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Asian Hotspots Catching Fire
Asian Hotspots Catching Fire

Chinese Economy Leading Asia's Economic Recovery

Chinese Economy Leading Asia's Economic Recovery: Asian Hotspots Catching Fire

About: (China Manufacturing PMI, China Economy, South Korea Manufacturing PMI, China Stock Digest, Japanese Prime Minister Hatoyama, China's Economic Growth)
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We’re seeing a strong regional uptrend in Asia. While western economies continue their lackluster performance, many of the countries in the Chinese economic sphere of influence are catching fire economically.

The most immediate and sensitive measure of economic activity is the PMI (purchasing manager’s index) in various countries. Any result in the PMI survey of purchasing managers above 50 indicates economic expansion. As China investors we’re very pleased to see that China’s PMI continues to soar.

The China Manufacturing PMI rose to 56.1 in December – the second fastest rise ever recorded by the survey. The PMI survey indicates a ninth consecutive monthly expansion in new order volume, with companies reporting buoyant demand in both domestic and export markets. We haven’t seen momentum like this since 2005. Manufacturing activity in December expanded at the fastest pace for 20 months.

The good news for China investors is buttressed by equally strong PMI numbers for regional Asian trading partners.

The South Korea manufacturing PMI moved up in December to 52.8 from 52.6 in November. This indicates a continued expansion of the economy. In Taiwan, the manufacturing PMI moved upwards for the ninth successive month, reaching 58.7 from 58.4 in November. The index showed strong demand in both export and domestic markets, although the rate of increase in new orders edged downwards.

Singapore has been less of a success story, with an economic contraction expected in the fourth quarter compared to the previous quarter. Year over year, the fourth quarter is expected to show 3.5% economic expansion.

India appears to be another big winner in the PMI race. The India Manufacturing PMI has hit its highest level since May, rising sharply from 53 to 55.6. India’s PMI has now been above 50 for nine consecutive months, indicating a sustainable trend of expansion.

Japan continues to founder in the grips of what may become another so-called “Lost Decade.” But the new government says it is determined to make inroads on that country’s unaddressed economic malaise.

Japanese Prime Minister Hatoyama says his top priority is to prevent the economy from slipping back into recession by passing budget bills for the current fiscal year and the next. So far, Japan’s record of coming to grips with ingrained economic ills has been dismal but perhaps the new administration can make some inroads at last.

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China Economy: The Mystery of China’s Exploding Retail Sales
China Economy: The Mystery of China’s Exploding Retail Sales

Decoding the Mystery of China’s Exploding Retail Sales

Decoding the Mystery of China’s Exploding Retail Sales

About: (Chen Deming, China’s Minister of Commerce, Chang Xiaocun, China Daily, Department of Market System Development, China Economy)
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First the good news. The total volume of retail sales in China will likely grow by 16 percent next year, that according to Chen Deming, China’s Minister of Commerce. If such a prediction were made about U.S. retail sales, champagne corks would be flying in every mall and big box store nationwide. But, when considering China, as always, it’s complicated.

That brings us to the less good news. China’s retail sales figure is based partly on government spending as it directly affects the retail economy. The ratio of government to true consumer spending has never been clear, but with Beijing’s stimulus money still being distributed, it has to be a substantial portion.

Here’s the last part of the downside. This year’s retail numbers, which have been running at a year-over-year average rate of about 15 percent improvement in retail sales are somewhat misleading because some monthly figures stand in comparison to the sharp drop in sales caused worldwide by the global financial crisis.

Back to the good news. A 16 percent increase for the whole of next year is still a very impressive number.

The prediction for 2010 stands in comparison to this year when widespread government rebate and incentive programs have improved appliance sales and driven automobile sales into the stratosphere. Improving on a stimulus boosted economy is an enviable prospect indeed.

No one should be shocked by now to learn that China became the world’s number one vehicle market in 2009 with sales in excess of 1.2 million units.

By the end of October, the “home appliances to the countryside” stimulus program yielded $17.58 billion in retail sales for appliance makers, not bad considering the ‘countryside’ is code for ‘poor’ districts in China.  Another stimulus called the “trade-in program” of rebates created another $1.46 billion in sales of new cars and home appliances by November 24th.

With exports still down China is hitting the gas to boost domestic consumption, hoping China’s consumers will pick up the slack. Stimulus funds are being distributed according to Beijing’s guidelines but not all of the money is coming from Beijing. Under the guidelines, 32 cities and regions have allocated funds worth $366 million to expand sales networks in rural areas, to rebate programs for household appliances and automobiles, and to launch credit subsidy policies for small and medium-sized enterprises.

Chang Xiaocun, director general of the Department of Market System Development told China Daily, “Ballooning consumption of household appliances, auto, property and agricultural goods is the major driving force behind the rising retail sales.”

Chinese mandarins have given every indication that they want the retail boom to continue. China’s consumers spend a far smaller percentage of GDP than Americans so there’s plenty of room for growth. All of the signals we are getting indicate that consumer stimulus programs will continue through 2010.

China Economy: The Mystery of China
China Economy: The Mystery of China

Decoding the Mystery of China