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Following the the lower than expected June CPI and PPI data, the bears have consolidated their position on the commanding heights of the media. This New York Times headline–China’s Economy: Apocalypse Soon?–sums up the fear and, at least in some quarters, the glee about the slowdown in China. Ironically, the article links to another New York Times story on the data–Price Data Suggest Specter of Deflation in China–that quotes uber ursus sinica Michael Pettis as saying the latest price data may have a silver lining:
Michael Pettis, a finance professor at the Guanghua School of Management at Peking University, said that falling prices could even be good for China. Chinese banks have allocated credit heavily to state-owned enterprises and politically connected individuals, who have prospered by borrowing money at 6 percent and investing it in an economy growing at twice that pace, before adjusting for inflation.
Households, which have few investment options available other than bank accounts, have paid a high price under the current system, earning only 3 percent in annual interest, or a quarter of the economic growth rate. The disappearance of inflation, and even falling prices, would help erase a huge annual transfer of wealth away from households and would help to rebalance the economy toward consumers, Mr. Pettis said.
Bloomberg reports on the stock market reaction in China’s Stocks Drop Most in Month on Economy, Deflation Concern, the Wall Street Journal tells us how Economists React: China Inflation Eases in June, and Bloomberg explains that the China Inflation May Let Wen Intensify Growth Efforts, as the sharp slowdown could lead to further stimulus measures.
I personally experience minimal deflation in my daily life in Beijing. In fact, prices of most things seem to be rising much higher than the CPI, and certainly wage growth is far outpacing the official inflation data. Tom Orlik tries to explain that in Inflated Confidence in China’s Falling Price:
Falling inflation would typically seem at odds with high and persistent increases in wages. In 2011, average wages in the private sector rose 18.3% on year. The first quarter of 2012 saw double-digit increases in the minimum wage in some provinces, and a recent survey of 4,242 employers conducted by Manpower suggests labor market conditions remain tight.
Rising wages put more money in consumers’ pockets and should pass through into higher prices. In China though, the relationship between wages and inflation is distorted by government control of prices for key goods and services. Prices for utilities, energy and public transport—together accounting for a big chunk of the consumer price index—are set by the government and maintained at low levels.
That means the CPI figure doesn’t tell the entire story of inflation in China. Price rises outside of the CPI basket can be much sharper…
In the short term, falling inflation means more room to support growth. Goldman Sachs expects the CPI to dip below 2% in July and one to two more rate cuts this year. But rapid increases in wages mean China’s respite from inflation will be shorter than the government—or the markets—would like.
Confused yet? Over the last couple of years we have had fear of inflation (China Hides Rampant Inflation in Money Binge: Patrick Chovanec – Bloomberg), then stagflation (Andy Xie: An inefficient public sector and negative real interest rates are pushing China toward stagflation and instability), and now deflation. The short China trade looks very crowded. Generally such a consensus about China, especially among foreigners, turns out to be incorrect. I am still in the “China will muddle through” camp, though it is getting a bit lonely.
In mid-June Boxun claimed that the Bo Xilai was verdict due before end of June (重庆消息：惩处薄熙来最迟六月底 谷开来另案处理). But as of July 10 there has been no official news of a verdict. Boxun was wrong, once again proving itself to be less a reliable source of China news and more a site that collects titillating, unreliable rumors.
John Garnaut recently wrote in Strongmen of China playing a risky game of thrones that:
Fourteen weeks have passed since Bo was toppled as party boss of Chongqing city and placed under some form of house arrest. It was widely billed as the biggest event in Chinese politics since the Tiananmen massacres of 1989, not least because Premier Wen Jiabao implicitly compared Bo’s Chongqing with Mao’s Cultural Revolution.
The Politburo is so factionally divided – and Bo subdivided it in so many personal and ideological ways – that they haven’t yet worked out how to frame his sins, even though he gave them rich material to work with.
That there has been no news after 14 weeks is in no way proof that “the Politburo is so factionally divided.”, or in fact divided any more than “normal”, whatever that may be. It certainly could be, but as of yet no one has reported anything that can be taken as conclusive evidence. In fact (as someone far more knowledgeable than I recently pointed out) it took over three years from removal to sentencing for Beijing Party Chief Chen Xitong (note the whitewashing of his Wikipedia entry) and almost two years from removal to sentencing for Shanghai Party Chief Chen Liangyu. An investigation of someone at the Politburo level is very complicated and delicate, even in the best of times, which 2012 is clearly not.
real estate development continuing in xianghe, hebei. really surprised no one has covered this story, so close to beijing
- When the Raven met the Dragon – The Bhutanese
It was actually the Chinese Premier who brought up the need for formal diplomatic relations between Bhutan and China and so the Bhutanese Prime Minister was compelled to give a response.
For a follower of the limited Bhutan-China relations, this would be nothing new as Chinese leaders at various levels have declared their country’s wish to establish diplomatic relations with Bhutan in the past, especially during the boundary talks…
Policy watchers and media outlets in India should not be unduly alarmed as Bhutan is still a close and strategic friend of India, and the only South Asian country which has not used or attempted to use the China card.
- Startup noodle | Entrepreneurs go east
- 广电总局：应网民要求 网剧微电影等将先审后播_新闻_腾讯网
SARFT wants to regulate/approve original online video programming. bad for youku et al
- Property speculation curb ‘a long-term task’ |Industries |chinadaily.com.cn
Chinese Premier Wen Jiabao said Saturday the government will resolutely implement real estate market regulation and make it a long-term task to curb speculation in this sector.
- New rule to rein in govt spending |Politics |chinadaily.com.cn
Officials face removal from their posts if they are found overspending on vehicles, receptions and overseas trips, according to new regulation released on Monday.
The regulation issued by the State Council are the first legal documents that ask authorities above county level to include spending on the three items in budgets. The rules will take effect from Oct 1.
the SARFT circular on increasing oversight over original online video programming
- Local governments should be more open: China Youth Daily｜Society｜News｜WantChinaTimes.com
Two recent incidents in Sichuan and Tianjin reflect the importance of local governments being frank and open with the public, reports the China Youth Daily, the official newspaper of the Communist Youth League of China.
- Tsinghua professor pitches ‘Chinese Union’ bloc｜Economy｜News｜WantChinaTimes.com
The concept of a “Chinese Union” consisting of China, Hong Kong, Macau, Taiwan, North Korea, South Korea, Vietnam, Singapore and Mongolia has suggested by professor Ju Jiandong, director of the Center for Economic Research at Tsinghua University in Beijing, reports Hong Kong’s Phoenix Television
- Sany to revive Hong Kong IPO plan for needed funds｜Economy｜News｜WantChinaTimes.com
Chinese construction machinery equipment giant Sany Heavy Industry Co plans to revive a plan suspended last September to go public in Hong Kong for a capital injection to cope with a business slowdown.
- Why Apple needs a more worldly phone soon — Apple News, Tips and Reviews
China Mobile is the biggest mobile carrier in the world. The iPhone is Apple’s most important product. Apple has to figure out how to marry the two, especially if it has identified China as its most important market outside the U.S.
- China’s smartphone market grows 164%, Apple’s iOS takes 17.3% share
- Apple Is Getting Clobbered By Android In China – Business Insider
Here’s one reason to be worried about Apple’s long term success in China, though. Android has 70% of the smartphone market versus iOS which only has 17.3%, according to data in a Needham & Company report
- 五粮液改革谜底： 集团“分羹”，国资公司牢牢控盘|上市公司|股票|IPO_21世纪网
- 兵败江津地产项目 “足浴大王”郭家富深陷债务泥潭|足浴大王|江津地产项目|郭家富_21世纪网
- 哇塞网 －文艺范儿的科技站
the suancai podcast
- New Chinese Media Mixes Daily Life, Social Activism Into “Firefly Community” | Tea Leaf Nation
Chinese politics and macroeconomics may be front-page news abroad, but China’s netizens have a slew of more pressing personal concerns that don’t occupy international headlines. Did their Taobao (online shopping website) account get hacked? Is their mobile phone real or fake? Which charities can they trust after netizen Guo Meimei, who claimed to be working for the Chinese Red Cross, famously flaunted her wealth online?
- Netizen Voices: Hu Xijin on Shifang – China Digital Times (CDT)
weibo does make many things look worse. it is like an anger accelerant//
Chinese society perennially harbors discontent. This discontent forms as an amalgamation of various unfortunate circumstances. Through the Internet, a portion of this discontent will naturally be lumped in with the Shifang incident, which in turn will add to the difficulty for Shifang to deal with the aftermath. This is one reason why it’s so easy for any of China’s specific conflicts to balloon into larger issues. The authorities now must do more than merely communicate effectively with the people at large. Online discontent has in fact become a part of the incident.
- Hengdeli Says China Luxury Watch Sales Slowing on Economy – Bloomberg
corruption down as economy slowing
- 住建部调研地方政策 变相放松者或被问责|住建部|调研|地方_21世纪网
housing ministry investigating local governments to ensure they are not loosening real estate restrictions in any way
Did a “hawk” just become the political commissar of the South china sea fleet?
- Meng’s Seoul trip likely linked to 4 Korean detainees
A high-ranking Chinese official in charge of national security will make an unprecedented trip to Seoul later this week, drawing attention regarding the purposes of his visit….Observers speculated Monday that Public Security Minister Meng Jianzhu’s Seoul trip could offer clues to the fate of four South Korean detainees in China, including high-profile human rights activist Kim Young-hwan.
- China’s Economy: Apocalypse Soon? – NYTimes.com
Talk of an economic slowdown in China has become so loud and persistent that it now has its own slang: ghost cities, ghost fleets, rocket eggs, naked officials. The downturn has even led to the invention of a new financial algorithm, something called the China Stress Index — and the index remains high.
- Alibaba Said to Boost Revenue to More Than $1.8 Billion – Bloomberg
Alibaba Group Holding Ltd., China’s biggest e-commerce company, boosted half-year revenue at least 60 percent to more than $1.8 billion, as growth of its websites improved profitability, a person familiar with the matter said.
- Police warn against false Internet posts – Globaltimes.cn
Baoshan police warned Internet users not to post false messages online after a father wrote a plea on Sina Weibo Monday morning that asked for help finding his missing 3-year-old daughter. The post was forwarded more than 60,000 times in four hours. The man, Shen Xuerong, said his daughter disappeared from his house in
Baoshan district around 8 am. “I am seeking help from microbloggers because my daughter Shen Manjie has been gone for more than three hours,” he wrote. “She disappeared near Gongkang Road East and Lingnan Road in Baoshan district. Someone saw a short woman with dyed hair and black clothing take her away.” The post spread quickly around Sina Weibo, which has 300 million registered users. Baoshan district police immediately launched an investigation. However, they soon found that it was actually Shen’s wife who had taken the girl after the couple had a fierce argument.
- Price Data Suggest Specter of Deflation in China – NYTimes.com
- China’s Surprising Internet Advantage Over the US | PandoDaily
China, on the other hand, has been able to do some leapfrogging, skipping past stages of Internet and commercial development that in the US played out over the course of many years, or are still playing out. That’s what happened with the shift from PC-based Internet to mobile Internet, which was sped up by the relatively high costs of computers and the affordability and abundance of Internet-enabled mobile devices. Many Chinese Internet users have never owned a PC, or even used one. A similar shift is happening with the proliferation of cheap smartphones, which is catapulting huge and growing parts of the population into an era of more useful and versatile handheld Internet….These instances of accelerated development have allowed Chinese Internet companies to build new tech-commerce infrastructures from scratch. That means they have been able to create many products, services, and entire businesses in a consolidated fashion right from the start, in a way that makes sense for consumers and partners.
- China Yurun Tumbles as Chairman Resigns – Deal Journal – WSJ
China Yurun Food Group Ltd.’s shares are taking a beating on Monday morning after the embattled meat processor’s founder and chairman resigned, following a string of news reports questioning the safety and quality of the company’s products.
- 中央密集表态调控不放松 开发商称“能放量赶紧跑”|温家宝|房价|开放商_21世纪网
multiple departments trying to quash market expectations of real estate loosening
- Heard on the Street: Inflated Confidence in China’s Falling Price – WSJ.com
- China to Cut Retail Fuel Prices – WSJ.com
The coming cut is expected to be between 400 and 600 yuan (about $63 to $94) a metric ton, analysts said, or as much as 6.6% and 7.2% for gasoline and diesel, respectively. The current average retail ceiling benchmarks are 9,120 yuan per metric ton for gasoline and 8,310 yuan per ton for diesel. Because the two fuels have different densities, gasoline is cheaper by volume despite being costlier by weight—the benchmarks translate to $4.01 per gallon for gasoline and $4.17 per gallon for diesel, or $1.06 and $1.10 per liter.
- China’s Stocks Drop Most in Month on Economy, Deflation Concern – Bloomberg
“A lower inflation figure actually implies the economy is slowing down more than expected,” said Cao Xuefeng, an analyst at Huaxi Securities. “Investors are quite worried that other data this month will be below expectations.”
- Shark Fin, Premium Booze Off the Menu for Cadres in Chinese City – Bloomberg
A Chinese city where slowing growth has spurred dozens of suicides, bankruptcies and disappearances by local businessmen barred officials from expensing shark-fin soup and high-end liquor in a bid to end lavish banquets.
“Official receptions are criticized by the whole society,” the Wenzhou city Commission for Discipline Inspection said in a statement on its website July 5. “It has become a common practice to drink during lunch, to have up to eight local officials at banquets when only one or two guests are in town.”
- China’s securities regulator roots out insider trading｜Economy｜News｜WantChinaTimes.com
An inside sources note that a 200-member auditing team of the China Securities Regulatory Commission is probing insider trading reports in capital-active areas throughout China, including Shanghai, Beijing, Hangzhou and Shenzhen. Many investigations are being carried out by the auditing team directly, rather than local regulatory bureaus, and therefore elicit scant public attention.
- Chinese companies getting wise to short sellers｜Economy｜News｜WantChinaTimes.com
Listed Chinese companies are becoming more experienced in dealing with negative market information released by short sellers, says Scott Mozarsky, the executive vice president and global chief commercial officer of corporate news and communication giant PR Newswire.
- Chinese dairies to follow tighter UN levels on melamine｜Society｜News｜WantChinaTimes.com
Dairy companies in China will be forced to further tighten the maximum amount of the industrial chemical melamine allowed in their products in accordance with the latest standard set by a United Nations agency to lower melamine levels in liquid infant milk to just 0.5mg/kg…The new standard is far tighter than the allowable levels of 1mg/kg for infant formula and 2.5mg/kg for other food products as stipulated under existing Chinese regulations.
- Woman sprouts hairs after using Yunnan Baiyao spray｜Society｜News｜WantChinaTimes.com
A woman in China who used Yunnan Baiyao, a medicinal preparation famous for stopping bleeding, later found coarse black hair growing on her calf.
- Blood in the baijiu | 300 Shots at Greatness
This is all horrible news if you’re making a second-rate, overpriced baijiu, but it’s fantastic news for consumers. If there is a growing reluctance to spend top dollar on spirits, I suspect that baijiu drinkers will start paying a bit more attention to the baijiu itself and to which brand offers the best value. This is not to say that the more expensive baijiu brands are going under. Many of them are well managed and put out exceptional products. But there’s blood in the water, and everyone will need to work harder to survive….I think we’re witnessing the beginning of very interesting times in the baijiu business.
- Amazon.com: Hu Jintao: China’s Silent Ruler: Kerry Brown
Over the six-month period from late 2012 to early 2013, Hu Jintao, the President of the People’s Republic of China, Chair of the Central Military Commission, and Party Secretary of the Chinese Communist Party (CCP), will relinquish at least two of his three positions. According to the constitution of the CCP, his time as Party head will come to an end, given that he has already served for two terms. Well over the supposed retirement age of 68, he will have to hand over the leadership of China to a new generation of leaders at the 18th Party Congress in Beijing. In Chinese politics, the act of retirement is surprisingly difficult, but Hu Jintao is widely known for his reserve and reticence; there is little doubt that he could disappear into a quiet and anonymous retirement if he so desires. This timely volume thus aims to provide an analytical assessment of Hu’s period in charge of the world’s most populous country. It concentrates briefly on his early life and entry into politics, then considers and evaluates his stewardship of the economy and of international affairs, as well as his ideological contribution and leadership of the communist party. In the process, the reader will also be afforded a broad overview of China’s rapid developments over the last decade, since 2002.
- Beijing switch from coal to natural gas: can rest of China follow suit? | chinadialogue
Public anger over air pollution has helped drive plans, once thought fanciful, to make a wholesale shift away from coal. But can other cities follow suit? An Geng and Xu Nan report.
- 3G Phones Now Outselling 2G Phones in China, Smartphones Beating Feature Phones
China’s Ministry of Industry and Information Technology (MIIT) has a telecommunications research arm that has just released a very interesting report. According to the report, in the first half of 2012, China shipped more 3G phones than 2G phones. The internet age has well and truly come to the Middle Kingdom.
- China’s Mobile Market Figures at Your Fingertips
Thanks to the folks at Shanghaiist for pointing out this informative animation from the ad company GroupM about the mobile space in China, appropriately titled ‘China at your fingertips.’
- Sansha Officials Discussing Large-Scale Commercial Development – Caixin Online
- The Rapid Rise of Smartphone Maker Xiaomi – Caixin Online
- The Lethal Presidency of Barack Obama, by Tom Junod – Esquire
no matter what you think of Obama’s targeted assassination campaign against China, i do not think you can argue that it has not completely undercut the moral authority of any american criticisms of china’s human rights situation. And China knows this, and it is another reason why the country believe it can act with impunity when it comes to human rights
- Economists React: China Inflation Eases in June – China Real Time Report – WSJ
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