The Black China Blog

Here is an article which appeared in today’s China Daily. Articles which appear in the China Daily should always be looked on with some caution. There is no doubt that the purpose in making predictions such as those in this article is to help make them come true. But coming out and making such a prediction says something about the confidence levels within China for the future. This in turn will have flow-on effects for the aluminium industry and the crude oil refining industry.

For the former, a 9% growth rate should equate to a 12% - 14% growth in aluminium consumption, while for the latter, a return to normal refining levels will restore the inventory levels of green coke. Currently green coke levels have dropped to a minimum, but mostly because of lack of supply. If supply returns to something like previous levels, then the aluminium industry is likely to enjoy more stable coke prices. At least until the latent smelter capacity starts to consume coke at previous rates again.

Here is the article.

9% GDP growth tipped for next year

By Xin Zhiming (China Daily)
Updated: 2008-12-03 06:52

China could next year notch up growth of 9 percent, or even above, as the world’s fourth-largest economy pulls out all stops to stimulate investment and consumption, the nation’s top think tank said on Tuesday.

“I think China can achieve 9 percent GDP growth, or even higher,” said Wang Tongsan, a senior economist at the Chinese Academy of Social Sciences (CASS), at a news conference releasing the academy’s annual economic forecast, or Blue Book.

“The possibility is quite high - it could be at least 70 percent possible that GDP growth reaches 9 percent next year.”

The economic forecast research team said in an article in the CASS blue book that next year, economic growth could reach 9.3 percent, compared with this year’s estimated 9.8 percent.

Zheng Jingping, an official at the National Bureau of Statistics, also said in an article for the CASS book that growth would be about 9 percent next year.

The forecasts are higher than those made by international organizations.

The World Bank said last month that China’s growth may slow to 7.5 percent next year, the lowest since 1990. Though the bank expects 9.4 percent growth this year, it said the global financial crisis would take a greater toll in 2009.

An Organization of Economic Cooperation and Development report said China’s growth next year could be 8 percent, while the International Monetary Fund put it at 8.5 percent.

The CASS’ Wang said the government’s forceful stimulus moves would make a big difference next year. “We believe the pro-active policies to stimulate domestic demand will work and the effect will be impressive,” Wang said, referring to the country’s $586 billion stimulus plan announced on Nov 9.

Local governments have also pledged to follow suit to help prevent the national economy from sliding further after it registered an annualized 9 percent growth in the third quarter of this year, compared to nearly 12 percent for last year.

The central bank slashed the benchmark interest rates by 1.08 percentage points last week, the steepest cut in 11 years, to reduce borrowing costs for enterprises and individuals, and bolster confidence.

More supportive fiscal and monetary policies are believed to be in the pipeline, analysts said.

Given the serious global financial turmoil and economic slowdown, China would not be unscathed but “we should be confident in China’s stable economic growth, or relatively high growth”, Wang said.

He said there are two prerequisites for the GDP to grow by at least 9 percent: The US economy does not significantly worsen and China’s pro-growth economic policies are well implemented.

The CASS team also forecast that China’s consumer price index (CPI), the key gauge of inflation, could drop to 4.3 percent next year from more than 6 percent this year.

“The falling trend of CPI is entrenched,” said Wang, adding it would not rebound in the coming months.

Zheng from the NBS put CPI growth much lower for next year, at around 3 percent.

The urban jobless rate, meanwhile, could rise to 4.5 percent next year from this year’s 4 percent, according to a forecast by Fan Jianping, an economist from at the State Information Center.

Here is an article which appeared in yesterday’s China Daily.

Only about 60% of the 4 trillion in the package is listed here, but we know that additional money is going towards propping up the price of grain.

This article also gives us an insight into exactly how big the package is. Compared to 2007 at 13 trillion, 2008 will close out at 16 trillion and 2009 at 18 trillion. This suggests to me that in fact much of the 4 trillion is expenditure which was already announced, perhaps with some programs receiving a boost or an accelerated time frame.

But this also supports our argument that China’s economy is still primarily supported by investments, not by exports. Falling export figures are of course a problem for employment and confidence, but in macro terms the economy is likely to continue to grow as the investments in the stimulus package start to create more jobs.

Here is the article. I have inserted approximate USD values.

Minister of National Development and Reform Commission (NDRC) Zhang Ping has made public the breakdown of China’s four-trillion-yuan stimulus plan, which will cover livelihood improvements, R&D, environmental protection and other sectors.

· 280 billion yuan for housing projects (US$40bn)

· 370 billion yuan to improve people’s lives and infrastructure in rural areas (US$54bn)

· 180 billion yuan to build highways, railroads, and the power grid (US$26bn)

· 40 billion yuan for medical care and education (US$6bn)

· 350 billion yuan for ecological and environmental projects (US$51bn)

· 160 billion yuan to fund R&D and innovation projects (US$23bn)

· 1 trillion yuan for places worst hit by the earthquakes (US$146bn)

The new details of the stimulus plan have been revealed together at the same time as China’s total domestic investment was forecast to reach 18 trillion yuan in 2009. (US$2.6tr)

For 2008 total investment is expected to reach 16 trillion yuan, while last year it was 13 trillion yuan. The four-trillion-yuan stimulus package is just part of all the investment China needs to drive its economy.

Among the financial stimulus plan, 350 billion yuan will be spent on improving the ecological environment and treating pollution, Zhang said. The four-trillion-yuan investment will not be spent in the energy and resource-intensive industries or high-pollution industries.

Zhou Shengxian, minister of environmental protection, said earlier that the main targets of environmental investment will go to beef up rural environmental efforts. He said China’s fledgling green industries, such as those involved in the development of renewable energies and pollution treatment, will also benefit from the investment plan.

Further aspects to the NDRC’s plans to stimulate the economy have also been released, including a review of the fuel tax reform formula, undertaken with other government departments. Once the formula is ready, it will be released to seek public opinion on amendments, said Zhang at the press conference.

“The goal for fuel reform is to highlight four concepts, which are fair taxation, a regulated charging system, energy conservation and less financial burden for people,” Zhang said.

“It is fair that the more people consume oil the more they have to pay for it,” Zhang said. By replacing the maintenance fee for roads, navigation systems and road tolls with a fuel tax, car owners will pay less than before.

“By replacing the fees with fuel taxes, we also hope to regulate road toll stations that used to charge drivers for no legal reason,” he added.