The Nation Newspaper

Tag: china

  • China’s manufacturing growth slows again

    China’s factory activity slowed by more than expected in November, highlighting how a cooling economy is impacting its vast manufacturing sector.

    The official purchasing managers’ index (PMI) dipped to 50.3 in November from October’s 50.8, closer to the 50 point mark that separates growth from contraction.

    It was below the 50.6 level expected by economists.

    Rising costs and falling demand were blamed for the downturn in activity.

    Meanwhile, a private survey from from HSBC showed that growth in Chinese factories in November stalled as output shrank for the first time in six months.

    The final HSBC/Markit manufacturing PMI slipped to a six-month low of 50 in November, down from 50.4 in October. The reading was unchanged from a preliminary “flash” finding released earlier this month.

    Output fell to 49.6, which was the worst reading since May.

    “Muted growth in new work,” led companies to hold back production, HSBC/Markit said.

    Growth in the world’s second largest economy fell to 7.3% in the third quarter, which was the slowest pace since the global financial crisis.

    The risk that China might miss its official growth target of 7.5% this year for the first time in 15 years is growing because economic data is weaker than expected, economists said.

    A struggling property market, uneven export growth and cooling domestic demand and investment are some of the major factors weighing on overall growth.

    Alaistair Chan, economist at Moody’s Analytics, said he had expected the slowdown in manufacturing and was a “little more pessimistic” than the market for two reasons.

    “Firstly, there are signs the recent export boom is fading. Meanwhile, the housing market and related sectors such as steel and cement manufacturing, remains in a slump,” Mr Chan said.

  • China to cut rates on fears of deflation

    China’s leadership and central bank are ready to cut interest rates again and also loosen lending restrictions, concerned that falling prices could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making.

    The surprise cut in rates, the first in more than two years, reflects a change of course by Beijing and the central bank, which had persisted with modest stimulus measures before finally deciding last week that a bold monetary policy step was required to stabilise the world’s second-largest economy.

    Economic growth has slowed to 7.3 per cent in the third quarter and policymakers feared it was on the verge of dipping below seven percent – a rate not seen since the global financial crisis. Producer prices, charged at the factory gate, have been falling for almost three years, piling pressure on manufacturers, and consumer inflation is also weak. “Top leaders have changed their views,” said a senior economist at a government think-tank involved in internal policy discussions.

    China cut the RRR for some banks this year but has not announced a banking-wide reduction in the ratio since May 2012.

    “Further interest rate cuts should be in the pipeline as we have entered into a rate-cut cycle and RRR cuts are also likely,” the think-tank’s economist said.

    Friday’s move, which cut one-year benchmark lending rates by 40 basis points to 5.6 per cent, also arose from concerns that local governments are struggling to manage high debt burdens amidst reforms to their funding arrangements, the sources said.

    The cut helped send Asian shares broadly higher on Monday. The CSI300 Index. CSI300 of the largest companies listed in Shanghai and Shenzhen opened up 1.2 per cent at its highest level since June, last year, while the Shanghai Composite Index. SSEC opened up 0.8 per cent.

    Top Chinese leaders had been resisting a rate cut, fearing it could fuel debt and property bubbles and dent their reformist credentials, but were eventually swayed by signs of deteriorating growth as the property sector cooled. Until then, they had persisted with targeted policy steps, such as cuts in reserve ratios for selected banks and liquidity injections into the banking system. But these failed to bring down borrowing costs for the corporate sector.

    “Increasing liquidity by the central bank has failed to lower borrowing costs for the real economy,” said a former central bank researcher who now works for the government.

    “Employment still holds up, but corporate profits have been squeezed as producer price deflation bites, and it’s unreasonable for banks to have hefty profits.”

     

     

    “GDP growth is near 7 percent which is at a dangerous level given it could still go even lower due to structural reforms,” said Li Xunlei, chief economist at Haitong Securities.

    “The rate cut helped boost confidence in next year’s growth outlook,” said Li, who was among economists who discussed policy issues with Premier Li Keqiang at a recent cabinet session.

    Government think-tanks, which make policy proposals, have urged Beijing to cut its economic growth target next year, probably to around 7 percent, from around 7.5 percent this year.

    The leadership is due to map out economic and reform plans for 2015 at a work conference next month, including economic targets which will be unveiled in parliament next March.

    China’s leaders also worried that a sharp economic slowdown could hurt employment and undermine public support for reforms.

    “Employment still holds up now, but it will definitely be affected if growth slows further,” said Yin Zhongli, senior economist at the Chinese Academy of Social Sciences, a top government think-tank.

    The central bank does not have the final word on adjusting interest rates or the value of the yuan. The basic course of monetary and currency policy is set by the State Council, China’s cabinet, or by the Communist Party’s ruling Politburo.

    Beijing wants to push some painful reforms next year, including fiscal reforms to deal with a mountain of local government debt, and the risk of pushing local governments into defaults could be offset by lower interest rates. Some policy insiders said the rate cut was also influenced by talks at this month’s summit of the G20 group of nations, which pledged to boost flagging global growth.

    China, which will host the G20 summit in 2016, is keen to maintain its influence as a major driver of global growth. “China is keen to play a bigger role within G20 and it needs to maintain relatively fast economic growth,” said Zhao Xijun, an influential economist at Renmin University.

     

  • Coastal rail line: Govt signs $11.97b contract with China

    Coastal rail line: Govt signs $11.97b contract with China

    •May link Lagos to Abuja by rail next year

    The planned 1,402 km coastal rail line from Lagos to Calabar got underway last week, with the signing of $11.97 billion  contract between the Federal Government and China.

    The deputy chairman of China Railway Construction Corporation-China-Africa Construction Limited, Cao Baogang, signed the deal with the Transport Minister, Senator Idris Audu Umar, in Abuja.

    The railway will run through 10 states of the Southeast and the Southsouth’s Niger Delta, terminating at Calabar, the Cross River State capital.

    The trains for the route will travel at 120km/h and stop at 22 stations.

    The construction of the rail line will create an estimated 50,000 jobs directly and an additional 150,000 indirectly, while it will generate, after completion, between 20,000 to 30,000 jobs.

    The project will contribute nearly $4 billion of Chinese construction equipment, rolling stock, steel and electro-mechanical equipment exports, said Meng Fengchao, chairman and party secretary of China Railway Construction Corporation.

    Meanwhile, Nigerians will begin to enjoy a new train service from the Nigeria Railway Corporation (NRC), from next year, a top official of the corporation has said.

    The source, who craved anonymity, said in his office last week, that passengers would be able to connect the Federal Capital Territory (FCT), Abuja from Lagos before December next year. He said passengers would make Abuja from Lagos in three hours, same for a return trip.

    He said the project, which would be the flagship of the transformed train service, would be made possible by the standard gauge tracks being built by the Federal Government.

    It would complement the Eastern line running from Port-Harcourt to Maiduguri, the first phase of which would come on stream next month.

    He said government began the phased construction of the standard gauge few years ago, adding that while some have been completed, others are at advanced stage. Some of them, he said, have just taken off to be completed before the third quarter of next year.

    He said: “The Federal Government is building a new  rail corridor for this initiative and it is being embarked upon in phases because it is capital intensive.

    “As we speak, Ajaokuta to Warri through Itakpe line has been completed. Abuja to Kaduna would be delivered by December, and work has already started on the Lagos to Ibadan standard gauge line.”

    The source said the standard gauge line, which has the capacity for modern, fast moving locomotives, would replace the existing narrow gauge and its attendant slow moving trains.

    He said the 3,500 kilometre long narrow gauge, which is 3.6 feet wide, is the oldest rail track system in the world and has been in operation in Nigeria since 1898, when it was constructed by the British colonial masters.

    He added that the existing narrow gauge and single track network no longer meets the nation’s rapidly growing development with over 70 per cent of transportation and 90 percent of the country’s social and economic activity relying on roads’ mode of transportation.

    He said: “For 116 years, we have served Nigerians through this line and our flagship, Western line – Lagos to Kano, is narrow gauge.”

    He said train  service is being invigorated in the country because it has the solution to the mass transit challenges facing the nation.

    The President-General of the National Union of Railway Workers (NUR), Comrade Raphael Okoro, said the new standard gauge, would on the long run, decongest the cities, making housing cheaper, and reduce cost of foodstuffs. “It would also create hundreds of jobs directly and indirectly. Most workers in advanced countries live in the interlands and connect the cities to their places of work by rail,” he said.

    Okoro praised the government for the attention being focused on the sub-sector, saying the train is globally acknowledged as the safest, most reliable and affordable means of transportation.

  • Economy ‘not scary’, says China president

    The risks faced by China’s economy are not that scary and the government is confident it can head off the dangers, President Xi Jinping told global business leaders to dispel worries about the world’s second-largest economy.

    In a speech to chief executives at the Asia Pacific Economic Cooperation (APEC) CEO Summit, Xi said even if China’s economy were to grow seven per cent, that would still rank it at the forefront of the world’s economies.

    China’s economy, the world’s second-largest, has had a rocky year. Growth slid to a low not seen since the 2008/09 global financial crisis in the third quarter dragged by a housing slowdown, softening domestic demand and unsteady exports.

    Xi said: “Some people worry that China’s economic growth will fall further, can it climb over the ridge?  There are indeed risks, but it’s not so scary.

    “Even at growth of around seven per cent, regardless of speed or volume, (we) are among the best in the world,” he said, noting that China’s economy remained “stable”.

    The remarks from Xi came a day after data showed annual growth in Chinese exports and imports cooled in October, in another sign of fragility in the economy that could prompt policymakers to take further action to stoke growth.

    To shore up activity, policymakers have loosened monetary and fiscal policies since April to ensure that the economy can grow by around 7.5 per cent this year.

    Regional governments have accelerated spending on some infrastructure projects and abolished limits on the number of homes that Chinese can buy. The central bank has also injected short-term loans into banks to increase credit supply, and cut mortgage rates for some home buyers.

    Yet the results yielded have not been as good as some had hoped, fuelling speculation that China may have to cut interest rates or the reduce the amount of deposits that banks set aside as reserves – moves Beijing has denied are on the cards.

    Xi, who would sign off on any interest rate cut in China alongside the country’s elite decision-making Politburo, did not comment on the policy outlook, but stressed that his government was focused on reforms and that China was open for business.

    Underlining the country’s growing clout as an exporter of capital, he said China’s overseas direct investment was expected to hit $1.2 trillion in the next decade.

    After three decades of almost uninterrupted double-digit growth, China’s economy has lifted several hundred millions of Chinese from abject poverty, but also polluted the country’s air, land and waterways.

    The destruction of China’s environment and a yawning income gap has led Chinese authorities to promise to enact sweeping social, financial and economic reforms in the country that would be the most ambitious in three decades.

    “These reforms are gradually being put into effect project by project,” Xi said. “Once the bow is drawn, the arrow cannot be put back in the quiver; we will resolutely deepen reform.”

    Xi also sought to address concerns that China’s growing economic and diplomatic prowess could constitute a threat beyond its borders, saying that China is willing to have friendly relations with its neighbours.

    China has territorial disputes with many of its neighbours and has been much more aggressive in enforcing its claims in recent years.

    “China’s development brings enormous opportunities and benefits to the Asia Pacific and the world, and the business opportunities are lasting and limitless,” he said.

  • China, EU close to ending telecoms row

    China and the European Union (EU) are closing in on a deal to resolve a long-running telecoms dispute by the end of the month, people close to the matter  have said.      They say this will potentially put an end to one of the most divisive issues between the two big trade partners.

    The EU’s trade chief is ready to drop an investigation into what Brussels says are illegal subsidies to Chinese makers of equipment for mobile telecom networks if China makes concessions.

    Imports of such equipment into the EU are worth an annual 1 billion euros (81 million pounds) and bring Chinese companies into competition with European firms including Ericsson, the world’s biggest mobile telecom equipment maker, Nokia Siemens Networks and Alcatel-Lucent.

    Beijing is considering a deal in which China promises to limit its export credits to China’s No. 2 telecoms equipment maker Huawei and the smaller ZTE, people close to the talks told Reuters.

    Both sides would also agree to monitor the market share of Chinese telecoms companies in Europe and European companies in China. They would also cooperate on industrial research and standardisation in the telecoms sector.

    Resolving the telecoms issue could dramatically change the tone of the bilateral relationship.

    Europe is China’s most important trading partner and for the EU, China is second only to the United States (U.S.). A successful telecoms agreement could pave the way for a wider free-trade accord in the future.

    “The two parties have reached a common understanding on all the four issues and they are looking to cut a final deal,” said one person close to the talks who declined to be named because of the sensitivity of the issue.

    Another person said EU Trade Commissioner Karel De Gucht wants to reach a deal before he leaves office on Oct. 31.

    “This investigation was De Gucht’s issue. He doesn’t want to leave this with his successor,” the person said, saying that De Gucht had held phone conversations with China’s Minister of Commerce Gao Hucheng.

    According to an EU document seen by Reuters, the Commission says Huawei’s swift rise in the European telecoms equipment market-from a 2.5 per cent market share in 2006 to a 25 per cent share today- could only have been achieved with state aid that global trade rules say are illegal.

    The document said Huawei and ZTE have prices that are 18 per cent below those of EU producers, hurting the profitability of European manufacturers.

    Chinese Premier Li Keqiang will meet senior EU officials at a summit in Milan between Oct. 16 and 17 and is expected to discuss the issue. The European Commission declined official comment.

    Failure to reach a deal could potentially see the EU executive launching an anti-subsidy procedure imposing punitive levies on Chinese telecoms equipment exports.

     

     

     

     

  • Chinese manufacturers reject Nigeria’s Letters of Credit, says CBN

    Chinese manufacturers are refusing Letters of Credit (LCs) from Nigerian importers, insisting on cash payment only, the Central Bank of Nigeria (CBN) Director, Trade and Exchange, Olakanmi Gbadamosi has disclosed.
    Speaking on Wednesday at the 2014 Wema Bank Customer Trade & Structured Finance Forum held in Lagos, Gbadamosi regretted that despite improved banking regulation in Nigeria and the CBN Cash-less banking policy, the Chinese exporters still reject LCs from Nigeria.
    A LC is document issued by a financial institution, or a similar party, assuring payment to a seller of goods or services provided certain documents have been presented to the bank. The LC serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay.
    It ensures that the risk that the buyer will fail to pay is transferred from the seller to the letter’s issuer. The letter can also be used to ensure that all agreed standards are met by the supplier, provided that these requirements are reflected in the documents described in the letter of credit.
    Gbadamosi, who was represented by CBN Deputy Director, Trade and Exchange, Mrs. Onyinye Ahuchiogu said the practice is affecting Chinese trade volume with the country and should to be addressed.
    “At CBN, we are very much aware of that because I want to tell you authoritatively that at that end, some people monitor foreign exchange flows. We do know that so much money goes to China, cash, not LCs. The demand for cash is against the CBN cash-less banking policy,” he said.
    Continuing, he said: “I do know that that the cash-less policy is gaining ground; everybody is going cash-less, but China has refused. I think it is a bilateral issue and we have suggested that it should be tackled because this people are doing business in our environment and they are making profit. They are enjoying our environment. Despite security challenges in Nigeria, businesses are still thriving”. He said the CBN is looking at ways of resolving the challenge.
    He said the CBN is committed to ensuring that banks fund their accounts, two days before the bid date for foreign exchange adding that importers can source for funds either through the official window or interbank.
    “As a business man, you can source fund from any segment, depending on the transaction you want to execute. But in Nigeria, we have a list of eligible bank transactions, which we expect that importers chose only from this list. It is also our expectations that banks educate their customers about these transactions, and the supporting documents needed for effective import,” he said.
    He said Form ‘M’ completion is expected from anyone doing business in Nigeria as it helps the CBN to know who is buying what, and what needed to be done to meet customers’ needs. He said that importers of goods worth less than $250,000 annually are to carry out minimal documentation but they still have to do the Form ‘M’.

     

  • China, India, 198 others at Abuja fair

    Traders and exhibitors from the Republic of China, India and 198 other countries are participating at the Ninth Abuja International Trade Fair.

    President, Abuja Chamber of Commerce, Industry, Mines and Agriculture (ABUCCIMA), Solomon Nyagba said the fair, which began yesterday, will end on October 6.

    He said: “The reason we are targeting SMEs as our theme is because they are the engine of economic growth and not the big companies. The objective of the fair is to promote accelerated development of commerce and industry; revitalise and diversify the Nigerian economy by promoting the non-oil sector, agro-allied products and mineral resources; direct attention to the role of the private sector in the economy and provide access to resource and technology findings.”

  • Slow in China’s growth not a result of internal factors: economist

    China’s economic growth has been slowing since the first quarter of 2010 and the major reasons behind it are not internal structural factors, an economist said.

    As a developing country going through transformation, China definitely has structural problems, but declining growth in the past 18 quarters was caused by the external environment, said Justin Yifu Lin, former chief economist of the World Bank.

    He made the remarks at the forum Opportunities for Chinese Enterprises under the New Normal of Chinese Economy held by the National School of Development at Peking University.

    Citing examples of countries that have experienced similar trajectories in the past, including India, Brazil, the Republic of Korea and Singapore, he said that the economic growth rate in Brazil, for example, was 7.5 per cent in 2010, but only 2.2 per cent in 2013, namely it went through a similar slowdown as China, but more violently.

    “You cannot blame China’s internal factors for their dropping growth rates,” Lin said, believing that there are external reasons for the countries to go through such similar growth trajectories.

    He said that China can achieve its 7.5 per cent economic growth target this year, based on its investment opportunities on industrial upgrading, infrastructure, environment and urban management.

    He said that China’s annual growth must average 6.8 per cent to achieve its target of doubling its economy from 2010 to 2020. The annual growth should be at least 7.3 per cent however, to achieve its other goal of doubling per capita income over the same period, he said.

    China’s economic growth rate will stay between 7 per cent to 7.5 per cent in the coming five years or even longer, Lin forecast, adding that in this case, China’s enterprises face two opportunities: overseas mergers and transferring labour-intensive businesses overseas.

    China’s economy grew 10.4 per cent in 2010, 9.3 per cent in 2011, 7.7 per cent in 2012 and 7.7 per cent in 2013.

  • Unsecured loan, missing CEO add red flags to China lending

    omura Holdings and co-lenders spent nine months poring over the books, sizing up management and even checking out the factory floor at China’s Ultrasonic AG before deciding in August to give the Frankfurt-listed shoemaker a $60 million unsecured credit facility.

    The loan was unsecured in keeping with regulations in China at the time it was structured. Nomura, a Japanese bank, and its partner banks, however, felt they had done their homework.

    But within weeks, the three-year loan had been drawn down in full and two of Ultrasonic’s top executives had disappeared – leaving the lenders in a situation that should ring alarm bells for foreign bankers exposed to China.

    “You couldn’t get onshore security for offshore loans,” said a person involved in the loan negotiations. “It was a common risk in offshore borrowing for Chinese companies.”

    The affair is a reminder for offshore banks of the risk of lending to small and mid-sized Chinese firms which have long struggled to access credit. Local banks are more inclined to lend to larger, more established companies as economic growth slows, forcing smaller firms to seek expensive loans in the less-regulated shadow banking industry or from offshore lenders.

    Asia-Pacific banks had about $1.2 trillion worth of China-related exposure at the end of last year, including bank and non-bank lending, latest Fitch Ratings data show.

    “These mid-sized companies are getting hit the hardest by the slight slowdown in the economy, and that’s having an impact on how they view the future …,” said Kent Kedl, Shanghai-based managing director for Greater China and North Asia at consultancy Control Risks.

    “This isn’t to say that mid-sized companies have any more innately corrupt people in them than do large companies, but large companies can weather storms a little easier.”

    China’s economy grew 7.5 percent in April-June, a touch quicker than the previous quarter’s 7.4 percent – the slowest since the third quarter of 2012.

    Ultrasonic on Tuesday said CEO Wu Qingyong and his son, Chief Operating Officer Wu Minghong, had been missing since the weekend, and most of the company’s cash reserves in China and Hong Kong had vanished. On Thursday, the company said the pair had withdrawn the cash in two tranches.

    Just five weeks earlier, the CEO and Ultrasonic’s listed holding company had guaranteed the loan, extended by Nomura’s Hong Kong unit after extensive checks on the company and its customers, people involved in the loan talks told Reuters.

    CEO Wu was well known in Jinjiang City in the southeastern province of Fujian, where the company’s factory was located. He received an award from the provincial government last year in recognition of his contribution to the development of the Western Taiwan Straits Economic Zone, according to a government website.

     

  • Russia,China launch gas pipeline

    Russia and China have begun the construction of a new gas pipeline linking the countries, with a ceremony in the Siberian city of Yakutsk.

    China’s CNPC has agreed to buy $400bn (£240billion) of gas from Russia’s Gazprom.

    Russia will ship 38 billion cubic metres (bcm) of gas yearly over 30 years.

    The deal will lessen Russia’s dependence on European buyers, who have imposed economic sanctions because of the crisis in Ukraine.

    The construction ceremony was attended by Russian President Vladmir Putin and Chinese Vice-Premier Zhang Gaoli.

    China will start work on the construction of its side of the pipeline in the first half of next year, Mr Zhang said.

    The first gas will be pumped from Siberia to north-east China in early 2019.

    Over the past 10 years, China has used other gas suppliers. Turkmenistan is now China’s largest foreign gas supplier. Last year, it started importing piped natural gas from Myanmar.

    China is Russia’s largest single trading partner, with bilateral trade flows of $90billion (£53billion) in 2013.

    The two neighbours aim to double the volume to $200billion in 10 years.