Wednesday 28 February 2007

Stock Market Fall: Banks, Rumours and Taxi-drivers

Stock markets around the world continued to fall in the wake of the Chinese stockmarket wave of yesterday.

In the end, I suspect that whilst it might seem like a large Chinese ripple effect, that the US market in particular was just looking for an excuse to sell-off. That aside the Chinese market was presenting signs of bubble like behaviour with PE ratios getting ahead of themselves.

There were a number of points that I wanted to blog on today but after reading an excellent post byChina Matters titled "Take the Money and Run" that links to a 1st Feb 2007 article in Time magazine HERE I have changed tack and will just provide a short overview.

The beginning of the TIME article is the standard "crash" ttext that they trot out every time stock markets run away with themselves and then suffer large one day declines e.g. Tulips, south-sea bubbles, dot.coms, 1929s etc. but then discusses the issue from a Chinese small investor perspective. The article touches on some of the issues outlined in my previous two posts:

China Stock Market Crisis
A look at the fundamentals

The following quote is from the China Matters post and is a good quote. Although we have heard this all before in the West it may be new to many small Chinese investors. It comes back to the greed and fear equation I discussed yesterday.

Last year 2.4 million investors began trading stocks through the Shanghai exchange, a 250% increase in new accounts. That's an average of about 7,000 a day, a flood of fresh blood from san hu (as the Chinese call small investors) that is making seasoned traders nervous. "When you see shop assistants and taxi drivers racing out to borrow money to buy stocks, you've got trouble," says commodities guru Jim Rogers. "That's the market sucking in a whole lot of neophytes priming to get slaughtered."

The rest of the China Matters article is spot on in my opinion and is a well written piece. I quote large chunks of it here as it saves time going over many of the same points.

The main points are:

1. The US stock market falls are not China specific.
2. The idea that bank loans have been taken out to fund share purchases.

Both are important factors. The second mirrors the behaviour of East Asian banks just before the 1997 currency crisis where real estate speculation was to blame.

From China Matters:
Some observers apparently thought that the rumor of an impending capital gains tax was enough to end the party.

I tend to attribute the crash to reports of an impending government crackdown against illegal bank loans i.e. bank loans taken out for ostensibly for business and capital construction purchases but diverted to stock market speculation.

This is probably as close to a smoking gun as we’ll get, from China Daily on January 30:

China's banking regulators have banned commercial banks from giving loans for stock investment and to investigate and call in all loans suspected of being used for such investment.

The China Banking Regulatory Commission (CBRC) would dispatch officials to examine loans at all commercial banks after the Spring Festival, which will fall on February 18, said an official with the China Banking Regulatory Commission, who declined to identified.

A crackdown right after Chinese New Year.

Just when the market crashed.

How about that.

The first thing the banks do when they hear about a possible audit is to try to call in suspicious loans and clean up their books; and that would be the signal for the speculators to realize their gains and get out of the market.

As to why the loss of 8% in market capitalization on a highly speculative bourse with minimal foreign exposure would give the New York Stock market the heebie-jeebies: it would be a dismaying indication of the tangential bad news that U.S. traders were looking for to confirm their own pessimism.

If I were in the U.S. markets, I would worry less about a much-needed $100 billion correction in Shanghai, than I would about the absolutely catastrophic news that the OMB was correcting its growth estimate for fourth quarter 2006 U.S. GDP from a heartening 3.5% to a dismal 2%.

That’s an overestimate of 75%, representing a contraction in anticipated GDP of perhaps $50 billion for the quarter, with a commensurate reduction in profits translating into a shrink in market capitalization of perhaps $200 billion based on real world—as opposed to speculative—valuation.

And it’s a sign that the U.S. is continuing to plod into a recession instead of pulling out of one.

For China, on the other hand, the crash is good news for everyone except, inevitably, its mismanaged banks, which have probably accumulated a fresh inventory of funny paper for their bad debt portfolios.

Fewer loans are written, macro control of the runaway economy is strengthened, inflationary pressures are reduced, the hemorrhaging of money from productive to speculative endeavors is staunched, and taxi drivers and shop assistants learn a salutary lesson about the risks of capitalism.
The big money players, I suspect, didn’t get skinned.

They took the money and ran—away from the stock market and back to the bond market and banking system.

That’s something I suspect doesn’t bother the government one bit.

I could not have put the bold print bit any better myself. Good piece.

Tuesday 27 February 2007

Chinese Stock Market Correction: A look at the fundamentals

In the previous post and in the press there is a lot of talk about the causes of the 9% correction in the Chinese stock market (after recent highs note).

The reasons suggested by commentators are (1) a potential slow down in Chinese growth and (2) a rise in inflation.

For one thing (1) might be driven by a fall in exports - this in turn would be driven by a fall in the growth in the US or Europe.

To get an idea of the Chinese growth situation it is worth looking at the recent World Bank report on China. This is the story as reported in China Daily. This article is dated 15th Feb. 2007. Key phrases are in bold.

China's growth to slow in 2007 - World Bank
China's economic growth is expected to fall to 9.6 percent this year from 10.7 percent last year amid a mild slowdown in exports, the World Bank has said.

Export growth is likely to decline to 20 percent this year, in real terms, from 24 percent in 2006, the World Bank said in its 21-page quarterly update on China.

"A resilient world economy means that export demand prospects remain good, although less buoyant than in 2006," the report said Wednesday.

The World Bank said productivity growth meant exporters would probably be able to continue absorbing the effect of a rising currency and the gradual lowering of export tax rebates.

Investment, a main engine of growth in the world's fourth largest economy in recent years, is unlikely to slow drastically in early 2007, while consumption should grow solidly, it said.

"With rising profit growth and ample liquidity in the banking system, the fundamental drivers of enterprise investment are still present," the report said.

"Consumption (will be) underpinned by income growth and to a lesser extent the shift in government spending towards health and education, but held back by food price increases," it said.

The World Bank urged China to increasingly rely on new sources of growth in the medium term, with a re-allocation of labor out of agriculture and into services, and labor-intensive urban growth, seen as key.

This could boost urban employment, wages and household incomes and reduce rural-urban disparities, while mitigating external imbalances, the bank added.

"Re-balancing the pattern of growth, featuring a move to more labour intensive urban growth, will need to be a key part of an effort to boost the role of consumption in the economy and to reduce the trade surplus," it said.

So predictions from the World Bank are for only a very small fall in Chinese growth. 9.6% is still massive. Perhaps of more concern is the inflationary trend in China. Again this article is from China Daily and is dated 12th Feb. 2007. The bold print this time tells its own story. "Stock market bubble" is mentioned.

Inflation may hold close to two-year high
China's inflation probably held close to an almost two-year high on food prices, increasing the likelihood of the central bank raising interest rates.

Consumer prices rose 2.6 percent in January from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg News. That would be down from 2.8 percent in December, the biggest increase since February 2005. The statistics bureau will release the figures at 10 a.m. on Feb. 14.

"The probability of an interest rate raise in the coming few months has increased and a second rate hike is also possible this year," said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. Besides accelerating inflation, he cited concerns over a potential stock market bubble and a rebound in investment.
China is trying to prevent the overheating of the world's fourth-biggest economy, which last year expanded 10.7 percent, the fastest pace since 1995. An export boom drove a US$177.5 billion trade surplus that is pumping cash into the financial system.

Economists surveyed by Bloomberg News last month expect the central bank to raise interest rates and curb bank lending in the first half. The one-year benchmark lending rate is 6.12 percent.

Central bank Governor Zhou Xiaochuan is seeking inflation of less than 3 percent this year. Food accounts for a third of the consumer price index.

Grain Prices

Corn futures on the Dalian Commodity Exchange jumped 25 percent in 2006 as soaring demand swallowed a record harvest. The world's most populous nation may struggle to meet its grain needs as farmland shrinks amid rapid urbanization, the Ministry of Agriculture said Jan. 26.

"Unless the government has massive food stockpiles to dump on the market that we are not aware of, we may see prices soar even higher in the months ahead," said Carl Weinberg, chief economist at High Frequency Economics Ltd. in New York.

The inflation figures will be affected by the timing of China's Lunar New Year holiday which fell partly in January last year. Chinese people buy extra food for holiday feasts.

M2, the broadest measure of money supply which includes cash and all deposits, probably grew 16.5 percent in January from a year earlier, the Bloomberg News survey showed. The central bank will release the figures as early as Monday.

Producer prices likely rose 3 percent in January from a year earlier, the survey showed. The statistics bureau will release the figures tomorrow.

The increase in money supply also needs to be considered. The ECON101 general rule is that if the MS increases, the interest rate falls, investment increases (cheaper borrowing), inflation increases. Put another way, if business confidence increases (as it has in China), investment increases, and without an accomodating increase in money supply we would get an increase in interest rates that might dampen investment.

Interesting times.

China Stockmarket Crisis - 9% fall: Where next?

Whenever a major stock market falls 9% there will be repercussions and these were felt today across Western stock markets with the FTSE 100 off close to 2% on the day.

As always the cause of the fall is primarily economic or more specifically, fear of an economic downturn in China. The result is that many commodity stocks trading in the US fell heavily.

The BBC news website report the fall as follows:

World shares wobble on China fear

China has been one of the main emerging markets for many investors as the country's economy has grown strongly and the government has sold stakes in some of its biggest and most attractive companies.

However, the government has been looking at ways of slowing growth in order to stop the economy from overheating, and many investors are worried that it may lead to tougher regulations that will limit stock-market investment.

At the same time, there are concerns that interest rates will have to be raised in order to rein in economic and price growth, further denting domestic demand for shares.

This whole issue links back to the undervalued RMB and the question of whether China is really overheating. There is evidence that this is the case when one looks at house price inflation (and other assets) and even signs that wages are coming under pressure.

However, one needs to dig a little deeper for the reason for this fall (lurking in the background I expect to find the little understood but highly dangerous hedge funds).

Share sale knocks Chinese market

The benchmark Shanghai Composite Index fell nearly 9%, its worst daily performance since February 1997.

The fall comes amid rumours of a crackdown on illegal share offerings and trading, as well as fears about accelerating inflation.

In addition to the well understood fear on inflation we now have the whiff of corruption and illegal share offerings to throw into the mix. The latter can have a devastating effect on the confidence of the small retail investor in China.

The question then is whether there is substance to this fall or whether it is a move by short sellers to worry the market and then profit handsomely from the fear driven into the small investor. Greed is a strong emotion for small investors - fear is always stronger and hence the reasons stockmarkets rise slowly but fall far more quickly.
Chinese markets have been performing strongly on the back of the country's stellar economic growth, and the Shanghai Composite Index closed above the 3,000 mark for the first time on Monday.

Indeed, some commentators have said that the day's slump was itself the product of speculative pressures, and that economic fundamentals remained strong.

We will post more the ramifications of today's fall in the Chinese stock market. There are certain things to look for:

1. The role of hedge funds - when they get it right they make a lot of money. When there is the perfect storm (such as a 9% fall) this can trigger a chain of events across global institutions that can have large impacts on stock markets around the world. All markets are closely inter-related by massive capital flows. When the fail they fail big.

2. The illegal share dealing clamp down.

3. The share prices of commodity stocks.

4. Moves ahead of an appreciation in the RMB.

Monday 26 February 2007

"Larry Summers on China": Lessons from Japan

Larry Summers in today's LA.Times online has written an interesting opinion piece on the similarities between China now and Japan in the 1980's and early 90's.

He makes some good points and Econ101 students should read this in light of some basic questions: "What does it mean to run a trade surplus or deficit?" Can the US run a deficit for ever? Can China run a surplus forever? What does China do with its surplus money? What role do exchange rates play? Can equilibrium be restored painlessly? What may happen if China does not act now to let its currency appreciate?

Importantly, in light of this article, is to consider the very large differences between the Japan of the 1980's and China now. The same mistakes are not inevitable.

Some of the answers are contained within this article. Also interesting are some of the comments on Greg Mankiw's blog post (see below).
"Summers of China

A Japanese lesson for China
A RISING Asian power is an export juggernaut and enjoys prodigious growth fueled by high savings and investment rates. Its rapidly modernizing industries threaten an ever greater swath of industry in Europe and the United States. Its formidable central bank reserves and burgeoning account surplus lead to claims that its exchange rate is being unfairly manipulated. Its financial system is bank-centric, heavily regulated in favor of domestic institutions and closely tied to government and industry. Rapid productivity growth holds down prices, but its asset values rise sharply.

Key congressional leaders in Washington demand radical action to contain the economic threat. Diplomats warn that public bashing is unproductive but make clear that economic issues are a crucial part of the bilateral relationship. Delegations of senior U.S. officials engage in "dialogue" with their counterparts about the many aspects of their economic policies that promote imbalances, warning of the congressional demons who stand ready to act if "results" are not achieved quickly.

All of this describes what is happening in China, and with our relationship with Beijing, today. It also describes the Japanese economy in the late 1980s and early 1990s, before its lost decade of deflation and considerable deterioration in global prestige. Although there are obvious differences, notably China's much lower level of development, the similarities are striking enough to invite an effort to draw some lessons from the Japanese experience.

The definitive history of Japan's dismal decade has yet to be written. But most observers would agree that key elements included the bursting of stock market and land bubbles, the resulting problems in the financial system, the collapse of aggregate demand as banks stopped extending credit and the difficulty of moving from export-led growth to domestic-led growth once consumer and business confidence was lost.

In retrospect, Japanese officials made several important policy errors. In order to avoid further yen appreciation in the late 1980s, they followed easy monetary and financial policies that gave rise to huge asset price bubbles and expansions in credit, which set the stage for the downturn. At the same time, they failed to encourage a shift to domestic demand-led growth at a moment when consumers were enjoying record increases in wealth. And they allowed problems in the banking system to fester. The result was that Japan was not well positioned to prevent or address the serious problems of the 1990s.

This suggests that if China is to sustain rapid growth and not repeat Japan's mistakes, it must fix the policy roof now, when the sun is shining. Allowing inevitable currency appreciation and spurring domestic demand by encouraging consumption is much easier now when the economy is at the edge of overheating than it is likely to be in the future when it cools off. It has been estimated that seeking to maintain the current exchange rate could require as much as $400 billion in reserve accumulation in 2007, which would almost certainly lead to rapid asset price inflation as renminbi are printed to buy dollars. And there will not be a better moment to fix problems in the banking system.

These lessons for Chinese economic policy contrast sharply with those drawn by observers in and out of China who attribute Japan's deflation and consequent poor performance to its willingness to accede to American pressure for currency appreciation. This alternative view offers no explanation for Japan's asset bubble and collapse, and no theory about what measures would have spurred domestic-led growth.

Another lesson of the Japanese experience is the need for modesty regarding economic diplomacy. Events and national and political decisions, not international communiques, shape economic outcomes. The effect of events beyond the control of governments — the collapse of Japan's asset markets, information technology's spur to U.S. productivity, the Asian financial crisis — dwarfed the diplomatic debate.

Even in areas in which government policies might have had significant effects, such as housing, finance, social security or retail regulation, there is no evidence that Japan in the 1980s and 1990s made any changes in response to U.S. pressure. If heavy-handed pressure makes it easier for special interests to invoke nationalism as they resist change, high-profile negotiations can be counterproductive. And in a world in which goodwill capital is scarce, heavy-handed pressure engenders resentments that spill into other spheres.

It was a cliche in the late 1980s and early '90s that the U.S.-Japan relationship was the world's most important bilateral relationship. Given China's scale, rapid growth and the greater level of imbalances in today's global economy, Chinese economic policy and its international economic relations are even more important. By learning from a rather unfortunate history, policymakers on both sides of the Pacific can avoid repeating its mistakes.

China's central bank increases reserve ratio

In ECON101 undergraduate economics the creation of credit by finanical instutions depends on the reserve ratio that the central bank. A lowering of the reserve ratio (which is what has happened in the UK and generally in the West in recent years) means that banks are able to lend more money hence increasing the money supply.

Today's news shows that the Chinese government may becoming worried about the overheating economy (whether this is via share prices, real estate prices etc.)

Central bank increases reserve ratio
The People's Bank of China (PBOC) has raised its reserve ratio for financial institutions engaged in deposit business by 0.5% to 10% to absorb liquidity, state media reported. Analysts project ratio hikes to rise as high as 11.5% in 2007. The PBOC has increased the reserve ratio five times since July 2006, with the latest move expected to take US$23.22 billion out of the banking pool. In a public statement, the PBOC attributed the hikes to rising currency liquidity caused by "unbalanced international payments generated by mounting trade surplus".

It will be interesting to see whether the ratio is tightened again. This is a policy rarely used by the West.

China's "Brain Drain": Education as a gateway to the West

An interesting piece on the BBC website that interviews 4 different Chinese ex-pats.

China's lost talent overseas
A report by the Academy of Social Sciences in Beijing suggests that China suffers from the world's most severe brain drain.

About two-thirds of Chinese who have studied abroad since the 1980s have chosen not to go back home, according to state media.

There is one example of a Chinese student who went to the UK for postgraduate study. Li Feng makes some excellent points - from an economics perspective it is all about supply and demand. For the UK, we are getting academically excellent students who are well motivated. In years to come informal networks between people will help the UK prosper in the globalised world.

We will post more on immigration and globalisation in the coming weeks.
I am from south-east China, not far from Shanghai. I came to the UK to do my Masters in 2004. After graduating a year later I got a job as a planning policy officer at a local district council.

I didn't leave China to find a better life abroad. To be honest, the life quality I had in China was much better than here. The reason for me to be here is to get knowledge and experience in a developed country.

Universities in China produce loads of graduates each year, the competition is very strong and it is very difficult to get a good job straight after university. You have to offer something more than the other graduates and it's all about wider experience.

China's growing integration with the rest of the world means that the need of multi-culturalism is more important than ever. Once equipped with experience and knowledge I plan to go back.

Many of those who started leaving from the 1980s until the late 1990s have chosen to stay abroad. The reason is that China used to be poor, whereas a foreign country could provide them with better career opportunities or at least a better life style.

Many people in China became rich in the last decade and unlike during previous decades, many can afford to go abroad now. Studying and working abroad is no longer just about fortune hunting, it's about life style.

If you read some reports on this, you will find that more and more overseas Chinese are continuously going back to contribute to the rapid economic development. China has never been so hungry for educated people and has started a movement to bring them back.

I think most of the Chinese people who live abroad would like to go back, at some point. The reason they keep on staying is perhaps of a more human nature - for fear of change, fear of losing what they've already got, fear of failure.

Life in the UK is very different from China. It's peaceful and there are fewer pressures. But there is a barrier - mostly because of cultural differences. It's difficult to make friends and belong to a community and I would find it difficult to make it a home.

Hat-tip: China's Brain Drain

Thursday 22 February 2007

RMB: To revalue or not to revalue

The academic debate on whether China should revalue its currency continues.

Over at Market Watch there is a neat little article with a few facts and figures thrown in. The background on the economic implications of the year of the pig is unnecessary but worth reading (I am not sure this helps with the gravitas of the piece though).

Whither China in the year of the pig?

HONG KONG (MarketWatch) -- When it comes to the direction of bull and bear markets, generally investors know where they stand, but what to make of a pig?

This week marks a new Chinese New Year, the Year of the Pig, and in Hong Kong shops and restaurants are festooned with golden pigs to bring good fortune.

But soothsayers have been quick to point out this is actually a year of the fire pig marked by upheavals, changes of government and landmark political shifts. Not only is the Year of the Pig not matched with lucky gold, it is fire that sits on water putting the elements in conflict. Further this year's flames are not even a yang fire, symbolizing warmth of the sun, politeness and optimism. Instead it's a yin fire that signifies the spark of tension, conflict and even war.

I don't suppose these soothsayers are fully paid up economists?
For investors talking stock at Lunar New Year, it might be worth considering the last year of a yin fire was 1997 - the year of Asian financial crises when market bubbles burst and currencies collapsed across the region.

Looks like the market is a sell then.
Today, currencies and bubbles are again back in focus, with most eyes on trading goliath China and the sensitive position of its pegged currency in the global economy. If anything encapsulates a landmark political shift, a major move in China's pegged currency to the U.S. dollar since 1993 would surely fit the bill.
While a decade ago China won plaudits for resisting a me-too competitive devaluation as Asian currencies fell domino style, today the government has made it clear any change will be timed to serve its own interests. Could that time be approaching?
One prominent Sino-economist says he now expects China will opt for a faster than generally expected pre-emptive policy revaluation. In a paper released in recent weeks Chicago based economist David Hale says he expects a revaluation that will surprise on the high side, "with some movement perhaps around the time of the Chinese New Year in mid-February, or the 17th CPC Congress this fall. "

So this will be the Chicago based economist that has no relation to the economics department at Chicago but happens to run his own consultancy that happens to be in Chicago. Fine - he does have an MSc in Economics from the LSE after all. However, the analysis has a ring of truth to it:
A confluence of factors has combined to lead to a change in mainland thinking. For one, Chinese companies have coped well with a nearly 6% yuan appreciation since July 2005 to date. Exports, 25% of which are destined for the US market, have been strong and increased 27.2% year on year in the last quarter of 2006.

He also cites a change of tone in the Ministry of Commerce towards revaluation, which has long fretted about how profits would suffer at domestic firms.
Arguments that China needed a fixed exchange rate to safeguard its financial system now also carry last weight. Privatization of its three largest state-owned banks has improved the sectors health giving these banks a combined market capitalization of $460 billion, or 15.1% of GDP.

And for the Peoples Bank of China, traditionally more supportive of a revaluation in order to tighten monetary policy and dampen the export boom, arguably those arguments look more persuasive than ever.

There are some other interesting statistics:
China's trade surplus jumped nearly 75 per cent to reach a record $177.5 billion last year. Hale argues China now appears to have a structural current account surplus equal to 6-8% of GDP, and if capital spending were to suddenly slow, the current account surplus could rise to 10% of GDP.

Also, rampant money supply growth is being directly linked to the current gradualist approach of appreciation of the yuan, even by local economists. Yu Yongding, a former central bank advisor, warned in the past week that this risks encouraging more speculative money to enter the country.

'With the guidance of market expectations, foreign capital will continue to flow in, creating asset bubbles and even possibly leading to a financial crisis in China," Yu writes in the latest issue of the International Economic Review.

Of course, China has been acting to restrain money supply growth, raising reserve requirements for banks again last week the fifth time in the past 6 months as well as two interest rate increases. Headline inflation might suggest this is working as CPI recorded a modest 2.2% year-on-year rise in January vs. 2.8% in December.
Asset prices, however, tell another story. Both the red hot A-share market and record property prices are widely believed to be in bubble land and are being keenly watched by government policymakers.

Given some of the recent posts on this blog, an upward revaluation of the RMB would make studying in abroad cheaper and would no doubt make UK Universities and potential students happy. Education provision is, afterall, one of the UK's largest exports.

Studying "Economics in the UK": General Links

We have spent some time talking about where to study for a "MSc in Economics" in the UK and the cost - in this post we provide all the general information required including information on Visas, English Language and much more.

"MSc Economics": How much does it cost?
Which UK University to study in? Academic Rankings

In this post we provide the other links that Chinese students will find useful when deciding on which country to study and where. Linked to this is the provision of English language teaching.

The most respected source of information is the British Council. Anything you read on the British Council website can be trusted. Links are now provided under GENERAL EDUCATION in the sidebar.

Some rules and hints:

(1) If you want to study English in the UK make sure you ONLY pick a course that is accredited by the British Council. British Council accredited English Courses.

(2) Make sure you follow the UK Visa application process closely and apply in time. This is the UK government site for UK Visa applications. UK Visas.

(3) When picking a course, if you are from China, make sure you check the British Council China site. At this site there is a lot of information in Chinese and you can select the course you want and it will provide a list of all recognised instutions. See the links below:

Full-time postgraduate economics courses in the UK (first 100 courses)

Full-time undergraduate economics courses in the UK (first 100 courses)

I reiterate - use these lists in conjunction with the World University Rankings.

As economists or would-be economists you should be thinking rationally - this means you should take an economics qualification that will maximise your life-time earnings. This means going to a Univerity that is world renowned and will have been heard of by potential employees (they may even have gone there themselves). Taking an undergraduate or postgraduate qualification in the UK is expensive. Make sure you make the right decision.

This will often mean going to big city Universities that have large science based departments and good international reputations.

The Universities included in the Postgraduate list in the sidebar should provide a good starting place.

(4) For information on other qualifications and other information about studying in the UK see the British Council Factsheets.

If you want to take an English Language course, Undergraduate and then postgraduate course it might be worth looking at those places that provide all three. You can work this out using the links above. We may post on this a later date but I would advise taking your Engish course at a well established University. This will give you a better feel for undergraduate or postgraduate life in the UK.

The following posts may be of interest:
Econphd Ranking of "Economics departments"

Ten Reasons Why You Should Study in Britain

Studying "Economics in the UK": General Links

Which UK University to study in? "Academic Ranking of World Universities"

Studying in the UK: Cost of Accomodation

World University Rankings: Rankings and text

"UK University Ranking": large city effect

Wednesday 21 February 2007

"MSc Economics": How much does it cost?

When any Chinese student or overseas student decides they want to study abroad (whether it is economics or any other subject) there are a number of considerations:

1. "The ranking of the University".
2. "The Ranking of the department".
3. The cost of the course.
4. The cost of living in the University city.
5. English language requirements and whether pre-course English courses are available.

We have already posted on issues (1) and (2) although there will be more on these in later postings, more specifically, rankings of individual economics departments.

Which UK University to study in? "Academic Ranking of World Universities"

In this post we look at the cost for each course. The Universities chosen are from the sidebar listings which include only those Universities that appear in the "Shanghai Jiao Tong University" TOP 100 Universities plus a couple of other Universities that score well for Social Sciences.

The UK Universities in the TOP 100 are can be seen in the above post.

Of those Universities with a 1 year MSc Economics programme below we compare the costs. Note that these costs are for OVERSEAS students. One reason for this post is that Universities seem to go out of there way to hide this information and it is rarely shown on the Economics pages themselves.

The costs are for the coming academic year, 2007/2008 unless stated.

University of Birmingham COST: £9,200
University of Bristol COST: £9,600
University of East Anglia COST: £8,995
University of Manchester COST: £9,500
University of Nottingham COST: £9,600
University of Sheffield COST: £9,450
University College London COST: £12,480 (for 2006/2007)
University of Warwick COST: £9,500

Given London is the most expensive place to live, the large discrepancy between the UCL price and the others is of come concern. The prices of the other courses are relatively similar. Given the that all MSc Economics courses cover largely the same material even these small cost differences are worth looking at.

On the cost of living, apart from London, all the other Universities are in locations and cities with similar levels of cost. Birmingham and Manchester are the big cities with large Chinese communities.

We will review individual cities in a later post.

Tuesday 20 February 2007

Research Paper: Wealth Accumulation and Distribution in Urban China

An interesting paper that I need to read. The interesting aspect appears to be the ability of party members to accumulate wealth and the role wealth accumulation has had on the ability of families to send their children to Western Unviersities to study.

"Wealth Accumulation and Distribution in Urban China"
IZA Discussion Paper No. 2553

Contact: XIN MENG
Australian National University - Department of
Economics, Institute for the Study of Labor (IZA)

Full Text:

ABSTRACT: Under socialism it was neither possible nor necessary to accumulate significant levels of personal wealth. The acceleration of economic reform in the last decade, however, has brought dramatic increases in income and investment opportunities. Reform has also reduced social protections provided by the state welfare system. In response to these changes, between 1995 and 2002, urban average real household net total wealth increased by 24 per cent per annum. There is a concern, however, that those accumulating wealth are the economic and political elites while those unable to accumulate wealth are the most vulnerable workers who are losing social protection.

Using Chinese urban survey data of 1995, 1999, and 2002, this paper investigates this issue. It is found that households with above average income have accumulated more wealth than their poorer counterparts. In addition, a large proportion of this wealth accumulation may be from non-earned sources, such as buying larger and better housing at highly subsidized prices.

Furthermore, party members and their children have benefited a great deal from this fast wealth accumulation process. Although at lower rates, the poor and vulnerable have also been able to accumulate wealth.

Friday 16 February 2007

China's surplus - what to do with it?

In economics there is a constant debate on the US deficit and the Chinese surplus. Can this go on forever? What does a deficit really mean.

One problem, often written about, is that the Chinese currency is too weak relative to the dollar. One thing that prevents a correction is that China uses its vast surplus (obtained from exporting to the world) to buy up US and European government bonds (and thus supporting the US dollar).

It is interesting to read therefore that:

China to select riskier investments
16 February 2007
The central bank said China's stash of $1.07 trillion in foreign currency and securities will likely be invested in new ways rather than only in US and European government bonds, the Wall Street Journal reported. China, one of the biggest investors in the world, has announced that its old system of investment is out of date and it will follow the lead of countries like Japan, Singapore, and South Korea. New steps would mean fewer steady purchases of US Treasury bonds and more investments that are riskier but have better long-term returns, like corporate bonds, stocks or even real estate and commodities. Analysts suggest China could spare $200 billion - $300 billion from its reserves for more aggressive investments in the coming years.

This is a potentially important move - the ramifications might be widespread.

Thursday 15 February 2007

Environmental Round-up: Water, Ports and Clean Development

Three recent news articles that give a good overview of the problems but also the political will that China now appears to be showing regarding the continued environmental degradation of the country.

I have included only the highlights.

Thirsty China Sets Ambitious Water - Saving Goal
China has per capita water resources well below global averages, and expects climate change to worsen shortages across the already arid north, but until now it has focused on massive water transfer schemes to try to resolve the problem.
The target, which matches one for energy saving over the same period, was also signed off by the water resources and construction ministries, the National Development and Reform Commission said in a statement on its Web site (

Under the plan, China aims to boost efficiency in agricultural irrigation systems -- in some areas the most wasteful users of water -- increase recycling of urban water and cut back on leaks from urban pipe networks, the document said.

Altogether it should save 69 billion cubic metres of water, the report added.

China has only recently started focusing on environmental protection after years of promoting economic growth at almost any cost, as riots and mounting bills over pollution problems drew Beijing's attention to the problem.

This year alone, drought in northwestern Shaanxi province has left at least 300,000 people short of drinking water.

Tap water turned salty in parts of the gambling hub of the former Portuguese enclave of Macau after water flows down the Pearl River slowed, and the sea level rose, forcing it to hastily build a plan to access fresh water further upstream.

China Orders Closure of 12 Plants for Pollution
BEIJING - China has ordered a dozen heavy industrial plants to shut down for failing to meet pollution standards and told another 70 to comply with the rules.

The State Environmental Protection Administration said on its Web site ( that the plants represented combined investment of 2 billion yuan (US$258 million).

They include a metallurgy company in Inner Mongolia, four steel makers in Jiangsu and Hebei and a charcoal plant in Shandong.

"Projects that seriously violate the state's industrial policies and environmental protection thresholds must be immediately and permanently closed down," SEPA vice head Pan Yue was quoted as saying.

The agency has been striving to extend its influence in the face of opposition from local authorities that frequently put growth before the environment.

SEPA said on Monday that China fell short of its goal for 2006 to reduce emissions of pollutants by 2 percent from 2005 levels.

With New Port, China Aims for Cleaner Development
Caofeidian, China's newest and largest iron ore port, is open for business, just 19 months after workers began to convert an isolated sand spit in northeastern China into a massive port and industrial zone.

But the Caofeidian project shows not just the dizzying speed of China's development, it is also meant as a clean departure from earlier policies of growth for growth's sake.

The facility, 220 kilometres (136 miles) southeast of Beijing is held up as a model in a country plagued by smelly black smoke and even fouler water from steel mills and factories.

When completed, it will boast a world-class steel mill, berths to unload coal, crude oil and liquefied natural gas, strategic oil reserve tanks, a petrochemical complex, a refinery, a cogeneration plant, a man-made harbour and a five-star hotel.

Wang Junguo, Caofeidian office director for the Communist Party Committee of the nearby city of Tangshan, said he is confident that this time the planners will manage to achieve economic development without worsening pollution.

The industrial zone's modern, energy efficient facilities will allow China to shut down ageing, polluting steel mills and other plants in surrounding Hebei Province.

A natural deep channel will allow large ships to deliver iron ore efficiently to mills in northeastern China. A railroad will link to the Datong-Qinhuangdao line, China's most-heavily used route for coal, coke, iron ore and steel. A coastal highway is being completed.

Tuesday 13 February 2007

China in 2050: Report Released

It is the question economists the world over want to know - just what will China be like in around 50 years time. Although the answer will be "very different" just how different is the question and will it always be for the better.

This report, I would suggest, from the Official communist party of China, is a tad on the optimistic side.

What will be China like in 2050?
"An Outline of Sustainable Development in China: State Volume", a 20-volume book series compiled by 184 Chinese experts and scholars over two years and eight months, was published Sunday in Beijing.

The publication is China's first large-scale academic work summarizing the experience and laws of sustainable development. It proposes strategic objectives for sustainable development in China by 2050: reaching the sustainability level of moderately developed countries in an all-round way and entering the ranks of the world's top ten countries in terms of sustainable development capability.

Many indicators related to people's livelihood

The outline proposes concrete indicators to be attained by 2050 in sustainable development, with many of them closely related to people's lives.

The average life expectancy is to reach 85.

The four major coefficients will average at the following points: Engel's coefficient below 0.15; the Gini coefficient between 0.35 and 0.40; the human development index over 0.900; and the dual structure index around 1.5.

The average number of years of education for the whole population will grow from the current 8.2 years to over 14 years.

Scientific development will contribute more than 75 percent to the national economy as a whole.

Energy and resource consumption per unit of GDP will generate a value between 15 and 20 times higher than that in 2005.

Poverty will basically be eliminated nationwide.

Zero growth in the degeneration rate of the environment will basically be achieved.

Three steps in the course of development

China must pass through three stages before reaching its sustainable development objectives, the Outline suggests. These are the three basic "zero growths" ¨C zero growth in the natural growth rate of the population by 2030; zero growth in the consumption rate of energy and resources by 2040; and zero growth in the degeneration rate of the environment by 2050.

These three stages are a must for every country implementing a sustainable development strategy, said Niu Wenyuan, chief scientist and team leader of the sustainability studies group at the Chinese Academy of Sciences. Of them, zero growth of the population is the most important. Before 2050, China will pass through the peaks of three reversed-U curves as it makes a positive shift.

Timetable formulated for modernization

The Outline makes predictions about when each Chinese region will realize modernization, or reach the level of moderately developed countries at that time.

Shanghai is believed to be the first to realize modernization, in around 2015, followed by Beijing around 2018. Thirteen Chinese provinces and municipalities are expected to realize modernization ahead of schedule, prior to 2050.

By 2050, China as a nation will reach the level of moderately developed countries in an all-round way, and then march forward dynamically towards higher objectives.

Before 2060, 27 provinces, autonomous regions and municipalities will have reached their development goals, followed by the remainder of the nation by 2075.

By People's Daily Online

IMF research papers on China: Growth and FDI into the Banking Sector

Here are two new papers from the IMF on China (1) The rise of FDI into China's banks and the other (2) looking at growth theory in a Chinese context.

"The Rise of Foreign Investment in China's Banks: Taking Stock"
IMF Working Paper No. 06/292

International Monetary Fund (IMF), CERGE-EI, Center
For Econ Research & Grad Education, and Econ
Institute, Prague

International Monetary Fund (IMF)

Full Text:

ABSTRACT: The recent wave of foreign investment in China's banks and the prospects of further opening of the banking sector under the WTO agreement suggest that foreign banks are likely to play an increasingly important role in China. This paper takes stock of the involvement of foreign banks in the Chinese banking sector in the perspective of international experience. While in most other countries foreign bank entry took the form of direct takeover or majority shareholding, foreign investments in China's banks have been minority shareholdings with very limited management involvement. The paper concludes that China appears to be well positioned to benefit from further opening of the banking sector to foreign investors. International experience suggests that greater competition from and participation of foreign banks can in general bring important benefits if appropriate incentives and sufficient opportunities are created.

"Rebalancing China's Economy: What Does Growth Theory Tell Us?"
IMF Working Paper No. 06/291

International Monetary Fund (IMF) - Asia and
Pacific Department

Full Text:

ABSTRACT: This paper uses the standard one-sector neoclassical growth model to investigate why China's consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly distorted in the 1990s and 2000s. The distortion could have been caused by nonperforming loans, borrowing constraints, and uncertainty over changes in government guidance in bank lending. If China is to rebalance growth towards relying more on consumption and less on exports and investment, banking sector reforms and financial market development could, therefore, turn out to be key.

Monday 12 February 2007

"Exporting Trash": Comparative advantage or Exploitation

From the Globalisation and the Environment blog.

For every "globalisation is good for the environment" story there are another 10 that don't shed such an attractive light on this topic. However, one needs to carefully study the economics of trash a little more closely.

The news that the West exports high quantities of trash and has done so since the 1960's and 1970's kind of passed me by even though I have been working with detailed trade statistics for years.

I suppose this is because I find it hard to percieve that it can be cost effective to transport rubbish half way around the world. In the international trade and economic geography literature transport costs (iceberg costs) are an important element in modelling international trade patterns. The gravity model result that distance matters is a cornerstone of the emprical trade literature.

So how does the trade in trash fit with the theory. The answer is that this is no ordinary trash. This is a good article and is thus posted in full.

This article is from ChinaDialogue.

Waste exports: the underside of globalisation

Sky TV recently reported that the world's largest container ship, the Emma Maersk, had arrived in south China’s Lianjiao, laden with 170,000 tonnes of rubbish. The local economy has relied on waste recycling for years. As a result, fumes can be seen pouring out of Lianjiao’s chimneys, its rivers are blackened, its soil is contaminated, its water is polluted and trash can be seen piled up like mountains. The story has ignited controversy in both the UK and China.

But this is not a new phenomenon. Western nations started exporting waste to developing countries as early as the 1960s and ‘70s, with disastrous consequences. In August 2006, a boat chartered by a Netherlands-based firm dumped hundreds of tonnes of toxic waste in the Ivory Coast, killing seven and hospitalising 24, with almost 40,000 people suffering to some degree.

The overwhelming opinion of online commentators is that this demonstrated how western countries adhere to double standards with regard to the environment. But waste dumping is not carried out by nations: it is carried out by corporations.

But how can it be economic or profitable? Ah, the avoidance of environmental regulations. The Pollution Haven Hypothesis is alive and well. But, China also gains a raw material - but at what costs?
Exporting trash has allowed firms to earn money from governments in the developed world, cutting government costs and avoiding local regulations, while the exporters earn an additional income from selling the rubbish. At the same time, developing countries get a source of raw materials. China is the world's second largest consumer of plastic; one tonne of synthetic resin costs 11,000 yuan (around US$1,420), but a tonne of imported plastic, discarded in the west, can be bought for as little as 4,000 yuan (around US$515). The work of sorting the waste is hard and dirty, but for many it is more lucrative than the alternative. “We’re poor, so we still have to,” explained one interviewee. “If we plant crops, we can only earn around 2,000 yuan (around US$260) every year. But this work pays much more quickly: as much as 800 yuan (around US$100) every month.”

When there is this kind of profit to be made, there will always be someone willing to risk others’ health by importing trash, and many more who will endanger their own to sort it: it is simple economics.

A nice quote - we now have some "value of statistical life" stuff thrown in there.
Or is it? If the UK had weaker environmental laws, money could be made processing waste there, and nobody would export rubbish to China. Trash ends up in China because developed countries have more robust green laws, greater social supervision and more effective governments; high fees associated with waste processing and pollution emissions have made it uneconomical to process the trash locally.

But the low cost of waste processing and the large profits to be made in China make it a lucrative industry. Meanwhile, government oversight is weak and punishment is mainly in the form of fines that go directly to government rather than compensating the victims of pollution. As a result, companies and individuals involved can keep on polluting.

Globalisation benefits both developed and developing nations, but environmental laws and their enforcement are weaker in poorer countries. This gives richer nations a chance to export their waste and pollution. The economic and environmental differences are, in essence, the result of underdeveloped systems.

Globalisation increases the interaction between different systems, and exposes the gaps between them. In the same way that less-developed systems attract unregulated and risky investments, they also attract waste.

Governments, businesses and the international community should make a sustained effort to prevent the continuation and expansion of this serious problem.

International agreements that invoke the authority of a third party should be implemented. Sponsored by the United Nations or global environmental groups, such agreements would reduce the potential for harm to developing countries. The third party should also be able to help with the costs of environmental protection.

It is also important to control those factors that allow this unregulated trade. In this particular case, the UK government should bear responsibility for not implementing international agreements, take its rubbish back and discuss more effective systems for managing the international flow of solid waste with the Chinese government. Similarly, China should increase the cost of waste production and waste imports to reduce the price differentials: only this can get to the root of the problem. Otherwise, this issue will become intractable, and more problems will arise.

The Chinese government recognises the harm caused, and a law on solid waste is being rushed through the legislative process. Laws and regulations should be enough to improve the management of imported waste and reduce its environmental harm. But many have concerns about their effectiveness; waste processing and plastics are still highly lucrative industries, and the companies at the heart of the industry may just relocate.

The most basic and important measure is to build the public into the new systems. In the west, it is social pressure that blocks interest groups, keeps the government in line and pushes for strict environmental policies. Public movements inspired by environmental disasters in the 1960s and ‘70s led to a solid environmental protection system and a tradition of public oversight of the environment.

NGOs such as Greenpeace, the media, strict laws and responsible local governments must all play a part in helping China's environment to ensure that situations like this do not continue to arise.

Some good economic analysis in this piece that provides food for thought.

Friday 9 February 2007

Which UK University to study in? "Academic Ranking of World Universities"

The link to the Shanghai Jiao Tong University TOP 500 University ranking is now in the sidebar.

When students are thinking about postgraduate study abroad using University rankings is an important method for narrowing down the choice.

Academic Ranking of Universities

The UK Universities in the TOP 100 are:

World Ranking University European Ranking

2. University of Cambridge 1.
10. University of Oxford 2.
23. Imperial College London 3.
26. University College London 4.
50. University of Manchester 9.
52. University of Edinburgh 11.
62. University of Bristol 15.
69. University of Sheffield 20.
79. Universiy of Nottingham 24.
83. Kings College London 26.
90. University of Birmingham 29.

Consequently, we will use this ranking to present the Postgraduate courses available for Chinese students wishing to study Economics and Economic related subjects in the UK. See the sidebar on the right under postgraduate education.

Whilst not ordered in terms of Economics specifically, graduate employees are likely to be aware of both the ranking of the University and the course (with arguably more weight on the former).

However, there are some notable Universities that need to be included given the high quality provision of their Social Science provision. These include:

London School of Economics
London Business School
University of East Anglia
University of Warwick

Given the relatively homogeneous product of a Masters in Economics, it is a balance between course and University ranking (and of course cost and entry requirements).

Entry requirements and language requirements will be discussed in a later post.
The following posts may be of interest:
Econphd Ranking of "Economics departments"

Ten Reasons Why You Should Study in Britain

Studying "Economics in the UK": General Links

Which UK University to study in? "Academic Ranking of World Universities"

Studying in the UK: Cost of Accomodation

World University Rankings: Rankings and text

"UK University Ranking": large city effect

Graduate Employment in China: What makes a good CV?

Hot on the heels of the previous post we now read that graduates need try hard to get an interview. This is nothing new in the West but we should be aware that even if a country grows at 10% a year it does not guarentee all graduates a high paid job.

Again, this increases the risks to those households that borrow heavily to finance their childs education. The question is how does the likelihood of getting an interview depend on (1) where the student studies and (2) the subject they studied.

How do UK graduates compare to US graduates or Chinese graduates? Is a postgraduate degree now essential to get those top jobs in high paying multinationals?

This blog will be paying particular attention to the Chinese graduate labour market in thte months to come.

21 resumes may land One interview
Shops that offer copying and printing services around universities in Beijing will likely witness a brisk surge in business after a recent survey that shows that sending out an average of 21 resumes to land an interview with a potential employer, the Beijing-based China Youth Daily reported.

The survey, conducted by the Beijing Institution of Social Sciences, polled 175 men and 284 women from nine universities.

One respondent sent out 500 resumes before landing an interview.

Regarding anticipated monthly salaries, respondents from the China University of Geosciences expected only less than 1000 yuan ($128.86) a month.

As many as 37.3 percent respondents expected 2000-2999 yuan a month while 25 percent expected 3000-4999 yuan.

Respondents from the prestigious Peking University and Tsinghua University are the most optimistic group expecting 5000 yuan or above per month.

The starting salary for an undergraduate is 2,500 yuan, according to a report from the China National Radio (

The survey revealed work experience is a major stumbling block for undergraduates searching for jobs.

According to the China Youth Daily, , the focus on work experience indicates employers are trying to cut training costs.

Apart from work experience, sexual discrimination and majors that are not in demand are other obstacles.

White Collar jobs in China: migrant workers with college degrees?

With the large number of Chinese students coming to the US, US and now across Europe to study as economists we would expect the returns to education to be high. Given the cost of living and studying in the UK a good job back in China was the expectation.

However, with the increase in the supply of well educated graduates from the West the returns to this education is falling.

This article from China Daily is an interesting although badly written read.

White collars feel blue
At the forefront of those benefiting from China's rapid economic growth, the white collars are supposed to be happy. In fact, many are downright blue.

Their salaries are going up, but they aren't getting promoted. They are feeling less happy, and their personal lives are deteriorating.

According to a recent study jointly conducted by CCTV and, more than 60% of Chinese white collars are unhappy with their lives and careers, and surprisingly, those who feel more unhappy are from economically advanced areas like Shanghai and Beijing. It seems earning more money does not necessarily make people happy, and more often than not, the money comes at the price of sacrificing one's personal life.

Literary Study

"The so-called 'white collars' are nothing more than migrant workers with college degrees," said Winnie Wang, a young employee working with a major PR company in Shanghai. The term "white collar" usually refers to people who spend most of their time facing computers in offices in China. Being a white collar usually means making a living with brainpower, not physical strength. They are not factory workers or farmers, yet they are not bosses, either.

However, the term 'white collar,' once something to be proud of, is losing its power to impress.

"A lot of my classmates working in the four major accounting firms in the CBD area in Beijing do not like to be called 'white collars,'" said Jessie Tao, who graduated from the China University of Politics and Law more than two years ago, "because being called a 'white collar' actually gives you a label, which sometimes denotes monotony and oppression."


Even if the job is run-of-the-mill, white collars typically feel they are under a lot of pressure. "I am fed up with the routine," said Rachel Wang, who just quit her third job at an import and export company in Shanghai. "The boss was always picking on me. I didn't see a future in that job, and I was not happy, so I quit."

Stress is a major factor that forces a lot of young white collars to quit their jobs. The heavy workload usually leaves the white collars very little time to enjoy themselves, and it's becoming trendy for a lot of people to exit the job, and then travel for a few months before finding a new one.

Thursday 8 February 2007

China's trade surplus at $15.5bn

The strength of the yuan is a continuing cause of concern. More on this in subsequent posts.

Trade surplus of US$15.5b
China will probably post a US$15.5 billion trade surplus in January, pumping more cash into the economy and fueling speculations that the yuan will get stronger.

The gap narrowed from US$21 billion in the previous month, according to the median estimate of 20 economists surveyed by Bloomberg News. Exports probably rose 25 percent in January from a year earlier and imports gained 16.4 percent. China's surfeit of exports over imports has flooded the economy with cash. The yuan has climbed 4.3 percent against the US dollar since China scrapped a decade-long peg in July 2005, revalued it by 2.1 percent and allowed it to trade against a basket of currencies.

Website Pirates Crackdown

China moves to quell concerns over pircay.

China shuts 205 Web sites in crackdown on piracy
BEIJING - China, often criticised by the West for failing to tackle rampant illegal downloading of music and films, said on Thursday it had closed 205 Web sites in a crackdown on Internet piracy.

Officials said that between the end of September and January they had investigated 436 cases, including about 130 at the request of overseas industry associations, and ordered 361 offenders to stop their infringements.

"Piracy of intellectual property on the Internet has seriously harmed the interests of copyright owners, leading to a large number of disputes -- and thus disrupting the orderliness of the Internet," Yan Xiaohong, deputy director of the National Copyright Administration, told a news conference.

Yan said that in the latest action, authorities had imposed fines totaling 705,000 yuan ($91,000), confiscated 71 servers and transferred six cases to courts for prosecution. One of those had led to a conviction, he said.

Prominent cases included sites that offered downloads of software, textbooks, music and television shows. In one case, all the Internet cafes in Changchun, in the country's northeast, were found to be linked into a database of pirated films.

Official figures show China now has about 843,000 Web sites and 140 million Internet users, making it the world's second largest Internet market.

Yan declined to estimate how many of those sites contained pirated material, but called for understanding from China's trade partners that it was working in earnest to address the issue.

"With the Internet developing so quickly, I'm afraid that in China, as elsewhere, it's going to take some time before we can effectively manage it," he said.

Wednesday 7 February 2007

China and the Environment: Round up of Stories

The relationship between economic growth and environmental degradation is a close one.

This blog will document news stories on the state of the environment in China.

China Eyes Summer Launch for Carbon Credit Exchange
BEIJING - Beijing plans to launch a pilot exchange for carbon trade this summer to be ready to win a slice of the multi-billion dollar market by 2008 and capitalise on China's emergence as an hotspot for emissions-cutting projects.

The exchange would aim to combine sales of carbon credits valid under the Kyoto Protocol on climate change with a market in voluntary emissions reductions like those traded in Chicago, government and UN officials said on Tuesday.

N.W. China Drought Dries up Water Supplies
BEIJING - Drought in China's northwestern province of Shaanxi has left at least 300,000 people short of drinking water and similar weather conditions have afflicted other parts of the country, Xinhua news agency said on Tuesday.

Below-average levels of rainfall and higher-than-usual temperatures in Shaanxi in recent weeks had also affected thousands of hectares of cropland and curbed water supplies for 60,000 animals, it said.

Drought had also affected areas of northeast, northwest and southwest China over the past month, it cited the weather bureau as saying.

Conditions in some parts of the country were set to deteriorate, with the worst drought in five years expected to hit central parts of Ningxia region in the spring, it said.

China Says Global Warming in Hands of Wealthy Nations

BEIJING - Rich nations are responsible for greenhouse gases fuelling global warming, China said on Tuesday, urging them to cut emissions and deflecting questions about whether Beijing will accept limits.

Spokeswoman for China's Foreign Ministry, Jiang Yu, said Beijing was willing to contribute to curbing greenhouses gases from industry, agriculture and vehicles, which a UN scientific panel last week reported was almost certainly behind rising average temperatures threatening wrenching climate change.

But Jiang told a regular news briefing that wealthy countries bore the blame, and the solution lay in their hands.

"It must be pointed out that climate change has been caused by the long-term historic emissions of developed countries and their high per-capita emissions," she said.

"Developed countries bear an unshirkable responsibility," she said, adding that they should "lead the way in assuming responsibility for emissions cuts".

China is Set on Curbing Fossil Fuels -- Climate Chief

BEIJING - China's top climate official said on Tuesday that Beijing is determined to curb the use of fossil fuels behind global warming, but deflected questions of whether the big emitter will accept caps on greenhouse gases.

Qin Dahe, chief of the China Meteorological Administration, said the nation's leaders worried that global warming, bringing intensifying droughts, floods and heat waves in its wake, would undermine development goals.

"The Chinese government is taking climate change extremely seriously," Qin told a news conference. "President Hu Jintao has said that climate change is not just an environmental issue but also a development issue, ultimately a development issue."

Tuesday 6 February 2007

Welcome to the China Economics Blog

Welcome to the China Economics Blog.

Over the following months and years we hope that the "China Economic Blog" will provide a archieved journey through this country's economic development.

When any country is able to grow at close to 10% for a decade, along the way there are bound to be some mistakes made, economic battles won and lost, many millions taken out of poverty and maybe many more returned to it. The rich no doubt continue to get richer and the environment will continue suffer.

There are many challenges ahead for China and its economy. We hope that this blog will be there to record the news as it happens, to provide data for researchers and to provide links to the most important academic economic papers from the best economists and the best journals.