Happening in China - February 2016

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  1. China central bank resumes easing cycle to cushion reform pain | Reuters
  • European Chamber of Commerce in China: Overcapacity in China

  • Xinhua: China inaugurates national R&D plan: "The plan merges several prominent state sci-tech programs, including the program 863 and program 973, focused on key fields such as biotechnology, space, information, automation, energy, new materials, telecommunications and marine technology. Breakthroughs of the program 863 include supercomputer Tianhe-1, manned deep-sea research submersible Jiaolong, and super hybrid rice."

  • Stefania Palma: Asia’s surging household debt: how risky is it?

Countries where debt has grown gradually and where regulators implemented pre-emptive macro prudential policies are more likely to minimise blows to economic growth.
Those with reactive regulatory bodies and where household debt surged in just a few years are more at risk, according to analysts and economists. Malaysia and Thailand are at the top of this list.
Domestic credit growth and swelling household debt have kept many Asian economies humming, even in the face of weak external demand from the west after 2008. Asian banks are, to a large extent, capitalised enough to bear the brunt of high household debt. But if other economic sectors start faltering, these obligations could start eroding GDP growth."

  • FT: Chinese lending: undercover: Peer-to-peer is largely funded by individuals, prompting a clampdown

  • FT: China rule change clears path to equity index inclusion - Loosening of restrictions could let A shares into the MSCI index and drive capital inflows

  • Bloomberg: China Seen Risking Credit Market Crunch With Leverage Crackdown

  • WSJ quotes Lagarde: countries “should consider new regulations and tax policies that curb short-term debt flows”

  • CCTV: “Local governments across China have issued guidelines to encourage a 2.5-day weekend since last month after the State Council released a document in August encouraging flexible working schedules to let weekends begin Friday at noon, in a bid to boost domestic spending and tourism.”

  • China Daily New China-led bank 'will be inclusive'

  • Bloomberg: Beijing May Double Companies Included in Carbon-Trading Market

  • ceskenoviny.cz: Czech Prime Minister Sobotka wants CR to be transport node between China and Europe

  • Cui Tiankai: A Prosperous China Benefits the World

  • Gordon Orr: What might happen in China in 2016?

  • FT: China speaks out on EU steel tariffs

  • FT: “Activity in China’s factory and services sectors fell last month to its lowest level since the aftermath of the global financial crisis, the latest signal of a deepening economic slowdown that prompted the central bank to inject cash into the banking system on Monday.”

  • FT: “Many of Europe’s largest industrial groups now regard their home continent as a source of stable growth amid the economic woes in emerging markets — marking a reversal of strategy for some businesses that spent years on overseas expansion to offset stagnant domestic sales.”

  • Reuters: Obama: China knows it cannot sustain export-driven growth model

Obama told the governors he was "cautiously optimistic" that Congress ultimately will back the 12-nation TPP trade pact, which labor unions oppose because of what Obama called "emotions" about job losses from past trade deals.
"Our concern there was that China was the 800-pound gorilla. And if we allowed them to set trade rules out there, American businesses and American workers were going to be cut out," he said.
Obama said he would have to rely on votes from "a set of strong pro-trade Democrats" in Congress as well as Republicans.

  • China Economic Watch | China Outperforms in Global Trade

  • CESifo: “Germany’s current account surplus continued to rise in 2015 to a record high of 252 billion euros, up from 212 billion euros in the previous year, according to calculations by the Ifo Institute. From a global perspective, however, Germany was overtaken by China in 2015 [emphasis added]. The economic downturn in China led to a drop in imported goods for the purposes of consumption and investment, and thus freed up more income to be exported as savings.”

  • As China Cools, Korean Exporters Feel Chill

South Korean exporters are among the top global casualties as Chinese economic growth ebbs to a 25-year low. For many companies in Korea and elsewhere in Asia, the damage is compounded by the speed at which Chinese rivals expanded their own production while demand was booming, leaving industries from petrochemicals to shipbuilding saddled with excess capacity. ...
... In Malaysia, where exports to China account for around 8% of the economy, concern over a drop in Chinese demand for the palm oil used in products like cosmetics and chocolate has pushed prices of the commodity to a six-year low. And Taiwan, with 14% of its gross domestic product tied to China-bound exports, recently halved its projection for economic growth this year to 1.56%, as Chinese orders for its mainstay electronics components slowed.


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