Some basic data [latest]
Some basic data [latest]
==Some basic data (latest)
==Latest GDP growth 9.4%
==Industrial Production growth 16.1%y/y
== Inflation 8.05 1.3%y/y
==Foreign reserves $769bn
==trade balance positive $102bn
==12 months current account positive $128.5bn

Short news
== China even though slowly becoming a superpower stays reluctant to tiptoe on US feet. The US versus China development still will go on, as China’s global pursuit of energy sources and raw materials to fuel it’s economic growth are leading to bonds with countries distinctly inimical to American interests including Venezuela, Sudan, Zimbabwe and most crucially Iran a big supplier of oil for China. Still China has remained reluctant to veto initiatives in the UN that are regarded strategically vital for the US.
==China is acquires more assets abroad. Latest acquisition is Petro Kazakhstan, a firm based in Canada with energy assets in Central Asian for $4.2bn. It is China's biggest ever cross border take over. CNPC won the bid despite competition from India's Oil and natural Gas Corporation, a state run company that has indicated it may make a counter offer. China & India are seeking to increase energy capacity as their economies expand.
==China's new currency basket is broader than most economists had expected. The governor of the central bank of China revealed now that the basket contained the US $, the Yen, the Euro, the Won and also currencies of Singapore, UK, Malaysia, Russia, Australia, Thailand and Canada. Secret stays the weight of the different currencies. The choice of currencies orients not only the pattern of trade but also the sources of foreign direct investment.
== China is likely to achieve the goal of halving poverty in the next 10 years.
== Upward pressure on wages and utility shortages are widespread. Higher wages lead to higher consumption and to higher travelling expenses. Thus don't be too surprised if you see more and more Chinese in Nepal

China’s far west, a repetition of Tibet?
You ever heard of Xinjiang? Well it’s a big region of China (6times as big as Nepal) bordering in the south on Tibet in the east on central China, in the north/north west on Mongolia, in the west on the former Asian Republics of the Sowjet Union and Pakistan.
It was for a longtime that foreigners were not allowed to enter this region as it was until 6 years ago a shame place of poverty. Poorer than Tibet was at that time, although much larger..
Now since 6 years the Chinese government follows there the same policy as in Tibet. means a policy of boosting the economy by at the same time encouraging Han Chinese to immigrate. Economy has become lively and during the day Han Chinese, Uighurs, Kazakhs, Russians and Tajiks are meeting in the markets to trade their goods. .
The parallel to the politic in Tibet is obvious. Twice in 97 separatists launched riots there, merciless suppressed initially by the central government. But three years later China launched the great development of the west. It is not love which drives the government to support a positive development of the region, but a policy of tightening central control over remote far flung territories and assimilating them into China proper.
Its not only a chasm of language , culture and religion that lies between the Han Chinese , who make up 90% of China’s central population and the native Uighurs, Kazakhs and Tajiks. It’s also the religion brand of Islam heavily influenced by Sufi mysticism. which feels uncomfortable with the atheism preached by the Chinese Communist Party.
Thus calls for independence which were strong a few years ago are still heard. But the Chinese government is not worried, as rapid economic growth is silencing radical political demands.
And Xinjiang is very important for China. As the country searches for energy resources to fuel its economic growth its gaze has turned westwards to Xinjiang’s rich reserves of coal, oil and natural gas. That’s why the province has become a focal point of exploration by China’s largest oil and gas producer. (CNOC) Now a 4000km long pipeline has been built to pump gas from Xinjiang to China’s highly developed east coast. With borders to Kazakhstan, Kirgizstan, Tajikistan and Pakistan (“stans) among others Xinjiang is also China’s gateway to the energy reserves of Central Asia. The first phase of an oil pipeline stretching from Kazakhstan to its border will soon be completed. The feasibility for a pipeline for gas is on the way.
As shown in Tianmen and Tibet China has no qualms using force to keep insurgencies under control. Religious schools in the region have been completely banned. And China gets support from abroad from countries like Russia, and all the “stans”. With getting immigration of Han Chinese into Xinjiang on the way, they are now in urban areas even majority (again like Tibet)
The Han have come in and have successfully enriched themselves. But not not only they got rich but also a lot of the natives as well and that’s the main reason why many locals are not keen to disrupt the new order It’s a boom powered by trade, mining and an exploding tourist industry. No doubt Xinjiangs muslims are economically better off than since a long time. Crucial for the latest developments is, that life as a Chinese subject compared with many other parts of Central Asia has its merits.
Although the economic development helps to create a stable middle class as it has in Tibet it also exacerbates social divisions. The divide between urban and rural communities is a big challenge. Energy and tourism aside industrial growth is so slow to leave many natives out of the stream. Thus a growing gap between the rich and the poor could provide fuel for religious and ethnic hatred.
While a number of Xianjing’s Muslims have benefited from the economic development the biggest number of losers are Muslims. So it’s no wonder that tensions do still exist. But compared to a few years ago the change is showing. The strategy of the Chinese government to encourage Han Chinese to immigrate and then to create with the help of government investments in infrastructure a booming economy giving work and chances for everyone is without doubt working.

China education system
China is probably witnessing the biggest expansion of student numbers in history. Chinese government is trying to create centers of excellence and throwing open sector to private entrepreneurs. The main reason for this flurry of activity is the dramatic growth in the supply of potential students. The Chinease are engaged in the biggest universities expansion in history. In the 80's only 2%-3% went to university in 2003 the figure was 17%. The Chinese are determined to create a super-league of universities to rival the best in the world. What lies behind all this is a gigantic exercise in technology transfer. The Chinese are trying to recreate the best western universities at home in order to compete in more sophisticated industries. In some departments of the university of Peking a third of the faculty members have American doctorates. They are using joint ventures with foreign universities in much the same way as Chinese companies use joint ventures with foreign companies. China is creating a parallel system of private universities alongside the public ones.Links between universities and industries are common.

Chinese investments outside

Chinese companies are becoming aggressive buyers of overseas assets
Top companies are becoming more and more ambitious in their pursuit of foreign assets, helped by ready access to low cost funds. Last month computer maker Lenovo completed its acquisition of IBM's PC operations. Mid of June a consumers good company acquired an American rival and now the biggest Chinese oil company is offering $18.5bn for an American oil company. Looks the Chinese are invading the US. US politicians start to scream, as this seems for them to be painful. But wait a moment. It is no surprise that China wants energy resources, as the country is thirsty for energy and commodities to fuel it's booming economy. China is the world second largest oil and gas importer and of this the target oil company has a lot.

Some compare the Chinese investment drive to the Japanese one in the 1980's when Japan bought everything in sight. like the Japanese then the Chinese now are buying whatever is loose and in 05 offshore investments of $23bn are expected. These investments are not only going to the but also to countries like Brazil, France and others.
Beside of resources Chinese companies are willing to pay for brand names means markets and technical know how.
Like the Japanese earlier Chinese companies that are buying overseas now are often taken for a ride as a lot of poor assets are sold to them.

As this kind of investments is peacefully integrating China into the world economy, this should be welcomed. One thing is clear. Every company investing offshore is in danger of overpaying and Chinese companies are no exemption. But the Chinese overseas drive is not alone. Look to India and you'll see the same, as now even Indian companies are coming in. Can't we in Nepal not profit from this drive also???
China gets praise form Organisation for Economic and Commercial Development
According to the latest report of OECD Chins's rapid pace of reform, along with its low levels of public spending and burrowing would put many European countries to shame. The report praises China's bold reforms over the past 25 years, which allowed market forces a much bigger role in the economy and opened the country up to foreign competition and investment. In the last 10 years the number of state firms tumbled from 300.000 to 150.000. This has been offset by rapid growth in the private sector. In 2003 private companies accounted for 63% of China's business sector out put (94% of GDP) compared with 54% 5 years earlier and nothing 20 years earlier.

The average return on capital for private sector industrial firms rose from 8% in 1998 to 15% in 2003 due to rapid growth in productivity. The average return on capital is higher in Europe. Interestingly the productivity in state firms between 1998 and 2003 also grows with an average return on capital rising from 5% in 98 to 10% in 2003. Still 35% of state firms make a loss.

While doubts on China's growth sustainability are growing OECD feels that the rapid pace can be maintained if the reforms continue. To support the expansion of private business the OECD urges a reform of corporate law to remove barriers to the entry and expansion of new firms, bankruptcy law and property rights. Measures to develop and deregulate China's financial markets would also help to improve the allocation of capital.

Saving and investing in China

Electronic household equipment is meanwhile wide spread. Chinese traveling abroad is getting more by the day and the increase of travelers by 43% year on year has no comparison worldwide. The number of travelers has reached 29mio an already high figure, but still only 3% of the population, which means that the numbers will grow fast

China is investing at an unbelievable rate of 46% of GDP every year. This is financed by savings again nearly unbelievable, but don’t worry there is still net saving left over and this is even growing. It rose from 1.9% of GDP in 2000 to 4.2% in 04, and shows no signs of stopping.

The country's current account surplus is expected to rise this year to 7% or more of GDP. Only god knows where all this money is coming from. No wonder China has with $769bn the biggest reserves worldwide. Its capacity for thrift has long perplexed economists. But the hunger for savings becomes clear if you look nearer. Under the old economic regime many Chinese workers could count on health and pension benefits from state enterprises, thus pension coverage is very low and only 45% of urban workers pay actually into formal pension schemes Forget about the rural ones. This makes savings vital. It is therefore no wonder that household savings reach on average around 25% of disposable income, which is very high by international standards.

The fiscal accounts show the government's revenue to be about 20% of GDP with a deficit reaching 2% of GDP. The government spends only 13% of GDP on goods services and wages. The remainder almost 10% of GDP is again government saving which is invested, largely in infrastructure projects or to the support of state firms.

Corporate profits soared after 2000, thanks to rapid growth, low interest rates, rising productivity and cuts in employee benefits. The corporate sector like in US is now compared to households the bigger saver but contrary to many other countries the corporate sector is investing the surpluses. The high investment rate may well prove unsustainable. Profit growth has slowed sharply over the past year because of excess capacity in the most over invested sectors, such as cement and steel. While in early 2004 overall profits in industrial firms were expanding at 40% a year, by May 2005 this growth rate had "slowed "to 16% still wonderful news for investors in other countries.

Slower profit growth means less corporate saving, but investment seems to be slowing faster at least in already highly invested sectors. The growth rate of imports of capital goods is now less than a third of what it was in 04, but don't get irritated it is still growth.

China stays a big trading giant. Exports and imports add up to 70% of it's GDP, compared with only 20% in Japan the other huge trading giant. Mind you, sometimes China picture is tooooo rosy tue be true. So what surprises will we see there? Let's wait and see

Media market in China develops fast
China’s population of 1.3bn people are undergoing a massive change in the way how they approach media consumption. The total media market is already worth $25bn with a relatively underdeveloped TV market having revenues of around $7bn, a totally fragmented advertising market with revenues of around $1.6bn, newspaper with revenues of $3bn. and magazines 1.5bn. What is most important is that this market in China seems to be exploding and whoever can come in in time will be a winner.
While the opportunities are overall high terrific opportunities lie in the development of new media. Mobile phones for example which are bearer of content have become not only a gold mine but a platinum mine. (Platinum is said to be the most expensive metal) So Nepali entrepreneurs though small could also look north. Once you get an approval for your activities from the government the world is yours.

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