan independence forces and cease any official association or contact with Taiwan.

This is not the first time the US has challenged China on Taiwan since Donald Trump assumed the US presidency. Early in December 2016, Trump broke diplomatic tradition and made a 10-minute phone call with Taiwan leader Tsai Ing-wen.

 

Belt and Road brings opportunities to all participants: Pakistani employee of Chinese firm

The Belt and Road Initiative has brought many opportunities to its participants, said Abrar Manzoor, a Pakistani employee of a Chinese company in Saudi Arabia. More and more Pakistanis are coming back to develop their own country, he added.

Abrar is a purchasing manager at the Saudi Arabia branch of China Communications Construction Company Limited (CCCC). Abrar, together with nine other foreign staff members, were bestowed with the “Excellent Foreign Youth Employee” award in Beijing at the end of January.

In his eyes, Chinese are diligent and friendly. He said he has become half-Chinese after working in the Chinese enterprise for a long time. Chinese colleagues are family, he told Global Times.

Abundant job opportunities attracted the Pakistani man to Saudi Arabia, but he later found that more and more of his peers were going back to Pakistan for work because of the huge employment opportunities created by the Belt and Road Initiative.

He said that one of his friends has just returned to Pakistan, hoping to make a contribution to his own country.

Abrar said that no country will obey the will of others for profits when talking about the recent threats from the US to freeze aid to Pakistan. He believes that cooperation is based on economic and trade relations, harmonious communication, and brotherliness.

On the contrary, he said, China’s assistance to Pakistan is unconditional, the spirit of which is beyond the expression of language. China has earned both welcome and respect from Pakistan, he said.

After working for CCCC, Abrar has learnt more about cooperation. As the purchasing manager, he always makes the suppliers understand that it is not only cash exchanges that are important, but also partnerships.

“They are not working for me, but with me,” he noted.

However, the cooperation between China and Pakistan on the Belt and Road construction has been publicly opposed by India. “I don’t understand why India feels afraid about cooperation between the two countries,” Abrar said, adding that India is a hypocrite in this sense.

He believes that the Belt and Road is a road of business that promotes local development, creates more jobs, and enhances trade. There is no need to oppose it, he said.

To Mercedes-Benz: Don’t dare challenge China’s core interests

Mercedes-Benz China apologized on Tuesday for its parent company quoting the Dalai Lama in an “extremely wrong message” on social media.

The apology came after a post on Mercedes-Benz’s Instagram account showed a luxury vehicle and quoted the Dalai Lama saying “Look at situations from all angles, and you will become more open.”

The post not only hurt the feelings of the Chinese people, but also challenged their bottom line on national sovereignty.

Mercedes-Benz delivered more than 600,000 new cars in China in 2017, setting a global record in a single market, according to Hubertus Troska, who is responsible for the Greater China, attributing the result to Chinese customers’ trust in the company.

The car company followed in the footsteps of U.S. hotel chain Marriott, who just recently apologized for wrongly labeling Chinese territories as independent countries.

Chasing profits in China while hurting the feelings of the Chinese people, the reason for this conduct of some foreign enterprises is unacceptable.

The Dalai Lama’s agenda to split the country in the name of “autonomy” is well-known around the world, and anyone who supports him is clearly against China.

At a Tibet work conference held in August 2015, Chinese President Xi Jinping pointed out that the international community should understand that foreign interference in China’s domestic affairs is intolerable.

The President sent a clear message that any country, enterprise, or individual should not challenge the core interests of China, and any activity to split China will never be tolerated.

As a foreign enterprise, Mercedes–Benz always stresses its social responsibilities, but hurting Chinese customers and crossing the red line of sovereignty is not socially responsible.

Tolerance is a virtue of the Chinese culture, but tolerance has its limits. How will the German people react if a foreign enterprise speaks highly of Adolf Hitler and propagates his quotes, or worships views that try to separate German?

Clearly, cultural tolerance should not an excuse for a foreign firm to challenge the limits of a host country.

In its apology, Mercedes-Benz said it will deepen understanding of Chinese culture and values among its staff, including overseas staff. But the apology lacks sincerity and reflects the German carmaker’s lack of understanding of Chinese culture and values.

China’s core interests cannot be challenged. Without sincere reflection, any foreign car business will not survive in China.

Lower growth can tame risk of ‘gray rhinos’ in China

As socialism with Chinese characteristics has entered a new era, the nation’s economy has turned out to have two distinct sides. On the one hand, the economy is seen to be stabilizing, with indicators for 2017 beating expectations. The three wagons pulling the economy – investment, exports and consumption – all gained steam over the past year, while the new economy flourished.

On the other hand, local debt risks have grown, and many provincial-level regions and cities have admitted inflating their GDP and fiscal numbers. The financial industry is also rife with risks. In a striking example, the Chengdu branch of Shanghai Pudong Development Bank was revealed to have provided more than 70 billion yuan ($11.11 billion) in loans illegally to shell companies.

In addition, bubbles are piling up in the property market and tightening measures that restrict home purchases, loans and sales, among others, are still indispensable to curb property investment.

Understanding the dual realities of the economy will cast light on the challenges the economy faces.

There were heated arguments last year over whether the economy’s rebound resulted from a new cycle of economic growth or an old growth model. I would argue that both helped in propping up the economy.

For one thing, investment in infrastructure and real estate has played an important part in steadying the economy. Meanwhile, owing to a global economic recovery, net exports contributed 0.6 percentage point to GDP growth last year.

For another, the new economy, powered by the Internet Plus policy and based on big data, cloud computing and artificial intelligence (AI), has rapidly risen to prominence. China’s mobile payment applications have taken the lead globally, dramatically reducing transaction costs and increasing the economy’s operational efficiency.

AI is developing rapidly in China and the country’s robotics sector is growing fast. China’s industrial robot output accounts for one-third of the world’s total. Also, e-commerce is expanding much faster than overall retail sales. It can be said that the new economy is remaking traditional business models and becoming a significant growth engine of China’s economy in the new era.

In light of this, some optimists reckon the economy has entered a new cycle and will continue on the recovery track in 2018, with GDP growth rebounding to 7 percent or even higher. But I would argue that it is less likely the economy will be powered simultaneously by the new growth engine and the old model this year.

The old model, relying on new debt to stimulate investment, helps in stabilizing economic growth in the short term, but the resulting financial risks have grown. This is unsustainable, as there are hidden worries about local government debt, high leverage in both the financial sector and real economy, and property bubbles that could be giant “gray rhinos” weighing on the economy. Amid deleveraging concerns, this year is likely to be filled with uncertainty for China’s economy.

First, local government debt risk can’t be underestimated. North China’s Tianjin Municipality recently admitted falsifying their economic data. Despite supposedly higher fiscal revenues, local government debt continued increasing, with the debt rising beyond local governments’ repayment capacity.

Second, local governments raise debts to invest mostly in medium- to long-term infrastructure projects. These take a long time to build and start operating, yet they provide few short-term benefits, thus increasing financial risks.

Third, the financial sector is exposed to greater risks amid the country’s deleveraging drive. Since the 19th National Congress of the Communist Party of China, policymakers have clearly delineated their stance favoring tighter rules and deleveraging efforts.

I tend to believe the deleveraging push might increase the probability of a risk incident in the financial sector. At the start of the year, a State-owned investment platform in Southwest China’s Yunnan Province was reported to have secured financing after defaulting on two trust loans in December, in the latest sign that State-backed financing vehicles can’t guarantee loan repayments. With local governments subject to tighter debt constraints and financial deleveraging underway, it is reckoned that the Yunnan case won’t be the only such case this year.

The financial market might seem placid as high leverage is seen as enabling prosperity, but once the government shifts toward policy tightening, it will be quite difficult to cover any problems and the genuine stability and risk-hedging capacity of financial institutions will be a concern.

Apart from that, fixing property bubbles is a tough job. Over the past decade, China’s home prices have frequently entered the crosshairs of government controls and yet have continued an overall upward spiral. This has been achieved through a recurring cycle of rising home prices for a certain period, prompting the government to tighten its grip on the housing market, followed by an increase in income that offers a fix for property bubbles.

This cycle is unlikely to continue, however, as home prices in many cities have doubled over the past two years, while income growth has declined.

With policymakers clearly stating that homes are for living in, not for speculation, along with declines in sales and new starts, there will be a gradual slowdown in property investment. Property-related consumption and local government coffers will also be affected, dealing a blow to economic growth. In policy terms, there remains uncertainty over the rollout of a property tax, a key component of any long-term mechanism to regulate the housing market.

In conclusion, the economy’s rebound in 2017 lacked a stable foundation. Powered purely by the new dynamics, economic expansion is likely to go on a downward spiral, with GDP growth falling to 6.3 percent in 2018 from last year’s 6.9 percent.

The sacrifice of growth in the short run, nevertheless, is a must for “gray rhinos” to be prevented and for there to be higher-quality growth.

Source: Global Times

 

Paint buckets favored by migrant workers during Spring Festival travel rush

Paint buckets have become standard “gear” for Chinese migrant workers on their way home amid the Spring Festival travel rush, the world’s largest human migration.

A worker surnamed Xiang, who was heading to his hometown Nanchong in Sichuan province from the western city of Xi’an, took eight buckets with him. He said the buckets can be used as seats on the journey back home and as food containers at home.

China produced 1.9 billion mobile phones in 2017

China produced 1.9 billion mobile phones in 2017, up 1.6% from a year earlier, said a report issued by the country’s Ministry of Industry and Information on Feb. 5.

However, the growth rate has dropped by 18.7% from 2016.

Smartphones made up 1.4 billion of the total production, an increase of 0.7% year on year.

The export delivery value of the industry increased 13.9%, growing 10.5% faster than the previous year.

However, mobile phone shipments in the domestic market stood at 491 million last year, down by 12.3% year on year, said a report in January.

Shares tumble in global stock rout

Chinese mainland equities tumbled on Tuesday, amid a global stock rout that has sent major markets into a dive, but losses in the Chinese mainland were much lower than in other markets.

Despite the market slump on Tuesday, the People’s Bank of China (PBC), the country’s central bank, and the State Administration of Foreign Exchange (SAFE) reiterated their goals of maintaining prudent monetary policy, fighting systemic financial risks and managing external risks.

The global market rout began on Monday, and mainland stocks plummeted on Tuesday, with the Shanghai Composite Index dropping by 3.35 percent, the biggest single-day drop in nearly two years. The Shenzhen Component Index dived by 4.23 percent.

China’s NASDAQ-style board, ChiNext, plunged by 5.34 percent, its biggest drop in more than a year, while the blue-chip CSI 300 Index ended down 2.9 percent. Also, trading of shares in more than 400 Chinese companies was suspended after prices dropped by the daily limit.

Liu Dongliang, an analyst with China Merchants Bank, said Tuesday’s losses in Chinese equities showed that the market is fragile due to a shortage of funds and a tendency for Chinese blue-chip stocks to follow bear runs in the US rather than bull runs.

“The Chinese stock market faces a shortage in incremental funds. This has led to a very fragile market, in which a relatively small sell-off could cause a significant downfall,” Liu told the Global Times on Tuesday, adding that the fundamentals in China do not face “major problems.”

Liu said that the Chinese A-share market might face significant pressure in the short term, but the bond market will rally given the mood of risk aversion and more attractive yields.

However, the market volatility will be contained “if the ‘national team’ [State-owned investors] choose an appropriate time to stabilize the market and ease concerns among domestic investors,” Liu noted.

Some domestic traders also appeared confident that losses in the mainland market will be contained and that shares will rebound.

“I think our mood is not bad. We are waiting for a bottoming-out and hoping that stocks we are interested in will drop below their value. That would be a great opportunity,” the head of a domestic trading firm, who spoke on condition of anonymity, told the Global Times on Tuesday.

Sound economy

Cheng Shi, head of International Research at ICBC, told the Global Times on Tuesday that China’s economic fundamentals remained very solid, saying the global stock rout “will not change China’s overall prudent, positive direction.”

Chinese regulators did not respond directly to the market volatility on Tuesday but statements from the PBC and SAFE signaled no major policy change or planned response.

In a statement released after a policy meeting on Tuesday, the PBC said its top two goals for 2018 are to maintain prudent monetary policy and to prevent systemic financial risks.

In a separate statement on Tuesday, SAFE also listed its top goals for 2018, including improving the management system for cross-border capital flows and managing external pressure on the yuan’s exchange rate.

Cheng argued that losses in the stock markets could actually be a positive thing for the real economy. “Only when we clear out the risks and cool down the market can we encourage a shift in distribution of resources from financial markets to the real economy,” he wrote in a separate note.

However, some individual investors were panicking on Tuesday as they watched their portfolios drop.

Source: Global Times