Tempered,by,caution:《一拜天地》bycaution

“rim,” was the word Com- merce Minister Chen Deming chose to label China’s trade outlook. Chen and other Chinese officials reacted to the November 9 release of positive economic indicators for October with a heavy dose of skepticism. “We are still continuing to deal with [the European debt crisis],” warned central bank Governor Zhou Xiaochuan. “We still can’t relax,” economic planning chief Zhang Ping said, adding that the foundations for the country’s recovery are still weak.The tendency for caution among officials may come as a surprise, as economic indicators for October outpaced analyst expectations virtually across the board.Exports rose 11.6% in October, outpacing the 10% increase predicted in a Bloomberg survey of economists. Retail sales were also buoyant, with a 14.5% year-on-year increase, while industrial production appeared to be reviving, expanding 9.6% to beat analysts’ predictions.“What a lovely dataset to welcome in China’s new set of leaders,” research firm IHS said of the figures published during China’s once-a-decade leadership transition.The lack of cheer among officials has not affected investors, who are at their most optimistic since July 2009, a November survey of Asia’s fund managers by Bank of America-Merrill Lynch showed. According to the survey, 51% of those polled are confident China’s economy will improve in the next year.In mid-November, the renminbi strengthened to a nearly 20-year high as investors brought their capital back to China. Many commentators have touted the rosy figures as the beginning of an economic upswing. Analysts at Bank of America-Merrill Lynch expect strong export figures to boost GDP growth to 8.3% in the first quarter of 2013, up from 7.4% in the third quarter of this year. HSBC believes the increase in Chinese bank lending will continue to accelerate consumption and investment spending and predicts 8.6% growth next year.But Chinese officials like Chen and Zhou are tempering expectations for a reason, and investors should take note. Strong exports in October should be weighed against a poor turnout and weak sales at the November session of the Canton Fair, a trade fair in Guangzhou that is often seen as a barometer for the country’s international trade. Orders placed at the fair fell 13.8% year-on-year, an ominous sign for future exports.Then there are the external risks. Euro zone instability poses a serious risk to China’s economic rebound, as Zhou identified. Exports to the EU, China’s largest trading partner, fell 8.1% year-onyear in October, after a fall of 10.7% the previous month. The US fiscal cliff also looms over China’s growth prospects. If unchecked, tax hikes and public spending cuts next year could weaken a crucial trading partner. China has started gearing up domestic consumption to counter the volatility of overseas demand. The government has introduced subsidies for a myriad of consumer products from electric cars to ecofriendly washing machines, in an attempt to bolster spending. But this strategy will only succeed if Chinese consumers pick up the mantel, and that remains far from certain.Given the propitious timing of the figures, just before Beijing’s 18th Communist Party Congress, Chinese officials could have chosen to trumpet an unreservedly positive spin of the data as a national triumph. Their measured responses warn that now is not yet time for unbridled optimism. Investors would be wise to follow their lead. NEWSROUNDUP POLITICSChina’s new Politburo Standing Committee, the country’s highest leadership body, was revealed to the world at the conclusion of the 18th Party Congress on November 15. The seven men will determine the direction of the world’s second-largest economy for the next five years. Analysts saw the inclusion in the group of Zhang Gaoli, the former Tianjin party secretary who presided over a period of debt-fueled stimulus, and the exclusion of Wang Yang, the Guangdong party secretary known for supporting economic liberalization, as a sign that Beijing may be less willing to undertake economic reforms. Central bank governor Zhou Xiaochuan, Commerce Minister Chen Deming and Finance Minister Xie Xuren were not elected to the 205-member Central Committee, suggesting that they will leave their posts. During the congress, officials largely avoided politically sensitive questions from the press, indicating a party on the defensive following the high profile Bo Xilai scandal. China’s outgoing president, Hu Jintao, also stressed the importance of state-owned enterprise against a backdrop of increasingly critical views on state firms. ECONOMYConsumer inflation slowed more than expected to a 33-month low of 1.7% in October as food prices rose at a slower pace. Producer prices fell 2.8% year-onyear in October following a 3.6% drop in September. China’s official purchasing managers’ index increased to 50.2 in October from 49.8 in September, the first acceleration in manufacturing growth in three months. Industrial production and retail sales both quickened compared with September. Chinese banks issued RMB505 billion (US$81.06 billion) in renminbi-denominated loans in October, down 13.9% year-on-year and the lowest figure in 13 months. However, midto long-term loans rose significantly month-on-month as corporate demand for investment rose. Profits among major Chinese industrial corporations increased 7.8% year-on-year to US$74.3 billion in September, the first gain in six months, adding to signs that the economy is rebounding. FINANCE & INVESTMENTThe value of the renminbi rose to 6.2262 per US dollar on November 13, a record high since the country unified its official and market exchange rates in 1993, as investors flocked back to China amid recent signs of its stronger economic prospects. China’s securities regulator said it plans to increase the quota of its Renminbi Qualified Foreign Institutional Investor (RQFII) scheme by US$31.74 billion as the current quota of US$11.2 billion is insufficient to meet demand. US regulators completed an initial round of auditing observations in China, a step toward regulating Chinese firms listed in the US. Sovereign wealth fund China Investment Corporation acquired a 10% stake in London’s Heathrow airport from Spain’s Ferrovial for US$414.5 million. The fund’s chief executive, Lou Jiwei, said CIC will invest more in Asia amid rising protectionism in the West. Lou’s comments came after the US blocked a Chinese company from constructing wind turbines close to a US military base and Canada delayed a decision on CNOOC’s bid for energy company Nexen amid national security concerns. TradeChina’s trade surplus reached US$32 billion in October, up from US$27.7 billion in September and the largest number since January 2009. Exports were up 11.6% year-on-year to US$175.6 billion in October, while imports rose 2.4% yearon-year to US$143.6 billion. However, the number of buyers and orders placed at the biannual Canton Fair, Asia’s largest trade fair for China-made products that is often viewed as a barometer for industry health, fell by 10% this autumn. The drop may foretell a slowdown in Chinese exports next year. China lodged a WTO complaint against what it termed unfair solar power programs in Greece and Italy, saying the two countries’policies discriminated against foreign companies and violated international trade law. The US subsequently approved five-year duties ranging from 23.75% to more than 250% on solar energy products from China in a bid to protect US manufacturers. BUSINESSTwo of the mainland’s largest air carriers, Air China and China Eastern Airlines, posted double-digit profit declines yearon-year in the third quarter due to weak passenger operations and weak cargo traffic. State-owned investment company CITIC Securities inked a deal with French bank Credit Agricole to acquire Asian broker CLSA for US$1.25 billion. New Zealand’s Overseas Investment Office approved Chinese appliance maker Haier’s US$762 million bid for upmarket appliance manufacturer Fisher & Paykel Appliances. Search giant Google reported an unusual decline in traffic on its China sites as an internet monitor said its services were being blocked in the country. China’s broadcasting regulator said a deal with the US to open up the Chinese film market to US movies has hurt local movie producers. EnergyChina cut the price of gasoline and diesel in mid-November for the first time since July, a move that may narrow refiners’processing margins. Sinopec signed a preliminary agreement to acquire stakes in Nigerian offshore oil blocks for approximately US$2.4 billion from French explorer Total. PetroChina’s gas network operating subsidiary Phoenix Energy Holdings signed a deal with Calgarybased TransCanada to develop a US$3 billion oil pipeline from the Canadian oil sands to provincial capital Edmonton. Authorities in Ningbo, Zhejiang province, halted the planned US$8.9 billion expansion of a China Petrochemical Corporation plant after protests over the potential ill effects on residents’ health and the environment erupted in October. PropertyNew home prices edged up 0.17% monthon-month to US$1,405 per square meter in October, increasing for a fifth consecutive month but remaining 1% lower than the same month last year, according to data provider SouFun. Sales of residential and commercial housing were US$742.2 billion from January through October, up 5.6% from last year. Booming land and real estate transactions have shored up tax earnings for local governments, leading to a 18.7% year-on-year surge in fiscal revenue between January and October. The Chinese government’s total fiscal revenue grew 11.2% year-on-year during the period. Analysts expect fiscal revenue to grow faster in the last two months of the year as the economy gains momentum.

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