NEWS -
China Finance
Written by Bloomberg
Friday, 11 September 2009 17:33
Sept. 11 (Bloomberg) -- China’s Premier Wen Jiabao signaled he will maintain unprecedented government spending to drive a recovery from the slowest expansion in almost a decade.
“China’s economic rebound is unstable, unbalanced and not yet solid,” Wen said yesterday in a speech at the World Economic Forum in Dalian, a city in northeastern China. “We cannot and will not change the direction of our policies when the conditions aren’t appropriate.”
Wen’s remarks reflect a commitment last week from the world’s biggest nations to maintain unprecedented fiscal and monetary measures to secure a recovery from the deepest postwar recession. The comments also may help reassure investors that a slowdown in new loans won’t derail China’s rebound.
“The worst has passed, now it’s about whether China can maintain the strong momentum of a recovery that’s primarily been driven by policy stimulus,” said Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong. “Very weak external demand is the key concern.”
Nine months of falling exports, overcapacity in manufacturing and elevated unemployment have restrained the recovery generated by record lending in the first half of the year and a 4 trillion yuan ($586 billion) stimulus package.
The Shanghai Composite Index plunged into a bear market, or a decline of at least 20 percent, on Aug. 31 amid concern that reduced new lending in the second half could damp growth. The index has since pared the slide to 16 percent, and remains up 37 percent from a year ago.
‘Initial Results’
Stimulus steps have “yielded initial results,” arresting a downturn in economic growth, and the government will maintain a moderately loose monetary policy and a “proactive” fiscal stance, Wen said. He cautioned that some stimulus measures will “fade” and others will take time to become effective.
The government is due to announce August figures for trade, industrial production, fixed-asset investment, retail sales and inflation today. Economists anticipate industrial production rose the most in a year and retail sales gained at a faster pace, according to the median estimates in Bloomberg News surveys.
Risks for the economy include asset-price inflation, after a record $1.1 trillion of new loans in the first six months. Bank of China Ltd. Vice President Zhu Min said in an interview in Dalian yesterday that ample liquidity has caused “bubbles” in stocks, commodities and real estate.
‘Asset Bubbles’
“The potential risk is that a lot of liquidity goes to the asset market,” Zhu said. “So you see asset bubbles in commodities, stocks and real estate, not only in China, but everywhere.”
While China’s consumer prices have fallen for most of this year, Wen said policy makers are on alert for inflation risks.
The government said this week the employment situation remains “grave,” underscoring the need to promote economic growth to create jobs and preserve social stability as the Communist Party prepares to celebrate 60 years of rule on Oct. 1.
While China’s gross domestic product is 70 times bigger than when Deng Xiaoping endorsed free-market policies in 1978, widening income disparities, corruption, pollution and ethnic tensions threaten to foster unrest. Five people died last week in protests in Urumqi, where ethnic Uighurs and Han Chinese are at odds, following unrest in July which killed almost 200 people.
Government Goals
The government’s goals are social harmony and stability and “steady and relatively fast” growth, the premier said yesterday, adding that the government is “taking all possible steps to expand employment.”
China also faces the challenge of reducing the economy’s dependence on investment and exports for growth and boosting services and domestic consumption. Achieving that goal could reduce global imbalances in spending and saving that some economists blame for helping cause the global financial crisis.
Domestic demand is playing a bigger role in China’s economy, Wen said yesterday.
The economy accelerated in the second quarter, expanding 7.9 percent, and economists forecast faster growth for the rest of the year. World Bank President Robert Zoellick said Sept. 2 that the nation’s expansion has aided trading partners and increased the chance of a global rebound.
China’s ‘Pull’
“Asia is recovering faster from the economic downturn than other regions, in part thanks to China’s gravitational pull,” European Union Trade Commissioner Catherine Ashton said in Beijing this week.
While cautioning of “many uncertainties” for the global economy, Wen said he saw “the light of dawn” and called for the green shoots of recovery to be tended through coordinated moves by world leaders. “Confidence is even more precious” than gold or money, he said.
Finance ministers and central bank governors from the Group of 20 emerging and developed nations meeting last week in London vowed to sustain efforts to secure a global recovery. “We will continue to implement decisively our necessary financial-support measures and expansionary monetary and fiscal policies,” they said in a joint statement.
China’s premier also yesterday called for a global fight against protectionism in trade.
A resurgence of China’s property market, rising auto sales and the fastest expansion of manufacturing in 16 months in August have added to signs that the Chinese economy recovery is maintaining momentum.
Home Prices
China’s house prices in 70 cities rose 2 percent in August, double the gain in July, after sales and investment climbed, the statistics bureau said yesterday. General Motors Co., the largest overseas automaker in China, more than doubled sales in the nation last month to 152,365 vehicles.
China’s gross domestic product may increase 9.5 percent in 2010 after an 8.3 percent gain in 2009, the smallest in eight years, according to a Bloomberg survey of 22 economists conducted the week ending Aug. 28.
Investors in recent weeks indicated doubt that the recovery will be sustained as exports slide and the government seeks to rein in overcapacity in industries such as steel and cement.
NEWS -
China Finance
Written by Bloomberg
Thursday, 10 September 2009 16:47
Sept. 10 (Bloomberg) -- China Merchants Holdings (International) Co., the investor in ports moving about a third of the country’s containers, posted a 14 percent drop in first- half profit as the global recession damped trade.
Net income dropped to HK$1.73 billion ($223 million) from HK$2.02 billion a year earlier, the company said in a Hong Kong stock exchange statement today. Sales plunged 20 percent to HK$1.65 billion.
China Merchants joined Cosco Pacific Ltd. and Hutchison Port Holdings Ltd. in posting a slump in profit as U.S. and European consumers cut spending on Asian-made toys, furniture and other goods. The Hong Kong-based company said the effects of the global recession may begin to “gradually diminish.”
“Exports have seen a rebound from July, and it seems like a solid one,” said Geoffrey Cheng, a Hong Kong-based analyst at Daiwa Institute of Research. “In the second half, China Merchant’s profit probably won’t decline that much.”
Chinese exports rose a seasonally adjusted 5.2 percent in July from the previous month.
China Merchants’ first-half container volume dropped 19 percent to 20.3 million boxes, it said in the statement. Traffic at mainland ports it has investments in, including Shanghai, Shenzhen and Tianjin, fell 19 percent to 17.6 million boxes.
The Hang Seng Index company rose 2.2 percent to HK$27.95 at 2:43 p.m. in Hong Kong. The stock has gained 86 percent this year, outpacing a 48 percent increase for the benchmark index.
The company proposed an interim dividend of 25 Hong Kong cents, compared with 28 cents a year earlier. It may make a full-year profit of HK$3 billion, according to the median of nine analyst estimates complied by Bloomberg, compared with HK$3.7 billion last year.
Hutchison Port, the world’s largest container-terminal operator, posted its biggest profit decline in at least eight years in the first half. The Hutchison Whampoa Ltd. unit said global trade will “recover slowly” from the recession.
