China, too, feeling the heat
Thursday, 18 September 2008
Fazle Rashid from New York
CHINA, which has the largest reserve of foreign exchange in the world, was a mute witness to a large dip in its exports earning. China had so far remained unaffected by the global economic slowdown.
China has now joined the United States and Europe in the catalogue of nations suffering from a real estate decline. Real estate prices are weakening, particularly in the coastal areas that depend on export. China's stock market has lost three-fifths of its value since October, the New York Times reported recently.
China has abruptly changed its policy by cutting interest rates and easing bank lending restrictions in response to signs that the growth of the economy is slowing. China's restrictions on large scale movement in and out of the country and its vast reserve of hard currency have shielded it from the trouble shaking the Wall Street. China has foreign exchange reserve of $1.8 trillion. But this has not been enough to protect China from a global economic downturn. China is biggest possessor of dollar denominated US bonds and about $1 trillion of China's total foreign exchange reserves are in American securities. China's principal economic goal has been to contain inflation. But the economic managers and policy planners recently decided to sustain economic growth and at the same limit inflation. The Western economists have applauded Beijing's move to lower interest rates and easing limits on lendings.
We see these adjustments as a positive step in view of the fact that there is the unprecedented uncertainties in the international financial markets, researchers commented. China's central bank also brought down by a full percentage point the share of assets that small and medium size banks were required to deposit as reserve with the central bank. But this concession was not provided to nation's six largest banks namely Industrial and Commercial bank of China, Agriculture Bank of China, The Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.
These banks together account for more than two-thirds of the banking market. The Central Bank pay an interest rate of 1.89 percent. The Chinese skylines are dotted with cranes. The Guardian Industries which produces glass said the demand has dropped sharply. But unlike the subprime meltdown in America resulting in credit crunch, Chinese real estate market do not appear to be a threat to the vibrancy and vitality of the Chinese economy.
China's trade surplus in August set a record of $28.7 billion largely because of an unexpected slowdown in the growth of imports. Slower growth of imports is a sign of a weakening economy. China in the meantime has set a Sept 30 deadline for all foreign companies operating in the country to allow union their offices and factories. The companies that do not comply with the order run the risk of being publicly villified and penalised by the government. Some of the largest corporations fear that admitting unions will give the Chinese employees the power to disrupt operations. Cheap labour has been a major attraction for foreign multinational corporation to open offices and factories in China. This will significantly increase the cost of doing business in China.
Hundreds of big corporations like Wal-Mart, McDonalds have agreed to allow unions. But nonmanufacturing companies are resisting. Some American companies have been singled out for employing contractors which violate China's labour laws. Some foreign companies in China have not behaved well in dealing with their workers interests and rights, an official of the All China Federation of Trade Unions was quoted as saying by the NYT. More than 500 multinational companies have their offices and manufacturing units in China. The labour cost has already jumped by 30 to 40 per cent. This is due to the scarcity of skilled workers. The Chinese labour leaders hoped that more 80 percent of the 500 big corporations functioning in China will have unions by the end of this month.
CHINA, which has the largest reserve of foreign exchange in the world, was a mute witness to a large dip in its exports earning. China had so far remained unaffected by the global economic slowdown.
China has now joined the United States and Europe in the catalogue of nations suffering from a real estate decline. Real estate prices are weakening, particularly in the coastal areas that depend on export. China's stock market has lost three-fifths of its value since October, the New York Times reported recently.
China has abruptly changed its policy by cutting interest rates and easing bank lending restrictions in response to signs that the growth of the economy is slowing. China's restrictions on large scale movement in and out of the country and its vast reserve of hard currency have shielded it from the trouble shaking the Wall Street. China has foreign exchange reserve of $1.8 trillion. But this has not been enough to protect China from a global economic downturn. China is biggest possessor of dollar denominated US bonds and about $1 trillion of China's total foreign exchange reserves are in American securities. China's principal economic goal has been to contain inflation. But the economic managers and policy planners recently decided to sustain economic growth and at the same limit inflation. The Western economists have applauded Beijing's move to lower interest rates and easing limits on lendings.
We see these adjustments as a positive step in view of the fact that there is the unprecedented uncertainties in the international financial markets, researchers commented. China's central bank also brought down by a full percentage point the share of assets that small and medium size banks were required to deposit as reserve with the central bank. But this concession was not provided to nation's six largest banks namely Industrial and Commercial bank of China, Agriculture Bank of China, The Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.
These banks together account for more than two-thirds of the banking market. The Central Bank pay an interest rate of 1.89 percent. The Chinese skylines are dotted with cranes. The Guardian Industries which produces glass said the demand has dropped sharply. But unlike the subprime meltdown in America resulting in credit crunch, Chinese real estate market do not appear to be a threat to the vibrancy and vitality of the Chinese economy.
China's trade surplus in August set a record of $28.7 billion largely because of an unexpected slowdown in the growth of imports. Slower growth of imports is a sign of a weakening economy. China in the meantime has set a Sept 30 deadline for all foreign companies operating in the country to allow union their offices and factories. The companies that do not comply with the order run the risk of being publicly villified and penalised by the government. Some of the largest corporations fear that admitting unions will give the Chinese employees the power to disrupt operations. Cheap labour has been a major attraction for foreign multinational corporation to open offices and factories in China. This will significantly increase the cost of doing business in China.
Hundreds of big corporations like Wal-Mart, McDonalds have agreed to allow unions. But nonmanufacturing companies are resisting. Some American companies have been singled out for employing contractors which violate China's labour laws. Some foreign companies in China have not behaved well in dealing with their workers interests and rights, an official of the All China Federation of Trade Unions was quoted as saying by the NYT. More than 500 multinational companies have their offices and manufacturing units in China. The labour cost has already jumped by 30 to 40 per cent. This is due to the scarcity of skilled workers. The Chinese labour leaders hoped that more 80 percent of the 500 big corporations functioning in China will have unions by the end of this month.