Showing posts with label Chinas. Show all posts
Showing posts with label Chinas. Show all posts

Thursday, July 14, 2011

China's growth rate slows to 9.5%

13 July 2011 Last updated at 09:31 GMT The government's attempts to rein in growth and rising prices are likely to slowdown China's growth rate

China's economic growth has slowed further in the second quarter after the government stepped up its battle against inflation.

Growth was 9.5% in the three months to the end of June compared with a year earlier. That is down from 9.7% in the previous quarter.

China says controlling prices is its top priority after inflation hit a three-year high in June.

However, other data on Wednesday showed it may be tough to slow growth further.

China's factory output grew by a better-than-expected 15% in June, while retail sales surged by 17.7%.

Analysts say further tightening measures are likely before the year is over.

Monetary measures

China has already raised interest rates three times this year, with the most recent increase coming last week.

"With inflation hitting a new three-year high in June, further monetary measures look likely," said George Worthington, an economist at IFR in Sydney.

He added that the current central bank interest rate of 6.56% could rise another 50 basis points by the end of September.

Sheng Laiyun, a spokesperson for China's statistics bureau said the government's policies would be "targeted, flexible and effective" to ensure the target to inflation under control is met.

"It's not easy and China has done a great job to maintain fast economic growth when the global situation is complex and volatile," he said.

The prospect of China's economic growth slowing has raised worries over how this might affect the world's other main economies.

However, IFR's Mr Worthington downplayed these concerns.

Wednesday's "data should also help to dispel the wilder fears of an economic collapse in China as a result of the anti-inflation fight", he said.

Stability

Despite the slowdown, China's growth rate remains one of the quickest in Asia, and the country is cementing its position as the world's second-biggest economy.

However, strong domestic demand and global problems with food production have led to an increase in the cost of food and other essential commodities, such as fuel.

Consumer buying vegetables in China The surging cost of food and fuel has become a threat to China's economic growth

This, in turn, has led to the occasional outbreak of unrest, something that the government is keen to control and limit.

Some analysts say that a slowdown in the growth rate is something China will have to accept if it wants a stable political and pricing environment.

"The biggest problem for China is not growth deceleration, it is inflation," said Chris Leung, senior economist at DBS Bank in Hong Kong.

"So in order to solve inflation, growth will have to slow down."

Credit-led growth

China's rapid expansion in recent times has been fuelled by a credit boom in the country.

As the world economies grappled with the global financial crisis, Chinese banks lent out record sums of money in an attempt to ensure that the country's high growth rate continued.

However, analysts said while the easy availability of cash had fuelled growth, it had also created issues for the government.

"You have to look at what's driving growth in China, it's mainly investments," said Patrick Chovanec, an associate professor at Tsinghua University in Beijing.

"This investment is being financed by expanding the money supply, which is fuelling inflation," he added.

Analysts also said that given the huge amount of loans that had been extended by the Chinese banks, there were concerns about asset bubbles being formed in the country.

"A lot of the investment that is going out, there is a real question being raised about whether it is going to generate return and a lot of it has started to show up as bad debt in the banking system," Prof Chovanec said.

He warned that the current path of growth in China was unsustainable.

"What we are seeing is not necessarily a strong economy, it's an economy that has been pumped up on steroids," he said.

However, Prof Chovanec said that despite the government efforts to rein in growth, a lot of people China wanted the credit-led growth to continue.

"There is a tug-of-war between those who say keep lending and let growth continue, versus those who are more concerned about inflation and want to rein it in," he said.


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Wednesday, June 29, 2011

Diageo eyes China's spirit market

28 June 2011 Last updated at 05:42 GMT British drinks giant Diageo takes control of Chinese liquor firm Sichuan Chengdu Quanxing.

Drinks giant Diageo has agreed a deal that will allow it to expand its business in China's fast growing spirits market.

Diageo will acquire an additional 4% stake in Sichuan Chengdu Quanxing Group (Quanxing) for 140m yuan ($22m; ?13m), taking its holding to 53%.

The deal will give Diageo an indirect control of ShuiJingFang, a famous brand of popular Chinese spirit Baijiu.

Baijiu accounts for more than 30% of China's alcoholic drinks market.

"We are privileged to have the unique opportunity to participate at scale in super premium Chinese white spirits, one of the largest, fastest growing spirits segments in the world," said Paul Walsh, Chief Executive of Diageo.

'Iconic Chinese brand' Continue reading the main story
We have managed to quadruple the sales of ShuiJingFang in the regional duty frees in Asia in the last two years”

End Quote Gilbert Ghostine Diageo While Baijiu's popularity within China has been on the rise, Diageo said it was confident of turning the spirit into an international success as well.

"We are fully committed to build ShuiJingFang into an internationally successful iconic Chinese brand," said Gilbert Ghostine, President of Diageo Asia Pacific.

Mr Ghostine said that the brand was already being sold at 14 regional airports and three regional airlines were also carrying it.

He added that Diageo had managed to start sales of the brand at Dallas and Chicago airports and was targeting sales at two additional US airports by the end of the year.

"We have managed to quadruple the sales of ShuiJingFang in the regional duty frees in Asia in the last two years," he said.

"It is going from strength to strength," he added.

Full control

Quanxing currently holds a 39.7% stake in ShuiJingFang.

Diageo said it is seeking approval from the China Securities Regulatory Commission (CSRC) to launch a mandatory tender offer (MTO) for the remaining shares of Shuijingfang.

An employee at Diageo's distillery views a whisky China's economic growth has seen its liquor market expand at a rapid pace

"Once the CSRC approval has been received, Diageo will immediately launch the MTO for the outstanding shares of ShuiJingFang in accordance with Chinese takeover regulations," the company said.

Diageo said that it would offer 21.45 yuan per share, the minimum price permitted by Chinese takeover regulations.

The company will need to pay close to 6.6bn yuan ($1bn) if all the shareholders accept its offer.

"Diageo will fund the MTO through its diversified financing sources and strong global cash generation," the company said.


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