China Information News
China's budget deficit may reach 280 bln yuan in 2009
11 December 2008
China's budget deficit will rise to 280 billion yuan in 2009, according to a fiscal budget proposal presented by the Ministry of Finance (MOF) to the State Council, China Business Journal reported Monday.
The 280 billion yuan deficit, although still reasonable in the context of China's 4 trillion yuan stimulus package, marks a substantial rise of 100 billion yuan from this year's budget deficit. The jump in fiscal deficit on one hand is in line with the government's shift to an active fiscal policy, on the other hand indicates that China will face more fiscal pressure amid the global financial crisis.
280 bln yuan budget deficit
The MOF has decided on a 280-billion-yuan budget deficit for fiscal year 2009, rising by 100 billion yuan from this year's figure, said a source close to the ministry.
"The 280 billion yuan is the planning deficit in the fiscal budget report; there will be other deficit data in the government's final accounting of revenue and expenditure," the source noted.
Normally the deficit data only shows the state of fiscal balance, and information on how the increased deficit will be used is not specified.
According to the source, the fiscal budget report has been submitted to the State Council and might have been discussed at the Central Economic Work Conference which concluded yesterday.
Growing fiscal pressure in 2009
Although the impact of the global financial crisis on China started to emerge in the second half of this year, China is still looking at a 24 percent fiscal revenue growth in 2008. Based on calculations of the Research Institute for Fiscal Science under the Ministry of Finance, China may still be able to increase by about 20 percent in its fiscal revenues next year.
"We will also see an obvious rise in long-term construction treasury bonds and fiscal deficit in 2009," said Jia Kang, head of the institute. But he argued that even so, China's deficit is still within the safety zone.
Although China's deficit in 2008 reached 180 billion yuan, its nominal deficit ratio still remains relatively low. Jia said that most of the 180 billion yuan deficit had not been invested in projects, but in state funds, such as "the central budget stability and regulation fund, the social security fund and so on."
In the meanwhile MOF officials have agreed on the growing fiscal pressure next year, the above source said.
Fiscal policy targets adjusting economic structure
Monetary policy cannot provide much help in adjusting the economic structure; in contrast, both expanding the deficit and active fiscal policy can impact directly on structural economic adjustment, noted an expert within the government finance system.
According to this expert, the Central Economic Conference would have discussed measures to ensure allocation of fiscal funds and avoid reverting to the old investment pattern in the planned economy.
(China.org.cn by Yan Pei, December 11, 2008)
Thursday, December 11, 2008
China - Key economic conference promises stable growth
China Information News
Key economic conference promises stable growth
11 December 2008
China concluded the three-day annual Central Economic Work Conference Wednesday in Beijing with a pledge to maintain stable, healthy growth next year through domestic demand expansion and economic restructuring.
President Hu Jintao and Premier Wen Jiabao addressed the meeting, which is held once a year to set the tone for economic development during the next year.
It was agreed at the meeting, 2008 was an extraordinary year for China, in which the country experienced unexpected, seldom seen, major challenges. Those include severe winter weather at the beginning of the year, the May 12 earthquake and the current international financial crisis.
Fighting those challenges, China has taken a string of measures to further expand domestic demand and promote economic growth. As a result, the Chinese economy has kept growing relatively rapidly, with inflationary pressure eased and the economic structure improved.
The achievements "demonstrated the overall national strength China had built over the past three decades, proved the correctness of socialism with Chinese characteristics and justified the advantage of a socialist institution in pooling various forces to realize big feats," according to attendees of the meeting.
The achievements also displayed the "heroism and strong cohesion" of the Chinese nation.
As international financial woes worsened and permeated into the real economy worldwide, instabilities and uncertainties mounted for the Chinese economy. This, together with problems that already exist within the Chinese economy, downward economic pressure increased on the nation.
However, conference attendees noted, important opportunities for China's economic and social development still existed and would not be reversed by ongoing global financial woes.
As they pointed out, priority should be given to maintaining stable and relatively fast economic growth next year. This will be achieved through expanding domestic demand, restructuring the economy and transforming the growth pattern. All will ultimately target improving people's living standard.
In 2009, China will enhance and improve macroeconomic control efforts and carry out an active fiscal policy, as well as a moderately easy monetary policy, the central authorities decided.
In this regard, expenditures in public areas will be "substantially increased" and those in major areas should be guaranteed.
Financial support should be reinforced for farmers and agricultural production, employment, social welfare, education, health care, energy conservation and emissions reduction, technical innovation, manufacturing of state-of-the-art equipment, service and smaller enterprises. Subsidies and other aid should be increased for low-income earners.
It is also stressed more efforts should be made to "solve problems related to interests of ordinary people, so as to maintain stability of the society".
Wide-ranging measures should be taken to provide more jobs and improve social welfare systems for both urban and rural areas. Pension and health care insurance should cover more employees in urban areas, similar services should be offered on a trial basis in rural areas and related insurance should be established for rural migrant workers, according to the central authorities.
Also noted was the exchange rate of Chinese currency, Renminbi. Attendees said it should be kept "largely stable at a reasonable and balanced level".
Zhao Jinping, a researcher with the government think tank, the Development Research Center under the State Council, said it was necessary for China to mitigate the upward trend of Renminbi.
Tan Yaling, a Beijing-based financial expert, said Renminbi had not entered a channel of depreciation.
She was echoed by Zhao. He said depreciation would bring about outflow of short-term speculative funds, which was unfavorable for the stability of capital markets.
To achieve 2009's goals, the attendees pointed out, flexible and prudent macroeconomic policies should continue. China should also improve abilities to respond to changes and enhance the real effect of macro control efforts.
(Xinhua News Agency December 11, 2008)
Key economic conference promises stable growth
11 December 2008
China concluded the three-day annual Central Economic Work Conference Wednesday in Beijing with a pledge to maintain stable, healthy growth next year through domestic demand expansion and economic restructuring.
President Hu Jintao and Premier Wen Jiabao addressed the meeting, which is held once a year to set the tone for economic development during the next year.
It was agreed at the meeting, 2008 was an extraordinary year for China, in which the country experienced unexpected, seldom seen, major challenges. Those include severe winter weather at the beginning of the year, the May 12 earthquake and the current international financial crisis.
Fighting those challenges, China has taken a string of measures to further expand domestic demand and promote economic growth. As a result, the Chinese economy has kept growing relatively rapidly, with inflationary pressure eased and the economic structure improved.
The achievements "demonstrated the overall national strength China had built over the past three decades, proved the correctness of socialism with Chinese characteristics and justified the advantage of a socialist institution in pooling various forces to realize big feats," according to attendees of the meeting.
The achievements also displayed the "heroism and strong cohesion" of the Chinese nation.
As international financial woes worsened and permeated into the real economy worldwide, instabilities and uncertainties mounted for the Chinese economy. This, together with problems that already exist within the Chinese economy, downward economic pressure increased on the nation.
However, conference attendees noted, important opportunities for China's economic and social development still existed and would not be reversed by ongoing global financial woes.
As they pointed out, priority should be given to maintaining stable and relatively fast economic growth next year. This will be achieved through expanding domestic demand, restructuring the economy and transforming the growth pattern. All will ultimately target improving people's living standard.
In 2009, China will enhance and improve macroeconomic control efforts and carry out an active fiscal policy, as well as a moderately easy monetary policy, the central authorities decided.
In this regard, expenditures in public areas will be "substantially increased" and those in major areas should be guaranteed.
Financial support should be reinforced for farmers and agricultural production, employment, social welfare, education, health care, energy conservation and emissions reduction, technical innovation, manufacturing of state-of-the-art equipment, service and smaller enterprises. Subsidies and other aid should be increased for low-income earners.
It is also stressed more efforts should be made to "solve problems related to interests of ordinary people, so as to maintain stability of the society".
Wide-ranging measures should be taken to provide more jobs and improve social welfare systems for both urban and rural areas. Pension and health care insurance should cover more employees in urban areas, similar services should be offered on a trial basis in rural areas and related insurance should be established for rural migrant workers, according to the central authorities.
Also noted was the exchange rate of Chinese currency, Renminbi. Attendees said it should be kept "largely stable at a reasonable and balanced level".
Zhao Jinping, a researcher with the government think tank, the Development Research Center under the State Council, said it was necessary for China to mitigate the upward trend of Renminbi.
Tan Yaling, a Beijing-based financial expert, said Renminbi had not entered a channel of depreciation.
She was echoed by Zhao. He said depreciation would bring about outflow of short-term speculative funds, which was unfavorable for the stability of capital markets.
To achieve 2009's goals, the attendees pointed out, flexible and prudent macroeconomic policies should continue. China should also improve abilities to respond to changes and enhance the real effect of macro control efforts.
(Xinhua News Agency December 11, 2008)
Weathering the economic storm - Rapid collective action is key
China Information News
Weathering the economic storm - Rapid collective action is key
11 December 2008
By David Ferguson
Decisive and collective action will be key to the success of Asian countries in defending themselves from the impact of the global economic slowdown.
This was the message from Jong-Wha Lee, Head of the Office of Regional Economic Integration (OREI) of the Asian Development Bank (ADB), in response to a new report from the Bank indicating a slowdown in economic growth in developing Asia. As the impact of the global financial crisis spreads to emerging markets, growth will slow to 5.8% in 2009, down from a probable 6.9% this year and 9% in 2007.
With the global economy facing a major downturn, the region's economic resilience will be tested by weakening exports and a sharp slowdown of private capital flows, according to the December issue of Asia Economic Monitor (AEM).
"2009 is likely to be a difficult year for developing Asia but it will be manageable if countries respond decisively and collectively," said Lee.
The message will strike a chord in China and in the ASEAN (Association of South East Asia Nations). At the recent China-ASEAN Trade Expo and Business Summit held in Nanning, Guanxi, in October, there was clear understanding of the expected economic turbulence. Eminent speakers, including some of the most senior politicians from the participating nations, repeatedly emphasized the need for common action, but the mood was in general assertive and positive rather than pessimistic. Even then, widespread support was apparent for Lee's current analysis: "Swift action by policymakers to stem both the threat to the financial systems and the real economy will allow most of the region's economies to sustain a healthy if slower expansion."
Economic growth in emerging East Asia - defined as ASEAN, plus the People's Republic of China (PRC), Hong Kong, Chinese Taipei, and the Republic of Korea - will slow to 5.7% in 2009 down from 6.9% in 2008. Growth in the PRC itself, the region's engine, is expected to moderate to 8.2% in 2009 from 9.5% in 2008 even as the government has undertaken aggressive measures, with the injection of 4 trillion yuan (US $600 billion) into the economy to spur domestic demand in order to offset a slowdown in exports and private investment growth.
The AEM says that supporting this growth momentum in domestic demand is key to keeping the regional economy in relatively good shape amid a weakening external environment. But further clouding the outlook is the prospect of a deeper, more prolonged global recession creating persistent stress on the region's financial systems.
"The risks to the region's growth outlook are strongly tied to the global outlook through both trade and financial links," says Dr. Lee. "Further financial disruption could also exert a significant influence on consumer and investor confidence in the region."
While the region's economies and financial systems are fundamentally sound and appear better cushioned to withstand the immediate effects of the crisis than other parts of the world, the report notes with concern that the global credit crunch is now simmering in the domestic banking systems, squeezing funding resources for corporate investment, and could boil over in some key regional economies if left unaddressed. If banks in the region become more risk averse, the report warns, monetary policy may have less traction than in the past and governments will have to develop more active fiscal responses to shore up domestic demand.
The most dynamic economy in South Asia in recent years, India, is facing similar problems. The country is seriously concerned by the probable impact of the global financial crisis on its banking systems and financial markets, and the impact on its economic performance will be almost identical - the growth projection for India has been revised down to 7% in 2008 and 6.5% in 2009, falling from 9% in 2007. These figures are reflected in the forecasts for the whole of South Asia, which follow a similar trend to India but are slightly lower.
The AEM urges policymakers throughout the Asian region to move swiftly to reduce the risk of a regional credit crunch, and provides a number of specific recommendations. These include: increased monitoring of local financial markets; clear policies in place in advance to deal with stressed institutions; adequate provision of foreign and domestic liquidity so that credit continues to flow into the economy.
A further recommendation to the region's authorities concerns improvements in the regulation, control, and monitoring of financial systems. The five key objectives here are: (a) to strengthen transparency and accountability, (b) to enhance prudent management and effective review, (c) to mitigate the impact of extremes in financial market cycles, (d) to extend the range and depth of financial markets in order to enhance their resilience to economic turbulence, and (e) to reinforce cross-border cooperation.
(China.org.cn December 11, 2008)
Weathering the economic storm - Rapid collective action is key
11 December 2008
By David Ferguson
Decisive and collective action will be key to the success of Asian countries in defending themselves from the impact of the global economic slowdown.
This was the message from Jong-Wha Lee, Head of the Office of Regional Economic Integration (OREI) of the Asian Development Bank (ADB), in response to a new report from the Bank indicating a slowdown in economic growth in developing Asia. As the impact of the global financial crisis spreads to emerging markets, growth will slow to 5.8% in 2009, down from a probable 6.9% this year and 9% in 2007.
With the global economy facing a major downturn, the region's economic resilience will be tested by weakening exports and a sharp slowdown of private capital flows, according to the December issue of Asia Economic Monitor (AEM).
"2009 is likely to be a difficult year for developing Asia but it will be manageable if countries respond decisively and collectively," said Lee.
The message will strike a chord in China and in the ASEAN (Association of South East Asia Nations). At the recent China-ASEAN Trade Expo and Business Summit held in Nanning, Guanxi, in October, there was clear understanding of the expected economic turbulence. Eminent speakers, including some of the most senior politicians from the participating nations, repeatedly emphasized the need for common action, but the mood was in general assertive and positive rather than pessimistic. Even then, widespread support was apparent for Lee's current analysis: "Swift action by policymakers to stem both the threat to the financial systems and the real economy will allow most of the region's economies to sustain a healthy if slower expansion."
Economic growth in emerging East Asia - defined as ASEAN, plus the People's Republic of China (PRC), Hong Kong, Chinese Taipei, and the Republic of Korea - will slow to 5.7% in 2009 down from 6.9% in 2008. Growth in the PRC itself, the region's engine, is expected to moderate to 8.2% in 2009 from 9.5% in 2008 even as the government has undertaken aggressive measures, with the injection of 4 trillion yuan (US $600 billion) into the economy to spur domestic demand in order to offset a slowdown in exports and private investment growth.
The AEM says that supporting this growth momentum in domestic demand is key to keeping the regional economy in relatively good shape amid a weakening external environment. But further clouding the outlook is the prospect of a deeper, more prolonged global recession creating persistent stress on the region's financial systems.
"The risks to the region's growth outlook are strongly tied to the global outlook through both trade and financial links," says Dr. Lee. "Further financial disruption could also exert a significant influence on consumer and investor confidence in the region."
While the region's economies and financial systems are fundamentally sound and appear better cushioned to withstand the immediate effects of the crisis than other parts of the world, the report notes with concern that the global credit crunch is now simmering in the domestic banking systems, squeezing funding resources for corporate investment, and could boil over in some key regional economies if left unaddressed. If banks in the region become more risk averse, the report warns, monetary policy may have less traction than in the past and governments will have to develop more active fiscal responses to shore up domestic demand.
The most dynamic economy in South Asia in recent years, India, is facing similar problems. The country is seriously concerned by the probable impact of the global financial crisis on its banking systems and financial markets, and the impact on its economic performance will be almost identical - the growth projection for India has been revised down to 7% in 2008 and 6.5% in 2009, falling from 9% in 2007. These figures are reflected in the forecasts for the whole of South Asia, which follow a similar trend to India but are slightly lower.
The AEM urges policymakers throughout the Asian region to move swiftly to reduce the risk of a regional credit crunch, and provides a number of specific recommendations. These include: increased monitoring of local financial markets; clear policies in place in advance to deal with stressed institutions; adequate provision of foreign and domestic liquidity so that credit continues to flow into the economy.
A further recommendation to the region's authorities concerns improvements in the regulation, control, and monitoring of financial systems. The five key objectives here are: (a) to strengthen transparency and accountability, (b) to enhance prudent management and effective review, (c) to mitigate the impact of extremes in financial market cycles, (d) to extend the range and depth of financial markets in order to enhance their resilience to economic turbulence, and (e) to reinforce cross-border cooperation.
(China.org.cn December 11, 2008)
Morgan Stanley: China's economy likely to regain growth momentum in 2nd half of 2009
XinHua News
Morgan Stanley: China's economy likely to regain growth momentum in 2nd half of 2009
2008-12-11 00:51:57
by Xinhua Writer Cheng Yunjie
BEIJING, Dec. 10 (Xinhua) -- As the risk of deflation looms large on top of weaker exports and declining private real estate investment, China's economy may continue to slow down in the quarters immediately ahead but regain growth momentum in the second half of next year, according to a Morgan Stanley report released on Wednesday.
In its China Economics Outlook for 2009, the Hong Kong-based Morgan Stanley Asia forecast China's baseline GDP growth would be around 7.5 percent next year, with the bull and bear scenarios projected at 9 percent and 5 percent respectively.
The projection came after the country's economic indicators showed that the impacts from the global financial crisis on China's tangible economy have become much severer.
The exports totaled 115 billion U.S. dollars last month, down 2.2 percent year-on-year in the first monthly decline since June 2001, the General Administration of Customs said on Wednesday. The previous decline, a much smaller 0.6 percent, reflected slumping U.S. demand after the tech bubble burst.
The producer price index (PPI), a measure of inflation at the factory level, decelerated sharply to an annual rise of 2 percent in November. It was also slowest rise for the PPI since May 2006, which prompted worries about the fast-slowing economy and rising deflation risks.
Late last month, the World Bank has revised down its forecast for China's GDP rise of next year from 9.2 percent to 7.5 percent.
Morgan Stanley Asia chief economist on the Chinese economy Wang Qing said that three factors, namely the cooling-down in real estate investment, a massive de-stocking of raw material inputs in the immediate aftermath of the collapse of international commodity prices and the weakening external demand, had caused China's economy to slowdown rather sharply.
The "triple-whammy impact" however could barely maintain its full force throughout 2009, although the ravage would likely continue to be felt though in the first quarter of next year, he said. "We believe that China's economic outlook for next year is best characterized as getting worse before getting better, laying the foundation for a firmer recovery in 2010."
As the fiscal stimulus package came much faster this time than that during the Asia financial crisis, Morgan Stanley expected the effect to be apparent by mid-2009. Besides, the slow recovery of the G3 economies -- the United States, European Union and Japan--after the unprecedented monetary and fiscal policy actions might have led to an improving external demand by the second half of next year and thus would contribute to a modest recovery of the Chinese economy.
REAL ESTATE CONCERN
Identifying real estate as the biggest swing factor among all scenarios, Wang said that weakening external demand was not the primary reason for China's sharp economic slowdown as deceleration in exports had been gradual and taking place since mid-2007.
It was the macroeconomic tightening policy package launched in late 2007 to avert overheating that has hit the property sector hard. As a consequence, real estate investment has slowed substantially, diminishing demand for key construction materials, such as steel, cement, and aluminum, and housing-related consumer durable goods, he noted.
Wang envisaged a significant decline of six percent (in real terms) in real estate investment from the private sector next year, contending that the chance of a massive industrial collapse on a nationwide scale was small.
To activate the property market, Chinese government has rolled back austere measures previously taken to prevent the economy from overheating, reduced taxes and cut interests.
"There has been a welcome correction in property prices, we expect housing affordability to increase, sentiment to improve, and property sales to stabilize by mid-year 2009", said the report. "Further property-sector-boosting policy measures will likely be implemented in the coming months."
DEFLATION RISK
In this report, Morgan Stanley Asia also revised its Consumer Price Index forecast for 2009 from 1.5 percent down to -0.8 percent, pointing to a "high deflation risk".
From the supply side, the bursting of the international commodity price bubble since October has spawned a sharp decline in the prices of raw materials imported by China. Moreover, weakening exports that are expected to continue amid a synchronized recession in G3 economies also exacerbated the problem of production overcapacity, limiting Chinese producers' pricing power, it said.
"Deflation is not always a bad thing. The challenge is to prevent deflationary expectations from getting entrenched. This necessitates a strong, preemptive monetary policy response," Wang said.
Morgan Stanley therefore expected China's central bank to cut benchmark interest rates aggressively by an additional 162 basis points over the course of 2009. And to ease deflationary expectations, the cuts will most probably be done in the first half.
Although China's economy would steer clear of the extreme downside risk of an outright hard landing after current public-sector-driven growth helped achieve the headline GDP growth and job creation targets, the stimulus would not deliver nearly as strong corporate earnings growth as when the same level of headline GDP growth was fueled by buoyant private-sector spending.
"China's macro-economic environment will be relatively job-rich but profit-deficient in which bonds tend to be favored over equities," Wang said.
Editor: Sun
Morgan Stanley: China's economy likely to regain growth momentum in 2nd half of 2009
2008-12-11 00:51:57
by Xinhua Writer Cheng Yunjie
BEIJING, Dec. 10 (Xinhua) -- As the risk of deflation looms large on top of weaker exports and declining private real estate investment, China's economy may continue to slow down in the quarters immediately ahead but regain growth momentum in the second half of next year, according to a Morgan Stanley report released on Wednesday.
In its China Economics Outlook for 2009, the Hong Kong-based Morgan Stanley Asia forecast China's baseline GDP growth would be around 7.5 percent next year, with the bull and bear scenarios projected at 9 percent and 5 percent respectively.
The projection came after the country's economic indicators showed that the impacts from the global financial crisis on China's tangible economy have become much severer.
The exports totaled 115 billion U.S. dollars last month, down 2.2 percent year-on-year in the first monthly decline since June 2001, the General Administration of Customs said on Wednesday. The previous decline, a much smaller 0.6 percent, reflected slumping U.S. demand after the tech bubble burst.
The producer price index (PPI), a measure of inflation at the factory level, decelerated sharply to an annual rise of 2 percent in November. It was also slowest rise for the PPI since May 2006, which prompted worries about the fast-slowing economy and rising deflation risks.
Late last month, the World Bank has revised down its forecast for China's GDP rise of next year from 9.2 percent to 7.5 percent.
Morgan Stanley Asia chief economist on the Chinese economy Wang Qing said that three factors, namely the cooling-down in real estate investment, a massive de-stocking of raw material inputs in the immediate aftermath of the collapse of international commodity prices and the weakening external demand, had caused China's economy to slowdown rather sharply.
The "triple-whammy impact" however could barely maintain its full force throughout 2009, although the ravage would likely continue to be felt though in the first quarter of next year, he said. "We believe that China's economic outlook for next year is best characterized as getting worse before getting better, laying the foundation for a firmer recovery in 2010."
As the fiscal stimulus package came much faster this time than that during the Asia financial crisis, Morgan Stanley expected the effect to be apparent by mid-2009. Besides, the slow recovery of the G3 economies -- the United States, European Union and Japan--after the unprecedented monetary and fiscal policy actions might have led to an improving external demand by the second half of next year and thus would contribute to a modest recovery of the Chinese economy.
REAL ESTATE CONCERN
Identifying real estate as the biggest swing factor among all scenarios, Wang said that weakening external demand was not the primary reason for China's sharp economic slowdown as deceleration in exports had been gradual and taking place since mid-2007.
It was the macroeconomic tightening policy package launched in late 2007 to avert overheating that has hit the property sector hard. As a consequence, real estate investment has slowed substantially, diminishing demand for key construction materials, such as steel, cement, and aluminum, and housing-related consumer durable goods, he noted.
Wang envisaged a significant decline of six percent (in real terms) in real estate investment from the private sector next year, contending that the chance of a massive industrial collapse on a nationwide scale was small.
To activate the property market, Chinese government has rolled back austere measures previously taken to prevent the economy from overheating, reduced taxes and cut interests.
"There has been a welcome correction in property prices, we expect housing affordability to increase, sentiment to improve, and property sales to stabilize by mid-year 2009", said the report. "Further property-sector-boosting policy measures will likely be implemented in the coming months."
DEFLATION RISK
In this report, Morgan Stanley Asia also revised its Consumer Price Index forecast for 2009 from 1.5 percent down to -0.8 percent, pointing to a "high deflation risk".
From the supply side, the bursting of the international commodity price bubble since October has spawned a sharp decline in the prices of raw materials imported by China. Moreover, weakening exports that are expected to continue amid a synchronized recession in G3 economies also exacerbated the problem of production overcapacity, limiting Chinese producers' pricing power, it said.
"Deflation is not always a bad thing. The challenge is to prevent deflationary expectations from getting entrenched. This necessitates a strong, preemptive monetary policy response," Wang said.
Morgan Stanley therefore expected China's central bank to cut benchmark interest rates aggressively by an additional 162 basis points over the course of 2009. And to ease deflationary expectations, the cuts will most probably be done in the first half.
Although China's economy would steer clear of the extreme downside risk of an outright hard landing after current public-sector-driven growth helped achieve the headline GDP growth and job creation targets, the stimulus would not deliver nearly as strong corporate earnings growth as when the same level of headline GDP growth was fueled by buoyant private-sector spending.
"China's macro-economic environment will be relatively job-rich but profit-deficient in which bonds tend to be favored over equities," Wang said.
Editor: Sun
US jobless claims to rise
The Straits Times
Dec 11, 2008 |
US jobless claims to rise
WASHINGTON - WALL Street expects the US government to report that new claims for unemployment benefits increased last week as companies ramped-up layoffs amid the recession.
The jobless claims report comes a day after the federal government said the monthly budget deficit reached a record in November, in part because of increased spending on programs such as unemployment insurance and food stamps.
The number of new claims for jobless benefits is projected to increase to a seasonally adjusted 525,000, up from 509,000 the previous week, according to Wall Street economists surveyed by Thomson Reuters.
Claims late last month reached 543,000, their highest level in 16 years. Economists said the drop to 509,000 was partly due to volatility from the Thanksgiving holiday week.
Last week's report showed the number of people continuing to claim unemployment benefits reached nearly 4.09 million, the highest level since December 1982. Economists expect that number rose to 4.1 million.
Even when the larger work force is factored in, the proportion of workers who are continuing to receive jobless benefits matches a level last reached in September 1992, when the economy was recovering from a recession.
'The underlying trend in claims is still strongly upwards,' Ian Shepherdson, chief US economist at High Frequency Economics, said in a research note.
A number of large US employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.
The layoffs come as the federal budget deficit continues to spiral.
In just the first two months of the budget year that started Oct 1, the deficit totaled US$401.6 billion (S$598.4 billion), nearly matching the record gap of US$455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top US$1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps.
Then there's the US$700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and US$191.5 billion over the past two months.
The department said the gap between the government's revenue collections and what it paid out last month totalled US $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was US$98.2 billion in November 2007.
An annual deficit of US$1 trillion would equal 6.7 per cent of the gross domestic product, the economy's total output in a single year.
That would surpass the previous postwar record in GDP terms of 6 per cent sent in 1983 when Ronald Reagan was president.
And some economists think the annual deficit will be even higher.
David Rosenberg, North American economist at Merrill Lynch, projected that it could reach US$1.5 trillion, depending on how large an economic stimulus package is approved next year.
The Treasury Department plans to use US$250 billion of the US$700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the
hopes that they will resume more normal lending practices.
Some analysts argue that the deficit is effectively lower than Treasury's figures because the government has received stakes in the banks in return for the capital. The government could get some or all of the money back when it sells those ownership stakes in the future.
The Congressional Budget Office said last week that accounting for the value of those stakes would reduce the combined deficit for October and November to US$267 billion, rather than the US$401.6 billion reported by Treasury. -- AP
Dec 11, 2008 |
US jobless claims to rise
WASHINGTON - WALL Street expects the US government to report that new claims for unemployment benefits increased last week as companies ramped-up layoffs amid the recession.
The jobless claims report comes a day after the federal government said the monthly budget deficit reached a record in November, in part because of increased spending on programs such as unemployment insurance and food stamps.
The number of new claims for jobless benefits is projected to increase to a seasonally adjusted 525,000, up from 509,000 the previous week, according to Wall Street economists surveyed by Thomson Reuters.
Claims late last month reached 543,000, their highest level in 16 years. Economists said the drop to 509,000 was partly due to volatility from the Thanksgiving holiday week.
Last week's report showed the number of people continuing to claim unemployment benefits reached nearly 4.09 million, the highest level since December 1982. Economists expect that number rose to 4.1 million.
Even when the larger work force is factored in, the proportion of workers who are continuing to receive jobless benefits matches a level last reached in September 1992, when the economy was recovering from a recession.
'The underlying trend in claims is still strongly upwards,' Ian Shepherdson, chief US economist at High Frequency Economics, said in a research note.
A number of large US employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.
The layoffs come as the federal budget deficit continues to spiral.
In just the first two months of the budget year that started Oct 1, the deficit totaled US$401.6 billion (S$598.4 billion), nearly matching the record gap of US$455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top US$1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps.
Then there's the US$700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and US$191.5 billion over the past two months.
The department said the gap between the government's revenue collections and what it paid out last month totalled US $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was US$98.2 billion in November 2007.
An annual deficit of US$1 trillion would equal 6.7 per cent of the gross domestic product, the economy's total output in a single year.
That would surpass the previous postwar record in GDP terms of 6 per cent sent in 1983 when Ronald Reagan was president.
And some economists think the annual deficit will be even higher.
David Rosenberg, North American economist at Merrill Lynch, projected that it could reach US$1.5 trillion, depending on how large an economic stimulus package is approved next year.
The Treasury Department plans to use US$250 billion of the US$700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the
hopes that they will resume more normal lending practices.
Some analysts argue that the deficit is effectively lower than Treasury's figures because the government has received stakes in the banks in return for the capital. The government could get some or all of the money back when it sells those ownership stakes in the future.
The Congressional Budget Office said last week that accounting for the value of those stakes would reduce the combined deficit for October and November to US$267 billion, rather than the US$401.6 billion reported by Treasury. -- AP
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