China
Volts Don’t Lie? An Alternative Approach to Calculating China’s Growth
By Tom Orlik China’s Vice Premier Li Keqiang said in 2007 that the GDP data for the world’s second largest economy was ‘man made’ and not to be trusted. Instead, the then Party Secretary of Liaoning Province said, he relied on electricity production, train freight and bank loan data as a guide to the state of the economy. Last month, CRT looked at the strengths and weaknesses of China’s GDP data, concluding that the government’s methods for calculating the size of the world’s second-largest economy had improved but still left something to be desired . Are electricity statistics a better guide to growth? Electricity output has a special place in the world of China’s economic data. Officials might lie, it is believed, but volts do not. Ever since economists cried foul on the 1998 GDP data, citing the difference between falling growth in production of electricity and stable growth in GDP, the markets have viewed the electricity data as a proxy for overall growth. That makes some sense. The manufacturing and industrial sectors are major consumers of electricity; changes in output should be reflected in changes in electricity production. Over the last several years, growth in electricity output has moved more or less in line with growth in industrial output. With some of China’s main growth indicators putting in a dismal performance in the last few months, and concerns about a hard landing for the economy, the electricity data provides an optimistic counterpoint. Following a weak April and May, electricity output was up 16.2% year-on-year in June, suggesting a strengthening economy. That contrasts with a weak reading from the preliminary HSBC PMI report in July, which suggested contraction is on the cards. But before breaking out the celebratory baijiu and heading out for karaoke, China’s economic policy makers should consider a few shortcomings of the electricity output data as a guide to growth: – Changes in the structure of the economy change the relationship between growth and electricity consumption. For example, a shrinking role for manufacturing and a larger role for services – something China’s economic planners have been pushing lately — reduces growth in electricity production but not necessarily growth in GDP. And even with no change in the structure of industry, many manufacturers have off-grid generators that they can switch on or off without affecting electricity production data – which only captures on-grid activity. – China’s electricity producers have their own problems. Hydropower accounts for 16% of China’s electricity output. Droughts in April and May meant generators ran into difficulties. Heavy rain has now brought them whirring back to life. Neither the drought nor the flood said much about the underlying strength of demand for electricity. Changes in costs for coal – the main input into electricity generation – can also play havoc with production. – Households account for 12% of electricity consumption and their demand is affected mainly by the weather – which determines whether central heating and air conditioners are on or off – with little relation to changes in growth. All of these factors mean the relation between electricity production and economic growth is difficult to predict. Investors who pay too much attention to electricity as a proxy for growth can misread the signs. This was the case in the first half of 2009, when growth in electricity output stayed in negative territory till May – partly because of a slow recovery in the electricity intensive aluminum sector, but the rebound in the rest of the economy was strong. In the second half of 2011, optimism about the outlook based on June’s strong electricity data may be similarly misplaced. Tom Orlik’s new book Understanding China’s Economic Indicators was released July 12
By Tom Orlik China’s Vice Premier Li Keqiang said in 2007 that the GDP data for the world’s second largest economy was ‘man made’ and not to be trusted. Instead, the then Party Secretary of Liaoning Province said, he relied on electricity production, train freight and bank loan data as a guide to the state of the economy. Last month, CRT looked at the strengths and weaknesses of China’s GDP data, concluding that the government’s methods for calculating the size of the world’s second-largest economy had improved but still left something to be desired . Are electricity statistics a better guide to growth? Electricity output has a special place in the world of China’s economic data. Officials might lie, it is believed, but volts do not. Ever since economists cried foul on the 1998 GDP data, citing the difference between falling growth in production of electricity and stable growth in GDP, the markets have viewed the electricity data as a proxy for overall growth. That makes some sense. The manufacturing and industrial sectors are major consumers of electricity; changes in output should be reflected in changes in electricity production. Over the last several years, growth in electricity output has moved more or less in line with growth in industrial output. With some of China’s main growth indicators putting in a dismal performance in the last few months, and concerns about a hard landing for the economy, the electricity data provides an optimistic counterpoint. Following a weak April and May, electricity output was up 16.2% year-on-year in June, suggesting a strengthening economy. That contrasts with a weak reading from the preliminary HSBC PMI report in July, which suggested contraction is on the cards. But before breaking out the celebratory baijiu and heading out for karaoke, China’s economic policy makers should consider a few shortcomings of the electricity output data as a guide to growth: – Changes in the structure of the economy change the relationship between growth and electricity consumption. For example, a shrinking role for manufacturing and a larger role for services – something China’s economic planners have been pushing lately — reduces growth in electricity production but not necessarily growth in GDP. And even with no change in the structure of industry, many manufacturers have off-grid generators that they can switch on or off without affecting electricity production data – which only captures on-grid activity. – China’s electricity producers have their own problems. Hydropower accounts for 16% of China’s electricity output. Droughts in April and May meant generators ran into difficulties. Heavy rain has now brought them whirring back to life. Neither the drought nor the flood said much about the underlying strength of demand for electricity. Changes in costs for coal – the main input into electricity generation – can also play havoc with production. – Households account for 12% of electricity consumption and their demand is affected mainly by the weather – which determines whether central heating and air conditioners are on or off – with little relation to changes in growth. All of these factors mean the relation between electricity production and economic growth is difficult to predict. Investors who pay too much attention to electricity as a proxy for growth can misread the signs. This was the case in the first half of 2009, when growth in electricity output stayed in negative territory till May – partly because of a slow recovery in the electricity intensive aluminum sector, but the rebound in the rest of the economy was strong. In the second half of 2011, optimism about the outlook based on June’s strong electricity data may be similarly misplaced. Tom Orlik’s new book Understanding China’s Economic Indicators was released July 12
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Volts Don’t Lie? An Alternative Approach to Calculating China’s Growth
China
China Unveils Plan to Upgrade Industrial Equipment
China unveiled a comprehensive action plan for upgrading industrial equipment, with a focus on driving technological innovation and economic growth. The plan, released on April 9, 2024, aims to enhance competitiveness and sustainability within the manufacturing sector through extensive investment and regulatory support.
China announced an ambitious action plan for industrial equipment upgrading, which aims to drive technological innovation and economic growth through extensive investment and regulatory support.
On April 9, 2024, China’s Ministry of Industry and Information Technology (MIIT) and six other departments jointly released a notice introducing the Implementation Plan for Promoting Equipment Renewal in the Industrial Sector (hereafter referred to as the “action plan”).
Finalized earlier on March 23, 2024, this comprehensive action plan addresses critical issues related to technological innovation and economic development. It reflects China’s proactive stance in enhancing competitiveness and sustainability within its manufacturing sector. The initiative underscores the recognition of industrial equipment upgrading as a top policy priority.
The scope of China’s action plan to upgrade industrial equipment in manufacturing, is extensive, covering various aspects such as:
In line with China’s ambitious goals for industrial modernization and sustainable development, the action plan outlines several key objectives aimed at driving substantial advancements in the industrial sector by 2027.
These objectives encompass a wide range of areas, from increasing investment to enhancing digitalization and promoting innovation, including:
The objectives and key actions proposed in the action plan are summarized below.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
China deepens engagement with new Indonesian president as top diplomat visits Jakarta
China’s top diplomat met the outgoing Indonesian president and his successor in Jakarta on Thursday, as Beijing deepened its engagement with future leader Prabowo Subianto, amid a competition for regional influence with the United States.
The meeting with Chinese Foreign Minister Wang Yi was part of a joint commitment to advance the partnership between the two countries, said Prabowo, who visited Beijing in early April after his landslide win in the February general election.
“It is a great honor for me to welcome him [Wang] today. Thank you for the kind reception I received in Beijing a few weeks ago,” Prabowo said, according to an Indonesian defense ministry statement.
Chinese President Xi Jinping had invited Prabowo to visit, and the latter accepting the invitation raised eyebrows in Indonesia because no president-elect had made a foreign visit such as this one without being sworn in. China is Indonesia’s largest trading partner.
Wang, too, mentioned Prabowo’s Beijing trip, according to the same statement.
“We really appreciate and welcome Defense Minister Prabowo’s visit to China,” he said.
“We are committed to continuing to increase bilateral cooperation with Indonesia, both in the defense sector and other fields such as economic, social and cultural.”
Wang is scheduled to go to East Nusa Tenggara province on Friday to attend the China-Indonesia High-Level Dialogue Cooperation Mechanism, a process to support more effective bilateral cooperation. His Jakarta stop was the first of a six-day tour that also includes Cambodia and Papua New Guinea.
Prabowo and Wang discussed cooperation in the defense industry and sector, with potential measures such as educational and training collaboration, as well as joint exercises, said Brig. Gen. Edwin Adrian Sumantha, spokesman at the Indonesian defense ministry.
In fact, the ministry statement said that “China is Indonesia’s close partner and has had close bilateral relations, especially in the defense sector, for a long time.”
Of course, China has also invested billions of U.S. dollars in infrastructure projects in Indonesia, including as part of Beijing’s Belt and Road Initiative – the Jakarta-Bandung high-speed train, which began commercial operations in October 2023, is one such BRI project.
The two countries have drawn closer during outgoing President Joko “Jokowi” Widodo’s two terms, and Beijing would like that to continue as the U.S. tries to catch up with China’s gargantuan influence in Southeast Asia, analysts have said.
Indonesia, China call for ceasefire in Gaza
Both Indonesia and China shared the same position on Israel’s devastating attacks on Gaza, said Wang’s Indonesian counterpart, Retno Marsudi.
Israel’s air and ground strikes have killed more than 33,000 Palestinians following the Oct. 7 attack on the Jewish state by Palestinian militant group Hamas, which killed around 1,100 Israelis.
“We … have the same view regarding the importance of a ceasefire in Gaza and resolving the Palestinian problem fairly through two state solutions,” Retno told reporters in a joint press conference after meeting with Wang.
“Indonesia will support full Palestinian membership in the U.N. Middle East stability will not be realized without resolving the Palestinian issue.”
For his part, Wang slammed Washington for repeatedly vetoing resolutions calling for Israel to end the attacks on the Palestinian territory it occupies.
“The conflict in Gaza has lasted for half a year and caused a rare humanitarian tragedy in the 21st century,” Wang told the media at the same press conference, according to the Associated Press.
“The United Nations Security Council responded to the call of the international community and continued to review the resolution draft on the cease-fire in Gaza, but it was repeatedly vetoed by the United States.”
The conflict in the Middle East offered a strategic opportunity for China to further expand its influence in Southeast Asia, said Muhamad Arif, a lecturer in international relations at the University of Indonesia.
“China is trying to strengthen its position as a key player in the region,” Arief told BenarNews.
China could present an alternative approach to the conflict in Gaza, he said, which may find approval in Southeast Asia’s largest country, Indonesia, and other Mulism-majority states in the region, such as Malaysia and Brunei.
BenarNews is an RFA-affiliated online news organization.
Read the rest of this article here >>> China deepens engagement with new Indonesian president as top diplomat visits Jakarta
China
New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
The sixth revision of China’s Company Law is the most extensive amendment in history, impacting foreign invested enterprises with stricter rules on capital injection and corporate governance. Most FIEs must align with the New Company Law by July 1, 2024, with a deadline of December 31, 2024 for adjustments. Contact Dezan Shira & Associates for assistance.
The sixth revision of China’s Company Law represents the most extensive amendment in its history. From stricter capital injection rules to enhanced corporate governance, the changes introduced in the New Company Law have far-reaching implications for businesses, including foreign invested enterprises (FIEs) operating in or entering the China market.
Since January 1, 2020, the Company Law has governed both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs), following the enactment of the Foreign Investment Law (FIL). Most FIEs must align with the provisions of the New Company Law from July 1, 2024, while those established before January 1, 2020 have bit more time for adjustments due to the five-year grace period provided by the FIL. The final deadline for their alignment is December 31, 2024.
In this publication, we guide foreign investors through the implications of the New Company Law for existing and new FIEs and relevant stakeholders. We begin with an overview of the revision’s background and objectives, followed by a summary of key changes. Our in-depth analysis, from a foreign stakeholder perspective, illuminates the practical implications. Lastly, we explore tax impacts alongside the revisions, demonstrating how the New Company Law may shape future business transactions and arrangements.
If you or your company require assistance with Company Law adjustments in China, please do not hesitate to contact Dezan Shira & Associates. For more information, feel free to reach us via email at china@dezshira.com.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
- China Unveils Plan to Upgrade Industrial Equipment
- China deepens engagement with new Indonesian president as top diplomat visits Jakarta
- New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
- Lingang New Area in Shanghai Opens First Cross-Border Data Service Center to Streamline Data Export Process
- A Concise Guide to the Verification Letter of Invitation Requirement in the China Visa Process
- Uyghurs remember 1990 Baren Uprising over China’s forced abortions
