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China registered a significant drop in inflation, with the CPI dropping to 3.2 percent in February, from 4.5 percent in January (see Chart 1). The sharp drop can partly be attributed to the fading of temporary price hikes related to heightened demand for goods and services during the Lunar New Year festival season. It also marked the smallest rise since June 2010, giving China’s policymakers more leeway in steering the economy toward a soft landing. The Central Government recently announced it aims to keep average monthly inflation below 4 percent this year, unchanged from last year. However, endemic food inflation resulted in the 12-month average rate exceeding the target rate by 1.4 percentage points last year. In February, food inflation, which accounts for roughly one-third of the government’s official inflation measurement, fell to 6.2 percent, from 10.5 percent in January.
Premier Wen Jiabao recently announced at the start of the 2012 National People’s Congress’ annual session that the government is aiming for economic growth of 7.5 percent in 2012, a slowdown from nearly a decade’s long pursuit of 8 percent growth. The new target growth rate signals the government’s determination to rebalance the economy by veering it away from a heavy reliance on exports and investment and more toward domestic consumption. Likewise, February’s sharp drop in inflation also meant that real interest rates (return savers receive on their bank deposits) have edged into positive territory for the first time since the beginning of 2010. If this trend continues, households will not have to put away as much savings, thus having more discretionary income and boosting domestic consumption.
Manufacturing gains momentum
China’s manufacturing activity continued its expansion in February, with the official Purchasing Managers’ Index (PMI) rising to 51, its highest level since September, and an increase of 0.5 percentage points over January (see Chart 2). As a level of 50 demarcates expansion from contraction, it marked the third-straight month since China moved out of contractionary territory. Likewise, the sub-index for new export orders rose to 51.1 in February, its highest reading since May 2011 and the first indication of expansion in four months. The last figure suggests that demand for Chinese products from overseas markets is beginning to rebound, which will help prevent the factory sector from experiencing a hard economic landing. However some analysts suggest it’s too early to believe that the government will ease back from pro-growth fine-tuning of economic policy.
Trade deficit balloons
China’s monthly trade deficit reached $31.5 billion in February, its biggest such deficit in over a decade and in stark contrast to a record trade surplus of about $27.3 billion recorded in January. Overall, exports from China rose a slower-than-expected 18.4 percent from the previous year, reaching $114.47 billion(see Chart 3). Meanwhile imports registered a blistering 39.6 percent year-on-year growth rate to reach $145.9 billion, more than twice the rate of export growth, and the strongest rate since January 2011. For the two months combined, exports rose about 7 percent, while imports rose by about 7.7 percent. The fall in exports, which can be partly attributed to nationwide factory shutdowns during the Lunar New Year holiday, combined with strong commodities imports in the form of crude oil and iron ore, resulted in the largest trade deficit in years.
With growing signs of weakness in Europe, and more signs of more moderate growth and inflation easing in China, companies are pushing the government to use monetary and other policy measures to free up more money and stimulate growth, such as the reserve requirement ratio cut announced in midFebruary which released about $63 billion into the economy.
Race for african resources
Recently uncovered stores of mineral resources in East Africa will expedite competition between Chinese, Brazilian, Japanese, Indian, Russian, Irish and Anglo-Australian investors on the continent. Some of the new exploration findings include at least 70 trillion cubic feet of offshore gas reserves in Mozambique and Tanzania. Mozambique also has some of the world’s largest untapped coking coal deposits, while Uganda enjoys at least 1.1 billion barrels of oil reserves.
While the firm and ever-increasing footprint of China in acquiring African resources has long been in the spotlight, the roles of the two other largest emerging economies in the world, Russia and Brazil, have often not been given enough attention to. There are signs, however, that this will change in the short term, with both countries becoming increasingly assertive in setting their own footprint in Africa. Russia, having very strong positions in Africa in the second half of the 20th century, ceded ground after the collapse of the USSR (Union of Soviet Socialist Republics). Now, after 20 years, Moscow has recently made tangible steps toward the reboot of its relationship with Africa. At the end of December 2011, the first “Russia-Africa” business forum was held in Addis Ababa (Ethiopia), and in 2012, Russia expects to formalize a cooperation strategy with Africa. The forum has seen participation from leaders of Russia’s largest energy companies and banks, and African ministers of economy, finance and natural resources. Dozens of Russian companies are already racing for their own pieces of the African pie, as they think that it is the only continent where assets are still not over-valued and can be taken over for reasonable prices. Up to date, one of the most active Russian companies in Africa has been oil giant Lukoil (second-largest company after Rosneft and largest private oil company in Russia). So far, the focus of Lukoil has been oil-rich Western Africa, which can become the largest production center for the company outside of Russia. Currently, Lukoil has projects in three countries, Ghana, Cte d’Ivoire and Sierra Leone, with investments set to rise to $700-900 million, and with plans for further expansion into Gabon, Equatorial Guinea, Liberia and Uganda.
While for now Latin America may be the major supplier to Asia’s insatiable demand for raw materials, in the future, this role will be played by Africa. Foreseeing this, some of Brazil’s largest companies are already demonstrating a high commitment in the region. Vale, the world’s largest iron ore producer, is expected to bring on-stream a $1.3 billion coal project in Mozambique and further push for production in the Simandou iron ore deposit in Guinea where it invested $2.5 billion for a stake this year. Over the next five years, the company plans to grow its investments in Africa, up to $15-20 billion worth. Brazil’s top energy player, Petrobras, is building up its resource base in Africa as well, as seen
Through its recent acquisition of off-shore oil blocks in Benin and Gabon. This adds to the company’s existing operations in Nigeria, Angola, Tanzania, Namibia and Libya.
Reuse and recycle
The Ministry of Industry and Information Technology released a plan in March to recycle 7 billion tons of industrial solid waste during the 12th Five-Year Plan (2011-15), in an effort to help ease the country’s environmental deterioration. By 2015, around 1.6 billion tons of industrial waste will be recycled annually, with a utilization ratio of 50 percent, according to the plan. Boom to gloom
Passenger vehicle sales in China totaled 2.26 million units in the first two months of 2011, a decline of 1.4 percent from a year ago, according to data from the China Passenger Car Association. The market demand weakened as policymakers rolled back some incentives, and the continued increase in fuel prices also mounted pressures on potential buyers, said the association.
Entrepreneurs’ summit
The Global Entrepreneurs Summit, organized by China Association for International Economic Cooperation, will be held between June 6 and 8 in Guangzhou, Guangdong Province. The summit will cover the subject of business development amid global economic uncertainties, entrepreneurship and economic development, and how to increase China’s competitiveness in the international market. A group of foreign and domestic entrepreneurs has been invited to the event.
Policy justified
The Ministry of Commerce said in March that China’s restrictions on rare earth exports are justified and are in line with World Trade Organization rules. The policy aims to protect resources and environment, and realize sustainable development. China has no intention of restricting free trade or protecting domestic industries by distorting its foreign trade, said the ministry. China supplies more than 90 percent of rare earth products on the global market, but its reserves only account for about one third of the world’s total.
Cleaner villages
The Chinese Government will invest 5.5 billion yuan ($873 million) this year to clean up pollution in the country’s rural areas, said the Ministry of Finance. The central and local governments will invest further to complete the environmental clean-up of 60,000 villages across the country by 2015.
4G campaign
China’s telecom giant China Mobile recently unveiled a plan to deploy TD-LTE, a 4G mobile telecommunication technology, in the country. China Mobile said that over 20,000 TD-LTE base stations would be put in operation by the end of this year, and that the number would increase 10 times by the end of 2013.
Green credit
The China Banking Regulatory Commission (CBRC) recently issued a circular, requiring commercial banks to facilitate loans to “green” enterprises. The CBRC urged lenders to reduce loans to industries with high energy consumption, high pollution or excessive capacity, and to strengthen support for environment-friendly industries and projects.
Business environment improves
The Kenyan cabinet in March approved three key bills aimed at drastically improving the economic and business environment in the East African nation. The statement said the adoption of the VAT bill, Company’s Bill and Insolvency Bill comes soon after the city of Nairobi was ranked as one of the most competitive locations to invest new capital, in a survey done by the Economist Intelligence Unit. The Bills also exempt goods and services for export from VAT and gives better dispute resolution mechanisms between tax payers and the Kenya Revenue Authority.
Aviation show
The Beijing International Business Aviation Show, the first such show in the Chinese capital and hosted by China World Trade Center Co. Ltd., will be held between September 4 and 7, and about 6,000 buyers are expected to attend. The show has invited 150 exhibitors, most being manufacturers of international business jets, according to the organizer of the show.
Bankcard sector grows
China’s commercial banks opened new accounts for 2.9 billion debit and credit cards last year, up 22.1 percent year-onyear, indicating accelerating expansion of the bankcard business that has promoted the development of the retail market, said the People’s Bank of China or the central bank in March.
SOEs profits decline
Profit growth for Chinese state-owned enterprises (SOEs) slowed during the first two months of 2012, the Ministry of Finance said in March. The SOEs’ profits fell 10.9 percent year-on-year to reach 363.5 billion yuan ($57.7 billion) during the first two months, said the ministry. The profits of centrally-administered SOEs fell 11.5 percent year-on-year to 211.97 billion yuan ($33.6 billion), while those under local governments saw their profits down 10 percent to 51.53 billion yuan ($8.2billion).
China registered a significant drop in inflation, with the CPI dropping to 3.2 percent in February, from 4.5 percent in January (see Chart 1). The sharp drop can partly be attributed to the fading of temporary price hikes related to heightened demand for goods and services during the Lunar New Year festival season. It also marked the smallest rise since June 2010, giving China’s policymakers more leeway in steering the economy toward a soft landing. The Central Government recently announced it aims to keep average monthly inflation below 4 percent this year, unchanged from last year. However, endemic food inflation resulted in the 12-month average rate exceeding the target rate by 1.4 percentage points last year. In February, food inflation, which accounts for roughly one-third of the government’s official inflation measurement, fell to 6.2 percent, from 10.5 percent in January.
Premier Wen Jiabao recently announced at the start of the 2012 National People’s Congress’ annual session that the government is aiming for economic growth of 7.5 percent in 2012, a slowdown from nearly a decade’s long pursuit of 8 percent growth. The new target growth rate signals the government’s determination to rebalance the economy by veering it away from a heavy reliance on exports and investment and more toward domestic consumption. Likewise, February’s sharp drop in inflation also meant that real interest rates (return savers receive on their bank deposits) have edged into positive territory for the first time since the beginning of 2010. If this trend continues, households will not have to put away as much savings, thus having more discretionary income and boosting domestic consumption.
Manufacturing gains momentum
China’s manufacturing activity continued its expansion in February, with the official Purchasing Managers’ Index (PMI) rising to 51, its highest level since September, and an increase of 0.5 percentage points over January (see Chart 2). As a level of 50 demarcates expansion from contraction, it marked the third-straight month since China moved out of contractionary territory. Likewise, the sub-index for new export orders rose to 51.1 in February, its highest reading since May 2011 and the first indication of expansion in four months. The last figure suggests that demand for Chinese products from overseas markets is beginning to rebound, which will help prevent the factory sector from experiencing a hard economic landing. However some analysts suggest it’s too early to believe that the government will ease back from pro-growth fine-tuning of economic policy.
Trade deficit balloons
China’s monthly trade deficit reached $31.5 billion in February, its biggest such deficit in over a decade and in stark contrast to a record trade surplus of about $27.3 billion recorded in January. Overall, exports from China rose a slower-than-expected 18.4 percent from the previous year, reaching $114.47 billion(see Chart 3). Meanwhile imports registered a blistering 39.6 percent year-on-year growth rate to reach $145.9 billion, more than twice the rate of export growth, and the strongest rate since January 2011. For the two months combined, exports rose about 7 percent, while imports rose by about 7.7 percent. The fall in exports, which can be partly attributed to nationwide factory shutdowns during the Lunar New Year holiday, combined with strong commodities imports in the form of crude oil and iron ore, resulted in the largest trade deficit in years.
With growing signs of weakness in Europe, and more signs of more moderate growth and inflation easing in China, companies are pushing the government to use monetary and other policy measures to free up more money and stimulate growth, such as the reserve requirement ratio cut announced in midFebruary which released about $63 billion into the economy.
Race for african resources
Recently uncovered stores of mineral resources in East Africa will expedite competition between Chinese, Brazilian, Japanese, Indian, Russian, Irish and Anglo-Australian investors on the continent. Some of the new exploration findings include at least 70 trillion cubic feet of offshore gas reserves in Mozambique and Tanzania. Mozambique also has some of the world’s largest untapped coking coal deposits, while Uganda enjoys at least 1.1 billion barrels of oil reserves.
While the firm and ever-increasing footprint of China in acquiring African resources has long been in the spotlight, the roles of the two other largest emerging economies in the world, Russia and Brazil, have often not been given enough attention to. There are signs, however, that this will change in the short term, with both countries becoming increasingly assertive in setting their own footprint in Africa. Russia, having very strong positions in Africa in the second half of the 20th century, ceded ground after the collapse of the USSR (Union of Soviet Socialist Republics). Now, after 20 years, Moscow has recently made tangible steps toward the reboot of its relationship with Africa. At the end of December 2011, the first “Russia-Africa” business forum was held in Addis Ababa (Ethiopia), and in 2012, Russia expects to formalize a cooperation strategy with Africa. The forum has seen participation from leaders of Russia’s largest energy companies and banks, and African ministers of economy, finance and natural resources. Dozens of Russian companies are already racing for their own pieces of the African pie, as they think that it is the only continent where assets are still not over-valued and can be taken over for reasonable prices. Up to date, one of the most active Russian companies in Africa has been oil giant Lukoil (second-largest company after Rosneft and largest private oil company in Russia). So far, the focus of Lukoil has been oil-rich Western Africa, which can become the largest production center for the company outside of Russia. Currently, Lukoil has projects in three countries, Ghana, Cte d’Ivoire and Sierra Leone, with investments set to rise to $700-900 million, and with plans for further expansion into Gabon, Equatorial Guinea, Liberia and Uganda.
While for now Latin America may be the major supplier to Asia’s insatiable demand for raw materials, in the future, this role will be played by Africa. Foreseeing this, some of Brazil’s largest companies are already demonstrating a high commitment in the region. Vale, the world’s largest iron ore producer, is expected to bring on-stream a $1.3 billion coal project in Mozambique and further push for production in the Simandou iron ore deposit in Guinea where it invested $2.5 billion for a stake this year. Over the next five years, the company plans to grow its investments in Africa, up to $15-20 billion worth. Brazil’s top energy player, Petrobras, is building up its resource base in Africa as well, as seen
Through its recent acquisition of off-shore oil blocks in Benin and Gabon. This adds to the company’s existing operations in Nigeria, Angola, Tanzania, Namibia and Libya.
Reuse and recycle
The Ministry of Industry and Information Technology released a plan in March to recycle 7 billion tons of industrial solid waste during the 12th Five-Year Plan (2011-15), in an effort to help ease the country’s environmental deterioration. By 2015, around 1.6 billion tons of industrial waste will be recycled annually, with a utilization ratio of 50 percent, according to the plan. Boom to gloom
Passenger vehicle sales in China totaled 2.26 million units in the first two months of 2011, a decline of 1.4 percent from a year ago, according to data from the China Passenger Car Association. The market demand weakened as policymakers rolled back some incentives, and the continued increase in fuel prices also mounted pressures on potential buyers, said the association.
Entrepreneurs’ summit
The Global Entrepreneurs Summit, organized by China Association for International Economic Cooperation, will be held between June 6 and 8 in Guangzhou, Guangdong Province. The summit will cover the subject of business development amid global economic uncertainties, entrepreneurship and economic development, and how to increase China’s competitiveness in the international market. A group of foreign and domestic entrepreneurs has been invited to the event.
Policy justified
The Ministry of Commerce said in March that China’s restrictions on rare earth exports are justified and are in line with World Trade Organization rules. The policy aims to protect resources and environment, and realize sustainable development. China has no intention of restricting free trade or protecting domestic industries by distorting its foreign trade, said the ministry. China supplies more than 90 percent of rare earth products on the global market, but its reserves only account for about one third of the world’s total.
Cleaner villages
The Chinese Government will invest 5.5 billion yuan ($873 million) this year to clean up pollution in the country’s rural areas, said the Ministry of Finance. The central and local governments will invest further to complete the environmental clean-up of 60,000 villages across the country by 2015.
4G campaign
China’s telecom giant China Mobile recently unveiled a plan to deploy TD-LTE, a 4G mobile telecommunication technology, in the country. China Mobile said that over 20,000 TD-LTE base stations would be put in operation by the end of this year, and that the number would increase 10 times by the end of 2013.
Green credit
The China Banking Regulatory Commission (CBRC) recently issued a circular, requiring commercial banks to facilitate loans to “green” enterprises. The CBRC urged lenders to reduce loans to industries with high energy consumption, high pollution or excessive capacity, and to strengthen support for environment-friendly industries and projects.
Business environment improves
The Kenyan cabinet in March approved three key bills aimed at drastically improving the economic and business environment in the East African nation. The statement said the adoption of the VAT bill, Company’s Bill and Insolvency Bill comes soon after the city of Nairobi was ranked as one of the most competitive locations to invest new capital, in a survey done by the Economist Intelligence Unit. The Bills also exempt goods and services for export from VAT and gives better dispute resolution mechanisms between tax payers and the Kenya Revenue Authority.
Aviation show
The Beijing International Business Aviation Show, the first such show in the Chinese capital and hosted by China World Trade Center Co. Ltd., will be held between September 4 and 7, and about 6,000 buyers are expected to attend. The show has invited 150 exhibitors, most being manufacturers of international business jets, according to the organizer of the show.
Bankcard sector grows
China’s commercial banks opened new accounts for 2.9 billion debit and credit cards last year, up 22.1 percent year-onyear, indicating accelerating expansion of the bankcard business that has promoted the development of the retail market, said the People’s Bank of China or the central bank in March.
SOEs profits decline
Profit growth for Chinese state-owned enterprises (SOEs) slowed during the first two months of 2012, the Ministry of Finance said in March. The SOEs’ profits fell 10.9 percent year-on-year to reach 363.5 billion yuan ($57.7 billion) during the first two months, said the ministry. The profits of centrally-administered SOEs fell 11.5 percent year-on-year to 211.97 billion yuan ($33.6 billion), while those under local governments saw their profits down 10 percent to 51.53 billion yuan ($8.2billion).