Japan keeps interest rates on hold

The Japanese central bank has kept the interest rates on hold. The rates now stay at 0.1%.

The reason behind this measure, is the attempt to boost the country's economic recovery. Keeping these rates low was essential in the country's fight against falling prices, which are undermining the economy's recovery.

As result, Japan enjoyed economic growth of 0.9% in the last three months of 2009.

This growth also results in a duel with China to become the world’s second largest economy.

The only challenge Japan now faces, is overcoming deflation. If the Japanese economy returns to a sustainable growth path with price stability, Japan could enjoy an even higher growth.

Japan has a long history of struggling with deflation. Japan struggled more than 10 years with falling prices during Japan’s “lost decade”.

Deflation is bad for an economy because consumers and businesses wait to purchase products in the expectation that prices will fall further in the future.

I think that Japan can’t overcome this challenge in a short period. Such problems can only be solved with a solid project based on a long period. The chance is big that Japan is going to lose its second place in the top of largest economies.

Bram Verstraete

http://news.bbc.co.uk/2/hi/business/10092811.stm

Chinese are paying more for 'made in China' products

The Chinese consumers are paying most for products stamped “made in China”. As the largest manufacturing base in the world China is exporting countless different products to the world. The business owners and experts say that the main reason for this fact is the export tax rebates policies. This policies is hold accountable for the fact that Chinese consumers have to pay most for foreign produced products.

The economist Chen Zhiwu claims that not only the prices of foreign-made luxury goods are higher in China, but also the domestic-made products such as clothes, computer, etc. are also more expensive here than in for instance the US market.

The export tax rebates policies are need to help keep the prices competitive. Otherwise profits can be lost. The tax refund must be adjusted to keep the stress of the country’s taxation. Because China has handled 130 billion yuan of export tax rebates, which is a lot. The policy has to stay but appropriate adjustments are needed.

China's export value-added tax (VAT) rebate policy once promoted the country's exports and fuelled economic growth. However, the side effect of the policy is growing and appropriate adjustment is needed, the government has to look at it and take measures. The stress on the country’s taxation is enormous.

Thibaut Delsoir

Source: http://www.chinadaily.com.cn/business/2010-05/05/content_9813692.htm

Tough rules set to drop home prices 30%

The Chinese government will soon introduce tough new rules for the house market. It is expected that those new rules may drop home prices by as much as 30 percent by the end of this year in Beijing.

One of the new rules will be a restriction of maximum two houses for every family, where the amount of houses possessed by a family was unlimited before. Also, buyers of a new home will have to give all relevant information about their family before signing a contract. If a buyer gives false information or crosses the maximum of two homes, the contract will be invalid.

They are implementing these rules as a part of the central government's plan to curb housing speculation and soaring prices, because lately the prices in Beijing were going through the roof.

Analists speculate that the number of homes sold may fall down by 50 percent compared with the same period last year. One of the reasons would be that a lot of families have to stop buying apartments, as it has been common for those families to purchase several apartments. Also property developers may delay or even suspend projects in a move to reduce their risks.

In my opinion there are two sides to the story. On the one hand this is one of China's many restrictions that inhabitants have to live by, you can argue wether this is fair or not. Personally I think the Chinese should have more freedom to decide for themselves what they want, without the interference of the government. From this point of view I am against the new rules.

But on the other hand this is a measure that is necessary for the building sector, the people that can't afford a home because of the soaring prices, the future attractiveness of the region, etc. . And this might be more important than the liberty of the inhabitants of China, at least for now.

Tom Bogaert

http://www.chinadaily.com.cn/business/2010-05/03/content_9803455.htm

China opens World Expo 2010 in Shanghai

The World Expo 2010 has opened its doors in the city of Shanghai, a city in China. With this expo China wants to show their global growing influence to the world. 250 countries and organizations are represented and are showing their culture.

The opening was celebrated with lots of fireworks, lasers and 2300 musicians from all over the world. Many world leaders attended to the opening ceremony such as the France’s President Sarkozy.

The 2010 World expo will be open for the next six months. China expect 70 million visitors in these months, mostly Chinese people. For the start of this event Shanghai has dramatically increased the security. State media says that an additional of 8000 extra police officers joined the 46000 officers to patrol the city.

Residents aren’t upset with the taken security measures, due to these measures they can’t simply get in and out anymore. Besides that all markets are closed and used as car parks.

In my opinion it’s a good but very expensive event for China, the estimated cost is 53 billion dollars. They will surely get a small payback from the visitors who pay 160 dollar for a standard day ticket. But the most important are the relationships that China will build with the other countries, those relationships are priceless. Nowadays China has some problems with different countries and this event is a good way to solve them, or to consolidate their relationship.

Niels Steyaert

Source: http://news.bbc.co.uk/2/hi/asia-pacific/8653426.stm

Indonesia finance minister resigns for World Bank post

The minister of Indonesia's finance minister Sri Mulyani Indrawati has been appointed managing director of the World Bank.
We think Ms Indrawati wil leave her job she has been doing for the last five year with the approval of President Susilo Bambang Yudhoyono. Ms Indrawati is getting a lot of respect because she has been steering South East Asia's largest economy through the final crises. But in this five years she has been fighting against the corruption in this country. When you know this it is rather strange her name has been falling in an investigation about a criminal bank bailout in 2008, over which she denies to have made any wrongdoing.
She said it is a great honour for her and her country, that she is getting the opportunity to work at the World Bank. And that on the important mission of the bank in changing the world.

I think it is good that all kinds of people can work at the important mission of the World Bank, certainly because Indonesia knows what poverty is. She might have seen enough in her country. But I don't think it is realistic to think you can change the word. And I don't understand why they let somebody wok on a high position as this one when you are accused of corruption.
http://news.bbc.co.uk/2/hi/asia-pacific/8661476.stm

New bid for Axa Asia Pacific

Axa, Europe's second-largest insurer, is selling certain divisions of its company. These divisions include Axa Asia Pacific.

The National Australia Bank, Australia’s largest lender, placed a higher bid for Axa Asia Pacific than the local rival AMP. The offer from the NAB is 13.3bn Australian dollar.
Axa Asia Pacific is willing to accept this offer.

Shares in AXA Asia Pacific Holdings fell 3 per cent in opening trade after the Australian Competition and Consumer Commission blocked the bid from AMP.

The next move is for AMP. They can place an even higher offer, or they can lose the deal.

According to analysts, the deal would reduce competition in the domestic retail investment area.
A merge between NAB and Axa could harm the competition in the market for retail investment platforms for investors with complex investment needs.
On the other hand, a merge between AMP and Axa would not have this effect.

Life assurance and pensions companies have been increasingly focusing their attention on Asia as they search for growth beyond the mature markets of North America and Europe. That’s why NAB is willing to pay this large amount of money.

Bram Verstraete

http://news.bbc.co.uk/2/hi/business/8629196.stm

Japan Airlines makes route cuts

Japan Airlines has announced they would cut another 15 international routes, and suspend operations on 30 more domestic routes. Some of the international routes that will be closed are the flights to Amsterdam, Milan, Rome and Sao Paulo. By these cuts they have stopped operating on 28 international routes and 50 domestic routes. By which they have reduced their international operations by 40% and their passenger capacity by 30%.
All these measures are taken because Japan Airlines has landed in bad papers in the economical crises we have had last year. And we have to say that the resturing of the company was a success because they have realised to make the company rather profitable again. they have even managed to get the results they did predict for over 3 years in the last year.
But these measures that have been taken have also a less good side, Japan Airlines will also close 11 overseas bases and 8 domestics offices due to these restrictions. But a positive point is that they have recieved 1000 requests more for a early retirement than the 2700 that they had hoped for.

I know it might sound really strange but it is good Japan Airlines is willing to cut in their number of flights. Because by taking these measures they seem to save their company that was nearly going towards a bankruptcy.
http://news.bbc.co.uk/2hi/business/10089208.stm

Toyota Corolla sales banned in Brazilian state

Brazil decided to ban the sales of the Corolla, the model of the Japanese carmaker Toyota. The reason for this is the lack of quality of the cars the last few months. The cars face accelerator and brake defects. Internationally Toyota has recalled more than 8 million vehicles already. Toyota said that the problems were caused by badly installed floor mats.

An investigation of The US in February revealed that those problems already made 34 traffic victims. Brazil don’t want to take risks and banned all the Corolla sales in their country . The government says that these vehicles are a menace for the safety of the occupants.

The Corolla is not the only vehicle that has problems. Toyota also announced that it was recalling about 34000 Lexus GX and Land Cruiser Prado SUVs. Those cars have a problem with the stability-control software. This program is made to reduce the risk of sliding sideways when turning sharply at high speed.

In my opinion Brazil took the right decision, Toyota might be the biggest carmaker since it overtook GM in 2008, but it has some serious quality control problems. Those problems might be the reason of the rapid expansion, that Toyota is going through. Although this shouldn’t be a reason to endanger the safety of the occupants.

Niels Steyaert
Source: http://news.bbc.co.uk/2/hi/business/8638829.stm

South Korea economy boosted by exports

South Korea’s economy grew rapidly in the first quarter of the year 2010. The economy grew by 1.8% in the first three months of the year. Analysts did not expect that and are astonished by the sharp export rise. They forecast that the economy will expand this year at its fastest rate since 2006.

In the previous quarter, the fourth quarter of 2009, the economy only grew by 0.2%. So there is an increase of 1.6%, which is good considering the crisis.

The government has boosted the economy by low interest rates and stimulus measures. Because of that South Korea has recovered strongly from the economic downturn that took place all over the world.

The exports helped a lot to make this grow possible. It rose by 3.4% in the first quarter, because of that the overall economic growth rose by 1.8%.

Despite of the strong recovery of South Korea, the government should not stop to help the economy. The stimulus measures are still needed.

The government in South Korea did good by stimulating the economy. They did better than expected so the measures where successful. However they had a little bit of luck that there export rose that much otherwise it would not been possible to have a 1.8% growth of their economy.

Thibaut Delsoir

Source: http://news.bbc.co.uk/2/hi/business/8645959.stm

Podcast2: Asian Economic Affairs

http://soundcloud.com/pelzant/podcast-2

Tokyo tuna market bans tourists after trader complaints

Each morning there is a tuna market, known as the Tsukiji fish market, in Tokyo. It’s the biggest fish market in the world, handling 2000 tons of seafood every day. This means that every morning hundreds of tuna are laid out to be auctioned. The demand for it is very high and the stock is getting smaller, which makes the price insane. Some tuna’s are being sold for more than 100 000 dollar.

The growing reputation of sushi brings a lot of tourists to the market. The Japanese government, and especially the traders aren’t really upset with the foreign visitors. The tourists come straight to the market, after a night out. U can imagine that they bring more troubles than profit.

Also the camera flashes of the tourists are an obstacle, they obscure the hand signals used to make bids. For those reasons, the Japanese government decided to ban all tourists for a month. This decision was made after drunken visitors embraced and kissed a fish.

In my opinion the Japanese government took a wrong decision. I do agree with the part that foreign visitors only bring troubles to the fish market as aforementioned. But they could take more flexible measures than a total ban. They could ban camera’s on the fish market, to avoid that the tourists obscure the hand signals. They could also do an alcohol test on the visitors, to make sure that there’s no drunken people around.

Niels Steyaert

Source: http://news.bbc.co.uk/2/hi/asia-pacific/8608613.stm

Chinese Yuan must be more flexible, says White House

The US mentioned again that they would continue to press China to value their currency to be much more market based.

The white house says that the Chinese Yuan isn’t flexible enough and it should be more open to trade more on foreign exchange markets.

The Chinese Yuan stays low. This makes it harder for US exports to compete with Chinese exports. According to the US, Chinese exports have an unfair advantage in world trade and so steals American jobs.

I think it’s a normal reaction from the US to stress this economic phenomenon. They want to protect the American market from the strong growing Chinese Economy which is changing the global economy.

Robert Gibbs, the press secretary of the White House, said in a news briefing that the Yuan would be on the agenda next week when President Barack Obama meets his Chinese counterpart.

The US treasury is confident that China will decide it's in their interest to resume the move to a more flexible exchange rate.

Chinese officials have given no ground, saying they will stick to a stable exchange rate.

Resolving such trade disagreement requires that both sides need to be calm and sensible.

Bram Verstraete

Source: http://news.bbc.co.uk/2/hi/business/8606249.stm

Why migrant workers are shunning China's factories

If you are looking for a job in the city of Donguan in southern China, you do not have to do a great effort to find one. There is a shortage of 2 million workers in this part of China.

Close to the railway station representatives of the factories are eager to meet new recruits who can work in their factories. The government denies there is a shortage, but the body language of the recruiters suggests that this is not the case. The recruiters are working hard to find job seekers.

A worker from another province says it is a good time to be looking for a job, you can go to a factory and get a job without even an interview.

At the Yong Feng shoe moulding factory nearby they also have a shortage of workers, they have work for over 500 people but only 400 are working at the moment. The wages they used to offer were generally enough to convince a worker to stay, but those days are over. Between the wages inland and the one here there is not a huge difference.

I do not think it is good to employ workers without an interview, it is not good for the quality of the goods that the company is creating. Workers do not care if they get sacked cause finding another job is not hard to find. I would raise the wages and certainly do an interview before they can work in the factory.

Thibaut Delsoir

Source: http://news.bbc.co.uk/2/hi/asia-pacific/8586672.stm

China soya ban angers Argentina

Argentina did complain to the Chinese gouvernment about their planned boycott of Argentina's soya and oil. They are having this boycott because the Chinese gouvernment thinks the soya and oil is failing the quality standards.
But we think it is more an action against Argentina then the products "failing" to quality standards, they think it is just an excuse. While Argentina had taken some measures to protect their own economy. Such as taxes on Chinese import. They have done that to avoid the dumping strategy of the world's biggest exporter. These measures where necessary to prevent their own market to bee flood by Chinese goods.
If china would ban the soya oil of Argentina, Argentina's economy might have problems while they are the biggest oil exporter in the world, and the China is their biggest customer.

According to me the boycott has nothing to do with the quality of the oil, but China is putting a bit of pressure on Argentina so they stop protecting their own economy and let China use their dumping-measures again. I do not think countries as China should use their power to put pressure on smaller economies like there is in Argentina to be able to do whatever they want.
http://news.bbc.co.uk/2/hi/business/8604372.stm

Steel mills told to halt production

In China, small steel mills have to shut down their production by the end of this year. They are being told to do so by the central government, who is planning to reduce the productivity of the industry with this measure to prevent overcapacity. This way, the government also wants to force the industry to upgrade its facilities.

The measure is taken because the industry has been facing an oversupply which have weighed on steel prices and made profit margins drop. By lowering the supply they hope that the prices and profit margins rise again.

China's government is also planning to shut down small and outdated places in other sectors including power, coal, calcium carbide, ... On the one hand to save energy, on the other hand to reduce emissions.

Afterwards the government will strictly control the region's projects assessments, by withholding approvals for new investments. This way the government will be able to control the demand and supply more efficient to prevent overcapacity from occuring.

Personally I think the Chinese government shouldn't interfere to much with the economic market. China should strive for a free market without major economic intervention and regulation by its governement. I think it is wrong that the government has the power to decide that companies have to end their affairs, it doesn't belong in the world of today. Furthermore, why do the small companies have to shut down and can the big ones continu their production? What gives those other companies more rights?

Tom Bogaert

Source : http://www.chinadaily.com.cn/business/2010-04/07/content_9694850.htm

US group: China's business environment favorable

Harley Seyedin, president of the American Chamber of Commerce in South China, said that most foreign enterprises considered that the business environment in China is good. The American Chamber of Commerce is an association that represents more than 1,650 enterprises and individual members.

China's economic recovery is well on its way and the investment prospect is very optimistic. The Chamber made a report that stated that more than 90% of the foreign enterprises that took part of a study by the chamber considered China's business environment to be good, very good or outstanding. Also, 90% believed that the business environment has improved compared with 1 year ago.

The report indicates that investors and foreign enterprises are confident about China's economic future. The members of the chamber would invest a minimum of $9.4 billion this year. In the future, they will further increase their investment budget because of the favorable investment environment.

Zhu Jiming, president of the China branch of Caterpillar said that the investment environment of China has improved tremendously since the country joined the WTO in 2001. Since then, a lot of laws and regulations got changed so that the market became more transparant and open for foreign investors and enterprises.

He also said that the press always exaggerates trade disputes between the US and China, but that the trade disputes between for example the US and Canada are outnumbering those by far.

I think that it is important for both Chinese as foreign enterprises that China resists protectionism measures and keeps providing an environment of fair competition in the future. If not, the entire world economy would suffer from major trade disputes that can be avoided if all parties do some efforts.

Tom Bogaert

Source : http://www.chinadaily.com.cn/china/2010-03/31/content_9664659.htm

China steams ahead on clean energy

China isn’t only ahead technologic and export wise, they are also getting ahead on the use of clean energy. They have nearly as much green energy, the so called clean energy, as the United States. Researchers say that China invested nearly twice as much as the United States in clean energy. On the third place of the list you find the UK, followed by Spain and Brazil.

South Korea has known the biggest global growth. The last five years their capacity rose by 250 percent. Despite the global economic recession, the market of clean energy has experienced a globally impressive growth. A reason for this might be the jobs, export opportunities and businesses that the clean energy brings.

The US still has the lead in the total amount of installed capacity, but if China continues the grow, they will overtake the lead. The target of china is having 30GW renewable capacity by 2020. This goal will soon be exceeded by wind energy alone.

In my opinion this is another good move of China to invest in green energy, this will boost their economy even more, because the installation of renewable energy brings new jobs, businesses and it also boost their export, which is already at a top level. This isn’t the first economic affair where they hurt the United States.

Niels Steyaert

Source:http://news.bbc.co.uk/2/hi/science/nature/8587319.stm

Podcast1: Asian Economic Affairs

Link to podcast: http://soundcloud.com/pelzant/podcast1-asian-economic-affairs

Ford Agrees to Sell Volvo to a Fast-Rising Chinese Company

Ford agreed with The Zhejiang Geely Holding Group to sell its Volvo subsidiary.
This Chinese company is willing to pay $1.8 billion for Volvo, with $1.6 billion in cash and the rest in a note payable to Ford.

It is not the first time that Ford sells one of its brands. Jaguar and Land Rover were sold to the Tata Group of India for $2.3 billion a year ago. Ford has changed its strategy to focus on its core brands and that’s why it is selling all of its luxury brands.

Zhejiang Geely is planning to keep the production of Volvo cars in Sweden, but also to build another Volvo-factory in China.

Michael Dunne, an independent auto analyst, says that it Zhejiang Geely made a strong and smart move with buying Volvo. Buying a well-known brand like Volvo is the fastest way for a young company like Geely Auto to move up.

Many automakers in China are loaded with ambition and it is nice to see that Zhejiang Geely is showing those other companies how it has to be done.

I see this shift from west to east in the car industry as a good thing. These young Chinese companies could actually save the car market.

Bram Verstraete

Source: http://www.nytimes.com/2010/03/29/business/global/29auto.html

Japan retail sales boosted by government stimulus

The retail sales in Japan rose dramatically in February as a result of the government stimulus measures. With their stimulus measures the government has encouraged the consumers to spend more.

Sales rose by 4.2% compared with the year earlier, much more than analysts had expected. They say that this rise in retail sales is too good to be true.
Some of the government stimulus measures will continue until April and others will go on until September. After these stimulus measures expire, there should be a big negative rebound in retail sales.

The consumer prices fell by 1.2% in February from a year earlier, it is the 12th month in a row that the consumer prices have fallen. The Japan’s central bank increased the amount of money that they set available to banks for short-term loans. With this they try to halt the fall in prices

Despite of the government and central bank measures, analysts believe that Japan could be set for a long period of price falls.

The fall of prices is not a good thing for the economy in Japan. I think they should find other measures to slow down or to stop the price falls. The deflation is a sign that the Japan’s economy is starting to show some unhealthy signals. Japan has a history of struggling with deflation, so measures and solutions to stimuli the economy are needed.

Thibaut Delsoir
Source: http://news.bbc.co.uk/2/hi/business/8592222.stm

Japan's consumer prices continue to fall

Over the last 12 months Japan has been struggling with deflation. The prices of consumer goods fell by 1.2% in February with is not that bad, it has been worse. But the predictions for march for Tokyo (which is an indicator for the whole country) are even worse, they show an steeper decline. This deflation causes a lot of problems while people are not willing to buy things today because it might cost less tomorrow. Which leads to a vicious circle of failing company profits.

Now the government is pushing the Bank of Japan to make sure that the prises will start rising. Because this summer there are elections. But they have said that more efforts will be needed, that is why the parliament has passed a record budget of $ 1 trillion. Most of this amount of money is financed by borrowing.

For my opinion i think it is kind of crazy that a country in such problem can stil be the third largest economy behind the US and China. But according to me this is not a problem since the crises started last year. Because I have always heard when you put your money on a Japanese account every year you are losing money instead of making money.

http://news.bbc.uk/2/hi/business/8588399.stm

Rio Tinto signs mining deal with China's Chinalco

The australian mining company Rio Tinto has signed up a deal with the Chinese metal group Chinalco to develop a massive iron ore mine in Africa. The Chinese metal group will invest 1.3 billion dollars or 47% of the Simandou project in Africa.

The two companies did recently have some problems while four employees of Rio Tinto hace been caught and accused for commercial spying. That is whythe Chinese wil not be fully open to the diplomats. The australian embassyin Beijing has confirmed that alle the parts of the trail related secrets will be kept behind closed doors. Although they say this incident will not harm their cooperation in the Simandou project. They said: "the two matters are fully seperated".

It is also a great deal for Guinea because the railway infrastructure wil go through their country witch creates a lot of jobs, what is very good for the gouvernement while there are elections in June.
I hope that they will be able to work together without being suspicious who could possibly leak some information. Because this couok mean severe damage to both companies. But this will certainly be not easy keeping their history in mind. When it might work to cooperate it could mean big opportunities vor both companies.
http:/news.bbc.co.uk/2/business/857537.stm

Samsung chief returns after tax-evasion pardon

The former ceo of Samsung Electronics returned to the company. He was convicted of tax evasion, but was later given a presidential pardon.

Lee Kun-hee headed Samsung Electronics for almost 2 decades before he was accused for tax evasion. Analysts said Mr Lee’s return was good news for the electronics giant. Lee’s return removes what has been an uncertainty for Samsung Group.
Mr Lee, who is 68 year old, his father founded Samsung. He is seen as one of the South Korea’s most prominent businessman. Mr Lee is also one of the country’s richest men.

Lee Kun-hee received a presidential pardon last year, so that he could return to the International Olympics Committee and help South Korea’s appeal to host the 2018 Winter Olympics.

A founding family member in the ownership management offers a long-term vision and helps Samsung to find its long term goals and plans. However there were some discussion about re-appointing a convicted tax evader.

It is good for Samsung that they have found a good leader again. The uncertainty for the Samsung group is now cleared. A good leader in a company as big as Samsung is important for the image of the company. The fact that he is convicted for tax evasion is not so good for the image, but he received a presidential pardon so that problem is solved.

Thibaut Delsoir
Source: http://news.bbc.co.uk/2/hi/business/8584397.stm

U.S. firms worry over business chill in China

57 percent of U.S. IT firms in China expect new rules for government purchases will hurt their business in the fast-growing Chinese market.

New rules requiring government agencies to purchase goods from "indigenous" companies is having a chilling effect on sales. Anything that restricts or reduces access to Chinese customers will restrict or reduce interest in investing or doing business here.

One-third of the 203 companies surveyed by the American Chamber of Commerce have seen their China sales slide as confusion grows over the new directive for China's government agencies to purchase goods from Chinese companies.

Washington is accusing Beijing that it is manipulating its currency, causing it to be undervalued to help boost exports. Commerce Minister Chen Deming said that such allegations were irrational.

Chinese Premier Wen Jiabao said China would resist calls to appreciate the yuan and keep its currency "basically stable” because increasing the value of the yuan could lead the world to a "double-dip" recession. He also urged the United States and the European Union to lift restrictions on exports of certain technology to China.

A political fight between Washington and Beijing would of course impact interest in doing business in China. I think the governement should be careful with these new rules to prevent a collapse of the turnover of all the involved companies. These mesures can have great consequences when taken without care for the economic stability.

Tom Bogaert

Source : http://www.cnn.com/2010/BUSINESS/03/22/china.amchan.survey/index.html

China’s Internet Giants

A lot of big American internet companies, like Yahoo, Ebay and Google, fail to earn a place in the top of the Chinese market. And other companies like Facebook, Twitter and Youtube are blocked by the government.

Instead of these American companies, the market consists of fast-growing companies like Baidu, Tencent and Alibaba. These local firms are making huge profits because of the lack of competitors. The cause of this is due to the Chinese government, who continues to favor domestic companies.

Because those companies are unknown for us, it’s hard to analyze them. Still, the success of Chinese companies here can be measured by the numbers.
For example, the revenue at Tencent, a kind of Internet conglomerate, jumped over 70 percent last year, to about $1.8 billion.

Some analysts say the success of these companies is because of the young people who dominate Web use in China. They’re searching for a lifestyle. A combination of music, games and social networking. These Chinese companies apply these demands and they adjust their websites to be attractive and useful for the Chinese youngsters.
Those companies, however, have a small change to become global brands, because the Western society has other interests.

I think it would be interesting if the American internet companies would use the same strategy as the Chinese companies. If they should study the interests of the local citizens, they could make a better product.


Bram Verstraete

http://www.nytimes.com/2010/03/24/business/global/24internet.html

Chinese netizens divided over Google move

The persons who frequently use the Internet, the so called netizens, have divided opinions about the move of Google. Google is an American internet searching machine. They decided to stop censoring the search results, and automatically direct to the Hong Kong’s unrestricted site.

The majority of the Chinese population says that Google should stop their business in China. They came to China a few years ago and they already try to dictate rules. They also say that Google has to leave the business in Hong Kong, cause it’s also a part of China. China has other alternatives for Google such as “baidu.com” a Chinese searching machine.

The other part of China doesn’t want Google to leave. They say that it’s a tragedy for the Chinese internet users. They support the vision of Google and show anger for the Chinese government.

I do agree with the majority of the Chinese people, Google shouldn’t be allowed to do what they want, they have to obey the law of a country. They came to China to make so much money, it’s not such a big effort to follow their rules. But China will be able to survive in the cyber world without Google, they also have a lot of alternatives to use. But accusations such as “they came here to cause destruction and destroy Chinese unity” are over the top.

Niels Steyaert
Source: http://news.bbc.co.uk/2/hi/asia-pacific/8582556.stm

Japan's central bank seeks to boost lending

The central bank of Japan has increased a stimulus measure, they want to encourage Financial institutions to lend more money.

The central bank has doubled the amount of cheap short-term loans that it is offering to the banks.

The scheme the central bank uses for lending money at a rate of 0,1% was introduced in December to try to tackle the deflation which is threatening Japan’s economic recovery. They want to help the economic recovery by lowering the cost of lending. So the bank voted to hold interest rates at 0,1% the level which they have been since December 2008.

The economy in Japan grew less than first was expected in the final quarter of 2009. The Cabinet Office said the economy expanded by 0.9% between October and December of last year, but they estimated it would be 1,1%.
The bad revision increased the pressure on the Bank of Japan to ease monetary policy. However, with interest rates already down to 0,1% they do not have much room to move.

The continuining process of deflation is not good for an economy as it tends to make consumers and businesses delay major purchases in the expectation that prices will fall further in the future.

I think that with the measures they took they should be able to stop the deflation and so help to recover their economy. It is hard for a lot of countries in the world to keep their chin up in time of the crises, but everything will fall back into place I guess.

Thibaut Delsoir

source: http://news.bbc.co.uk/2/hi/business/8571624.stm

China Drawing High-Tech Research From U.S.

For years, the United States was the number one in high-tech developments in the world. Lately however, more and more U.S. companies and their employees are drawn to China, where the high-tech industry is booming really fast.

Today, Mr. Pinto is the first chief technology officer of a major American Tech company, Applied Materials, to move to China. Also, the company has set up an entire research lab in China because of the high demand for more technology and energy.

But Applied Materials and their employees aren't alone, more and more companies invest directly in the Chinese market by setting up new research and development buildings in the country itself. It is becoming clear that China is becoming a high-tech economy that increasingly competes directly with the United States.

The 'immigration' of foreign workers in China shouldn't come as a suprise. China has become the largest auto market of the world, has the most internet users and also is the biggest market for desktop computers. Many well-known western companies such as Intel and General Motors have already opened research labs.

Not only are they drawn to China because of the high demand for technology, but also China's reservoirs of cheap, highly skilled engineers and subsidies offered by the governement seem to be very attractive. For example, newly graduated engineers with master's degrees can be hired for only $730 a month.

Personally I think it is good that companies are flexible enough to move to other countries to provide in the needed technology and energy because it supports the entire world economy. I don't think this will effect the position of the United States and Europe a lot, China has the right to develop itself and become an economic world player.

Tom Bogaert

Source : http://www.nytimes.com/2010/03/18/business/global/18research.html

LG Display Sees Firmer Prices, Positive on Second Half

LG Display, the world's No.2 maker of liquid crystal display screens has enjoyed a strong demand for flat-screen TV’s. This because of the Chinese holidays and sports events such as the World Cup.

However, concerns have grown recently that the sector might return to oversupply as makers ramp up output.

The CEO of LG display, Kwon Young-soo said that the company is not concerned about oversupplying and the market will not crash, because despite increasing capacity, panel makers are struggling to meet demand for high-end products such as LED-backlit LCD and large-sized screens.

The demand in more advanced panels will grow and that’s why LG is setting a new production line in the first half. The company is awaiting approval from China on a proposed $4 billion LCD plant to increase capacity in South Korea.

Kwon Young-soo says that the demand is strong and the company is meeting only 80 percent of their customer demand. So it is wise to add new capacity.

The CEO also says that the prices of some products including TV and IT may actually rise due to supply shortages.

These affairs have a good influence on the stock exchange. The shares in LG Display rose 2.3 percent.

Bram Verstraete

Source: http://www.cnbc.com/id/35829509

Number of Chinese billionaires 'second only to US'

China has the second most billionaires in the World, only the United States are doing better with 403 billionaires, according to the Forbes magazine. In the annual list of world’s richest people there are 64 people of china mentioned, those people are living in the mainland of China. The number of billionaires increases to 89 if Hong Kong is included. It’s not surprising because China is in a booming economy the last years. China might take over the leader position in a few years.

The list of millionaires contains 1011 members, there is a total of 97 new additions this year, and 27 of those are from the mainland of China. The richest man in China is Zong Qinghou. He runs the Wahaha group, a so called gold mine, known from its soft drinks. He told that you don’t have to be afraid of competition, if you innovate, that’s his key of succes.

In my opinion it’s not good that the number of Chinese billionaires keep increasing. China already faces a wealth gap, the gap between the rich and the poor. In the future China will need to find a solution to reverse the widening income gap and to make the society fairer and more harmonious. The question is whether China will be able to close the gap, they did already solve a lot of problems in the past, but this problem is a tough one.

Niels Steyaert

Source: http://news.bbc.co.uk/2/hi/asia-pacific/8561433.stm

China denies currency undervalued

last week i did write about the huge growth of Chinese economy last month, by keeping the Yuan (undervalued) at the same level of the VS dollar. 40% below its value. Now premier Wen jiabao has rejectedthis aquisitions, he said that keeping the Yuan stable was very important for global economy which is in a downturn.

The relations between China and the USA did not get any better by this incident. He said: The other countries are just finger pointing at each other who made a mistake, but they don't do anything for a fast recovery of the economy. The relation chip between China and the USA was not very good untill this moment while they are still dilivering weapons to Taiwan, a dicision of former president George W. Bush. And Barack Obama visited the Dalai Lama. ant these two are not relly loved by the Chinese gouvernment.

i do not know if the Yuan is undervalued but China is very good in hiding information for the rest of the world. But it is really bad that the relations between China and the werstern countries are worsening again because they just started to spread some more information about their country. Although Google had to limit the information that could be seen by Chinese people which is another issue between these countries.

http:// news.bbc.co.uk/2/hi/asia-pacific/8566597.stm

China's exports up to 46% in February

BBC news announced us that the Chinese export has risen up to 46% in February, comparing with the previous year. These numbers give us hope in a fast recovery in global trade. The result is hihger than expected, analysts estimated a rise of 35% up to 40%. But it is not only the Chinese export that has been rising, the import has also risen by 44.7% last month.

People would think how they have done it? They kept the value of the Yuan at the same level as the dollar for 18 months to help their exporters. But particularly the VS is not very happy with this measure, and said the yuan is unfairly undervalued. Ans now the Cinese exports are retaken they still don not want to revalue the Yuan. While the futureof the global economic is not realy certain jet.

The rise of 46% is pretty impressive because last year New Year's festival was in January, and this year it was in February. In China the people use the whole week to celebrate New Year's festival. concluding there were five fewer days of economic activity.

I think it is great that a country van boost their economy by taking measures. But is I agree with the VS that by taking measures you can not put other countries in problems to protect your own. But it is still pretty impressive what they have done.

http://news.bbc.uk/2/hi/business/859088.stm

East or famine

Asia’s economic weight in the world has risen, but by less than commonly assumed.
It is not new that we have a feeling the world’s economic centre is moving to the east. But the global financial crisis, many argue, has given the shift in economic power from America and western Europe to Asia a big shove.

China overtook Germany in 2009 and it became the world’s biggest exporter. And now it looks like China is becoming the world’s biggest economy within ten years. It also has certainly become more important to bankers and businessmen, accounting for a record share of many companies’ profits last year.

But if we take a closer look at the figures from the last years, we see that the shift in economic power from West to East can be a bit exaggerated. Asia’s GDP stays slightly smaller than western Europe’s GDP. This means that the output of the rich West is still almost twice as big as that of the East.

The rise of the East is not a myth. The numbers clearly show us that Asia’s export keeps on growing. However, these GDP numbers show us Asia’s real expansion.
Asia’s GDP numbers are clearly lower than the GDP of western Europe and this because of the Asian financial crisis in the late 1990s. More importantly, prices of many domestic products are always cheaper in low-income countries, implying that households’ real spending power is bigger.

If GDP is instead measured at purchasing-power parity (PPP) to take account of these lower prices, Asia’s share of the world economy is higher and more steadily.

Bram Verstraete

http://www.economist.com/business-finance/displaystory.cfm?story_id=15579727

Economic concerns to dominate China's parliament

This friday, China's parliament starts its annual session of the National Peoples Congress where many politicians will cover various economical and social topics. This annual meeting has gained more importance and attention over the years, which makes it a useful platform for airing of public opinion and political debating. However, it stays mainly a ceremonial act as a part of the Chinese political policy.

China's economy, as everyone knows, has been growing very fast in recent years. The country reported that last year it recorded an 8.7 percent Gross Domestic Product growth despite the worldwide crisis. Chinese planners hope that China keeps growing this fast without falling in inflation or creating stock market bubbles as this would put an immediate stop to the growth.

Nonetheless, the economic growth doesn't give benifits to everyone . The poor seem to get poorer as the rich get richer. Also, the sky-rocketing house prices should be discussed at the National Peoples Congress aswell as people's incomes and the rising environmental corruption.

The growing rich-poor divide is very troubling and Chinese leaders acknowledged that it is undermining social stability and weakening their control on 1.3 billion people!

Around 135 million people still live on less than $1 a day, which is an amazing 10% of the population. Also, 10 million people have no access to electricty. I hope the Chinese leaders address the social and economic instability for the common people so that they can change the current outlook, which looks very dark for a lot of people.

Tom Bogaert

Source : http://www.cnn.com/2010/WORLD/asiapcf/03/04/china.congress/index.html

Cathay Pacific returns to profit

Cathay pacific, one of Asia’s biggest airlines, has reported that it returns to profit. The cost cutting and bets on the price of fuel paid off.

Fuel hedging, which has a lot of risk in it, helped the airline to avoid a fall in revenue of almost a quarter over the period. Despite the profit they made in the fourth quarter of the year, Cathay said it was cautions about prospects for 2010. They used fuel hedging which has a lot of risk so it could go wrong, luckily for them it did not.

The global economic slump last year resulted in extremely challenging business conditions for Cathay Pacific Group and commercial aviation in general, a lot of other airlines had a harsh time as well. They also had to make cuts in effort to survive the economic slump.

Cathay Pacific Group reported an increase in passenger numbers and cargo business in the second half of the year, but it would not be enough to cover the sharply reduced revenues for the first half of the year. They would still have take measures to recover and return to profit.

The other problem they had to face was the cost of fuel, which rose steadily from the middle of 2009. That could undermine the profitability.

According to the International Air Transport Association, 2009 saw the biggest decline in air passenger traffic in the post-war era. It estimated that airlines lost around $11bn together.

Now with the most of the global economic slump behind us they will have to keep up the cost cutting and keep the price of fuel in mind. The business conditions for commercial aviation are better in general, but there are still some airlines who are struggling to survive.

Thibaut Delsoir
source: http://news.bbc.co.uk/2/hi/business/8559328.stm

Climate goal is supported by China and India

On Tuesday 9 march, China and India formally agreed to join the international climate change agreement of Copenhagen. They were the last two major economies to sign up. China and India are among the most important and fastest-growing sources of greenhouse gas emissions in the world.

China and India together with 200 other countries have signed to support the climate goal. The contract contains a measure for limiting the rise in global temperatures to no more than 2 degrees Celsius.

The countries who signed the contract will have to spend 100 billion dollars a year to develop low-carbon energy systems, to protect tropical forests from destruction and to bring energy technology more quickly to the developing world. At the climate meeting in Copenhagen they did not formally adopt the accord, but they took note of it. The entry of china will give it a boost.

China said that it will try to reduce its emission of carbon dioxide by 40 to 45 percent by 2020 compared to 2005. The united states will reduce the greenhouse gas emission by 14 to 17 percent by 2020 compared to 2005.

It’s a good thing that two major economies support the climate change agreement of Copenhagen. First of all two big economies will bring a lot of money in the 100 billion dollar fund, which helps countries to become more ecologic. Secondly the entry of China and India will give the agreement a strong boost, because they were the last two major economies who didn’t join yet.

Niels Steyaert

Source: http://www.nytimes.com/2010/03/10/science/earth/10climate.html?ref=asia

China leads the world in auto sales, production

The production and sales of Chinese passenger vehicles both more than doubled from a year earlier. This causes China's auto market to lead the world industry. It's also the first time the domestic monthly production and sales were over 1 million units.

Rao claims this is strong evidence of the popularity of the auto market, despite the high oil prices and bad weather conditions lately which had an impact on the sales. He also predicts that sales will keep increasing in December and the sales peak will be in january.

It will be the first time in any country's auto industry that the montly sales continued to break records for seven months in a year. The total vehicles sales in China exceeded 12 million in the first months, which is enough to get the lead as the world's biggest auto market, reported Xinhua News Agency, citing the China Association of Automobile Manufacturers.

I think this is one of the many examples we can find to prove that China is an enormous economy that will only keep growing in the future. It will take over more and more market share of the world economy because of their improving technology, low labour costs, ... . Their turnover of vehicles for example in western countries is rather low at the moment, but I think they will keep improving their products and will conquer a bigger place in the world's technology economy in the near future.

Tom Bogaert

Source : http://www.chinadaily.com.cn/business/2009-12/08/content_9135316.htm

Shanghai opens doors to financial world

Shanghai is a city in China with 70 million people, known as a touristic paradise. Chinese leaders want to turn the city into a globally competitive financial capital, this should be done by 2020.

Shanghai has come from a long way, twenty years ago Shanghai had no stock exchange and now their stock exchange is already bigger than the one of Hong Kong.

If Shanghai wants to compete with New York and London in the next decade, they will have to recruit Chinese and foreign money managers, lawyers, accountants etc… New York has 10 percent of its workers in financial services against 2 percent of Shanghai, because China’s largest banks have their headquarters in Beijing and not Shanghai.

The last ten years, Shanghai has added a lot of facilities to become a higher value and to get rid of the manufacturing and industry image.

To become a global financial center, China has to allow the renminbi to become a convertible international currency. There’s never been a world financial center without a freely flowing currency. The question is whether China will allow the renminbi to become a convertible international currency.

In my opinion it’s good that Shanghai opens doors to the financial world, it will create new jobs and help china, who’s in a booming economy, grow even faster. The jobs will be more dynamic and challenging than a job in a bank or a security house. But in order to rival with New York and London, China will have to make the renminbi, their currency, convertible.


Niels Steyaert
Source:http://www.nytimes.com/2010/02/25/business/global/25iht-rshanfin.html?ref=asia

Japan Airlines reports huge loss

I have chosen an article which handles about the huge losses Japan Airlines has had the last months. The airline announced a loss of 177.9 bn yen, and apologized to their shareholders, creditors and customers.
Japan Airlines is under court supervision since they entered bankruptcy protection last month. Now the company is undergoing a major restricting which means they have to cut in their destinations, crew and amount of airplanes. They have to do all these measures to attempt to make Japan Airlines profitable again. They explain that they are working very hard to make their company profitable again, but they still want to provide a safe and stable flight and good services to their customers. Japan Airlines is one of the most high-profile airlines to fall victim under the pressure of the global recession.
I think it is unbelievable that a large company as Japan Airlines can suffer due to the global recession, and collapses under the pressure. Which started in the sector of real-estate. It is also really strange that their debts multiplied nine times before they asked for help. But it is very good that there is a thing like bankruptcy protection. A lot of companies have used it in the recession. GM, for example has used it and now they are making profit again. In the end, it is better for everyone, they can pay back their loans they have got from the government, the shareholders will not lose their money, and the employees will not lose their job.

http://news.bbc.co.uk/2/hi/business/8538347.stm

Asia’s boom conceals some darker prospects

It is a fact, Asia’s economic growth are clearly beating Europe and the United States in the recovery and proving to be a pocket of great hope for the global economy.

But as Asia’s role in the global economy expands, the threats facing the Asian economy grow in importance as well.

A look at Asia beyond the headlines shows the region still faces significant economic challenges. These challenges vary from export problems in Taiwan to deflation in anemic Japan.

The strongest pillar is China, but economists also warn of headwinds there. The real estate growth in China can change into a real estate bubble.

Robert Subbaraman, chief economist for Asia outside Japan at Nomura in Hong Kong, says that according to him, the issues lie beyond the region itself. They include a possible renewed slowdown in the world’s big advanced economies, where many households are still paying down debt and worrying about the unemployment rate.

Despite its problems concerning global economy, Asia has a couple of home-grown problems to contend with.

This number one concern is China. the pace of growth has been so rapid that many analysts are worried that the economy may soon begin to overheat.

Still, optimism is the overriding feeling despite the headwinds. “Asia is growing up,” said Bill Belchere, global economist at Mirae Asset in Hong Kong. “I think the recovery will actually be a lot stronger and a lot more durable than many people think.”

I also agree with all of these statements. China sure does have a lot of problems that they have to deal with. But they’ll surely overcome these problems, like they’ve solved many others.

Bram Verstraete

Source: http://www.nytimes.com/2010/02/23/business/global/23asiaecon.html?pagewanted=1&sq=asian%20economy&st=Search&scp=2

Asia defies forecasts and keeps growing during crisis

While Greece is in danger of default, Dubai still smarting from corporate collapse and 9.7 per cent of the US workforce is out of a job. In much of Asia, the question on people's lips is: crisis, what crisis?

Malaysia became the latest Asian country to report unexpectedly strong growth in gross domestic product for the fourth quarter of 2009. At the moment there gross domestic product rose with a 4.5 per cent over the same period a year earlier.
Hong Kong also beat forecasts when it announced a 2.3 per cent increase over the previous quarter. Taiwan announced a rise of 9.2 per cent from a year ago and Thailand saw comparable growth of 5.8 per cent.

The prime minister of Malaysia said the economy could expand by up to 5 per cent, which is a lot considering the rest of the world is in a crisis.
Economists said the recovery was not going to lead to rises in interest rates, even though several central bank governors have indicated moves to normalise monetary policy soon.

It is a good thing that the economy in Asia is recovering and growing. Governments in Asia pumped billions of dollars into their economies in response to the 2008-09 financial crisis. That leaves the problem of the downside when governments turn off the taps. So time will tell if the growth keeps going on or if the crisis will hit again.

Thibaut Delsoir

Source: http://www.ft.com/cms/s/0/f5e20ab2-21ae-11df-acf4-00144feab49a.html

More credit lines for small businesses

Recently, the Chinese government lowered the loan target for this year fearing excessive lending in 2009 which could lead to asset bubble risks. Dispite the clampdown, China's banking regulator said Tuesday it would open up more credit avenues for small enterprises this year.

Small- and medium- sized enterprises always had a harder time receiving credit lines in China as commercial lenders were reticent to give loans to them due to the high risk compared to larger companies and instead preferred to lend to large State-run companies. The earlier announced credit tightening has frightened the government because small enterprises could be the first to feel stricter credit availability. Therefore, more credit lines should be available to smaller businesses to prevent a total credit shutdown.

"In order to stimulate credit lending to smaller businesses, the banking supervision department is drafting new supervision rules governing banks' small enterprise business which are likely to come out later this year," said Xiao Yanqi, director general of banking supervision department II.

Also, an increasing number of domestic mid-sized lenders, are planning to lend more to smaller businesses to fend off competition with large State-run lenders, said Xiao.

Personally I think that the earlier announced credit tightening is an essential evil to prevent a future bubble that could lead to an enormous economic disaster. But I also find it a good decision to put more credit lines available for smaller businesses. Those small businesses are a very important part of a growing industry on which a lot of people are relying.

Tom Bogaert

Source : http://www.chinadaily.com.cn/bizchina/2010-02/24/content_9495627.htm

Toyota president says recall-hit firm 'grew too fast'

The boss of Toyota admitted that the safety problems of the last months are possibly due to the rapid expansion of the firm. Last Wednesday the president Akio Toyoda did explain that due to the fast growth of the company they have lost their priorities. Causing severe damage to the reputation of Toyota by several issues. By which 8.5 million cars had to be recalled for a check up. Most of the problems are “accelerator pedals getting stuck under the floor mats, and problems with the breaking systems on its hybrid models.

Mister Toyoda personally apologised and took all responsibility for the issues and troubles caused by quality problems by his cars. He also personally apologised to the families who were victims of an accident caused by failure of the braking system or acceleration problems. He is also handling the problem inside of the Toyota firm, because some of these issues could be prevented, and would there have not been a lack of communication in the firm. He ended “I, more than anyone, wish for Toyota’s cars to be safe and our customers to feel safe when they use our vehicles. While all Toyota vehicles bear my name.”

I agree that all carmakers should have a good check-up before a car leaves the firm. But it is always possible that there are some problems. On this moment they have to react as quickly as possible, and do not wait until there are some deadly accidents caused by the problems. It is time they take responsibility for their acts. And do not put their reputation above human life’s.

regards,
Jeanbart De Fruyt
http://news.bbc.co.uk/2/hi/business/8529950.stm
Jeanbart De Fruyt

China sees growth engine in a web of fast trains

In February 2010 China revealed the Chinese bullet train, this train is the world’s fastest train. The Chinese bullet train sure has earned it’s name, with an average speed of 215 miles an hour it’s as fast as a bullet. The bullet train connects Guangzhou, the southern coastal manufacturing center, to Wuhan, deep in the interior. This 664 mile run takes about 3 hours compared to 12 hours from the normal train.

The transport is possible thanks to a new high-speed line. China set to open 42 high-speed lines till 2012. This will be good for 5,000 miles of track for passenger trains at 215 miles an hour, 3,000 miles of track for passenger and fast freight trains traveling 155 miles an hour.

The United States choose not to be left behind and plan to build their first high-speed rail by 2014. This line will connect Tampa and Orlando.

China has known a phenomenal economic growth, and this railway system will only boost aforementioned growth. This new technology will boost, or even artificially create a new big export industry.

The high speed train also has some disadvantages, for instance the bullet train costs 72 dollar for a one way trip. This price is far from reasonable for labourers. Yet many workers do not complain about the price. They find it an understandable price based on the distance, although many workers take the slow train to save some money.

Secondly airlines are losing customers because the three-hour train to Wuhan is faster than the two hour flight included check-in times.

In my opinion the Chinese bullet train is a good invention, other countries will follow their idea and that will open chances for China. China is slowly becoming world’s biggest economy.

Niels Steyaert
Source: http://www.nytimes.com/2010/02/13/business/global/13rail.html?pagewanted=2

China's factories 'lack workers'

China is facing a shortage of workers in the Pearl River Delta, the manufacturing heart in southern China.

Some estimate that factories need two million more migrant workers from other parts of China. The shortage of workers have already been highlighted in Chinese media. That they emphasize the shortage is a good thing, because China is a big country and through the media they can reach a lot of persons who are interested in finding a job.

The expectations of higher wages and better working conditions are blamed for the labour shortage. The migrant workers used to travel from all over China for jobs like these, but now they found work where they pay similar salaries and closer to their home. They work on the infrastructure projects funded by the government. It is a good thing that China is investing in the infrastructure so that the economy can expand and spread itself over the whole county.

Beijing's own research suggests that each new generation of workers is better educated, and has higher expectations in terms of salary, labour conditions and rights. They want to choose more in what factory they want to work.

Experts think that because of the shortage of workers the companies are forced to invest in new technology. The investments can help to speed up the transformation of the economy and lift it to a higher level.

The shortage of workers does not have to be a bad thing for the economy, the companies are now forced to invest in new technology. They will also be obliged to give the workers better wages and labour conditions.

Thibaut Delsoir

http://news.bbc.co.uk/2/hi/business/8527621.stm

China: expect more tightening

China, the world's fastest-growing economy stands for a new problem due to the bad health of global economy.

China's central bank unexpectedly ordered banks to increase the amount of reserves they hold by 0.5%, in order to temper the lending boom. The amount of loans keeps on rising. January saw more new loans granted than in the previous three months combined.

The authorities are worried about overheating.

It is no surprise that the government of china had to step in and this because of the rising inflationary pressures.

Edward Hadas, Assistant Editor at Breakingviews, says that the authorities have an unenviable task to fulfill. They need to keep growth above about 8% and job creation steady so as to avoid social unrest.

But it’s possible that this problem could be solved by the significant jump in Chinese consumption. China is exporting more and more to the Western consumers.

The gradual slowdown on the cards for this year is one key reason why commodities are vulnerable to solve this problem.

However not everybody thinks that the demand in Chinese commodities will stabilize the situation. “Capital Economics” and “The Economist”, say that the Chinese demand will slow down.

Whether or not China can ultimately avoid a nasty crash stays a mystery for now.

I personally think that China will solve this problem, like they solved many others. The growth in Chinese commodities should easily avoid the crash. More consumption means more jobs and this should stabilize the demand for loans.

Bram Verstraete

Source: http://www.moneyweek.com/news-and-charts/economics/china-expect-more-tightening-47409.aspx