from George Chen:

China is still waiting for inflation to peak

By George Chen
August 31, 2011

By George Chen
The opinions expressed are the author’s own.

How time flies. It's already the end of August and speculations naturally arise about what China's inflation reading will be for this month.

from Entrepreneurial:

Bakery pushes own brand after years of white-label production

August 5, 2011

One way to counter the effects of the recession is to start a retail brand. That's what entrepreneur Karen Trilevsky did.

from George Chen:

Inflation-hit Chinese go abroad to shop

By George Chen
July 11, 2011

By George Chen
The opinions expressed are the author’s own.

It's been a month since my last column on Reuters.com as I have been on the road for a while.

from George Chen:

From noodles to gasoline, inflation is not just an issue in China

By George Chen
April 8, 2011

noodlesBy George Chen
The opinions expressed are the author’s own.

These days I'm increasingly convinced that inflation is not just a China issue but a global problem and one that is becoming worse.

from George Chen:

My Shanghai holiday

By George Chen
March 10, 2011

food

By George Chen
The opinions expressed are the author’s own.

While Chinese lawmakers gathered in Beijing for the annual parliamentary meeting, I returned to my hometown Shanghai for a holiday.

from George Chen:

Why property prices in China won’t fall

By George Chen
February 25, 2011

property

By George Chen
The opinions expressed are the author’s own.

Let’s face it -- it appears there is only upside for property prices in China.

from George Chen:

Property under attack in China

By George Chen
January 27, 2011
Property under attack in China While U.S. President Barack Obama hopes to see a quick property market recovery to boost investor confidence, China’s intentions for its own property market are the diametric opposite – not because it wants to damage investor confidence, but rather to cool growing social unrest prompted by fast-rising property prices. On Jan. 26, Chinese Premier Wen Jiabao hosted a cabinet meeting to discuss the latest property market situation. As a result of the top-level meeting, Wen announced his new "eight-point" guidelines, considered by many analysts as the toughest so far and probably his last major effort to curb property prices: 1. Local governments should set 2011 property price-control targets and make them public 2. Land supply for affordable public housing should be stepped up and the pace of construction increased 3. Properties sold within five years of purchase will be subject to a sales tax based on the selling price 4. The minimum down payment requirement on second homes will rise to 60 percent from 50 percent 5. Land supply for residential property this year should be no less than the average annual figure from the previous two years 6. Home-purchase limits will be adopted nationwide. Local governments should limit home purchases by non-local residents and those who have already purchased more than two homes. 7. Local government should take responsibility for stabilising property prices (in other words, those who fail to do their job could be punished) 8. Increased education to encourage more sensible property investment to create a more stable market for the long term Wen, whose nickname is “Grandpa Wen” for his usually warm public personality, has pledged to rein in property prices before the end of his final term in office in 2012. But time is short and progress has so far been limited, so he has decided to take action once again. Among the eight points, the most important is of course to raise the down payment minimum for second-home buyers. Local media have already reported a sharp rebound in property transactions, one or even two times more than usual since the beginning of the year in some big cities such as Shanghai and Beijing. With the anticipation of more policy curbs, Chinese home buyers feel compelled to sign deals more quickly and more aggressively. Early this week, official think-tank the China Academy of Sciences released its 2011 forecasts, including an estimate that property price growth may slow but will still rise about 12 percent on average. Such forecasts should serve as clear cautions to Premier Wen if he wants to keep his promise before he retires. Ironically, property prices have risen more than ever before since Wen took power. Of course, you can't blame him. All this, I say, is a natural process and the result of strong economic growth and increasing personal wealth. But just like a coin, everything has two sides. Those who get rich (as late Chinese leader Deng Xiaoping said "let some people get rich first") are happy to get their homes. Those who miss the chance ... oops ... perhaps Premier Wen can do more to get them on track. For global fund managers, who are still talking about the beautiful China story: Wake up, please, because 2011 looks like a truly strange and difficult year for China, if not for the whole world. Chinese banks are under pressure, thanks to endless reserve ratio increases. Property is now under attack. Commodities prices continue to rise in global markets and most people say it’s too complicated to understand how commodities and futures products work. So, tell me which is relatively speaking the safest area to put money? Perhaps property if you are a firm believer in yuan appreciation, which could be even faster this year for the sake of Sino-U.S. relations? I do believe President Hu Jintao doesn’t mean to disappoint President Obama after his successful state visit. Apparently, Zhang Xin, CEO and co-founder of leading Chinese developer SOHO China, is still a big fan of the business. There is little reason to expect new measures by the Chinese authorities to rein in property prices will be any more effective this year than in 2010, she said. What happened in 2010? It was considered the toughest policy year for real estate in China. And the result? Property price rose more than 20 percent on average. "So what, you say? Do what I do. The property market is already out of the government's control. It’s too late," a fund manager summed up the recent property policies for me when we had lunch recently. Then he ordered another glass of wine despite complaints about his lower bonus this year, given mediocre fund performance in 2010. My fund manager friend is probably what Deng was talking about -- those who get rich first. He's now looking to buy his third home in Shanghai.

Hu, Wen

from The Great Debate UK:

Is the re-pricing in stocks and oil complete?

May 28, 2010

-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

from Commentaries:

No immediate oil shortage, but medium-term outlook uncertain

July 27, 2009

-- John Kemp is a Reuters columnist. The views expressed are his own --
   
   By John Kemp
   LONDON, July 27 (Reuters) - The oil market looks set to remain well supplied through 2010.
   The huge stockpile of crude oil and refined products now being stored around the world, together with more than 5 million barrels per day (bpd) of spare production capacity, half of it in Saudi Arabia, means the market has a substantial buffer against either supply or demand "surprises".
   But a Reuters poll of supply and demand forecasts for 2010 highlights an unusual degree of uncertainty on the outlook as forecasters struggle to assess the combined effect of the deepest recession in 50 years as well as structural shifts in consumption patterns and production costs [ID:nLR342038].
   Uncertainty about supply and demand dynamics implies considerable uncertainty about how quickly the market will tighten again. Based on forecasts in the poll, cyclical slack could be absorbed as soon as the end of 2010 or as late as 2012.
   
   FORECAST DISPERSION
   The International Energy Agency (IEA), regarded by many as the benchmark forecaster for the oil market, projects crude oil consumption will rise 1.4 million bpd next year, reversing about half of the demand lost in 2008 (0.3 million bpd) and 2009 (2.4 million bpd) but still leaving consumption far below the 2007 peak (86.5 million bpd).
   Most growth is set to come from emerging markets (1.3 million bpd) such as the Middle East, China  and the rest of Asia with only a marginal contribution from the advanced industrial economies (0.1 million bpd).
   But the IEA is the most bullish forecaster in the survey. Others are more cautious. Estimates in the poll put the increase as low as 0.5 million bpd, with an average of just 0.9 million bpd.
   Similar uncertainty dominates supply projections. While IEA sees non-OPEC crude production rising 0.4 million bpd next year, other forecasters put growth as high as 0.9 million bpd or see a contraction of up to 0.6 million bpd.
   
   FORECASTING UNCERTAINTY
   The problem for all forecasters is how to assess the overlay from the largest cyclical variation in business activity and oil demand since the Second World War, as well as structural shifts in both consumption patterns and production costs, on longer-term trends in supply and demand:
   
   (1)  LONG-TERM TRENDS
   For the advanced industrial economies, oil consumption has been basically stable since 1997. Efficiency gains and the transfer of energy-intensive manufacturing industry to emerging markets have offset increases in GDP and transport demand.
   Marginal demand for crude has come almost entirely from emerging markets (up 11 million bpd between 1999 and 2007) especially the fast-growing economies of China, the rest of Asia, and the Middle East. The pattern is consistent with research showing oil demand rises steadily as per capita GDP rises from $5,000 to $20,000 before stabilising.
   On the supply side, underlying production from existing fields is falling by around 7 percent a year, according to the IEA. Producers need to bring on almost 6 million bpd of new capacity each year just to ensure output remains unchanged [ID: nLK174997].
   Much of the new production involves development of smaller, more expensive fields; often in difficult geological areas or expensive deepwater environments; employing costly techniques to enhance recovery rates (such as water injection); or involves unconventional resources such as Canada's oil sands.
   Given enormous resources of conventional oil, bitumen, coal and gas, let alone methane hydrates, there is unlikely to be a real shortage of hydrocarbons for hundreds of years (long after combusting them has cooked the planet, if fears about global warming prove correct). But the industry's rising cost structure means the days of cheap $20 oil are over forever, unless there is a major technological breakthrough in recovery and refining systems.
   
   (2)  DEEP CYCLE EFFECTS
   Overlaying these trends, the financial crisis has introduced the largest cyclical variation in both economic activity and oil consumption since 1945.
   The collapse of world trade has produced sharp declines in diesel and jet fuel consumption [ID:nLL657354]. This demand should return as the major economies start expanding again from Q4 2009 and world trade levels normalise. It will add back hundreds of thousands of barrels per day in consumption next year, but only once high inventories of both jet and distillates have been worked down [ID:nLN322311].
   On the supply side, the lasting impact is harder to gauge. While major oil companies have largely protected capital investment programmes, many smaller companies have cut exploration and production development expenditure sharply in a bid to conserve cashflow.
   The number of rotary rigs drilling exploration and production wells in the United States has halved since September 2008. For the time being, production has continued to increase, reflecting the lagged effects of the earlier period of high prices in 2004-2008. But past experience suggests the fall in new drilling activity could cut underlying production by as much as 500,000 bpd next year if not quickly reversed.
   The same pattern is repeated worldwide. OPEC's capacity is set to rise sharply in 2009 and 2010 as new Saudi fields (Khurais, Shaybah and Nuayyim) planned during the years of high prices finally come online after lengthy construction delays. It will push Saudi Arabia's maximum theoretical capacity to 12.5 million bpd compared with actual current output of around 8.2 million bpd, restoring a generous cushion of spare capacity to the market. But this will be gradually absorbed unless prices are sustained at a level high enough to continue incentivising new investment.
   Less clear is whether the price collapse will harm investment in the long-term. Following a rebound, current prices of $60-70 per barrel should be high enough to make most of the investments needed in the short-term economic. But the price gyration itself could make the industry more cautious about committing capital, slowing supply growth over the next 2-4 years and tightening the market by 2012-2015.
   
   (3)  STRUCTURAL BREAKS
   From the demand side, the shock caused by the earlier surge in prices has led to determined interest in conservation and substitution measures. Because many of these are embodied in legislation, they will not be reversed just because prices have fallen. In the United States, toughened ethanol blending requirements will displace an extra 30 million barrels of crude in 2010, followed by a further 16 million barrels in 2011 and 20 million in 2012.
   Price volatility, together with pressure for "decarbonisation" is pushing petroleum-derivatives out of the power stack in favour of cheaper and cleaner-burning natural gas -- as well as non-fossil sources, with heavy investment in windpower and solar systems [ID:nLD829860]. Cheaper prices may slow, but will not reverse, determined efforts to reduce dependence on conventional petroleum.
   Meanwhile rising costs are increasing the price-hurdle needed to sustain investment, meet demand growth and compensate for natural field declines. In a sign of the future, BP's state-of-the-art Thunder Horse platform cost $5 billion and extracts oil from three intervals of oil as much as 4 miles below the surface of the ocean at pressures almost 1200 times the earth's atmosphere.
   The poll's uncertainty about near-term and future production reflects the growing challenge of maintaining sufficient, risky investment to keep the market adequately supplied, with a cushion of spare capacity, in the face of an increasingly tough technical environment. 
    

from Commentaries:

Anglo’s shareholders – just waiting for more?

July 9, 2009

The Times says Anglo American shareholders have rejected rival Xstrata's merger approach.