Business news shorts from China

A Building in Hong Kong with RMB, USD, HKD symbols

China’s deflation down by 1.4 per cent, more than expected

China's Consumer Price Index (CPI) was down by 1.4 per cent from the same period last year; showing a greater drop than previously estimated.
The data released by China National Bureau of Statistics on June 10 showed that the changes of CPI during January to April 2009 are 1%, -1.6%, -1.2% and -1.5% compared with the same period last year. A decline by 1.4% in May marked the fourth month of deflation. CPI for the first five months dropped by 0.9% from the same period last year with 3.5% decline in property prices, 2.4% decline in apparel prices and 0.1% decline in food prices.
Some economists believe that the recently released CPI reflects weak domestic and overseas demand for Chinese products and the domestic overcapacity problem, causing a persistent decrease in prices. Additionally the Producer Price Index (PPI) released by China National Bureau of Statistics in May showed a 7.2% drop from the same period last year.
Declines in foreign investments persist for eight months in china
Foreign direct investment (FDI) data published by China’s Commerce Ministry on June 15 showed a persistent decline for eight months, with $6.379 billion USD in May; a decrease by 17.8% from the same period last year.
The data revealed the disbursement of foreign capital in China from January to May 2009 was $34.05 billion USD; a decline of 20.4% from the same period last year. Whereas from January to May, China approved 7,890 foreign-funded enterprises in total, down by 33.8% from the same period last year.
Officials of China’s Commerce Ministry said that this was the first time all three foreign capital utilization indicators (number of new established foreign companies, contractual foreign investment and direct foreign investment ) dropped at the same time since Asia’s financial storm in 1998.
Capital inflows fewer, China reduces its holdings of U.S. debt
Recent data published on the U.S. Treasury website shows that China’s overall holdings of U.S. treasury securities in April were reduced by $4.4 billion USD compared with March. This is the first time China cut its holdings in the past year. Foreign media also reported that fewer capital inflows was the principal reason, and was not China's intention.
Following the global financial crisis, China's trade surplus was down due to weaker external demand, and sharp reductions in the direct foreign investment. Therefore, China’s overall capital inflows began to drop in the past year. The data released by China's Customs shows that China exports in May decreased by 26.4% from the same period last year, while imports were down by 25.2% compared with the same sluggish period last year. China’s overall trade surplus kept shrinking to $13.39 billion USD.
China’s credit amount may hit over 8 million yuan this year
On June 12, a report from the People’s Bank of China said that new loans in May reached 664 billion CNY; reflecting an increase by 346 billion yuan from the same period last year. Total balance of loans is 36.21 million yuan for the first five months this year in China; up by 30.6 per cent from the same period last year. Market predictions indicated that if the loan balance kept increasing, total credit amount might reach 8 million yuan this year, which may cause a credit crunch.
China relaxed the bank loans resulting in 5.17 million yuan new loans from January to April this year, which exceed the planned 5 million yuan of new loans this year. Cumulative loan volume from January to May increased by 5.84 million yuan, growing by 3.72 million yuan from the same period last year.
China imports and exports declined in May for the seventh consecutive month
Data published by China’s Customs Administration on June 11 showed that both imports and exports declined again in May; for the seventh consecutive month. While exports did not improve in May, the decrease occurred at a 26.4 per cent annual pace, down by 22.6 per cent from April. Similarly, imports declined at a 25.2 per cent annual pace and dropped by 23 per cent compared with April.
Declines in China imports and exports lowered the forecast for its economic recovery. Although China offered an economic stimulus package, it could only play a limited role in improving declines in trade. As for bilateral trade with its main trading partners, the E.U., U.S. and Japan were still the top three trading partners with China, but trade volume with them declined by, respectively, 22.1 per cent, 17.1 per cent and 24.6 per cent from last year.
RMB exchange rate keeps sliding in may
Shanghai, China—The latest effective exchange rate (EER) released by the Bank for International Settlements (BIS) showed that China’s EER in May was 119.46; reflecting a drop of 2.43 per cent on a monthly basis, and a declining trend since March this year.
According to Reuters, China’s currency renminbi (RMB) yuan kept pegging into the U.S. dollar in spot-market. The U.S. dollar also slid in May, resulting in the devaluation of non-U.S. dollar currency. The 1.43 per cent decline of RMB in May was greater than its increase in the first four months and its nominal effective exchange rate (NEER) devaluated by 0.4 per cent in the same period.
The central rate of the RMB against the U.S. dollar published by The China Foreign Exchange Trade System (CFETS) this year moved most times within a narrow range of 6.82 to 6.84. It is expected that the RMB actual exchange rate in the future will maintain its weak position.