Indian minister sees new energy cooperation era as heads to China

NEW DELHI (AFP) - India's petroleum minister called for a new era of energy cooperation with China to avoid costly competition for fuel assets as he prepared to visit Beijing.
India has dubbed 2006 the "Year of Friendship with China" with which it has often been a bitter rival in the race for global fuel supplies and fought a brief border war over four decades ago.
"A cooperative relationship is not only desirable but eminently feasible," Petroleum Minister Mani Shankar Aiyar told reporters in the Indian capital before his departure late Tuesday for Beijing for the two-day visit.
Aiyar said "opportunities for cooperation will exist everywhere" and that his visit would herald a new chapter in India-China relations.
The countries, which rely heavily on energy imports to sustain their fuel-guzzling economies, have become the world's most aggressive seekers of foreign oil and gas properties.
Aiyar called on China to cooperate in bidding for overseas energy reserves to prevent rivalry in which the two sides bid up prices, making energy acquisitions unnecessarily expensive.
His planned visit was the second by a high-level Indian government figure this week. On Tuesday, Indian Foreign Secretary Shyam Saran held "friendly and pragmatic" talks in Beijing, Chinese officials said.
"China-India relations are on the track of fast development," said Chinese foreign ministry spokesman Kong Quan in Beijing.
The countries whose economies are the world's two fastest growing declared last April they would team up to bid for some energy assets.
"Instead of playing the 'Great Game' of bitter rivalry, we wish to prepare a mode of cooperation which is adapted to 21st century imperative of countries of Asia living in peace and cooperation," Aiyar said.
"The Great Game" was a term coined to describe the 19th-century rivalry between Britain and Russia for dominance in Central Asia where the spoils sought now are the Caspian energy reserves.
"Markets will dictate competition among the companies from the two countries sometimes but there will be opportunities where it might be in the interest of both parties to cooperate and submit joint bids," Aiyar said.
Aiyar's trip comes after India and China won a joint bid last month to buy Petro-Canada's 37 percent stake in Syrian oil fields for 573 million dollars.
The acquisition by India's Oil and Natural Gas Corp and China National Petroleum Corp, both state-owned, was the first time the nations bid together.
But some analysts described it as a consolation prize for New Delhi after China's regular outbidding of India, most recently last August when it won Kazakhstan's third-largest oil producer.
Analysts have been dubious about the potential for cooperation between the neighbours who have a history of suspicion and whose strategic interests are often at odds.
"These countries are mainly in competition," said Rahul Bedi, correspondent for Jane's Defence Weekly. "All this is more rhetoric than reality."
Aiyar said, however, "the Chinese do see advantage in working with India".
The Indian Express newspaper quoted Xia Yishen, head of a Chinese government energy think-tank, as saying "the necessity of cooperating to share risks and reduce costs in a multilateral way is gaining currency here".
Aiyar was to leave New Delhi late Tuesday and arrive the following day in Beijing. He heads back to New Delhi late Friday.
Aiyar will hold talks in Beijing with Ma Kai, Minister of the National Development and Reform Commission and other leaders in China's energy sector.
The two sides are expected to sign a slew of memorandums of understanding on energy cooperation, including between ONGC Videsh Ltd, India's flagship firm for overseas oil and gas field acquisitions, and its Chinese counterpart, China National Petroleum Corp.

New Research Suggests There Will Be 50,000,000 Residential Subscribers of Digital Television in China by the End of 2008

DUBLIN, Ireland--(BUSINESS WIRE)--Jan. 10, 2006--Research and Markets (http://www.researchandmarkets.com/reports/c24869) has announced the addition of Consumer Electronics - Focus Report on Chinese Digital Television Industry Development 2005 to their offering China's digital television market has started, but it is still in the development stage. Since national standards and policies were not issued for quite some time, the digital television receiver industry has not entered the stage of mass production. Because of this, no one wants to invest in it, resulting in tremendous difficulties that are now being faced by the industry. If those standards are issued before the end of 2005, China's digital television industry will enter a rapid development era from 2006 to 2008. These standards would cover implementation specifics like Host-Card Separation and digital transmission technologies. The content resources of digital television are in short supply and the service platform has not been completely established.
From examining commercial operation models of cities where digital television is currently operating, the following features have been identified. Large cities are intermediately developed and citizens have a relatively stronger purchasing power. Government plays an important role in the process of promoting digital television and boosting its development. The problems of high investment and sluggish returns are addressed by the joint assumption of investment risk for all parties. In the early stages of market development, promotion should be stressed but efforts should be take to minimize its popularity. At the same time, some common problems with the development of digital television have been discovered. The availability of suitable content is the most important bottleneck to the development of digital television. Current models of STB sales go against the development of digital television market. The costs of partnerships are unclear and there are potential disagreements with the division of the returned benefits. Interactive TV programs are in short supply. Finally, the digital television industry does not show its advantages. These problems should be solved as the industry grows and development proceeds.
In 2004, there were 1,020,000 subscribers of digital television, and in 2005 it is estimated that there will be 5,350,000 home subscribers. The beginning of an explosive growth trend gradually appears. After this rapid growth from 2006 to 2007, it is estimated that there will be 50,000,000 residential subscribers of digital television by the end of 2008. The compound growth rate of digital television subscribers is estimated at 164.6% from 2004 to 2008. The number of digital television sets sold from 2004 to 2008 is expected to exceed 25 million. This has a compounded growth rate of 79.7%. The volume of digital STBs sold during the same time is expected to exceed 21 million, reaching a compound growth rate of 126.4%.
For more information visit http://www.researchandmarkets.com/reports/c24869

China to overtake Britain after Beijing underestimates growth

Larry ElliottWednesday December 14, 2005The Guardian
China will overtake Britain as the world's fourth-biggest economy this year after the government in Beijing found it had underestimated output of the fastest-growing country in the world by as much as 20%.
China's first national census will show that under-recording of the service sector meant that China was just behind Britain in the global league table last year.
Economists said another year of rapid growth in China, a weak UK performance and changes in exchange rates left only the United States, Japan and Germany ahead of China in 2005. Jim O'Neill, head of global economics at Goldman Sachs, said he had expected China to overtake Britain by 2007 but that Beijing's revisions to the data had brought the date forward.
(image placeholder)(image placeholder)(image placeholder)oldman Sachs believes Brazil, Russia, India and China will expand rapidly in the next 30 to 50 years, overtaking all the richest countries bar the US. Mr O'Neill said: "If these figures are confirmed then it will mean that China will become the fourth-largest economy in the world."
The revisions also suggested that growth has been better balanced than some analysts feared, he said. Concerns were raised about an investment bubble but the new data suggested stronger growth of private services. "Speculation about an investment bubble that will have to crash is misplaced," he said.
China's GDP had been put at $1.65 trillion in 2004. The census found an extra $300bn of output - in sectors such as law, financial services, consultancy and advertising - and will lead to revisions in the growth rate over the past 10 years.
The Bank of England said the sterling-dollar exchange rate averaged $1.83 in 2004, making China's GDP worth £1.065 trillion. Last week's pre-budget report put British GDP in 2004 at £1.11 trillion. In 2005, China is estimated to have grown by 9% - five times as fast as Gordon Brown's 1.75% forecast for Britain. Sterling's decline against the dollar will also have the effect of inflating the value of China's GDP.
Julian Jessop, of Capital Economics, said: "These numbers show that the UK will clearly be overtaken by China in 2005. ... This increases the case for China to join the G7, perhaps in place of one of the smaller countries like Canada."
Beijing assumed that services made up almost 30% of China's GDP. But last year it launched a census to give a fuller picture of an economy that has grown by 8.7% on average for the past 10 years. The last big correction of data, in the mid-1990s, led to an upward revision of growth in the 15 years since the market reforms in 1978.
Most western economies, including Britain's, struggle to measure service-sector output but economists said China's statistical techniques up until now had been especially crude, leading to a systematic understatement of its contribution.
Frithjof Schmidt, a German Green MEP at the World Trade Organisation talks in Hong Kong, said the news would fan protectionism in the west. "China's success has made even strong industrial nations nervous ... Those who advocate free trade in Europe are beginning to rethink."

Rising inequality in China

C. P. ChandrasekharJayati Ghosh
Spectacular economic growth in China has been accompanied by growing inequalities of income and wealth distribution. In this edition of Macroscan, C. P. Chandrasekhar and Jayati Ghosh examine recent patterns of inequality in Chin a.
THERE is much international interest in China's economy, because of its remarkable growth over the past quarter century. Recently, attention has also focussed on the fact that this growth has been associated with significant increases in inequality in both income and wealth distribution, which were relatively low during the central planning period.
Two new reports also focus specifically on this issue of inequality in China, and provide important new information on recent patterns in this regard. The recently released China Human Development Report 2005 of the UNDP in Beijing (which is prepared mostly by Chinese economists) has as its theme the issue of inequality in economic and human development indicators. And the OECD has just come out with a report on income disparities in China, as part of its series on China in the Global Economy.
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Both of them reinforce the perceptions of observers and analysts that economic inequalities have increased sharply over the economic reform period since the early 1980s, and this has been especially marked since the substantial opening up of the economy since the early 1990s. As Chart 1 indicates, the Gini coefficient measure of inequality based on consumption data suggest some decrease from the mid-1970s to the mid-1980s, and increase thereafter. Intra-rural and intra-urban inequalities also increased over the 1990s, despite an episode of declining inequality within urban and rural areas around the mid-1990s.
Meanwhile, inequality between urban and rural areas rose steadily over the 1990s. The ratio of urban-rural per capita income (urban disposable income to rural net income) increased from 1.86 in 1985 to 3.11 in 1990. While there was a short period of declining differences between 1995 and 1997, the post-1997 period saw a dramatic and continuous increase in this ratio between 1997 and 2002, from 2.47 to 3.11.
It is likely however that these are still underestimates of the actual rural-urban income gaps. As the China Human Development Report (CHDR) 2005 points out, "if public housing subsidies, private housing imputed rent, pension, free medical care, and educational subsidies were included, the actual per capita income of urban residents in 2002 would increase by 3,600 to 3,900 yuan, bringing the urban-rural income ratio to about four-fold instead of the 3.2-fold acknowledged by official figures." (page 27) This would make rural-urban inequality in China among the highest in the world.
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The CHDR also points to widening inequality within rural and urban areas as well, based on data from a household survey conducted in 2002 (Chart 2). These increases in inequality are ascribed to the economic growth process, which has meant that rural non-farm income opportunities are concentrated in a few areas, while some urban areas have grown more rapidly than others.
China's regional inequality had declined between 1979 and 1990, but reversed to a rising trend over the 1990s. In particular, the difference between inland and coastal China increased, especially in the late 1990s.
According to the China HDR 2005, the ratio of per capita incomes of eastern to central regions increased from 1.42 in 1997 to 1.52 in 2003. Most of the regional inequality in China is to be found between three large regions and within provinces (that is, between districts within provinces). Coastal-inland inequality has been always much lower compared to rural-urban inequality, even though it has been rising more sharply in recent years.
The three largest cities of Beijing, Tianjin and Shanghai account for a large part of the variation in regional incomes. These large metros, which enjoy a high level of industrialisation and with over 71 per cent of their population living within 100 km off the coast or navigable waters, were able to reap the full benefits of public infrastructure expansion and export promotion, and therefore attracted substantial FDI inflows.
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The central region, the agricultural heartland, reaped benefits from deregulation in the early phase of the reform period and had a growth rate of 7.7 per cent, higher than the national average, between 1979 and 1984. However, the subsequent period saw growth rates fall as agricultural expansion reached its limit. With the lack of access to the mainland, compounded by difficult terrain and lack of mineral resources, western China has lagged behind average growth rates in the post-planning period, especially in the 1990s. The movements in per capita income across regions (Chart 3) indicate these trends.
Employment in China has increased steadily over the last two decades, much of it fuelled by the industrial and services sectors, and has registered an average annual growth rate of 2.55 per cent between 1980 and 2002. However, growth has been much slower in the period after 1990 at 1.09 per cent per annum, compared to 4.33 per cent in the earlier decade.
The share of agricultural employment in the aggregate has declined steadily from 68.7 per cent in 1980 to 50 per cent in 2000-2002. However, rural employment is still dominated by agriculture, which accounts for two-thirds of rural workers, and therefore, slow rates of expansion of agricultural employment have reinforced the widening of rural-urban inequality. Total rural employment has been almost stagnant between 1995 and 2002. Employment has grown at a low 0.22 per cent per annum over 1990-2002, much lower than the 4.13 per cent of the previous decade of structural reform in agriculture.
Part of the stagnation in rural employment reflects an economy in the process of industrialisation and development. The urban areas have absorbed part of the workforce from the rural areas reflected in large-scale migration, and this has compensated, at least partially, for stagnating rural employment. However, migration has also been partially the reason behind increasing urban unemployment post-1985. Unemployment (in terms of absolute numbers of people) has risen steadily since 1985, reaching a high of 7.7 million in 2002. This rise has been particularly sharp since 1990, recording an annual growth rate of 6 per cent, compared to - 3.4 per cent between 1980 and 1990.
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The disparity between rural and urban areas has been significantly accounted for by the growing gap between wages in agriculture which is dominant in rural areas and wages in industry and services which predominate in urban areas. The ratio of industrial wages to agricultural wages, which has always been high since 1980, has generally experienced a rising trend (Chart 4). This rising pattern is even sharper in the ratio between most of the service sector wages and agricultural wages, with declines only between 1993 and 1996. The remarkable rise in service sector wages and to a certain extent in industrial wages has, therefore, not benefited the rural population much.
Wage rates have also varied widely within the dominant sectors and between various sub-sectors within urban China, adding to urban inequality. Wages in new sectors such as telecommunications, banking and insurance, and real estate have increased significantly in recent years. Meanwhile, the government's recent attempts to stimulate domestic consumption have raised average wage levels in state-owned organisations dealing with healthcare, sports, education, culture, and scientific research and in government whereas wage levels in more traditional manufacturing industries with more older state-owned enterprises have stagnated throughout the decade because of the cut in government subsidies.
While external liberalisation may have facilitated more rapid growth, it has also been a major factor behind increasing inequalities. Part of this is due to the basic nature of FDI flows, which choose safe destinations that are already somewhat developed. That is why foreign investment in the coastal regions exceeded that in the interior regions by far — in 2000, foreign investments in the eastern region were more than 85 per cent of total FDI.
Public resource mobilisation has shown an increasing in-equalising tendency and a bias towards richer, coastal areas. Before economic reform, there was a centralised budget and an equitable distribution of resources, which were generated from the profits of and taxes on the state-owned enterprises (SOEs), since the rich provinces were required to turn over large surpluses to the government while the poorer provinces received large subsidies. However, as profitability of the SOEs declined in the reform era, the system was marked by chaos with local governments imposing other revenue raising measures.
There was a proliferation of ad hoc, extra-budgetary projects monitored through the banking system, which continues even today. The share of central revenues and, consequently, the ability of the central government to spend on physical and social infrastructure, declined considerably.
Industrial growth in the reform era has been very high, but even then, patterns of development have encouraged the forces of inequality. There has been acute capital-deepening in new enterprises, which have replaced traditional ones, so employment elasticity in manufacturing has been very low. Service sector employment growth has been inadequate to meet the needs of the labour force, and also typically service sector employment has required a higher level of skill which much of China's population, especially in rural interior areas, has not possessed. Further, reduced subsidies and greater external competition faced by SOEs have reduced their profitability and employment generation potential.
Since 1984, when benefits of the agrarian reform were exhausted, agricultural growth has decelerated and lagged behind industrial and service sector growth rates. Unlike the industrial sector, this sector has not received much state patronage in terms of investment, nor has it seen proliferation of small enterprises on the scale of the industrial and service sectors.
New agricultural policies that are now trying to regularise property rights in land in accordance with the structures of a market economy are likely to have a severe adverse impact on the rural population, since China's egalitarian distribution of land has had a strong equalising effect on the distribution of farm income. Recently there have been sharp increases in wealth inequality, driven by land ownership in particular. (China HDR 2005)
Restrictions on labour movements have been one important factor behind rural-urban inequalities in China. The origin of this lies in the Hukou, or household registration system, which was started during the central planning era. Individuals were tied to their birthplace and given a household-based residence status at birth. Only approved urban registered residents were allowed to live and work in urban areas, and in consequence rural residents were forced to stay and work within rural areas. More important, only the urban-Hukou holders were entitled to receive the guaranteed social service benefits such as education, housing and healthcare in the urban areas.
From 1980s onwards, some rural migrants have been granted temporary residence permits that allow them to remain in cities and enable them to access some social services, though at excessively high fees especially when compared to urban residents. The larger part of the migrant population, however, did not qualify for temporary residence permits, and had to remain in the informal sector without access to the public utilities and other benefits available to urban residents.
It is estimated that about half of the total flow of migrants would have been denied any kind of legal status in the form of temporary permits or urban Hukous. In addition, rural migrant workers in cities often face discrimination as a result of local regulations, being charged various "administration fees". (China HDR 2005) They also face harsher and more unhealthy and dangerous working conditions. All this has added to inequalities in access to income and public services among the migrant community and led to severe poverty among migrants.
A case can be made that increasing inequality during this phase of economic transition in China is inevitable. Thus, recently a government official argued : "Looking at income inequality as a whole, it may be the case that rational, and thus inevitable, disparities are more significant than irrational disparities. The widening of income disparities occurred, on the one hand, during a process when overall incomes increased steadily and, on the other, where economic efficiency has also been continuously improved. In this regard, the process has helped overall economic growth and social development." (Han Wenxiu, 2005, page 11).
However, it is also accepted that widening income disparities can impose more and more negative effects in economic and social development. The government of China seems to have recognised the growing problems of inequality and poverty. Recent "White Papers" on employment, poverty and women acknowledge the need to correct regional imbalances as well as rural-urban and gender disparities. There has been a specific attempt to develop infrastructure and natural minerals of the interior regions to generate incomes.
The recent strategies of developing the west and revitalising the northeast have involved funding new infrastructure projects and increasing fiscal transfers to these areas.
Other recent efforts include expanding the security net and providing pensions and unemployment insurance which was started in the 1980s, allowing some relaxation in migration norms, the launch of poverty relief programmes (including the aid-the-poor fund) on a much wider scale than before, extension and some decentralisation of the banking sector to make credit accessible to interior and rural areas.
Addressing the problems of poverty and inequality in China will require wide-ranging and multi-pronged policies. Fortunately, the Government still retains enough control over crucial economic levers to ensure a redirection of growth patterns in more progressive ways.

Threat of China's Economy

By Frank Ching
The Chinese economy, which has been growing at about 9 percent a year, took a big leap forward last week when the government announced that, as a result of a year-long national economic survey, it had revised its GDP upward to about $2 trillion for 2004, an increase of 16.8 percent, making the economy the sixth largest in the world, overtaking Italy.
Given the higher base for 2004, it appears highly likely that when the final figures for 2005 come in, China will have overtaken France and Britain as well, to become the world’s fourth largest economy, after the United States which last year registered a GDP of $11.7 trillion, Japan and Germany. In purchasing power parity terms, China is already the world’s second largest economy, exceeded only by the United States.
On a per capita basis, however, China is still a poor country. Li Deshui, head of the National Bureau of Statistics, said at a news conference last Tuesday that although the revised figures resulted in a considerable increase in total GDP, on a per capita basis, China still ranked only about 100th in the world. Using International Monetary Fund figures, China ranks 107th while the World Bank says China ranked 134th in income per person in 2003.
In fact, China’s per capita GDP is only 3.6 percent that of the United States and 4 percent that of Japan. The Chinese economy overall in 2004 was only 16.6 percent that of the United States.
Mr. Li emphasized that China was still a developing country, with 100 million peasant farmers and more than 20 million city dwellers roughly 10 percent of the population still struggling with poverty.
Interestingly, the revised figures show that the country had previously grossly undercounted its service sector. The revised figures for 2004 showed that the service sector including real estate, transportation and restaurants accounted for 40.7 percent of the economy, not 31.9 percent as previously reported. The increase in service output accounted for 93 percent of the total GDP increase.
“The revised statistics show that China’s economic structure is more reasonable and healthy than the previous figures showed,” Mr. Li said at the news conference. He explained that China had long used the Material Product System to calculate GDP. This method was developed under the centrally planned economic system and resulted in “very weak” figures for the service sector.
The new figures have been widely accepted by outside analysts, many of whom have long said that China has been underestimating the size of its service sector. The new figures show that agriculture, instead of accounting for 15.2 percent of the economy, accounted for only 13.1 percent. The share of industry (including manufacturing and mining) fell from 52.9 percent to 46.2 percent, leaving a very sizeable service sector.
As a result, economists said, China actually has a more “ordinary” economy than was previously thought to be the case. Now, there is less concern about the danger of overheating or that investment rates were too high vis-a-vis the size of the economy. There has been concern that China was investing too much and consuming too little and that the growth rate was unsustainable in an unbalanced economy. The new figures go far to ameliorate such concerns.
Apparently to allay concern that its new GDP ranking will spur a new round of “China threat” speculation, two days after the GDP announcement, Beijing released a white paper entitled “China’s Peaceful Development Road” in which the government made a “solemn promise” that its growing power will never become a threat to other nations.
The 32-page document said “peaceful development” is the inevitable way for China’s modernization, and declared that China’s goal was to build a harmonious world of sustained peace and common prosperity. “China did not seek hegemony in the past, nor does it now, and will not do so in the future when it gets stronger,” the document said. “China’s development will never pose a threat to anyone.”
The sudden jump in the country’s GDP ranking will almost inevitably spur concern about a rising China. It is also likely to fuel calls for Beijing to increase the value of its currency, which critics say is too low and so gives its exports an unreasonable advantage.
If so, it would be unfortunate because China should be encouraged to be more open and to adopt methods of calculations that are used by the rest of the world and to present an accurate picture of the size and composition of its economy rather than to engage in obfuscation.

'China's GDP grew 9.8% in '05'

REUTERS
Posted online: Monday, January 02, 2006 at 1103 hours IST
Updated: Monday, January 02, 2006 at 1111 hours IST

BEIJING, JANUARY 2: China's economy grew 9.8 per cent in 2005, a vice minister was quoted as saying on Sunday, revising up an earlier estimate and again confounding forecasts that the country's racing output growth had begun to slow at last.
The higher growth rate, which may not be the final official figure, builds on the latest estimates of China's 2004 Gross Domestic Product, which the statistics office hoisted by one sixth last month.

Ou Xinqian, a Vice Minister responsible for the National Development and Reform Commission, issued the new figure ahead of the release of the Statistics Office's 2005 GDP estimates due late this month.

"The commission's previous estimate for last year's economic growth was 9.4 per cent," the official news agency Xinhua said, citing Ou. "This figure was adjusted according to the newly revised GDP (of) 2004."

The commission, like other government agencies and private economists, had expected the economy to show a little moderation in 2005 after growing 9.5 per cent in both 2003 and 2004.

The authorities have been trying for more than two years to slow sectors reckoned to be in danger of overheating and risking an economic bust.

But while economists and investors worried about whether the authorities could pull off a soft landing, so far there has been no sign of any kind of landing at all.

It was unclear whether Ou's growth figure of 9.8 per cent represented the official estimate of the government statistician or was merely a preliminary and independent estimate from the commission, China's top economic planning authority.