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News from China
Shanghai’s economy faces tests to recover as indicators worsen
18th August 2015

 SHANGHAI’S plan for an economic recovery is facing renewed challenges as all its economic activity indicators worsened in July, the Shanghai Statistics Bureau said yesterday.

Industrial production declined 4.3 percent from a year earlier to 246.6 billion yuan (US$38.6 billion) last month, down further from the 1.9 percent fall in June.

Retail sales, the broad measure of consumer demand, rose 7.7 percent to 83.6 billion yuan, slowing from the pace of 9.6 percent a month earlier.

Trade shed 1.4 percent to 243.8 billion yuan from a year earlier, deteriorating from the zero change in June. Exports lost 8.7 percent in July although imports still managed to increase 4.9 percent.

Fixed-asset investment grew 8.7 percent to 316.1 billion yuan in the first seven months, also down from the 9.6 percent gain in the first six months.

“The overall performance was worse than expected,” said Li Maoyu, an analyst at Changjiang Securities Co.

“The data showed a weak foundation for the economic recovery that emerged in the second quarter, and the pace of deterioration is quick.”

Li cautioned that the corrections in the stock market may affect the city’s growth in the second half with less output in the services sector.

Finance, part of the services sector, powered Shanghai’s growth in the first half. Output from various financial services and products jumped 30.1 percent in the first six months, partly due to an active stock market.

Shanghai’s gross domestic product grew 7 percent in the first half of the year, up from the increase of 6.6 percent in the first three months and catching up with the national pace for the first time in seven years.

The city’s economic output totaled 1.18 trillion yuan in the first six months, with the service sector gaining 10.2 percent and producing 67.1 percent of the total output, compared with 67 percent in the first quarter and last year’s 64.8 percent.

The city’s manufacturing sector is also under pressure, Li said.

The six key industries — information technology, automaking, oil, refined steel, machinery equipment and biochemical — posted a combined loss of 2.9 percent last month.

Source: Shanghai Daily, August 18, 2015
Exporters to benefit from currency dip
17th August 2015

 

 
 
 
CHINA’S export-oriented companies are set to be the biggest winners from last week’s plunge in the value of the yuan.
 
Some of the many factories flooding Western markets with “Made in China” products said they will benefit from the depreciation, although the boon might be temporary, while others fear rising import costs could offset the benefit.
 
Xu Jianping, head of textile company Zhongxiang in east China’s Zhejiang Province, called the weakening yuan “a big bonus.”
 
The profits of his company, which sells cloth and garments overseas, will rise by 100 yuan (US$15.65) for every basis point the yuan’s exchange rate drops, he said.
 
“The average margin rate in China’s textile industry is about 5 percent. Every penny in profit increase will be helpful,” he said.
 
Cost-sensitive textile products take up a major portion of China’s exports. History shows that if the yuan depreciates by 1 percent against the US dollar, the average margin rate in the industry will increase by 2-6 percent.
 
“The cheaper yuan means our products are cheaper. Our competitiveness is rising,” said Wang Li, who is in charge of customs affairs at Luthai Textile Co in east China’s Shandong Province.
 
“We are trying to take advantage of the depreciation and seek a stronger footing overseas,” she said.
 
“The weaker yuan will have positive effects on machinery makers as well,” said Tang Yongping, general manager of Bracalente Manufacturing Group’s (BMG) China subsidiary.
 
The yuan was mildly appreciating when Tang joined BMG in 2006. A strong yuan added pressure to Chinese manufacturers already suffering from rising labor costs.
 
“To some extent, the ongoing depreciation will help reduce the financial burden,” he said.
 
China overhauled its exchange rate formation mechanism this week, shortly after the world’s largest goods trader reported an 8.9 percent slump in exports in July.
 
While export-oriented companies hailed the depreciation, those relying on imported raw materials are concerned the cheaper yuan will increase their production costs.
 
“We have not yet felt the pinch because we are using oil storage,” said Zhao Huili, trade manager of Shandong-based refiner Luqing Petrochemical Co.
 
“But we reckon the price of imported crude oil denominated in the US dollar will rise” and tariffs will increase accordingly, he said.
 
China’s imports also fell by 8.6 percent in July. Total foreign trade dropped 7.3 percent in the first seven months, while the country’s annual growth target for this year is about 7 percent.
 
Liu Sai, a customs officer in Jinan, capital of Shandong, said the current fluctuation in the yuan’s value will reassure trading companies, and advised them to arrange production to extend gains and avoid losses.
 
“What really matters now is how long this round of depreciation will last and how much the yuan will fall,” said Tang Yongping.
 
Zhang Xiaohui, assistant governor of the People’s Bank of China, said the value of the yuan has returned to market levels after the massive declines of last week.
 
Source: Shanghai Daily, August 17, 2015
Exports to get back on track this year
14th August 2015

 CHINA’S exports will hopefully return to positive territory this year as the latest monthly slump was partly caused by base effect, an official with the Ministry of Commerce said yesterday.

“The export structure is improving and the country’s share in the global market is steadily expanding — these trends have not been changed,” said Zhang Ji, assistant to the commerce minister.

China’s exports in the first seven months fell 0.9 percent year on year, with exports in July slumping 8.9 percent, compared with a 2.1 percent increase in June.

Zhang attributed July’s plunge to “exceptionally high” growth in the same period of last year, saying the decline would have been within a normal range if the base effect was excluded.

In July 2014, exports surged 14.5 percent year on year.

Though softening due to weaker external demand and rising costs, exports still outperformed those of other major economies, Zhang said.

Exports in the first six months by the United States and Japan fell by 5.2 percent and 8.1 percent, respectively, according to data from the World Trade Organization.

China’s exports rose by 0.9 percent in that period.

Zhang said there has been increased pressure on foreign trade, saying companies in the sector are having a hard time. Imports will likely stay weak, he said, but the downward momentum should be slower.

Source: Shanghai Daily, August 14, 2015
Sales of passenger vehicles in China plummet 6.6% to 1.3m
13th August 2015

 THE slump in China’s car market worsened in July as sales contracted by 6.6 percent, according to industry figures released yesterday.

People in the world’s biggest market by number of vehicles bought 1.3 million cars, minivans and other passenger vehicles, said the China Association of Automobile Manufacturers.

Sales growth that peaked at 45 percent in 2009 has declined steadily as the world’s second-largest economy cooled and cities imposed ownership limits to curb smog and congestion.

The fall in recent months has been far sharper than expected, leading General Motors Co, Volkswagen AG and Chinese SUV brand Great Wall Motors to cut prices.

Global car brands have invested heavily in trying to appeal to Chinese tastes.

On July 22, GM announced a US$5 billion plan to develop models with its main Chinese partner, Shanghai Automotive Industries Corp, to sell in China, India, Brazil and other developing markets.

Last month’s slide in sales followed June’s 3.4 percent decline, which was only the third such monthly contraction since September 2012.

This year’s downturn has been so abrupt that analysts who expected sales growth of up to 8 percent have cut their forecasts to as little as 1.7 percent.

Total vehicle sales, including trucks and buses, fell 7.1 percent in July to 1.5 million vehicles, though some types were relatively strong. SUV sales rose 34.2 percent to 393,000 vehicles, the association said.

Sales of passenger vehicles in the seven months through July rose 3.9 percent year on year to 1.1 million. Total vehicle sales came close to stalling, rising just 0.4 percent to 1.3 million.

Sales by Chinese brands rose 5.1 percent to 494,000 and their market share rose by 1.2 points to 38.9 percent.

GM, which competes with VW for the status of China’s biggest-selling car brand, said sales by the company and its Chinese partners fell 4 percent in July to 229,175. For the year to date, sales rose 3.3 percent to 1.9 million.

Ford said its July sales of Ford-brand vehicles dropped 6 percent year on year to 77,100.

Nissan said its July sales fell 13.9 percent to 84,200. For the year to date, sales rose 2.8 percent to 672,100 units.

Source: Shanghai Daily, August 13, 2015

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