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To: ahhaha who wrote (10524)	4/24/1998 1:41:00 AM
From: Lucretius	Read Replies (1) \| Respond to of 116764

The other shoe may fall.............. Friday April 24, 1:07 am Eastern Time China's growth shows more signs of faltering By Paul Eckert BEIJING, April 24 (Reuters) - China's economy slowed to 7.2 percent in the first quarter of 1998 amid plunging industrial profits and mounting stockpiles, official data released on Friday showed. The latest figures for Gross Domestic Product (GDP) growth raised new questions over whether China could achieve its target of 8.0 percent expansion for the whole year. There was better news on the trade front. China recorded a $10.64 billion trade surplus for the first three months, despite the Asian financial crisis, the State Statistical Bureau said in its quarterly review of the economy. The figure of 7.2 percent growth for the first three months was even worse than the 7.5 percent earlier forecast by Premier Zhu Rongji. China needs rapid growth to create new jobs needed to soak up millions of workers being laid off as a result of a radical restructuring of state-owned industry and a downsizing of government. Adding to worries about an economic slowdown were figures showing industrial stockpiles rising. Industrial inventories in the first quarter rose 14.2 percent to 558.2 billion yuan ($67.2 billion), equal to about seven percent of China's annual GDP. Western economists routinely subtract at least two percentage points from China's published GDP growth figures to take into account goods moving straight off production lines and into factory warehouses. Meanwhile, losses of Chinese industrial enterprises rose 21.7 percent to 35.6 billion yuan in the first two months of this year from a year earlier. Profits of industrial companies plunged 82.8 percent in the January-February period. ''The deterioration in the efficiency of firms is even worse than we expected,'' State Statistical Bureau chief economist Qiu Xiaohua told a news conference. Qiu said the main reason for falling profits was that fixed costs were increasing more rapidly than sales. ''The structural adjustment of firms is not keeping up with changes in the market,'' he said. Sales are slumping across China, reflecting a lack of consumer confidence amid rising unemployment and expectations that prices will continue to drop. The retail price index fell a year-on-year 1.5 percent in the first quarter while the consumer price index, which includes services and rents, inched up 0.3 percent. State media this week quoted Qiu as saying China's economy would grow by around 8.3 percent this year. Growth last year was 8.8 percent. China has pledged massive infrastructure spending on everything from ports to power stations to try to revive domestic demand as export growth slows. Exports rose 13.2 percent in the first quarter to $40.24 billion, while imports edged up 2.7 percent to $29.6 billion. Exports expanded by 20 percent for the whole of 1997. Qiu said China was successfully diversifying exports away from crisis-hit Asian economies. Exports to Asia grew by only 4.8 percent in the first quarter, while exports to all other regions combined grew by an average of more than 17 percent. Exports to North America were up 21.9 percent. Exports to Southeast Asia dropped 7.6 percent, to South Korea by 22.59 percent and to Japan by 1.7 percent. ''The foreign trade and investment side has held up relatively well, but if I were a Chinese leader I'd be worried about the 7.2 percent growth figure,'' said one Beijing-based Western diplomat. ''The figures show China is not doing enough on the fiscal spending and investment side to spur growth. ''Fixed asset investment will have to be higher if they are to hit their target of 8.0 percent growth for the year.'' --------------------------------------------------------------------------------

To: ahhaha who wrote (10524)	4/24/1998 3:16:00 AM
From: Abner Hosmer	Read Replies (1) \| Respond to of 116764

ahhaha - Your explanation of the current account and the marginal efficiency of labor was very enlightening, and I thank you for taking the time to explain. I have also heard it argued that the increasing trade deficits with Japan were offset by the long term decline of the dollar vs the yen. Sort of a long term competitive devaluation. I find my thinking challenged on the question of Japan, however. They have pushed interest rates as low as they can go, and yet, for many months I have been reading that Japanese businesses are going under because they are unable to obtain financing. It is not that there is a lack of demand for money, but that lending restrictions have been exceedingly tight. It seems that there is apparently little incentive for banks to make loans, particularly at the margins. A few months back the MOF apparently called the heads of some of the largest banks into their offices and beat them about the heads and shoulders concerning their lending policies, and insisted they start loaning out more money. One unidentified banker was heard to mumble afterwards, "What a joke." I've heard this situation in Japan called a "liquidity trap." Low interest rates in Japan have failed to stimulate investment (unless we are talking about overseas investment), instead, they seem to have had the opposite effect. The reluctance to lend has contributed to an increasing number of business failures, which have been helping to drag Japan into recession. Perhaps these failures are inevitable, and Japan will be better for it. Milton Friedman says they should just crank up the printing presses. Do you recall last year just before he came over to the US Hashimoto was telling Japanese investors that by the end of the year the JGB would be a better buy than US treasuries? That would seem to imply a decline of the dollar vs the yen, and a narrowing of the spread between the Treasuries and the JGB's. Obviously, something didn't work out as he'd hoped. Still, it seems that current holders of JGB's have to get hurt when rates go back up, as they eventually must. regards - Tom

To: ahhaha who wrote (10524)	4/24/1998 4:58:00 AM
From: Bobby Yellin	Read Replies (1) \| Respond to of 116764

"Will we demand more regardless of the threat of unemployment" they have just been there..a lot of citizens are up to their ears in credit card debt etc..safety nets have been removed.. there is a threat of more downsizing..also if the market starts tanking as a lot of us assume..they will also be feeling poorer.. I don't think the average person wants to risk unemployment..maybe recent graduates who have little responsibility..but unlike past "recent" graduates..they have embedded in their mind that there may be no social security etc for them..even Greenspan has been talking about lowering medicare benefits..so they may even be fearful of no health benefits..pretty powerful substance for "fear" over greed Really enjoy your posts.. Right now I am focussing primarily on "confidence"...what will shake confidence.. Microsoft said this time they meant that future earnings might not be so robust.."wolf" "wolf"..Gates has been cautious in his predictions for so long..wonder,even if true, will the street believe it..it was down yesterday... We will hear more and more about year2000...everybody who reads company reports filed with sec now will have that constant reminder.. great for programmers...bad for hardware suppliers..bad for bottom line with high cost of remediation.. The monster China hopefully, as Goldsnow has mentioned, will certainly do wonders for commodities if they start their infrastructure program..they probably will since the citizens might grow restless.. Japan might be pulling the rug under interest rates by redeeming more and more treasuries..isn't our market based on those low rates..that have helped our corporations more than anything else..