http://www.iht.com/articles/2006/04/16/business/chicon.php
Expansion in China is strongest in 3 years
By Keith Bradsher The New York Times
SUNDAY, APRIL 16, 2006
HONG KONG President Hu Jintao of China said Sunday that his country's economy grew at the rate of 10.2 percent in the first quarter of this year, a pace of expansion that could force Chinese officials to take action to prevent the economy from overheating.
Hu disclosed the growth rate - the strongest posted in three years - during a meeting Sunday with Lien Chan, the former chairman of Taiwan's opposition Nationalist Party. The official data had not been scheduled for release until Thursday.
The surge may further alarm the United States and other countries worried about job losses and commodity prices and as China's export economy roars ahead. Hu is scheduled to travel to the United States on Monday and meet Thursday with President George W. Bush, who is expected to press China to improve the protection of intellectual property and allow a faster rate of appreciation for its currency against the dollar.
Wen Jiabao, China's prime minister, said Friday that the government might tighten limits on bank lending, new investment projects and land use after studying the country's economic performance in the first quarter.
China's cabinet, the State Council, said that it would try to improve the efficiency of energy use and coordinate the use of natural resources. China's burgeoning thirst for oil has contributed to high global petroleum prices, although China contends its role has been overstated by Western experts.
Rapid growth in 2003, powered largely by fixed-asset investment and exports, led Beijing to impose stringent measures in the spring of 2004 to rein in growth. The government ordered banks to restrict access to credit, slapped expansion restrictions on overheated sectors like aluminum, steel and cement, and disciplined local officials and developers who pushed ahead with projects without the approval of the central government.
But some economists say the Chinese government is unlikely to impose severe measures this year. Inflation is low and economic growth in China is not as concentrated this time in exports, heavy industry and infrastructure projects, and also reflects higher levels of consumer spending.
"I don't expect them to take any drastic action. They are comfortable with higher growth," said Frank Gong, the chief economist for greater China at J.P. Morgan Securities.
Transportation bottlenecks ranked among the biggest problems that alarmed Chinese officials in 2004. Bulk cargo vessels carrying iron ore and other raw materials had to wait up to a month to unload at congested Chinese ports, while railroads proved incapable of carrying all the coal that southern Chinese power plants needed from mines in the north.
Big-ticket investment at ports and the construction of new railroads and highways appear to have relieved the bottlenecks.
Richard Elman, chief executive of Noble Group, one of the largest shipping companies in Asia, said in a recent interview that port delays were no longer a problem in China.
"The congestion has been solved in the last 18 months," he said.
Swift increases in bank lending, as in 2003, have stimulated growth, as China's large trade surplus and heavy inflows of direct investment from abroad have given Chinese companies and individuals large sums to stash in bank deposits, which the banks in turn lend for further investment.
While China raised interest rates and bank reserve requirements in 2004, it is moving this time to make it easier for Chinese companies and individuals to take more money out of the country, including three technical adjustments announced late Thursday night.
Beijing has been very cautious in recent years about acknowledging double-digit growth, claiming unusually steady quarterly growth rates of 9.5 percent to 9.9 percent for 8 of the last 11 quarters.
Many Western economists say they believe that China's statisticians smooth out growth statistics, partly to portray economic stability and partly to avoid alarming Western countries already troubled by the pace of growth in China.
http://www.bloomberg.com/apps/news?pid=ema...d=a9w3uJZVuiCA#
China Has $11.2 Bln Trade Surplus, Double Forecast (Update2)
April 11 (Bloomberg) -- China's trade surplus widened to $11.2 billion in March, the second-highest on record, an increase that may deepen tensions before a meeting between President Hu Jintao and U.S. President George W. Bush next week.
The surplus widened from $2.43 billion in February and was double the $5.7 billion median estimate of 27 economists in a Bloomberg survey. Exports jumped 28.3 percent from a year earlier, the most since October, the commerce ministry said on its Web site.
``This is really going to aggravate tensions with the U.S. ahead of Hu Jintao's visit,'' said Ben Simpfendorfer, China strategist at Royal Bank of Scotland in Hong Kong. ``Unless there's a dramatic decrease in the coming months, the trade surplus for the year is likely to widen.''
Bush said yesterday he wants China's president to explain how the government will allow its currency to strengthen and crack down on counterfeiting of Hollywood movies and Microsoft Corp. software. Hu, scheduled to meet Bush in Washington on April 20, is seeking to spur imports while protecting exports, which helped the nation's economy grow 9.9 percent last year.
February's gap takes the surplus for the first quarter to $23.2 billion, up from $16.5 billion in the same period a year earlier. Overseas sales rose to $78.1 billion, a monthly record, and imports gained 21.1 percent to $66.9 billion. Today's statement didn't give a breakdown of exports and imports.
China's trade surplus tripled to a record $102 billion in 2005 from a year earlier. Exports in March topped the $75.4 billion recorded in December, when Christmas orders drove overseas sales higher.
Piracy, Currency
The $285 billion trade relationship between the U.S. and China has grown contentious because of China's currency and market access policies. China is likely to pass Mexico this year as the second-largest U.S. trading partner.
``A lot of Americans are wondering where's the equity in trade,'' Bush said. ``It's very important for him to make a declaration on intellectual property.''
The yuan has appreciated 1.3 percent against the U.S. currency since China's July 21 decision to revalue the yuan by 2.1 percent and replace a decade-long peg to the dollar with a basket of currencies.
That hasn't satisfied U.S. lawmakers who say China's refusal to allow its currency to appreciate more quickly contributed to the U.S.'s record $726 billion trade gap last year. They say an artificially low exchange rate gives Chinese exporters an unfair advantage and is causing job losses in the U.S.
`Words Now, Action Later'
``China will not move on its currency during Hu's visit, in part because they do not wish to be taking steps of this kind under foreign pressure,'' said Jeffrey Bader, director of the China Initiative at the Brookings Institution in Washington. ``What might be sufficient to relieve U.S. pressure would be a combination of words now and action later.''
The pace of the yuan's appreciation against the dollar has accelerated to about 0.3 percent a month in March and February from 0.1 percent in December and January, Huang Yiping, China economist at Citigroup Inc., wrote in an April 4 report. The yuan was trading at 8.0023 at 12 p.m. Beijing time.
``There are clear expectations that the pace of appreciation is going to accelerate and that's reassuring because it's one of the key factors in easing trade tensions with the U.S.,'' Julian Jessop, chief international economist at Capital Economics in London, said before the report was released.
For China's Own Good
President Hu Jintao, who will meet Bush in Washington on April 20, may be more receptive to U.S. demands because the yuan's lack of flexibility is adding to problems in the domestic economy, analysts said.
China's widening trade surplus in 2005 contributed to a $209 billion surge in the country's foreign exchange reserves. It had a record $853.7 billion in reserves at the end of February, overtaking Japan's as the world's largest holder.
``The trade surplus is a big economic problem for China because it's boosting foreign-exchange reserves and adding too much liquidity into the economy,'' Paul Cavey, Hong Kong-based economist at Macquarie Bank Ltd., Australia's largest investment bank, said before the report was released.
China's central bank buys foreign exchange from the country's commercial banks to keep the yuan stable. The purchases create more yuan and to prevent those from entering the banking system and pushing up inflation and lending, the central bank mops up the liquidity it's created by issuing treasury bills, a process known as sterilization.
``Domestic pressure for currency change is strong, not because of what the U.S. is saying, but because it's in China's own interests to move,'' said Cavey. ``Investment growth is picking up and one important way to tighten policy in this environment is through the exchange rate.''
China Has $11.2 Bln Trade Surplus, Double Forecast (Update2)
April 11 (Bloomberg) -- China's trade surplus widened to $11.2 billion in March, the second-highest on record, an increase that may deepen tensions before a meeting between President Hu Jintao and U.S. President George W. Bush next week.
The surplus widened from $2.43 billion in February and was double the $5.7 billion median estimate of 27 economists in a Bloomberg survey. Exports jumped 28.3 percent from a year earlier, the most since October, the commerce ministry said on its Web site.
``This is really going to aggravate tensions with the U.S. ahead of Hu Jintao's visit,'' said Ben Simpfendorfer, China strategist at Royal Bank of Scotland in Hong Kong. ``Unless there's a dramatic decrease in the coming months, the trade surplus for the year is likely to widen.''
Bush said yesterday he wants China's president to explain how the government will allow its currency to strengthen and crack down on counterfeiting of Hollywood movies and Microsoft Corp. software. Hu, scheduled to meet Bush in Washington on April 20, is seeking to spur imports while protecting exports, which helped the nation's economy grow 9.9 percent last year.
February's gap takes the surplus for the first quarter to $23.2 billion, up from $16.5 billion in the same period a year earlier. Overseas sales rose to $78.1 billion, a monthly record, and imports gained 21.1 percent to $66.9 billion. Today's statement didn't give a breakdown of exports and imports.
China's trade surplus tripled to a record $102 billion in 2005 from a year earlier. Exports in March topped the $75.4 billion recorded in December, when Christmas orders drove overseas sales higher.
Piracy, Currency
The $285 billion trade relationship between the U.S. and China has grown contentious because of China's currency and market access policies. China is likely to pass Mexico this year as the second-largest U.S. trading partner.
``A lot of Americans are wondering where's the equity in trade,'' Bush said. ``It's very important for him to make a declaration on intellectual property.''
The yuan has appreciated 1.3 percent against the U.S. currency since China's July 21 decision to revalue the yuan by 2.1 percent and replace a decade-long peg to the dollar with a basket of currencies.
That hasn't satisfied U.S. lawmakers who say China's refusal to allow its currency to appreciate more quickly contributed to the U.S.'s record $726 billion trade gap last year. They say an artificially low exchange rate gives Chinese exporters an unfair advantage and is causing job losses in the U.S.
`Words Now, Action Later'
``China will not move on its currency during Hu's visit, in part because they do not wish to be taking steps of this kind under foreign pressure,'' said Jeffrey Bader, director of the China Initiative at the Brookings Institution in Washington. ``What might be sufficient to relieve U.S. pressure would be a combination of words now and action later.''
The pace of the yuan's appreciation against the dollar has accelerated to about 0.3 percent a month in March and February from 0.1 percent in December and January, Huang Yiping, China economist at Citigroup Inc., wrote in an April 4 report. The yuan was trading at 8.0023 at 12 p.m. Beijing time.
``There are clear expectations that the pace of appreciation is going to accelerate and that's reassuring because it's one of the key factors in easing trade tensions with the U.S.,'' Julian Jessop, chief international economist at Capital Economics in London, said before the report was released.
For China's Own Good
President Hu Jintao, who will meet Bush in Washington on April 20, may be more receptive to U.S. demands because the yuan's lack of flexibility is adding to problems in the domestic economy, analysts said.
China's widening trade surplus in 2005 contributed to a $209 billion surge in the country's foreign exchange reserves. It had a record $853.7 billion in reserves at the end of February, overtaking Japan's as the world's largest holder.
``The trade surplus is a big economic problem for China because it's boosting foreign-exchange reserves and adding too much liquidity into the economy,'' Paul Cavey, Hong Kong-based economist at Macquarie Bank Ltd., Australia's largest investment bank, said before the report was released.
China's central bank buys foreign exchange from the country's commercial banks to keep the yuan stable. The purchases create more yuan and to prevent those from entering the banking system and pushing up inflation and lending, the central bank mops up the liquidity it's created by issuing treasury bills, a process known as sterilization.
``Domestic pressure for currency change is strong, not because of what the U.S. is saying, but because it's in China's own interests to move,'' said Cavey. ``Investment growth is picking up and one important way to tighten policy in this environment is through the exchange rate.''
So I've been investing in China for a while and look forward to Yuan's appreciation.
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