Chinese Economy in Focus -- China may cut rates again to ensure "gentle slowdown" doesn't turn ugly

On the ground, things don't seem so bad in China. As I report from Suzhou, China I see construction booming on both a residential level on in terms of infrastructure. However as Bloomberg LP paints in a article you can view here, things aren't so pretty on a macro level.

Actually they may depend on what you think "pretty" is. Economic growth will slow this year. 3rd Quarter growth in 2008 when released is expected to come in at around 9%, down from 2007's astounding 11.9%. Considering the state of the global economy many argue 9% is still quite healthy. However for a country seeking to fast track its economic development and solidify its position in the global economy the slowing growth rate is not welcome news.

The government is acting quick to stem the problem, having already reduced interest rates three times in the past two months. Will it be enough? Probably not...

For one, the reckless speculation from abroad and domestically on Chinese equities has fully exploded in investors faces this year (including my own). The CSI 300 is down a whopping 69% in 2008 so far, and has not seen the rallies other Asian markets like Hong Kong, Korea and Japan have seen when the west introduced their respective bailouts, lowered interest rates and set up new lending facilities.

Chinese Media, Xinhua reports export orders dropped in the 3rd quarter to their lowest level since 2005. Home sales have plunged 59% in Beijing and 39% in Shanghai so far in 2008.

All this looks bleak, but a casual observer may add that between 2005 and 2008, both Beijing and Shanghai have continued to grow rapidly. Few can deny the changes which have manifested in each city in the past 3 years, not to mention the rapid change which occurred between 2000-2005.

My observations are simple. China was indeed growing too fast for its own good, this financial crisis is simply bringing it back down to reality. China will continue to grow but due to the nature of its export oriented economy it must do so within the context of the world economy. All the while it does have the capacity to cushion its own slowdown with its domestic economy and macro policies which will help spur growth in the domestic market.

Check out this Bloomberg article to get a full picture.

News Line: Commodities in Focus - China, Vietnam, Italian Investments in Peru and Venezuela, Petrobras to suffer from global credit crisis

1) Falling prices give China chances to buy copper mines -- reports Mining Journal Online via Reuters

Falling copper prices are providing opportunities for cash-rich Chinese firms to buy overseas resources, a senior executive at China Nonferrous Metal Mining said on Monday...

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"The winter is coming. It may be a good timing for Chinese firms to go out to buy resources," Liu Guoping, director of the exploration department at China Nonferrous, said at the conference. Liu said some overseas exploration firms might find it difficult to obtain funds to finance their projects, giving cash-rich Chinese firms good opportunities to buy their assets...

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Liu at China Nonferrous said Chinese firms had acquired copper resources in the past few years at high prices as China`s need for the raw material rose. The demand for imported copper materials would stay strong in the long term. Jiangxi Copper, China`s top producer and the owner of the country`s largest open-pit copper mine in Jiangxi, will need to import 70% of its materials for refined copper production by the end of this year when its capacity rises by nearly 30% to 900,000t/y, president Li Yihuang said.

Click here to view the full article, courtesy of Reuters and Mining Journal


2) Saipem wins $1.1 billion contracts in Peru and Venezuela

Italian oil and gas industry contractor Saipem announced it had won onshore drilling contracts in Peru and Venezuela worth a total value of about $1.1 billion...

Click here to access the full article, courtesy of Living In Peru


3) Vietnam Lion Field Fires up production offshore Vietnam

Cuu Long Joint Operating Co. has commenced oil production from the Su Tu Vang (Yellow Lion) field located in Block 15-1 offshore Vietnam, according to a Dow Jones Newswire citing the Thoi Bao Kinh Te newspaper. Su Tu Vang, estimated to be Vietnam's fourth-largest field, is situated in the Cuu Long Area near the Bach Ho, Rang Dong and Ruby Fields and was discovered in 2001. The 'Yellow Lion' field is set to produce 65,000 barrels of crude per day...

Click here to access the full article, courtesy of Rigzone


4) Credit crunch may block 20% of deep oil rigs, slow Petrobrad reports Bloomberg LP

Oct. 28 (Bloomberg) -- As many as 20 of the 100 deepwater oil rigs on order worldwide may be delayed or canceled as loan availability erodes, possibly slowing developments including the biggest petroleum discovery in the Americas in three decades...

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Norway's Sevan Marine ASA has lost 70 percent of its value this month amid concern it won't get financing for two drilling units. Houston-based Atwood Oceanics Inc. said Oct. 16 that it won't exercise an option to build a deepwater rig at Jurong Shipyard Pte. Ltd. in Singapore. New rigs were being ordered to ease a shortage of deepwater gear needed to exploit offshore prospects like Brazil's Tupi, announced in November by Petroleo Brasileiro SA, or Petrobras.

``Petrobras would probably be the dominant oil and gas company that gets hit by this,'' Uhlmer said.

Jose Sergio Gabrielli, chief executive officer at state- controlled Petrobras, said the Rio de Janeiro-based company may need to help find financing for some of its suppliers. ``We are concerned about the supply chain of products for Petrobras,'' Gabrielli told reporters at a conference in Houston last week...

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Click here to access the full article, courtesy of Bloomberg LP

你好 读者（Ni hao duzhe）-- Hello readers

I must apologize to all those who once counted on this blog for perspectives, news, analysis and all the rest that used to be provided on a daily basis.  Sadly Internet restrictions and lack of access in the far east have made it difficult, sometimes impossible to access blogger. 

I write to you from the beautiful, bustling, urbanized yet serene city of Suzhou, China.  

(Click here to check out some nice pics from the cities official website)

I had planned to keep this website going strong during my year long stay in China.  Sadly, it is incredibly difficult to update from here.  I will continue to try, and I have a new internet connection arriving in a few days, which I hope will allow me more privileges as I am being forced to provide everything down to my blood type in order to obtain (hehe).

While my connection lasts i'll get what word I can out.  Everyday as I check in with the world via my blackberry I see stock markets plummeting, governments hosting meeting to address the crises, blame being dealt left and right, and my portfolio sadly decrease in value more and more.

While on this side of the Pacific, many express concern and legitimate worry that something horrible is on the verge of beginning (a global recession).  Meanwhile, from a rational point of view, I don't exactly see the world crumbling into pieces.  Buildings are still going up, the malls in China are full, people are swiping their credit cards, mortgages are being taken to buy apartments and houses, and people have generally remained hopeful of a brighter future.

Whether it will still be like this 6 months from now when the economic problems of the West more fully manifest, I can not tell.  What I can say for certain is it is not in China or any other emerging market of Asia's interest to see the United States and Europe come tumbling down. There is still tremendous room for China to grow, and grow it will.  Factories which produce goods for export to the West will shut, but the economy will re-adjust with a heavier focus on the domestic front.  

Just as the United States has centers of economic activity - New York, California, Texas, etc, so does China.  Beijing, Shanghai, the Southern Coast, the rebuilding of Sichuan will dominate China's economy on the surface in the months to come.  

Yes, hardships will probably become more obvious in the poorer regions of the country in the months to come, but they will not dictate the course of China's economy.  I have come to learn, China can not grow to infinity on its own, if it could, my Chinese stocks would not be hurting so greatly right now.  China can however soften the impact it will feel from the global financial meltdown underway right now.  

After researching, analyzing and attempting to no avail to decipher the commodity trade between China and South America, one thing I can say for certain is that the recent plunge in commodity prices will help China continue to prosper, not hurt it.  Record high prices of everything from copper, iron ore to energy had become a genuine problem for many industries here in Asia.  

In the coming months it will be interesting to see how and if a new balance can be established, and where prices will settle.  I'll leave my personal observations here, and I hope to be able to soon be in a position where I can begin bringing news, analysis and my personal observations to all readers of this site.

News Line: Live from Tokyo!

1) Asia-Latin America Collaboration by Lim Hng Kiang

Most people think of Latin America and Asia as two regions separated by culture, language and history. Yet, Asia and Latin America are more connected than we imagine.

In recent years, political and economic ties between Latin America and Asia have deepened. Not only have government–to-government links and interactions grown, but companies from both regions have increasingly come to realize the potential for doing business with each other. The growth in total trade flows between Latin America and Asia bear testament to this, having risen to reach US$267.3 billion in 2007, an increase of 24 percent over 2006 (click here to read more)....

ASEAN AND UNASUR

In ASEAN, there has been good progress made towards achieving the ASEAN Economic Community. The recent conclusion of negotiations for the ASEAN-Australia-New Zealand FTA as well as the ASEAN-India FTA Trade in Goods during the ASEAN Economic Ministers Meeting in August will not only continue to deepen ASEAN’s internal integration, but also expand its external reach. In Latin America, 2008 bore witness to the establishment of the Union of South American Nations or UNASUR, which aims to create a single market and to integrate infrastructure (click here to read more)...

SINGAPORE'S GROWING LINKS

While trade links between Asia, as well as Singapore, and Latin America have grown, there is scope to do much more. For example, bilateral trade between Singapore and Latin America increased at a compounded annual growth rate (CAGR) of 17 percent over the last three years to reach US$8.89 billion (SS$ 13.4 billion) in 2007. But this only represents 0.07 percent of total world trade and 1.6 percent of Singapore’s total trade with the world last year. There are many areas where there are opportunities for collaboration, be it in agri-business, food and beverage, electronics, oil and gas, transport, logistics or infrastructure. In fact, an increasing number of our companies have made successful inroads into Latin America in these sectors. To date, there are about 56 Singapore-based companies with 191 points of presence throughout Latin America engaged in a variety of business and investment projects.

Latin America’s infrastructure sector in particular has attracted the interest of a number of Singapore companies. Latin American governments are placing increasing emphasis on investing in robust, well-integrated and efficiently managed infrastructure to sustain growth. This presents opportunities in transportation & logistics, urban planning, water and waste management, industrial park development, and oil & gas, amongst others, in both regions. Latin America’s need for expertise in infrastructure development dovetails well with Singapore companies’ infrastructure development capabilities and search for new markets (click here to read more).

Click here to access the full article from Latin Business Chronicle


2) Venezuela's Chavez calls for creation of an Oil Bank reports Rigzone via Dow Jones Newswires

Venezuela's President Hugo Chavez on Tuesday called for oil producing countries to create an oil bank and warned oil prices could fall further.

"We once proposed the creation of an OPEC Bank...but it wasn't adopted. Lets work with the idea of an oil bank, a couple of oil (producing) countries can do it," Chavez said as he arrived in Brazil for a state visit.

Click here to access the full article via Rigzone.com


3) China has muscles to push domestic growth - Xinhua

SINGAPORE, Sept. 30 (Xinhua) -- China has the muscles to push short-term domestic growth, but Japan and South Korea will continue to grapple with various difficulties in trying to rev up their sluggish economic engines into higher gear, said Standard & Poor's Ratings Services here on Tuesday.

In recent separate reports on the three countries, S&P said China will steer its economic policy toward supporting growth, despite some anticipated hurdles, while Japan and South Korea both face political stalemates, high oil and food prices, decelerating growth, among other issues.

The report said China is counting on its strong domestic demand to pull its economy ahead this year and next, "We expect tight labor market conditions, together with the implementation of the new Labor Contract law this year, to keep wage growth strong and lower uncertainties faced by employees."

Click here to access the full article from Xinhua


4) China's economy in good shape despite global financial chaos

TIANJIN, Sept. 27 (Xinhua) -- China's economy was in good shape and capable of maintaining financial stability despite global chaos, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said on Saturday.

Liu made the remarks at the ongoing 2008 Summer Davos forum, also known as the Annual Meeting of the New Champions 2008, which kicked off on Saturday in the north China metropolis of Tianjin.

Though feeling gloomy about the outlook of the world economy, most attendees were confident about China's economic prospects.

"China has full confidence and capabilities to ensure sound and fast economic growth for a long period of time," Premier Wen Jiabao said at the opening ceremony.

Click here to access the full article from Xinhua


5) South American leaders blame financial crisis on US irresponsibility reports Mecropress

Four of South America’s leaders meeting in the Amazon accused the United States on Tuesday of "irresponsibility" in its handling of a financial crisis that has dried up credit markets and threatens economies around the world.

Brazil’s Lula da Silva said that rich nations are responsible for the global financial crisis, and called on the US Congress to pass a solution quickly. Emerging markets, including Brazil, are better prepared to weather the crisis than the US, he said.

“We did our homework and they didn't”' Lula said. “Those that spent the last three decades telling us what to do didn't do what they had to do. The crisis is very serious and so profound that we don't know how big it is”.

Venezuelan President Hugo Chavez warned the crisis could slow economic growth across Latinamerica and predicted that US economic power is in dramatic decline.

"This crash of capitalism and of neo-liberalism will be worse than that of 1929" Chavez told reporters at the Manaus city meeting. “No country can say it won't be affected''.

Click here to access the full article from Mercopress


6) Brazil and Argentine markets suffer record day losses

Brazil’s Bovespa suffered its greatest loss in one day since 1999. Trading dropped 13.8% before beginning to recover towards the end of the day.

Before President Lula da Silva had to come out and insist that the global financial crisis would have a limited contagion for Brazil. Trading had to be stopped for 30 minutes after the crash reached the 10% threshold but once restarted continued to fall until at the end of the day the index settled at 46.028 points, down 9.4%.

In Argentina the MERVAL index skid 8.7% and in Mexico the IPC, 6.4%; in Chile the loss was 5.7% and in Colombia, 2.37%.

For Chile it was the worst daily fall in a decade and for Argentina’s Merval the blackest day since February 11, 2002 when the market crashed 10.68%. The Argentine stock exchange has lost 13,5% in September and 30% since the beginning of the year.

Click here to access the full article from Mecropress


7) US representatives extends benefits to Andean Countries

The United States House of Representatives voted unanimously on Monday to approve a one-year extension of trade benefits for Colombia, Peru, Ecuador and Bolivia that expire at the end of the year....

Click here to access the full article from Mercopress


8) Lima's stock market plunged 15.35% in September

Lima, Sep. 30 (ANDINA).- Lima Stock Exchange (BVL) plunged 15.35 percent in September, the second biggest month drop in 2008, after a 18.73 percent decrease in July, amid an international financial crisis worsening, said Tuesday the general manager of Seminario Brokerage (SAB), Roberto Seminario. The BVL was hurt by external factors linked to a metal price drop and a collapse of several American financial institutions such as Lehman Brothers, Merrill Lynch, Bear Stearns and Washington Mutual...

Click here to access the full article from Andina News


9) Chinese buyers of Indian Iron Ore demand discounts

Chinese buyers of Indian iron ore are defaulting on import contracts and refusing to lift the ore unless the seller offers a discount on contracted prices, a top industry official said on Monday.

"Our exports are in deep red as there is no demand from China," said Rahul Baldota, president of the Federation of Indian Mineral Industries and managing director of miner MSPL Ltd.

Chinese appetite for Indian ore has fallen despite rival Brazilian miner Vale`s demand for higher prices for the ore it exports to China -- a move that initially cheered Indian suppliers.

Nearly 75% of India`s annual iron ore exports of about 100Mt go to China, and shipments normally rise after the annual rainy season ends in September.

"The Chinese are backing off old contracts. They are saying either you reduce the price or we can`t take the shipments," Mr Baldota said. "I, myself, have had to suffer two cancellations."

Click here to access the full article from Mining-Journal

Chinese blast off into outer-space as global financial markets await US bailout plan

Original writing -- September 25th, 7:45pm China Central Time

Apologies to all readers in the lag in publishing of the following entries. Sadly due to "technical difficulties," a few entries written while on the ground in the great country of China could not be published on the spot.

As I wander around the parts of the net in which I am permitted to enter, I am watching the Chinese prepare to blast off into space for their third time. This time however will be the first time they actually venture outside the ship and "walk in space," as stated by CCTV 9.

Not sure if its the fact I'm in China watching live, but its quite an amazing feeling to see a country that is still developing on the verge of blasting off into space.

The mission will hopefully be accomplished using everything "made in China." The astronauts will even take traditional Chinese medicine before blast off to help with nausea. The astronauts are carrying back up Russian Space suits incase they need to ditch their Chinese ones for the actual "space walk."

Personally I hope all go smoothly with the Chinese suits, might help to restore a bit of faith after this milk scandal in Chinese standards hehe...