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Rebound in Chinese Industries Gains Steam

January 28, 2013 by Leave a Comment

BEIJING — Profits earned by Chinese industrial companies rose 17.3 percent in December from the same month a year earlier, to 895.2 billion renminbi, official data released Sunday showed, as a fourth-quarter recovery helped offset poorer corporate results in the third.

The data from the National Bureau of Statistics gave the latest sign of a gathering rebound in activity in China, the world’s second-largest economy after that of the United States. The December increase in profits to $143.91 billion was smaller than the 22.8 percent increase in November but still marked the third-fastest growth last year.

Industrial profits totaled 5.56 trillion renminbi in 2012, up 5.3 percent from a year earlier, the Chinese National Bureau of Statistics said on its Web site. That was up from a 3 percent increase in the first 11 months of 2012, compared with 2011.

The Chinese economy grew at a rate of 7.9 percent in the fourth quarter, snapping a streak of seven consecutive quarters of slowdown.

Among 41 sectors surveyed by the bureau, 29 reported rising profits last year, led by a 69 percent jump for power generation companies, a nearly 21 percent increase for food processing companies and an 8 percent rise for makers of electrical equipment.

But some sectors are still struggling. Profits at steel companies tumbled 37 percent, while earnings for chemical companies fell 6 percent.

According to a Reuters poll, analysts predict that China’s annual economic growth will rebound slightly to 8.1 percent this year.

The HSBC flash purchasing managers’ index this month, the earliest indicator of China’s industrial activity, showed growth in the factory sector accelerating to a two-year high in January.

Volvo’s China joint venture

Volvo of Sweden said it would surpass Daimler as the world’s biggest maker of heavy trucks after agreeing to set up a venture in China with Dongfeng Motor Group, Reuters reported from Beijing.

Volvo will pay 5.6 billion renminbi for a 45 percent stake in the joint venture, giving it access to China, where it currently has only a minor presence. The truck maker is a separate company from Volvo Cars, which Ford Motor sold to Geely Automobile of China in 2010.

China was “a little bit of a missing link in our global strategy” for trucks, Volvo’s chief executive, Olof Persson, said in a conference call with analysts and journalists. He said the agreement meant Volvo would “get a major foothold and share in the world’s largest truck market.”

The two companies will form a new venture, Dongfeng Commercial Vehicles, after the Chinese company buys out Nissan Motor of Japan in their joint venture in medium- and heavy-duty trucks. Dongfeng is the world’s second-largest producer of heavy-duty trucks and China’s biggest with total sales of 186,000 in 2011.

Article source: http://www.nytimes.com/2013/01/28/business/global/rebound-in-chinese-industries-gains-steam.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Conversations: Bringing Manufacturing Back to the United States

October 12, 2011 by Leave a Comment

A Boston Consulting Group analysis released last week found that manufacturing outsourced to China has begun to return to the United States as the economic advantages have started to shift. The analysis predicts that, with Chinese wages rising at 15 to 20 percent a year and with the continued appreciation of the renminbi against the dollar, the gap between the labor costs in Chinese coastal provinces and in America’s lower-cost states will shrink to less than 40 percent by around 2015 — and could lead to the creation of two million to three million jobs in the United States.

Mr. Fichter recently discussed the factors that led him to bring some of his manufacturing back to this country. A condensed version of the conversation follows.

Q. Why did you decide to open your new factory in the United States?

A. The lead time for orders coming from China is three weeks, and all of our brewery clients want our products faster — that’s the first thing they say when we meet with them.

Q. Were there other factors?

A. Once we started looking into it, we found the decision made business sense on many levels. Our Chinese labor costs have increased 300 percent since 2006, when we opened our factory there. Even at the higher wages Chinese workers are demanding, it’s gotten harder to find labor. To stay competitive we’ve also had to upgrade benefits like dormitories and food. On top of that, the Chinese currency continues to appreciate — it was valued at 8.28 to the dollar when I started the business. Now it’s at 6.38. And I predict shipping costs will keep going up as a result of the rising cost of oil.

Q. Do you see other manufacturers making the same decision?

A. While I don’t personally know any, I think we’re on the leading edge of a trend because the factors that are affecting us affect everyone.

Q. Why isn’t it happening faster?

A. Change will take time. Five years ago, there was an absolute advantage to manufacturing in China. Today, some things are better produced here, and some are better produced there. It’s 50-50. But I think the U.S. advantage will become clearer with time.

Q. Many owners complain about the quality of Chinese goods. Has that been a problem for you?

A. No, we opened our own factory in China in 2006. Quality there is good and has never been an issue. But we have had other challenges.

Q. Like what?

A. I like to do business by the rules, but as an American operating in China, the rules are not always entirely clear. For example, we lost power — and three days of productivity — at our Chinese factory in August. Maybe there was something we could have done to get our power turned back on. Meanwhile, our customers were screaming.

Q. How did you get into this business?

A. After business school, I worked in manufacturing as a consultant. I figured that if I could tell other companies what to do, I could run my own. So, I began to research businesses I could start with a very small investment. I came across a company that made tap handles for home brewers. They were failing, and I saw why: high labor costs. I decided I could do it better and started Taphandles out of my one-bedroom apartment with an $800 investment in tools and material from Home Depot. I started painting tap handles on my balcony.

Q. How did you end up manufacturing in China?

A. In preparation for a job interview with Breadman, the bread machine company, I’d done a ton of research on their Chinese manufacturing. I decided to use the Breadman model for my business, which would eliminate the high labor costs that contributed to the failure of that other tap handle business.

Q. Which products will Taphandles manufacture at its American factory?

A. While 98 percent of the tap handles will continue to come from China, we also make signs and displays — including the A-frame chalkboards you see outside bars. We want to grow this area of the business and had initially planned to do it in China. Instead, we’ll be making these products, which are big, bulky and expensive to ship, in Woodinville.

Q. How will your costs compare to what you would have paid in China?

A. We’ll break even on production, but come out ahead once we factor in lead time. Right now, we’re losing orders because of lead time.

Q. What type of work force will you need?

Article source: http://feeds.nytimes.com/click.phdo?i=ad8219c5299450ae76285f0a06620e6b

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Inflation in China Rose to 5.5% in May

June 14, 2011 by Leave a Comment

Consumer prices rose 5.5 percent last month from the same period a year earlier, slightly more than analysts had expected, and markedly faster than the 5.3 percent increase in April, data from the national statistics bureau showed on Tuesday.

May industrial output and retail sales rose 13.3 percent and 16.9 percent, respectively, from May 2010, separate data showed. Both figures were below those recorded in April, showing that the government’s efforts to cool the Chinese economy’s sizzling pace of growth are taking effect.

“Today’s numbers provide further evidence that growth is moderating in response to recent policy measures, but at a very gradual pace, with little to suggest that Beijing needs to worry about a hard landing in coming months,” Brian Jackson, an emerging markets strategist at the Royal Bank of Canada in Hong Kong, wrote in a research note.

“This means that the near-term focus will remain on inflation,” he said, adding that Beijing is likely to nudge up interest rates further in coming months and allow the renminbi to rise more rapidly against the United States dollar as part of its efforts to curb higher prices.

The Chinese authorities are intensely sensitive to rising consumer costs and any social tensions that could be set off by soaring food and fuel prices. Beijing has announced a series of steps designed to slow economic growth and the inflation that has accompanied it.

However, with the rise in global commodities prices, pressure for higher wages and severe droughts in China this year also fanning inflation, analysts expect consumer prices to continue to gain for a few months before they level off later this year.

China’s inflation-fighting measures so far have included a series of steps to restrain lending by state-controlled banks over the past year, as well as four interest rates increases since October. Many analysts now are forecasting another rate increase of a quarter of a percentage point as soon as this month.

Article source: http://feeds.nytimes.com/click.phdo?i=16d5399914f8118215c2512edf9ad44f

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Chinese Currency Rises Above Key Level

April 29, 2011 by Leave a Comment

HONG KONG — The Chinese currency hit a milestone Friday by rising beyond a level closely watched by analysts — the strongest since Beijing began allowing the currency, the renminbi, to rise in 2005 and a sign that the authorities might be using the appreciation as a weapon against inflation.

The dollar fell below 6.50 renminbi to about 6.491. That marks a 5 percent gain for the renminbi since last June, when it traded around 6.827.

The rise in the Chinese currency engineered by Beijing has gone in fits and starts. In 2005, the authorities allowed the renminbi to strengthen modestly after longstanding accusations by governments around the world that China was keeping its currency artificially weak to increase its exports. But in 2008, Beijing took a long pause, once again holding the renminbi steady to steer its giant economy through the global financial crisis. In June, the rise resumed.

The gains since then are small compared with the sharp upward moves staged by the currencies of many other emerging economies. Economic growth and interest rates well above those seen in developed economies have prompted large flows of cash into many emerging nations, pushing currencies like the Malaysian ringgit, the Mexican peso, the Brazilian real and the South African rand sharply higher since last year.

The renminbi’s strength comes amid a backdrop of a generally weak dollar against a large number of currencies, as investors worry about the strength of the U.S. economic recovery.

The relatively small rise in the renminbi has not been enough to end occasionally vocal criticism by some U.S. policy makers and business executives, who continue to argue that the renminbi’s valuation gives Chinese exporters an unfair advantage over their U.S. counterparts by making Chinese goods inexpensive overseas.

The move Friday past the eye-catching level of 6.50, and a climb of 0.9 percent during April, highlighted that the authorities in Beijing are serious about allowing the renminbi to strengthen — albeit at a pace that is slow enough in their eyes not to damage the Chinese export sector.

At the same time, by making it cheaper for China to import oil, iron ore and other goods, a rise in the renminbi is one way of combating inflation, which has become an increasingly worrisome and politically sensitive problem in China.

“Clearly, policy makers are increasingly using currency appreciation to combat imported inflation,” commented Dariusz Kowalczyk, an economist at Crédit Agricole in Hong Kong, wrote in a research note.

Most observers believe China will continue with a gradual appreciation rather than an all-out revaluation.

A revaluation would have meaningful disinflationary effect only if it were large enough to outweigh the sharp rises that global commodity prices have staged this year, Mr. Kowalczyk wrote. However, a gain of such magnitude “would have a devastating impact on Chinese exports and employment, a side effect too negative to be acceptable for policy makers,” he said.

Article source: http://www.nytimes.com/2011/04/30/business/global/30yuan.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

China Policy Main Topic for the G-20

April 14, 2011 by Leave a Comment

WASHINGTON — The United States and its allies, frustrated in their efforts to pressure China directly to change its economic policies, are seeking to enlist other developing nations in an international campaign that China may find more palatable.

At a meeting of finance ministers from the Group of 20 nations on Friday, the United States hopes to advance a set of proposed standards for judging the risks that individual nations pose to the global economy. Those standards could be used by the end of the year to put a spotlight on China for suppressing its currency to keep its exports cheap.

Even if the exercise succeeds, the benefits are unlikely to be tangible or clear. The United States and China have wrangled for years over the relative value of their currencies. The Chinese have made modest concessions in recent years, but mostly because of internal concerns about inflation and economic dependence on exports.

A senior Treasury official said that it was important for countries to establish shared standards, and in particular to highlight that large deficits and large surpluses were two sides of the same issue and merited the same concern.

“This hasn’t been on the table in the past, but that’s where the conversation is moving now and that’s helpful,” said Lael Brainard, the Treasury under secretary for international affairs.

The purpose of the standards is not lost on China, which has resisted the process. In February, the Chinese fought successfully to exclude one important measure, reserves of foreign currencies, from the list of proposed standards.

China holds more than $2.85 trillion in foreign currency, the world’s largest reserve. It has pursued an aggressive policy of printing renminbi to buy foreign currencies, lifting the value of those currencies and holding down the value of its own.

Earlier this week, a senior Chinese official published an article blasting the standards as a “political tool” intended to make developing nations like China pay for the economic recovery of developed nations like the United States.

Li Yong, vice minister of finance, wrote that developed nations were responsible for overprinting their own currencies, driving up the price of commodities and creating inflationary pressures in developing countries. Mr. Li wrote that the real goal of those countries was to increase demand for their own exports.

“The issue of external imbalances is a sensitive topic related to the development rights and growth potential of China and other emerging economies, and is another political tool, after the exchange rate, used by developed nations such as the U.S. to curb China’s economic development,” Mr. Li wrote in the article, which was published on the Web site of the finance ministry.

Still, China has shifted slowly in the direction sought by the international community in recent years. China’s policy makers adopted a five-year plan in October that calls for domestic consumption to replace exports as the driver of economic growth. The country also has allowed its currency to appreciate 4.4 percent against the dollar since last June. American officials describe this as an effective increase of 10 percent because the rate of inflation in China is much higher than in the United States.

The United States has embraced an elevated role for the Group of 20 as the primary forum for international economic coordination.

The Group of 7, which previously played that role, is composed of nations with economies driven by consumption, and currencies that float freely in response to demand. The new seats at the table, by contrast, are held mostly by nations like China, India and Brazil that manage their currencies to create a competitive advantage for their exports.

There is broad agreement that the unbalanced relationship between those two sets of countries — debtors on the one hand, exporters on the other — is a major fault line that threatens global stability. There is much less agreement about the proper allocation of the economic pain associated with potential solutions.

The goal of the current process is to break that controversial issue into manageable pieces. France, the current chairman of the group, has spent this year simply trying to create agreement on the rules for analyzing nations that can be completed by the time heads of state meet in Cannes this fall. Those rules would be used to single out nations that posed the greatest risks for further study.

A French official said he hoped there would be “incremental progress” on Friday.

As if to underscore the gap that must be bridged, the two sides will meet separately on Thursday. Finance ministers from the Group of 7 will consult quietly in Washington. Meanwhile, heads of state from Brazil, Russia, India, China and South Africa — the emerging powers known as BRICS — are meeting on the Chinese island of Hainan.

The governor of Australia’s central bank, Glenn Stevens, meanwhile warned Wednesday there was too much of a focus on the relationship between the United States and China.

Describing the issue of global imbalances in terms of two countries, he said, “risks oversimplifying problems and therefore lessening the likelihood of solutions.” Mr. Stevens spoke to the American Australian Association in New York.

He noted that the United States once described its trade problems in terms of Japan.

David Jolly contributed reporting from Paris and Xu Yan contributed research from Shanghai.

Article source: http://feeds.nytimes.com/click.phdo?i=1e0caab02263cb9011e82634ba136201

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