CHINA AND ITS REGION / economist

thats just in.... gerade reingekommen

Commerce Dept. sanctions China over subsidy dispute
The U.S. Commerce Department announced sanctions against China on Friday in connection with a dispute over paper subsidies. Secretary Carlos Gutierrez said the U.S. has the right to apply countervailing duties to Chinese paper imports, which he said threaten U.S. products

more from bloomberg http://tinyurl.com/yo957m

The U.S. Commerce Department decided today to begin to levy new duties on imports from China to compensate for Chinese subsidies to exporters, reversing more than two decades of its practices

The immediate case concerns a complaint by NewPage Corp. that low-cost imports of subsidized glossy paper from China, South Korea and Indonesia are undercutting its profitability. China's exports of coated paper were set to almost triple in 2006 to $263 million from their level in 2004, according to U.S. government data.

this from the nyt http://tinyurl.com/2dtg44

At present, imports account for only 5 percent of the domestic market, but American manufacturers fear that imports are underpricing what they can produce and could wipe out the industry in a matter of years.

But trade and industry officials say future actions based on the department’s new policy could lead to duties on imports of Chinese steel, plastics, machinery, textiles and many other products sold in the United States, if as expected those industries seek relief and the department finds that they are harmed by illegal subsidies.

About NewPage Corporation
NewPage Corporation, headquartered in Dayton, Ohio, is a leading U.S. producer of coated papers in North America. With 4,300 employees, the company operates four integrated pulp and paper manufacturing mills located in Escanaba, Michigan; Luke, Maryland; Rumford, Maine; and Wickliffe, Kentucky. These mills have a combined annual capacity of approximately 2.2 million tons of coated paper

>i´m not sure if this is the right approach ...? ( to put it mildely) some might have forgotten that they need china to fund their deficit........

will be interesting to see what happens when the election is getting closer....last time one topic was the outsourcing to india........

>kann mir nicht vorstellen das dies der richtige ansatz ist...? (gelinde gesagt) evtl. haben einige vergessen das china dringend benötigt wird um das defizit zu finanzieren.......

wird spannend sein wenn die us wahlen nächer kommen...beim letzten mal war das outsourcing nach indien das große thema.......

>lets hope that things calm down and don´t escalate. if not....the cartoon could be outdated.. then the imports and the oil will get more expansive..........

>bleibt zu hoffen das sich die dinge beruhigen und nicht eskalieren. dann könnte der folgende cartoon überholt sein. dann wird für für die usa wohl öl und die importe teurer.......

>but i´m pretty confident that hank paulson is busy....... if this lead to free trade this is one of the rare times i would appreciate it.....

>ich tippe mal das hank paulson bereits am wirbeln ist...........wenn das zu einem freieren handel führt wäre eine der seltenen einflußnahmen die ich befürworten würde......

rodger rafter has some good points at "the market traders board" (especially the looming treasury auction on monday........... :-) http://tinyurl.com/2979sd

now to the original story:

So far the world has come to China, but now a rising China is beginning to reach out to the world, starting with Asia

...China's economic rise is certainly impressive. The economy's growth—an average of 10% a year since 1990—is not really more remarkable than the earlier rise of other Asian economies, led by Japan, but there is a difference: the huge size of China's population, at 1.3 billion. In 2005 China overtook Japan in the volume of trade it conducts. Depending on how you measure size and guess at future growth rates, it may overtake both Germany and Japan within 15 years to become the world's second-biggest economy. Measured at purchasing-power parity, China's share of the world economy is already much closer to the rich countries' (see chart 1). But bear in mind that the average Chinese income remains low. If China is on its way to becoming a superpower, it will be the world's poorest one yet.

Opinion polls suggest that the vast majority of Chinese see their rise as nothing that should trouble others. For many of them it merely marks a return to historical norms. Angus Maddison, an economic historian at the University of Groningen, has estimated that between 1600 and the early 19th century China accounted for between a quarter and a third of global output (see chart 2). At that time China's agriculture was more advanced than the West's, its cities bigger and more literate and its ruling classes more meritocratic. The country had also proved itself capable of long-distance exploration by sea. Another historian, Niall Ferguson, reckons that what went so spectacularly wrong for China then is more remarkable and worthy of investigation than why things should now be going right.

But what is the nature of China's rising economic power now? There is room for misperceptions. Policymakers in Washington, DC, are alarmed by China's export strength and its ballooning trade surplus. China is lambasted for having mercantilist policies that artificially boost exports, depress the Chinese currency, restrict imports and widen America's trade and current-account deficits.


In several respects that view is wrong. With a trade-to-GDP ratio of around 70% and a sea of foreign investment, China is one of the world's most open economies. Much of the growth in America's bilateral deficit with China reflects a shift in low-cost manufacturing from other parts of Asia to the Chinese mainland. Certainly China's currency is undervalued, having followed the dollar down since 2002. But that is reinforcing inflationary pressures, particularly in wages, so China's advantage as always the lowest-cost producer can no longer be taken for granted.

America's emphasis on exports misses the point about China's economic power. That power comes not so much from being a seller of things but increasingly from being a buyer, an investor and a provider of aid, in Asia and beyond. One Chinese diplomat puts it thus: “Imports: that's real diplomacy, because it means you're attractive to others. It means other countries need you, not that you need them.” This subtle understanding sets China in stark contrast to how Japan viewed the world during its post-war rise.

With this new kind of power, the economic and geopolitical sides are ever more intertwined. China's presence as a commercial force is rapidly being felt around the world, through its growing investments overseas and through an apparently insatiable hunger for resources to fuel the industrial revolution at home. The shock troops of this force are there to see in China's main airports: planeloads of oil-drillers, pipe-layers and construction workers, in company overalls and hard hats, off to work on oil rigs or build ports, highways or railways in South-East Asia, Africa, Latin America or the Middle East. Chinese workers are also moving into other countries in less formal ways. In the northern birch forests of Mongolia, unofficial groups of them are cutting down trees for chopsticks. In poor northern Laos, thousands of Chinese labourers have come across from neighbouring Yunnan to grow corn and sugarcane for export back to China; traditional slash-and-burn agriculture is giving way to polytunnels and large-scale market gardening.

This is not the first time that mainland Chinese have fanned out to work the world's natural riches. In the 19th century hundreds of thousands of coolies—indentured workers lured by Chinese and Western recruiters using a greater or lesser degree of deception—toiled in some of the world's worst hellholes: the guano deposits of Peru, the canebrakes of Cuba or the gold mines of South Africa. Now the Chinese are back in some of the same parts of the world. The difference this time is that Chinese capital, usually state-owned, stands behind them.

Trying to charm
One of the advantages of state-led development is that China can entice countries with packages of corporate investment, cheap loans and other aid goodies. This way China has rapidly acquired interests and influence across swathes of South-East Asia, Africa and Central Asia. China's outward foreign direct investment more than quintupled in the first half of the decade, to $11.3 billion in 2005, and will have risen sharply since. Once a big aid recipient, China hosted a summit of 48 African leaders in Beijing last November, promising $5.5 billion in aid for Africa. According to a recent report by the Institute for Public Policy Research in London, China has become Africa's third-biggest trading partner after America and France.

China is also increasingly investing in the rich world. To some Americans, in particular, this is distasteful. In 2005, citing national-security concerns, Congress succeeded in thwarting the $19 billion bid by China National Offshore Oil Corporation (CNOOC) for Unocal, an American oil major with reserves in Asia. Competing resource companies from the West often claim that Chinese companies outbid them in third markets, using cheap, state-subsidised funds. Yet in growing numbers of countries, rich and poor, the Chinese presence is welcomed for bringing jobs, cash and infrastructure.

read also "china is shifting $ reserves to equities" http://tinyurl.com/3x6q7e

Australia has received more Chinese investment than most Western countries, much of it in mining. It is criticised in America and Europe for cosying up to a dictatorship. “We're also strong on the human-rights front,” an Australian diplomat says in defence. “But there's stuff to be done in the meantime.” When a senior Canadian official is asked what conclusions Chinese resource companies should draw from CNOOC's experience, he replies instantly: “Come to Canada.”
China's rise is a global phenomenon, but the rest of this special report will concentrate on its relations with Asia. After all, the region is on its doorstep. “If we can't get respect in Asia,” says a Chinese policymaker, “we can't get on in the world. If we can't have a peaceful and prosperous backyard, then there can't be any rise of China.”

In vying for influence in Asia, China has many competitors. They include India, rising in its idiosyncratic way; Japan, seeking a more robust foreign policy in the face of China's rise; Russia, a resource giant, even if a diplomatic minnow in Asia; the ten countries that make up the Association of South-East Asian Nations (ASEAN); and—still the top dog even if distracted in the Middle East—America. here more on the strong ASEAN position http://tinyurl.com/2dpy6l

It is in Asia that America risks falling prey to a final misperception. As Mr Lampton points out, just as Americans overstate China's export prowess as a source of economic power, so they underestimate China's intellectual, cultural and diplomatic influence. If policymakers view China's power “in substantially coercive terms when it is actually growing most rapidly in the economic and intellectual domains,” he writes, “they will be playing the wrong game, on the wrong field, with the wrong team.”

Housing chill strikes home / ripple effect

nachfolgend die bisher umfassenste zusammenfassung wieweit der dwonturn schon jetzt auswirkungen in baunahen sektoren hat. der entscheidenste faktor ist und bleibt aber wohl der abnehmende "wealth"effekt der keine refinanzierungen mehr ermöglicht und die einsicht auf hohen schulden samt abnehmenden asset zu sitzen.

Cabinetmakers, pool suppliers and toolmakers warn as demand falters
http://tinyurl.com/pwo8m

highlights:

It's not just homeowners and homebuilders that have a lot to lose if tremors roiling the real estate market turn into a full-scale quake.

Manufacturers of everything from drywall to the kitchen sink are also vulnerable to stagnant or declining sales as fewer houses change hands.

"Do a mental walk around your house and look at appliances and fixtures," to see what companies are exposed to the housing market, said Sam Stovall, chief investment strategist for Standard & Poor's.

Firms such as kitchen cabinet maker Masco Corp. and tool-maker Illinois Tool Works Inc. have already warned about an earnings pinch from slowing U.S. home sales. .........

Home prices and sales have been slipping. The NAHB expects remodeling activity to continue to expand but at a slower rate.

The Dow Jones Building Materials and Fixtures Index has fallen over 18% since an April high, as has the Dow Jones U.S. Forestry Index .

For many companies, the five-year housing boom was a sales bonanza. Not only did more homebuyers jump into the market, they also indulged an appetite for more living space than ever before. That meant more demand for windows, paneling and central air conditioning.

Last year, the average new U.S. home was about 2,434 square feet, compared to 1,500 square feet in the 1970s, says NAHB staff vice president of research Gopal Ahluwalia.

Some 40% of new homes had ceilings at least 9 feet high. In the 1980s, less than 15% could make that claim, says Ahluwalia.

Those with a more diverse customer base will likely perform far better. Consider American Standard Co.

It sells air conditioners, as well as kitchen faucets, toilets and bathtubs. But 70% of its air conditioner unit sales are to commercial customers and 64% of its bath and kitchen sales take place outside the U.S. All told, only about 25% of its sales have strong ties to U.S. households. (too bad that commercial real estate is close to a bubble and lets hope that they are not selling to uk, australia, ireland, spain etc.....)

Meanwhile, shares in homebuilders have been rallying in the past few weeks on the idea that a housing downturn has already been factored into their share price.

Some investors think it's time to look for value among buildings material companies whose shares got dragged down in the broad housing-related sell-off.

Buying housing-related stocks on the idea that shares have been overly discounted "is a good idea if you're nimble enough," said S&P's Stovall.

But there's no guarantee that the housing market has hit bottom yet.

"If we find that it's just the tip of the iceberg, this counter-trend rally could lose steam and these stocks could get hammered again," he said.

The lumber makers

Federal Way, Wash.-based Weyerhaeuser Co. is the world's biggest producer of softwood lumber. It also makes the most engineered lumber, which includes made-for-housing construction products like roof joists and beams. And it owns several homebuilders. (bad combination)

Once it spins off its paper business -- a deal it expects will close in the first quarter of 2007 -- about 45% of its revenues will come from wood products. Already, the slowing housing market has prompted it to wind down some production. On Monday night, the company said it was shutting output at two Canadian mills that make plywood and lumber for residential construction, to "balance our production to our orders."

Louisiana-Pacific Corp. is another big supplier of lumber and wood products for the housing industry.

At Rohm & Haas , North American paint sales accounts for about one-tenth of the company's roughly $8 billion in annual revenue. All that whitewash could wipe out some profits, says Citigroup analyst P.J. Juvekar, who expects Rohm & Haas earnings to fall next year. Juvekar says changes in home sales have tracked closely with the number of gallons of architectural paint sold over the past 25 years, as well as Rohm & Haas' stock price. Rohm & Haas, for its part, maintains that its sales to the paint market have more to do with remodeling activity than housing sales.

Window, cabinet and air-conditioning manufacturers

Masco, which sells kitchen cabinets and bathroom fixtures under the brands Mill's Pride, KraftMaid and Peerless Faucets, lowered its 2006 earnings forecast last month after new orders weakened in September. "Like many in the housing industry, we have been surprised by the severity and rapidity of the current housing decline," Masco Chief Executive Richard Manoogian said. See full story.

Emerson , which makes air conditioning equipment and parts, says growth in its appliance components business is "based on consumer spending and housing and also a business that's probably one of the most challenging," right now.

The pool and bath suppliers
Last week, Pentair Inc. cut its sales and earnings forecast for the third and fourth quarters, saying a slowing housing market was cutting into demand for its pool equipment. http://immobilienblasen.blogspot.com/2006/09/lows-pentair-ethan-allen.html

Wallboard and insulation makers

Eagle Materials Inc. last week cut its earnings outlook after a drop in new home construction cut into its gypsum wallboard and paper businesses.

U.S. Gypsum Corp. is the largest supplier of wallboard, which it sells under the brand-name SheetRock. About 60% of its revenue last year came from new home construction and remodeling,
A drop in home starts would directly eat into demand for its flagship product. A 10% decline in home starts translates into about a 4% decline in wallboard demand from current levels. But some of that reduced appetite from homebuilders could be handled by shutting factories and reducing supply, says the company. (fewer jobs.....)

Owens Corning , in the final stage of bankruptcy reorganization, produces more insulation than any other firm, plus sells roofing tiles and other building materials. About one-third of its sales are tied to new home construction.

Construction equipment

Some 12% of sales at Ingersoll-Rand , which makes Bobcat construction equipment used to dig ditches and lay sod, may have exposure to residential housing and "will clearly be under pressure as both new and existing home sales continue to decline," says Deutsche Bank.
The company, which also makes Schlage locks, doorknobs and similar hardware, says it doesn't break out its market exposure.

The tool companies

Illinois Tool Works Inc. , which makes welding and concrete fastening tools for the construction industry, citing a weakened market for new homes when forecast earnings that fell short of analysts' expectations last month.

Black & Decker Corp. , which makes Price Pfister faucets and DeWalt tools, hasn't updated its outlook for the third quarter. But back in the second quarter, it reported a 6% drop in hardware and home improvement sales. Shares have fallen 8% this year.

What's filling up the garage

Toro Co. ( in late August cut its outlook for full-year sales growth to 3% to 5% from 8%, complaining that a weakening housing market has kept consumers from buying as many new lawn mowers or snow blowers.

jan-martin