For China, (high) oil (prices) help lift other exports

Discussion in 'China' started by cir, May 7, 2012.

  1. cir

    cir Senior Member Senior Member

    Dec 28, 2010
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    While India suffers from high oil prices,China is thriving thanks to the same。 a :thumb::thumb::rofl:


    Published: May 7, 2012

    BEIJING — A $1 trillion oil-fueled trade windfall could not be better timed to help companies move into higher-value products and rebalance the economy in China, the world’s biggest exporter.

    Fast-growing countries producing oil and other commodities are taking advantage of the windfall from the recent gains in prices for those commodities, buying about half of the $2 trillion worth of goods sold by China overseas.

    But more important for the economy, they are buying the value-added products that Beijing wants its export-oriented factories to focus on — construction equipment and telecommunications network equipment, for instance.

    “Commodity exporting countries have had a windfall after commodity price rises, and they are now recycling this back into the global trade system,” Yao Wei, China economist at Société Générale in Hong Kong, told Reuters.

    “The silver lining to China’s exports is really the other emerging economies,” she said.

    China’s export-led expansion in the past decade has been largely through the processing trade — importing materials and components to assemble products that are then shipped overseas.

    Now the source of value in Chinese exports is shifting.

    New orders are increasingly coming from developing economies buying industrial goods to build infrastructure — products with a large element of domestic added value, using locally made components that China once imported.

    This shift in the focus of trade potentially benefits the domestic economy even more as skills and product lines are improved to satisfy demand from the new customer base.

    Analysts at the consulting firm GK Dragonomics calculate that the share of domestic value added in processed exports is 30 to 50 percent, while the share is 70 to 90 percent for products with locally made components.

    Those exports represented about 48 percent of the total of Chinese goods shipped overseas in 2011, versus an average of 41 percent in 2001 to 2005.

    Add together the effect of increasing the amount of domestic value added to exported goods and the new destinations to which China is shipping them, and that could underpin export growth, jobs and wealth creation for another decade.

    “The Chinese government’s eagerness to encourage these trends is thus quite understandable,” a recent GK Dragonomics study said.

    Still, while analysts at UBS anticipate a $1 trillion lift for global trade from a 14 percent gain in the price of benchmark Brent crude oil from an August 2011 trough, the share that Beijing can expect is unlikely to cause a jump in economic growth.

    Even if China rakes in $100 billion, in line with the share of about 10 percent that it has in the global export market, its economy, the biggest in Asia, remains on course for its slowest full year of expansion in a decade, with the consensus forecast among economists polled by Reuters calling for growth of 8.4 percent in 2012.

    But more emerging market demand is exactly what will help Beijing rebalance its export-oriented economic model — albeit not necessarily in the import-led way that leaders of stuttering developed economies hope to see.

    In fact, building up the customer base in oil-exporting countries ensures that China will get back a huge amount of the money it spends every year on fuel. China’s oil bill last year was about $200 billion.

    A study by the International Energy Agency of rising oil revenues on import demand among members of the Organization of the Petroleum Exporting Countries shows that compared with the 1970-2000 period, every additional dollar China spends on fuel imports generates 64 cents of demand for its exports.

    Analysts at Société Générale say it is that oil-related import growth, driven by the still relatively high price of crude, that has helped global trade volumes manage a stealthy sequential gain in momentum in recent months.

    “Despite a weak outlook for global G.D.P. growth, there are several factors that suggest the period of stagnating global trade may well be behind us,” the bank wrote in a report last week, referring to gross domestic product. “Specifically, we expect oil prices to remain elevated, suggesting that strong import demand from the Middle East should persist for some time.”

    One reason that Beijing is encouraging this diversification of its customer base to the Middle East and other emerging economies is the unreliability of demand from the European Union, where recession fears have reared up once again.

    It is growth elsewhere that makes the case for focusing on higher-value industries and diverse locations all the more compelling.

    Research by HSBC’s trade and receivables finance department forecasts an acceleration in global trade growth in the Asia-Pacific region, driven by emerging economies inside and outside the region, with demand flat in Europe and North America.

    The bank forecasts an expansion of 86 percent in the volume of total trade in the next 15 years, but the infrastructure trade component of that total will grow 110 percent in the same period.

    Plug into that, and China should see its share of global trade jump to 12.3 percent from 9.8 percent in 2011, making it the world’s biggest trading nation by 2016.

    It could certainly help counteract the lingering risks to growth from the European Union. Asian aggregate exports to the Union fell 5.2 percent in March, compared with the same period the previous year, while still managing an expansion of 4.6 percent globally, according to an analysis by Nomura.

    “Our assessment is that the economies in Asia,” excluding Japan, “are generally experiencing green shoots of recovery, but we are cognizant that they could quickly wilt if the recession in the euro area deepens,” the bank’s chief Asia economist, Rob Subbaraman, said in a note to clients.
  3. cir

    cir Senior Member Senior Member

    Dec 28, 2010
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    China to expand high-end equipment manufacturing sector

    Updated: 2012-05-07 17:05

    By Wei Tian (

    China is looking to expand the sales revenue of its high-end equipment manufacturing sector to six trillion yuan ($951 billion) by 2015, according to the industry’s 12th Five-Year Plan (2011-15) published on Monday by the Ministry of Industry and Information Technology.

    Sales of high-end equipment will account for 15 percent of the overall revenue of equipment manufacturing industry, and help generate 28 percent of industrial added value, together with a larger share of the global market, according to the plan on the ministry’s website.

    By 2020, the proportion of revenue will expand to 25 percent, while the industrial added value part will grow another two percentage points, which will make high-end equipment manufacturing a pillar industry of the world’s second-largest economy.

    High-end equipment mainly refers to aviation equipment, satellite and applications, railway transportation equipment, marine engineering equipment, and intelligent manufacturing equipment.

    In 2010, the sales income of high-end equipment in China was 1.6 trillion yuan, which accounted for 8 percent of the total revenue of the equipment manufacturing industry.

    The boom in the sector was attributed to China’s fast-growing industrial economy, which had the top position worldwide for two years in a row since 2009, according to the ministry.

    Aircraft manufacturing will be one of the key growth areas, as the plan vowed to launch a new regional aircraft research project, while seeking an annual sales volume of 100 planes in the next three years by accelerating the innovation and promotion of existing models such as ARJ-21 and MA 60.

    Meanwhile, China will continue its investment in high-speed railway innovation and the exploration of global markets, in order to establish its railway transportation industry as the world leader.

    Supportive policies such as tax cuts on imports of raw materials and vital spare parts will be issued, and more financial resources will be directed to high-end equipment manufacturers to facilitate their development, according to the plan.

    China to expand high-end equipment manufacturing sector|Policies|
  4. panduranghari

    panduranghari Senior Member Senior Member

    Jan 2, 2012
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    How much gold does China have? This will determine if they can afford oil in the future.

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