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News from China
April indicators damage hopes of China’s economic recovery
16th May 2016

 THE rates of growth of China’s industrial output, retail sales and fixed-asset investment all slowed in April, the National Bureau of Statistics said, dimming hopes raised by the March data and adding to signs of a still murky economic outlook.

Factory output rose 6 percent year-on-year in April, down from 6.8 percent in March and below market expectations of about 6.5 percent according to a Reuters poll.

Industrial production accounted for 40.5 percent of China’s GDP in 2015, making it one of the leading indicators of economic growth.

The bureau attributed the slower growth to weak foreign demand, declining production of high energy-consumption industries, and a correction from seasonal factors in March.

But growth of high-tech manufacturing output and consumer-oriented products accelerated, said NBS researcher Jiang Yuan.

Retail sales grew 10.1 percent year on year in April, slowing from 10.5 percent in March. Similarly, fixed-asset investment growth eased to 10.5 percent in the January-April period, missing market estimates of 10.9 percent and down from the first quarter’s 10.7 percent.

The NBS attributed the slower retail sales to weakness in the new car market, and the easier investment in manufacturing and infrastructure under pressure of overcapacity and weak demand.

The data were in line with an array of economic indicators pointing to ongoing but fragile growth momentum.

Consumer inflation remained at 2.3 percent for the third consecutive month in April, but factory prices fell for the 50th consecutive month.

Exports in yuan-denominated terms rose 4.1 percent year on year, slower than the 18 percent increase in March, while the Purchasing Managers’ Index fell 0.1 points month on month to 50.1.

Monthly new yuan loans also dropped almost 60 percent month on month to 555.6 billion yuan (US$85.2 billion) in April.

“The April data mark a return to the normal,” said Zhou Hao, an economist with Commerzbank.

“The economic situation is still under control of policy-makers, and the negative reading is just a correction to the over-positive sentiment in March,” he said.

Speculation about whether the government will rein in its stimulus measures rose after the People’s Daily published an interview with an “authoritative source” last week, saying the slow economic growth will last for years and warning that too much reliance on debt to boost the economy could lead to a financial crisis or recession.

Source: Shanghai Daily, May 16, 2016
Chinese car sales gain at slow pace
12th May 2016

 CHINA’S auto sales growth slowed in April, and customers may again benefit from another round of price war by dealers to drive sales.

 
Total deliveries of passenger cars and commercial vehicles grew 6.3 percent last month to 2.12 million units, slower than the 8.8 percent year-on-year increase in March. The passenger car market, making the bulk of the sales, rose 6.5 percent in April versus 9.8 percent in March, the China Association of Automobile Manufacturers said yesterday.
 
The slowdown in the sales growth showed signs of depressing demand, Zou Tianlong, UBS Securities analyst, said in a note yesterday.
 
Chinese auto sales growth peaked at 45 percent in 2009 and has fallen steadily as cities try to control smog and congestion with limits on new vehicles.
 
Automakers sold 24.6 million vehicles in China in 2015, up 4.7 percent. It was the smallest increase in three years, following gains of 6.9 percent and 13.9 percent in 2014 and 2013 respectively.
 
In October, China sought to boost the market by slashing the purchase tax on passenger cars with small engines.
 
Sales of passenger cars with engines smaller than 1.6 liters rose 12.1 percent in April from a year earlier to 1.28 million units, CAAM said in a statement.
 
The rough patch that China’s auto market went through last year starting from spring, which saw tepid demand followed by heavy price discounts, might be looming again.
 
“Our latest research shows that carmakers are all set to cut prices to fight for market share once they find the demand decreasing,” said Zou.
 
“We think over the next quarter or two, the industry will face the risk of another round of price reductions.”
 
Some foreign automakers outperformed the overall market.
 
General Motors said it sold 277,979 vehicles in April, up 7.5 percent year on year.
 
But another US automaker Ford said its sales fell 11 percent to 82,324 units last month, according to a statement.
Source: Shanghai Daily, May 12, 2016
Worries dent Chinese commodities
11th May 2016

 CHINESE commodities dived yesterday, led by 6 percent falls in steel and iron ore futures, as deepening worries about China’s demand extended a fortnight of sharp drops and false rebounds in the country’s market for industrial metals.

Speculative funds rushed into China’s commodities futures last month, betting the country’s economy was bottoming. The buying frenzy alarmed domestic exchanges and regulators feared a bubble could be forming as volumes and prices soared.

To limit speculation on futures from steel to coal, the country’s three commodity exchanges have taken steps, including raising trading margins and transaction fees, and widening daily movement caps.

The big market swings and the response of authorities have raised concerns about the risk of contagion for global markets, particularly after last year’s stock boom and bust.

Yesterday, the Dalian Commodity Exchange said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation.

“Futures liquidity has dropped sharply following exchanges’ measures, and now investors are worried China’s economic trend will be weaker than previously expected, hurting sentiment,” said Zhao Chaoyue, an analyst at Merchant Futures in Shenzhen.

The most-traded rebar, or reinforced steel, on the Shanghai Futures Exchange saw its biggest daily fall on record yesterday. It hit a downside limit of 6 percent to 2,175 yuan (US$334) a ton, the lowest since April 7.

September iron ore futures on the Dalian Commodity Exchange also tumbled by their daily permissible limit of 6 percent to 388 yuan a ton.

Spot prices of billet, a semi-finished steel product, seen as a key reference point for the physical market, have fallen in the last few days, traders said.

The declines followed customs data on Sunday that showed iron ore imports fell 2.2 percent in April from March, while copper ore and concentrate imports shed 8 percent on the month.

High iron ore stocks

Fanning concerns about weak fundamentals, iron ore inventories at China’s big ports topped 100 million tons by the end of April, the China Iron & Steel Association said yesterday.

“Steel demand is seasonally weaker between June and August, while output keeps rising, which has been interpreted by investors as the turning point of the economic recovery,” said Zhao of Merchant Futures.

Speculative interest has focused on steel since it is seen as a lead indicator for the commodities complex, which is used at the very early stage of projects.

“In the next two to three months we might see some seasonal factors kicking in to cool prices down and drive speculative buyers away,” said Judy Zhu, an analyst with Standard Chartered in Shanghai, adding that demand should gradually improve over six to eight months.

Other steelmaking raw material futures also fell yesterday, with metallurgical coke slumping 6.9 percent and coking coal down 4.3 percent. Nickel dropped 3.3 percent.

The selling also hit agricultural futures.

China’s Dalian soybeans slid for a fourth straight session yesterday to their lowest in nearly three weeks even as strong demand from the world’s top importer of the commodity drove up benchmark US prices.

Source: Shanghai Daily, May 10, 2016
SCO to engage in Belt and Road initiative
6th May 2016

 THE Shanghai Cooperation Organization will actively engage in the Belt and Road initiative to enhance its role in regional economic development, Rashid Alimov, secretary-general of the SCO, said yesterday.

“Apart from encouraging cooperation in regional security, the Shanghai Cooperation Organization will also make the expansion of business collaboration another priority of its work,” Rashid said in a speech at the Shanghai Academy of Social Sciences as part of events to celebrate the SCO’s 15th anniversary.

“We can play a special role in accelerating the Belt and Road initiative,” Rashid said.

He said the SCO has responded actively to the Belt and Road initiative, proposed by President Xi Jinping in 2013 to revive the ancient Silk Road, and will continue to push regional economic and cultural exchanges.

In 2014, members of the SCO signed a deal in Dushanbe, capital of Tajikistan, to streamline transport of goods in the region as part of the initiative.

Yesterday, Shen Danyang, spokesman for the Ministry of Commerce, said China will soon start talks with Eurasian countries on closer economic ties. It will also begin a feasible study on a free trade deal with the SCO “at an appropriate time.”

Source: Shanghai Daily, May 6, 2016

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