Archives January 2007

Lenovo sets its sights on buyers in US

CHINESE personal-computer giant Lenovo Group Ltd said it plans to enter the consumer market in the United States within the next two years.

“You’ll see us getting into consumer business,” William Amelio, Lenovo’s chief executive officer, said in an interview with Bloomberg News. “We’ve demonstrated success in China and India, and there’s no question we should have the same success in other developed markets.”

Amelio, speaking on Saturday at the World Economic Forum in Davos, Switzerland, said acquisitions were “way down my priority list.”

Lenovo became the world’s third-biggest personal computer maker when it bought the PC unit of International Business Machines Corp in May 2005.

“In China we cover consumers up to large enterprises with a full line,” he said. “Abroad, what we bought is primarily large accounts and government. Now we can fill in that space.”

China’s economy posts biggest rise in a decade

THE Chinese economy grew 10.7 percent in 2006 – the biggest increase in 10 years, even as the nation’s financial leaders tried to rein in excessive growth.

Their efforts did appear to have some effect in the last quarter, however, as the blistering pace tailed off slightly with a decline in fixed-asset investment.

Gross domestic product mounted to 20.94 trillion yuan (US$2.7 trillion) in the world’s fourth-largest economy last year, driven by overseas sales, investment and booming domestic consumption, the National Bureau of Statistics said yesterday.

Yearly growth exceeded the 10.4 percent gain in 2005, the bureau said. But after GDP peaked at 11.5 percent in second-quarter 2006, the rate of increase tailed off to 10.4 percent in the last three months.

“A combination of policies to rein in lending and control land use helped prevent the economy from expanding faster,” Xie Fuzhan, chief of the National Bureau of Statistics, said in Beijing.

Among the economy’s major components, the manufacturing sector grew the most last year, surging 12.5 percent to 10.2 trillion yuan. It was followed by the service industry, which advanced 10.3 percent to 8.27 trillion yuan. Agriculture rose five percent to 2.47 trillion yuan.

The country’s macroeconomic controls finally began to gain traction. Fixed-asset spending rose 24 percent to 10.99 trillion yuan overall, slowing from the 29.8 percent in the first half and 25.7 percent in 2005. Investment in the nation’s urban fixed assets climbed to 9.35 trillion yuan, up 24.5 percent from a year earlier, compared with a 27.2 percent on year gain in 2005.

“Investment growth showed visible deceleration, which could be partially attributed to policy tightening in the second half of 2006,” said Liang Hong, an economist in the global investment research division of Goldman Sachs.

“The central bank will likely maintain a tightening bias during the first quarter this year to prevent a rush in bank loan approvals.”

The central bank has stepped up land controls to make project approvals harder to come by, hiked interest rates and raised banks’ reserve requirements to curb credit and cool off an investment boom that has left the country with too much production capacity and idle factories.

Among other economic barometers, inflation last year stood at 1.5 percent, buffeted by a sudden increase of 2.8 percent in December as grain costs surged.

Still, the growth rate in consumer prices was smaller than the 1.8 percent in 2005.

Retail sales jumped 13.7 percent in 2006 to 7.64 trillion yuan, up from the 12.9 percent gain a year earlier as the government cut taxes, raised minimum wages and increased spending to improve education, welfare and health care.

Disposable incomes among the nation’s city dwellers advanced 12.1 percent to 11,759 yuan while those in rural regions climbed 10.2 percent to 3,587 yuan.

Foreign trade jumped 23.8 percent to US$1.76 trillion, yielding a record surplus of US$177.5 billion, up from the US$102 billion in 2005.

Services Trade With China Boosts US Jobs, Payments

January 23, 2007 — The dramatic expansion of trade and investment in services between China and the United States has benefited both economies substantially and will continue to do so for the foreseeable future, according to a new study by Oxford Economics. The study shows that the US could add as many as 240,000 new, high-paying service industry jobs by 2015 as a result of the growing trade with China, in which the United States has a balance of payments advantage.

The study, “The Prospects for US-China Services Trade and Investment,” was released today by the China Business Forum, the educational and research arm of the US-China Business Council (USCBC).

“This study shows that the future benefits are clearly significant for both the US and Chinese economies if China continues to open its service sector to foreign providers,” said John Frisbie, president of the USCBC. “The US is the world’s leading service economy and this is an important area for growth.”

Trade and foreign investment in China’s service sector already benefit both economies, according to the study. The United States has a services trade surplus with China, worth $2.6 billion in 2005. Net US service sector exports and income of service sector investments to China, worth $3.1 billion in 2005, currently support 37,000 jobs in high-productivity sectors of the US economy.

If the pace and scope of China’s service sector reform accelerate, the US services trade surplus with China could increase to around $60 billion by 2015, and extra income from US service-related investments in China would be worth $7 billion. The average US household would be better off by about $500 per year in 2010 as a result of this growth in services trade with China. By 2015, the US benefits would include the 240,000 new service sector jobs.

In the long run, US service sector exports to China could reach between 1.5 percent and 3.5 percent of US GDP. The US service sector trade surplus with China could be worth around 1 percent of US GDP, while inflows of profits from US service sector investments in China could contribute a further 0.5 percent of GDP to the US current account of the balance of payments.

“Our research shows that implementing China’s World Trade Organization commitments is an essential first step to maximizing the advantages for both economies of service sector trade and investment. If China increases the pace and scope of reform in the sector, the benefits will be even more substantial and long-lasting,” said Erik Britton, director of Economics at Oxford Economics and lead author of the study.

If the impediments to service sector growth in China are fully removed, the average Chinese household would be better off by $300 to $400, or RMB 2,300 to RMB 3,100, per year by 2015. The benefit would amount to an additional $138 billion in GDP (in 2006 prices). In this scenario, the growth in service sector trade and investment will add up to 7 million jobs in China in relatively high-paying, high-productivity service industries by 2015.

“As China’s economy shifts toward one based on services, consumption — and possibly imports — may rise. This would provide even more opportunities to US companies selling to China,” USCBC President Frisbie said.

About the China Business Forum and the USCBC

The China Business Forum, Inc. (www.chinabusinessforum.org) was established by the US-China Business Council (USCBC, www.uschina.org) to promote broad-based policy discussion and greater understanding in both China and the United States of the economic systems and business methods of each country and of the role of commerce in the overall relationship between the United States and China.

The USCBC is the leading organization of US companies engaged in business with the People’s Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory, and advocacy services, along with events, to nearly 250 US corporations operating within the United States and throughout Asia.

About Oxford Economics

Oxford Economics (www.oef.com) is one of the world’s leading providers of economic forecasting, analysis, modeling, and advisory services. Oxford Economics supplies a range of “off-the-shelf” products and services in addition to customized economic consultancy services, with staff in London, Oxford, and Philadelphia.