kent nickell
Well-known member
From the below article... a disease that wiped out much of the country's pig herd in 2007 (sending pork prices soaring)
(((In this article earthquake related problems were blamed for the loss of 700,000 tons of pork, that's a lot of pork http://translate.google.com/transla...ttp://news.sohu.com/20080603/n257241345.shtml
Earthquake disasters cause traffic disruption, such as soybean meal and fish meal feed can not be transferred, plus the phosphate production enterprises are mainly distributed in the hardest hit, Yinzai cut-off, "Affected by this, the province this year, slaughter pigs will be reduced by nearly 10 million, Pork production will be reduced by 700,000 tons. " )))
This article also alludes to the fact that prominent quantitative easing type measures are having trouble overcoming the impressive headwinds of deflation.
http://www.eiu.com/index.asp?layout...0&refm=vwCtry&page_title=Latest+analysis&rf=0
China economy: Outlook - Suffering deflation
March 24th 2009
FROM THE ECONOMIST INTELLIGENCE UNIT
Economic growth in China will slow sharply over 2009-10, despite the government's attempts to support the economy through its massive fiscal stimulus programme and a substantial relaxation of monetary policy. Real GDP growth will slow to just 6% in 2009, the slowest rate since 1990. For an economy which grew by an average of 11% a year in 2003-07, this will feel like a hard landing, resulting in increased economic hardship, more workers laid off and a rising number of bankruptcies. One of the main reasons for this will be the very weak state of global demand, which will cause export volumes to fall by 9.1% in 2009 and will lead to a drop in investment by businesses in export-oriented coastal provinces. In addition to poor global demand, the domestic economy has been hit by a slowdown linked to developments in the real estate sector, which have seen investment growth slow, reducing demand for heavy-industrial goods, such as steel and cement.
Our central forecast is based on the assumption that China's property sector will recover in the second half of 2009, and that this, combined with the government's stimulus package and interest rate cuts, will begin to support investment growth. Although property prices rose strongly across China in 2007, the country has not experienced the kind of huge property bubble that has been seen in the US. Moreover, given that the real estate sector's slowdown was largely policy-induced, there is a good chance that the policies now being implemented to boost housing demand (including interest rate cuts, which have improved affordability) will have the desired effect, enabling property investment to recover from late 2009. Private consumption growth will slow as unemployment rises and wage growth slumps, but it will still hold up relatively well. Government spending will accelerate sharply in order to support economic growth. As these trends continue, domestic demand will strengthen in 2010, but rising demand for raw materials and consumer goods will push up imports, limiting GDP growth to 7% in that year.
The government's forceful and rapid response to the economic downturn
should ensure that economic growth does not fall below 6% in 2009. However, concerns remain over the quality of the growth that the stimulus package will deliver. Given the speed with which investment is being increased (as measured by the rapid rise in fixed asset investment and bank lending growth in the first two months of the year), some funds will inevitably be misspent by local governments on investment projects with dubious economic value. Moreover, although most of the measures in the stimulus package are aimed at improving infrastructure and rural development, there is a risk that, with demand already weak, an increase in productive capacity in key sectors could lead to a rise in deflationary pressures.
China is now suffering from deflation. Consumer prices fell by 1.7% year on year in February 2009, the first fall in consumer prices since December 2002. The rapid fall in inflation, from a high of 8.8% in February 2008, reflects the fading effect of a number of one-off shocks, such as a disease that wiped out much of the country's pig herd in 2007 (sending pork prices soaring) and bad weather, as well as weakening domestic demand, which has led to an increase in spare capacity and unsold stock. The high year-on-year base will contribute to a 0.8% fall in consumer prices in 2009, with prices dropping during much of the period between February and June. Consumer price inflation will turn positive again in 2010, but at 1% it will be subdued. Given that external demand is forecast to remain weak, production overcapacity will be channelled into the domestic market, ensuring that price competition remains intense. Producer prices will be lowered by falling global commodity prices in 2009, but further increases in state-mandated utility prices and other input costs will see producer prices increase in 2010. There is always the risk that weather problems, such as drought, could hit local food production, causing prices to rise more strongly than expected.
Despite its rapid appreciation against the US dollar in 2008, the renminbi is still undervalued. However, the government will continue to intervene in foreign-exchange markets to limit the renminbi's rise against the US dollar amid increased concern over the weakness of exports, and the pace of appreciation will slow dramatically in 2009-10. The renminbi is actually expected to depreciate slightly against the dollar in early 2009, although it will strengthen slowly against that currency later in the year. By contrast, the renminbi will rise sharply against the euro, presenting challenges for exports to Europe. Despite the problems that it causes for exporters, further renminbi appreciation is desirable, as it should help to cut the huge surpluses on China's capital and current accounts, which are contributing significantly to current global economic imbalances.
After posting average annual growth of 27% in value terms in 2003-08, merchandise exports will contract by a massive 22.4% in 2009 in response to very weak global demand, and will experience only modest growth in 2010. Despite this, the trade surplus will remain huge in 2009-10, as falling oil prices and slower growth in domestic demand for raw materials will lead to a big drop in merchandise imports. The weak global economy will cause international tourist arrivals to fall in 2009-10, ensuring that the services account remains in deficit. The surplus on the income account will be substantial in 2009-10, reflecting earnings from the country's growing stock of foreign-exchange reserves and income from rising overseas investment, although low global interest rates and falling dividend payouts will reduce income inflows. The current-account surplus is forecast to narrow to the equivalent of 4.6% of GDP in 2010, from 10.5% in 2008.
The Economist Intelligence Unit
Source: Country Report
(((In this article earthquake related problems were blamed for the loss of 700,000 tons of pork, that's a lot of pork http://translate.google.com/transla...ttp://news.sohu.com/20080603/n257241345.shtml
Earthquake disasters cause traffic disruption, such as soybean meal and fish meal feed can not be transferred, plus the phosphate production enterprises are mainly distributed in the hardest hit, Yinzai cut-off, "Affected by this, the province this year, slaughter pigs will be reduced by nearly 10 million, Pork production will be reduced by 700,000 tons. " )))
This article also alludes to the fact that prominent quantitative easing type measures are having trouble overcoming the impressive headwinds of deflation.
http://www.eiu.com/index.asp?layout...0&refm=vwCtry&page_title=Latest+analysis&rf=0
China economy: Outlook - Suffering deflation
March 24th 2009
FROM THE ECONOMIST INTELLIGENCE UNIT
Economic growth in China will slow sharply over 2009-10, despite the government's attempts to support the economy through its massive fiscal stimulus programme and a substantial relaxation of monetary policy. Real GDP growth will slow to just 6% in 2009, the slowest rate since 1990. For an economy which grew by an average of 11% a year in 2003-07, this will feel like a hard landing, resulting in increased economic hardship, more workers laid off and a rising number of bankruptcies. One of the main reasons for this will be the very weak state of global demand, which will cause export volumes to fall by 9.1% in 2009 and will lead to a drop in investment by businesses in export-oriented coastal provinces. In addition to poor global demand, the domestic economy has been hit by a slowdown linked to developments in the real estate sector, which have seen investment growth slow, reducing demand for heavy-industrial goods, such as steel and cement.
Our central forecast is based on the assumption that China's property sector will recover in the second half of 2009, and that this, combined with the government's stimulus package and interest rate cuts, will begin to support investment growth. Although property prices rose strongly across China in 2007, the country has not experienced the kind of huge property bubble that has been seen in the US. Moreover, given that the real estate sector's slowdown was largely policy-induced, there is a good chance that the policies now being implemented to boost housing demand (including interest rate cuts, which have improved affordability) will have the desired effect, enabling property investment to recover from late 2009. Private consumption growth will slow as unemployment rises and wage growth slumps, but it will still hold up relatively well. Government spending will accelerate sharply in order to support economic growth. As these trends continue, domestic demand will strengthen in 2010, but rising demand for raw materials and consumer goods will push up imports, limiting GDP growth to 7% in that year.
The government's forceful and rapid response to the economic downturn
should ensure that economic growth does not fall below 6% in 2009. However, concerns remain over the quality of the growth that the stimulus package will deliver. Given the speed with which investment is being increased (as measured by the rapid rise in fixed asset investment and bank lending growth in the first two months of the year), some funds will inevitably be misspent by local governments on investment projects with dubious economic value. Moreover, although most of the measures in the stimulus package are aimed at improving infrastructure and rural development, there is a risk that, with demand already weak, an increase in productive capacity in key sectors could lead to a rise in deflationary pressures.
China is now suffering from deflation. Consumer prices fell by 1.7% year on year in February 2009, the first fall in consumer prices since December 2002. The rapid fall in inflation, from a high of 8.8% in February 2008, reflects the fading effect of a number of one-off shocks, such as a disease that wiped out much of the country's pig herd in 2007 (sending pork prices soaring) and bad weather, as well as weakening domestic demand, which has led to an increase in spare capacity and unsold stock. The high year-on-year base will contribute to a 0.8% fall in consumer prices in 2009, with prices dropping during much of the period between February and June. Consumer price inflation will turn positive again in 2010, but at 1% it will be subdued. Given that external demand is forecast to remain weak, production overcapacity will be channelled into the domestic market, ensuring that price competition remains intense. Producer prices will be lowered by falling global commodity prices in 2009, but further increases in state-mandated utility prices and other input costs will see producer prices increase in 2010. There is always the risk that weather problems, such as drought, could hit local food production, causing prices to rise more strongly than expected.
Despite its rapid appreciation against the US dollar in 2008, the renminbi is still undervalued. However, the government will continue to intervene in foreign-exchange markets to limit the renminbi's rise against the US dollar amid increased concern over the weakness of exports, and the pace of appreciation will slow dramatically in 2009-10. The renminbi is actually expected to depreciate slightly against the dollar in early 2009, although it will strengthen slowly against that currency later in the year. By contrast, the renminbi will rise sharply against the euro, presenting challenges for exports to Europe. Despite the problems that it causes for exporters, further renminbi appreciation is desirable, as it should help to cut the huge surpluses on China's capital and current accounts, which are contributing significantly to current global economic imbalances.
After posting average annual growth of 27% in value terms in 2003-08, merchandise exports will contract by a massive 22.4% in 2009 in response to very weak global demand, and will experience only modest growth in 2010. Despite this, the trade surplus will remain huge in 2009-10, as falling oil prices and slower growth in domestic demand for raw materials will lead to a big drop in merchandise imports. The weak global economy will cause international tourist arrivals to fall in 2009-10, ensuring that the services account remains in deficit. The surplus on the income account will be substantial in 2009-10, reflecting earnings from the country's growing stock of foreign-exchange reserves and income from rising overseas investment, although low global interest rates and falling dividend payouts will reduce income inflows. The current-account surplus is forecast to narrow to the equivalent of 4.6% of GDP in 2010, from 10.5% in 2008.
The Economist Intelligence Unit
Source: Country Report
