The Chinese currency’s sharp fall last August has put the spotlight on the country’s foreign exchange reserves that have been dropping, increasing the risk of capital outflows. The falling reserves are not only a result of China’s transition from investment and export-led growth to rising domestic consumption, but also a reflection of the-slower-than-expected economic growth. Meanwhile, more and more wealthy Chinese are moving their assets abroad amid a lackluster domestic environment and the anti-graft crackdown. This is significant for the Chinese economy because the falling forex reserves have led to monetary policy restrictions. What can be possibly done to stabilize capital flows?
The world’s largest restaurant chain is gearing up to do even more in China. In a bid to make China its second-largest market globally, fast food company McDonald’s is set to open 1,250 new outlets in China over the next five years. Despite recent troubles over food safety in China, McDonald’s continues to be gung ho about its prospects in the country. Even concerns over a slowing economy aren’t dampening is spirits. McDonald’s is betting on population growth and rising urbanization to give sales a boost. In this edition of China Data, we bring you the latest numbers from China: from Ronald McDonald’s China plans to wind power and pork prices in the country.
The Summer 2016 issue of CKGSB Knowledge is out! It has articles and interviews like: COVER STORY: Wanted: A Miracle: Buffeted by economic forces, does China still have the wherewithal to face strong winds? CHINA DATA: From stats on wind power to McDonald’s restaurant openings, the numbers you need to know SNAPSHOT: Out to the world: More Chinese students are studying […]
Having delayed serious structural reforms, China faces eye-watering overcapacity in heavy industries. Steel production volume is more than double that of the next four leading producers combined: Japan, India, the United States and Russia. Aluminum production capacity reached 40 million tons last year, exceeding global consumption by 9 million tons. Most remarkably, between 2011 and 2013 China produced more cement than the US did during the entire 20th century—6.6 gigatons, compared to the US’s 4.5. What can China possibly do about this excess capacity that is weighing on the balance sheets of debt-ridden firms reeling from China’s economic slowdown?
China’s boom times are over. With global investor sentiment slipping, concerns are rising about spillover effects of a faltering Chinese economy on global markets and institutions. Although the facts of the problem are well known, fixing it is another issue—the reach and pace of fundamental economic policy choices have been subject to debate. In September 2015, Willem Buiter, Chief Economist at Citigroup, and his team published a research note stating that it was likely that the global economy would soon slip into recession, caused by sluggish growth in emerging markets, especially China. In this interview, Buiter assesses Chinese economic growth and the potential for global recession.
How do Chinese companies view the next few months? The CKGSB Business Conditions Index registered 59.3 in April, falling slightly on March’s overall index of 59.7. This shows that for the survey’s sample firms, of which the majority are relatively successful in China, the next few months are being viewed with some optimism. The CKGSB Business Conditions Index comprises four sub-indices for corporate sales, corporate profits, corporate financing and inventory levels. Corporate sales fell slightly from 74.5 to 73.1, while the profit index rose from 58.9 in March to 61.5 in April. With the sales forecast falling and the profit rising, this shows that cost expectations are improving.
China’s industrial economy did not stabilize: it declined in the first quarter of 2016, according to the latest CKGSB survey of over 2,000 industrial firms nationwide. The survey, led by CKGSB Professor of Finance Gan Jie, shows that overcapacity and weak demand remain biggest challenges for China’s industrial economy. The Business Sentiment Index, a major indicator of the survey, stood at 46 in Q1 2016, a one point increase from Q4 2015, but still indicative of contraction. The BSI is the simple average of three diffusion indices including current operating conditions, expected change in operating conditions and investment timing.
Currently the most valuable fintech company in China, Alibaba’s Ant Financial owns a myriad of businesses: China’s largest payment tool AliPay and a variety of financial services in areas like banking, funds, insurance, credit scoring systems, etc. With over 400 million active users, it has ambitions to expand further into the Chinese hinterland as well as into global markets—something never done by Chinese financial companies before. How will Ant realize its elephantine goals? What is the logic behind its diverse businesses and which one is the focus? Can Ant become the Taobao of the financial industry? We offer some answers.
In previous years as provincial-level GDP data rolled in, China’s top leaders and provincial officials could take a certain satisfaction from the bountiful increases in wealth displayed therein. But were they to spend a bit more time with the data, such pleasure would likely lead to a state of confusion, if not consternation—the sums, quite literally, don’t add up. The total of provincial-level GDP has outstripped the national figure year after year, a problem that has only gotten worse over time. Consequently there has been a rise in the number of indicators that purport to give a true reflection of the situation.
Asia is seeing growing rivalries—and also the enduring influence of the US. In the post-war years it was perhaps easy to take for granted the deep and vast sway held by the US in Asia—from its significant role in the Asian Development Bank to its closeness to regional powerhouse Japan. China’s recent rise has reconfigured the terms of politics, economics and trade in Asia—and the world. That has informed the US’s much-discussed ‘pivot’ to Asia, a key plank of which has been the Trans Pacific Partnership (TPP). Are China’s prospects in trade and regional influence hampered because it is not a signatory of the TPP?