China extends selective RRR hike for 3 months

To explain reserve requirement, to people who are not familiar with it, just like me, it is a regulation by central bank that holds money from commercial banks. The more money the central bank hold, less money flows in the economy. The more money the central bank hold, it usually means there is too much money flowing in the economy. China has recently extend the reserve which was suppose to expire this week. The reserve will continue for another three months.

 

The move affects six of the country's biggest lenders, including Bank of China (3988.HK) and Industrial and Commercial Bank of China (1398.HK), the sources said.
With the extension of the selective increase, which had been initially ordered in October, the required reserve ratio will stand at a record high of 19 percent for the country's biggest banks.
"There are only about two weeks left before the end of the year, so it's not that likely that the central bank will announce or implement further RRR hikes. That's why it is choosing to extend the selective ratios," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.
The decision to extend the selective reserve requirement increase will lock up about 180 billion yuan ($27 billion) in deposits that the banks would otherwise have had available to lend.
Consumer prices soared past forecasts to a 28-month high in November and showed signs of spreading beyond food prices, putting pressure on the government to ratchet up its monetary tightening.
China officially raised banks' required reserves for the third time in a month on Friday. It has used selective increases twice this year, targeting banks that have been especially heavy lenders or that are systemically important.

 All the economists' spotlights are on China. China is trying to cool down the inflation and this regulation will decrease the money Chinese can spend. I am curious how this campaign will affect other counties, especially America, knowing that Chinese and American economies are intimately related.

On Clean Energy, China Skirts Rules

In the book Hot, Flat & Crowded, one of the author Tom Friedman's focus is on China and green energy.  This is a great approach to what many people including Friedman wants: the greener world and industries.

CHANGSHA, China — Until very recently, Hunan Province was known mainly for lip-searing spicy food, smoggy cities and destitute pig farmers. Mao was born in a village on the outskirts of Changsha, the provincial capital here in south-central China. 

Now, Changsha and two adjacent cities are emerging as a center of clean energy manufacturing. They are churning out solar panels for the American and European markets, developing new equipment to manufacture the panels and branching into turbines that generate electricity from wind. By contrast, clean energy companies in the United States and Europe are struggling. Some have started cutting jobs and moving operations to China in ventures with local partners. 

According to the article, Changsha used to have a "smoggy" stratosphere. Now Changsha, or China is changing. The big red country of manufacturing and monster factories are slowly becoming more friendly with the whole earth. At this rate, China might catch up with U.S. and out run the green energy race. I am eager to see China reforming their cities to be more green. Because it is China, that would be a great, big step to the greener earth and world economy.

Chinese Officials Call for Less Friction With U.S.

In the book Hot, Flat, and Crowded by Thomas L. Friedman, the author signifies China's relationship with America and their changing world.

Two White House officials — Lawrence H. Summers, the director of the National Economic Council, and Thomas E. Donilon, the deputy national security adviser — held meetings in Beijing on Monday and Tuesday that were aimed not at fashioning new pacts, but at maintaining a dialogue that had been strained at times in recent months.
“Strategic trust is the basis of China-U.S. cooperation,” said Dai Bingguo, a Chinese state councilor who met with them, the official Xinhua news agency reported.
Prime Minister Wen Jiabao told the two Americans that China and the United States should not view themselves as rivals, according to the Chinese state news media.
American and Chinese officials have been trying to lay the groundwork for a state visit to the United States this winter by President Hu Jintao, and for the resumption of contacts between the two countries’ militaries. China suspended military contacts last winter to protest a White House decision to proceed with arms sales to Taiwan. Beijing officials regard Taiwan as a renegade province.

I have not really payed attention to the news or China until this assignment. Now that I pay attention to the news, I see that China is taking a big roll in this fast-transforming world. As a considered world super power, (or is it now?) America needs to be careful with their relationship with China. This is a surprising approach from China considering that the world expects some sort of economy war between China and America. (Although, I believe it is going on right now.) If the Chinese officials are trying to make a friendship instead of a rivalry between U.S., it is clear that they are also expecting a soft approach from the U.S.
This also shows that China is also being careful of this relationship. Many people thinks of China as a reckless country, but China is a strong country with a big brain. They have factors that we, as a country lack.

China Growth Merely Moderating?

In Thomas L. Friedman's book, Hot, Flat and Crowded, He mentions China many times, the country growing its economy faster than anybody.

The mixed picture reflected the uncertainties haunting the global economy. U.S. unemployment and household debt remain high and the country’s property market is still fragile. At the same time, much of the Asia-Pacific region continues to stand out with buoyant, although moderating growth.

Growth in China, which this year leapfrogged Japan to become the second-largest economy in the world, behind the United States, has been supported by a giant government stimulus package and ample lending by state-controlled banks.

The pace of expansion in China has somewhat moderated in recent months, as the government has instructed banks to lend less and as various tools designed to curb speculative investments in the soaring property market have stalled excessive price increases in the sector.

But the manufacturing data on Wednesday, which gave the first insight into how the economy performed in August, showed that the modest slowdown of the past few months had not become a worrying decline.

This article shows how the world is observing China very carefully, and patiently. China is a country that interests and shocks people with their very fast growing and government controlled economy. When the world is facing a big recession, the attention rises even more, people curious of how China will react to challenges that a country can face during a world wide recession. All though this article have mention the decline was "not worrying", This is still something fascinating knowing the past economy rush of China. Something like this "little decline" can happen any time and it might not matter, but it is good to watch China and its unstoppable economy.

When Rare Earths Get Rarer

In the book, Hot, Flat, and Crowded, by Tom Friedman, he encourages green technology, something that will free us from oil/gasoline dependency and for a better environment and future.

During the summer break, China’s commerce ministry cut export quotas for so-called rare earth elements by 72 percent for the second half of this year.
This has serious implications. Rare earth elements are playing a rapidly growing role in our drive toward a high-tech, low-carbon economy, in everything from batteries for hybrid and plug-in cars to catalysts in energy-efficient light bulbs.
The rare-earth element terbium, for example, can cut the electricity demand of lights by up to 80 percent, while fractions of dysprosium can significantly reduce the weight of magnets in electric motors. Rare earth elements also have found military applications.
China holds the largest reserves of rare earths and is responsible for over 95 percent of their current global production. Beijing is well aware of the importance of these strategic resources. In 1992, Deng Xiaoping noted that “the Middle East has its oil, China has rare earth.”

This is very interesting and exiting, knowing that China is a big, big manufacture in the world. If China succeeds at this green technology plan, because it is China, the the whole world can benefit greatly from it. This can expand our possibility of energy use and other researches of green technology. This is another stepping stone for low-carbon, high tech economy which the world desperately needs.