“Sunflower Seeds refers to everyday life, to hunger (the seeds were a reliable staple during the Cultural Revolution), to collective work and to an enduring Chinese industry. But it is also symbolic……a lesson in Chinese history and western modernisation, and the price individuals in China pay for that” wrote Adrian Searle of The Guardian.
On Friday Ai Weiwei began three days of house arrest apparently on the orders of senior officials in Shanghai who were attempting to prevent him from hosting a reception in the City. That is, Ai was planning a “demolition party” for the public at his Shanghai studio to “celebrate” a government decision to demolish the building, which it says does not have the proper permits. Ai only built the expensive studio at this location on the invitation of the Shanghai government. He believes the decision to condemn it is retaliation by local authorities for his vociferous political activism. Ai told the FT that “the Chinese government is arrogant and incapable of dealing with fundamental issues of human rights”.
This incident and the continued imprisonment of dissident and Nobel Peace Prize winner Liu Xiaobo remind us that, while economic progress is rampant, the social side is still playing catch-up.
As we speak, too, the ink is drying on the PRC’s 12th five year plan and it is, apparently more socially aware than before and, in particular, intends to focus on consumption and income equality. Similarly, there are recommendations to raise the percentage share of GDP which goes to workers, while Boston Consulting points to a near tripling of middle class and affluent consumers over next 10 years. The State Council is also talking about a moderating level of GDP growth from 10 to 7%. Nonetheless, inflation and food prices in particular (restrictions are planned) remain a source of concern. Real estate, however, had a welcome fillip as CCBC spoke of what it describes as “formidable” foreign capital flows into China’s property market and developers are now at their best level, collectively, in seven months.
On a more macro plane, the Shanghai Composite continues to rise and is back to where it was in early April; it is also 34% up on early July and off less than 4% year-to-date. The Yuan has also eased for the first time in five days, but this has more to do with US dollar strength (and Yuan Forwards still point to +3.2% over 12 months). The G20 is to be held later this week (11-12 November) and already the kibosh has been put on Tim Geithner’s idea of adopting current account targets as a proportion of GDP. Similarly, Hu’s charm offensive in Europe continues and he and Sarkozy have called for the G20 to avoid currency confrontations. The Chinese President has also been nice to Portugal and said that China is “available” to support its economic recovery plans . At the same time, the UK is launching its largest ever trade delegation to China led by none other than PM Cameron. Finally, the IMF’s executive board has approved a plan which would make China the third strongest voice in the Fund.
“Reform is China's second revolution” - Deng Xiaoping
Shanghai Composite:
Today: +0.96% to 3,159.51 at close
(best since 14 April)
Last week: +5.1%
Since 5 July: +33.7%
YTD: -3.6%
Hang Seng:
Today: +0.35% to 24,964.37 at close
(best since 22 May 2008)
Last week: +7.7%
YTD: +14.1%
Oil futures: $86.31
(having nudged two year highs)
Gold futures: $1389.70
(new ‘immediate delivery’ high of $1398.60 on 8 November)
Euro/$ spot: 1.3928
HEADLINES
EQUITIES, YUAN & BONDS
- Shares at seven month high
- China is the World's largest market for commodities futures
Yuan falls for first time in five days on US dollar strength; albeit Forwards still point to +3.2% over 12 months - Sinochem bond yields are very close to Dow Chemical
- Mobius and Citigroup see record emerging market stock rally
- China banks have a “huge” fundraising requirement over next few years
ECONOMY
- New five year plan is et to make consumption and income inequality key priorities
- China's growth to slow to 7% in next three-to-five years, says State Council
- Inflation rate may exceed 3% this quarter and reach 4% in 2011, say Government economists
- Plans to stop rising food prices
- Zhou says China’s capital controls can block abnormal inflows
- China should raise worker earnings as percentage of GDP
- Middle class and affluent Chinese consumers may near triple in a decade
INTERNATIONAL
- G20 conflict risk eases as US says that Geithner's proposed current account targets are unrealistic
- Hu and Sarkozy say G20 should avoid currency confrontations
- China is “available” to support Portugal through it financial crisis, says Hu
- Prime Minister leads largest ever UK trade delegation to China
- Consider a role for gold in overhaul of Bretton Woods, says World Bank President in the FT
- IMF proposes China to be its third strongest voice
- Geithner says India sets example with a flexible exchange rate
- Chinese are interested in Metro-Goldwyn-Mayer
REAL ESTATE
- China must create capital raising channels for real estate, says CCBC Chairman;
as “formidable” foreign capital flows into domestic real estate - New home prices in Shanghai fall 5% in week ended 7 November, says UWin
- KWG and R&F to buy stake in Shanghai mixed-use development for $353.5 million
DOMESTIC
- High speed rail link questions and review
- China is to limit marine pollution in new five year plan
- China forecasts snowstorms in Northern Provinces as temperature set to plunge
IRON & STEEL
- China may invest Yuan 30 billion to explore mining resources, says Xinhua
- Sundance hires Citic to secure Chinese funding for West Africa iron ore mine
- Taiwan’s China Steel Corporation plans to buy iron ore resources and coal mines to reduce reliance on suppliers
- Zanaga Iron Ore has attracted all the shareholders it needs for $100 million IPO on AIM in London
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