china steel overcapacity: 7.9% setup, new pres Jinping admin
China's Economy Is on the Mend
In a sign that a recovery is picking up speed, China’s economy grew 7.9 percent in the last quarter of 2012, the first acceleration in two years, and faster than the 7.8 percent rise predicted in a survey of economists. The expansion was up significantly from the previous quarter’s 7.4 percent, China’s National Bureau of Statistics.
Crucially, corporate profits are also showing signs of improvement; that is particularly good news following an earlier worrisome trend of rising company debt, squeezed margins, and industrial gluts, including in steel, coal, aluminum, and construction machinery equipment.
“Industrial profits are recovering strongly on the recent economic upturn. We expect a quick rebound in profit growth and margins for the industrial sector,” wrote Lai Shen and Stephen Green, China economists at Standard Chartered, in a Jan. 17 note. The “destocking process is near an end; restocking demand will become a positive in early 2013.”
That put full-year growth at 7.8 percent, the slowest since 1999, but well above the official target of 7.5 percent, set by outgoing premier Wen Jiabao in March 2012.
“China enters 2013 on a pretty favorable growth trajectory,” says Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong, who has now raised his estimate for this year’s growth from 8 percent to 8.4 percent.
The positive GDP performance was matched by a host of other relatively rosy economic indicators. Industrial production, for example, was up 10.3 percent in December from a year earlier, and retail sales grew 15.2 percent over the same period, both beating predictions by economists.
That means China’s next premier Li Keqiang, set to take charge of the economy at a National Party Congress in March, along with new party secretary Xi Jinping, who becomes president, will receive an improving economic outlook.
Chinese investment made up 55pc of all growth in 2012, and may reach 60% in 2013.
The boom is rotating, of course, which makes it harder to read. The epicentre is moving West, deep into the Upper Yangtze and heartland regions holding 700m people.
The Sichuan capital of Chengdu is completing the world’s biggest building, a glass and steel pagoda. This will soon be eclipsed for sheer chutzpa by the world’s tallest tower in Changsha, to be erected in three months flat.
Standard Chartered has just upgraded its China growth forecast to 8.3pc year and 8.2pc next, and others are doing much the same.
The balance sheets of China’s banks have been growing by over 30% of GDP a year since the Lehman crisis and are still growing at a 20pc.
Fitch Ratings said fresh credit added to the Chinese economy over the last four years has reached $14 trillion, if you include shadow banking, trusts, letters of credit and off-shore vehicles. This extra blast of loan stimulus is roughly equal to the entire US commercial banking system.
The old China is vanishing fast, but the new one is still being born
Does the once-in-a-decade leadership turnover mean new Communist Party Secretary Xi Jinping will bring more change?
At the government ministries, each of them in sleek, modern buildings, officials strived to put the best face on the nation's leadership turnover and the 18th Communist Party Congress held in November.
At Defense, military officers pointed to a convergence of interests with the United States on global issues such as anti-terrorism, Pacific region stability and Israeli-Palestinian peace.
At Foreign Affairs, the emphasis was on cooperative ventures with the United States: joint earthquake rescue training, joint diplomatic training and the interdependence of the world's two largest economies. "China and the United States are just like a married couple," one minister said. "They may quarrel, but they don't want a divorce. The unspoken thing is we have much more common interests."
At Commerce, the focus was on China's robust economy. General Motors also sells one car every six seconds in China, and the streets of the capital are clogged with them.
Commerce officials hope new U.S. partnerships will bring solutions. They want to attract more American companies in the pharmaceutical, environmental protection and renewable energy industries. "First, we wanted electricity," one minister said. "Now we want cars. We want what Americans have, but if 1.3 billion Chinese lived that way, it would be unsustainable."
On Jinbao Street, the Starbucks has to compete for attention with the Ferrari, Lamborghini and Bentley dealers. A giant Apple store beckons pedestrians to come in, after they've finished their Haagen-Daz, and try out the latest iPad. Farther down the busy boulevard is the Hong Kong Jockey Club, an elegant, members-only dining palace where corporate chiefs cut the big deals over plates of Peking duck.
Mao Zedong would hardly recognize the place.
The fabulous wealth, economic growth and material goods that have exploded in the capital have spread to other urban zones as well. December at least, hotel and office lobbies are adorned with giant, sparkling Christmas trees. Road and shop signs are bilingual, to assist English speakers, and at night Beijing's shopping districts pulse with as many watts and consumers as a top-tier American city.
Among those who want a share of China's galloping economy are the 14 million who move to the cities each year. Although three decades of rapid urbanization have lifted 600 million Chinese out of poverty, the country still has the second-largest number of poor in the world.
Some of them live on the outskirts of Beijing, an hour away in the Chaoyang District. In a neighborhood where bricks are hauled by horse-drawn wagon, migrant families live in meager cinder-block dwellings heated by coal.
"Smart cities will embrace migrants as an asset and build transition pathways to allow and encourage them to integrate into the formal society, instead of allowing them to bounce back onto the informal edges of their cities," Mr. Hursh said. "Cities in the developing world which recognize this will be the New Yorks and Londons of the future in their regions. A smart city is an inclusive city."
In the rural outposts, though, farmers still water their plots with wooden buckets balanced on medieval yokes and shoppers go to market in horse-drawn carts. Millions of them have flocked to the cities for opportunity -- work, income, a car -- but many first end up in grim migrant slums, far from the glow of nightlife, like modern-day invaders kept out by some Great Wall. Community's per capita income was 500 yuan (about $80) in 1995, compared to 5,200 yuan ($837) today. U.S. per capita income is $41,663.
Whether individuals or minority groups will gain more freedom in the new China is hard to say. An economist for a major bank in Hong Kong believes change is coming. He cited a study of the Internet in China that showed a significant increase in use of the word "reform." In 2011, he said, the word came up fewer than 1 million times per month. Now it's used more than 7 million times per month. The traditional media is now getting more information from bloggers. And in some places where people don't have a chance to get newspapers or magazines, they now have access to blogs."
Such an independent chorus of voices would have been impossible in China prior to the age of the Internet. This quiet but steady proliferation of information gatherers and online commentators may be proof that, a generation later, the spirit of Tiananmen Square lives.