Sovereign Funds of Gulf Cooperation Council

Assets accumulated by sovereign wealth funds (SWFs) of Gulf Cooperation Council (GCC)
countries as a whole amount to more than $1.8 trillion  or 34% of $5.4 trillion assets         accumulated by SWFs worldwide . The capitalization of SWFs is only about a
quarter of that of other types of funds, such as pension or mutual funds, but unlike such funds
GCC SWFs continued to expand very rapidly after the crisis on the back of rising oil prices.
The largest GCC SWFs were established in the 1950s and in the 1970s in the wake of decolonization and oil shocks, when Gulf monarchs began to consolidate their ownership over their
own oil production. Most of the smaller GCC SWFs, however, appeared after 2000, when average oil prices progressively quintupled from $20 per barrel (pb) to more than $100 pb, swelling balance of payment surpluses in oil-exporting countries.

The GCC Sovereign Funds *           US$ Billion Dollars

          UEA                                             816.6

          Saudi Arabia                                538.2

          Kuwait                                         342

          Qatar                                            115

          Oman                                               8.2

          Bahrain                                            7.1

          *Sovereign Wealth Fund Institute

           Pierre Kohler

           United Nations Organization
           

Precious Metals Prices

Gold Price Futures        3 months     US$  1,314.93

Silver Price Futures      3 months      US$      20.21

China's CPI grew 2.7% YoY in July

China's consumer price index (CPI), a main gauge of inflation, grew 2.7 percent year on year in July, staying flat from the figure for June, the National Bureau of Statistics (NBS) announced on Friday.

The figure was lower than market expectations of an increase of 2.8 percent, and remained well below the government's full-year target of 3.5 percent.

The NBS attributed the inflation growth mainly to rises in food prices on a year-on-year basis, which went up 5 percent in July. Food prices weigh about one third in calculation of the CPI.

Yu Qiumei, a senior statistician with the NBS, said China's consumer prices have stayed relatively stable. "Compared on a monthly basis, the July CPI grew 0.1 percent from June, and food prices in July also stayed flat from a month ago," Yu said.

China's Trade report shot copper to a two month high

According to an article published in the Wall Street Journal today,"copper futures shot to a two-month high after data showing imports by top consumer China rose to the highest level in 14 months in July.
The most actively traded copper contract, for September delivery, rose 9.75 cents, or 3.1%, to settle at $3.2705 a pound".
"Chinese exports and imports both rose more than economists had expected last month, a sign that the second-largest economy may be steadying following a slowdown during the first half of the year.
Chinese exports rose 5.1% in July from the same month a year earlier, data released on Thursday showed, reversing a 3.1% drop the previous month".

"China's copper imports in July rose 12% from a year earlier, to 410,680 tons, the most since May 2012.

Analysts with Commerzbank said in a note that traders in China likely took advantage of the lower global copper prices to stock up".

Stephen Roach: China crash syndrome

Excerpts

''China crash syndrome once again.Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China skeptics".
"Yes, China’s economy has slowed. While the crisis-battered West could only dream of matching the 7.5% annual GDP growth rate that China’sNational Bureau of Statistics reported for the second quarter of 2013, it certainly does represent an appreciable slowdown from the 10% growth trend recorded from 1980 to 2010".
 But the skeptics are not only worried by a possible hard landing,they also concerned over excessive debt and
fears of a fragile banking system,and about the property bubble. And the lack of meaningful progress to change
the export led and fixed investment model, to one driven by private consumption.
"The rebalancing of any economy – a major structural transformation in the sources of output growth – can hardly be expected to occur overnight. It takes strategy, time, and determination to pull it off. China has an ample supply of all three".

"It is far too early to expect significant shifts in the major sources of aggregate demand. For now, it is much more important to examine trends in the potential determinants of Chinese consumption.

From this perspective, there is good reason for optimism, especially given accelerated growth in China’s services sector – one of the key building blocks of a consumer-led rebalancing. In the first half of 2013, services output ( expanded by 8.3% year on year – markedly faster than the combined 7.6% growth of manufacturing and construction.

Moreover, the gap between growth in services and growth in manufacturing and construction widened over the first two quarters of 2013, following annual gains of 8.1% in both sectors in 2012. These developments – first convergence, and now faster services growth – stand in sharp contrast with earlier trends.
Indeed, from 1980 to 2011, growth in services output averaged 8.9% per year, fully 2.7 percentage points less than the combined growth of 11.6% in manufacturing and construction over the same period. 
The recent inversion of this relationship suggests that the structure of Chinese growth is starting to tilt toward services.

In 2011, Chinese services generated 30% more jobs per unit of output than did manufacturing and construction. This means that the Chinese economy can achieve its all-important labor-absorption objectives – employment, urbanization, and poverty reduction – with much slower GDP growth than in the past. In other words, a 7-8% growth trajectory in an increasingly services-led economy can hit the same labor-absorption targets that required 10% growth under China’s previous model.
That is good news for three reasons. First, services growth is beginning to tap a new source of labor-income generation, the mainstay of consumer demand. Second, greater reliance on services allows China to settle into a lower and more sustainable growth trajectory.
And, third, growth in the embryonic services sector, which currently accounts for just 43% of the country’s GDP, broadens China’s economic base, creating a significant opportunity to reduce income inequality.

 Far from crashing, the Chinese economy is at a pivotal point. The wheels of rebalancing are turning. While that is not showing up in the composition of final demand (at least not yet), the shift from manufacturing and construction toward services is a far more meaningful indicator at this stage in the transformation.
Slowly but surely, the next China is coming into focus. China doubters in the West have misread the Chinese economy’s vital signs once again".

Stephen Roach
Former Chairman of
Morgan Stanley Asia
Project Syndicate

China: Local Governments meet revenue targets in H1 2013

"Property boom helps provinces, cities hit half-year targets, despite slowdown in the overall economy

Local governments' fiscal revenue in the first half of this year generally slowed down compared with a year earlier but its growth was much faster than that of the central government because of surging housing-related revenues.

So far, 31 provinces, municipalities and autonomous regions across China's mainland have released their half-year fiscal reports. Although all have fulfilled their six-month targets, growth has significantly slowed, providing evidence of the slowing economy's toll on tax revenue.

Nationally, China's local fiscal revenue in the first half grew 13.5 percent to 3.628 trillion yuan, down from 14.4 percent growth a year earlier. But the growth of local fiscal revenue was well above the central government's 1.5 percent gain.

China's eastern regions maintained a steady revenue growth, while the figures for central and western regions generally fell to more than 10 percent. It was higher than 20 percent just two or three years ago.

While inland regions struggled, coastal regions maintained a steady growth rate, thanks to a booming property market in the first six months .

In Shandong province, brisk property transactions sent the province's fiscal revenue up to 253.6 billion yuan, a rise of 12.5 percent over a year before. Tax collected from the housing market totaled 43.2 billion yuan. Although it only contributed 17 percent of public finances, it accounted for 53.7 percent of the increment".

China Economic Net

China's exports improve in July

China's exports went up 5.1 percent year on year to 185.99 billion U.S. dollars in July, recovering from a tumble in June, according to data on Thursday.

Imports also rebounded last month, gaining 10.9 percent to 168.17 billion U.S. dollars, the General Administration of Customs said in a statement.

Total foreign trade grew 7.8 percent in July from a year earlier to 354.16 billion U.S. dollars, after it recorded a year-on-year decline of 2 percent in June.

The trade surplus narrowed by 29.6 percent year on year to 17.82 billion U.S. dollars last month, as import gains outpaced export gains, customs data showed.

In July, two-way trade with the EU and the United States rose 5 percent and 10 percent over a year earlier respectively, as compared with a year-on-year drop of 5.4 percent and 8.3 percent respectively with the two economies in June.

Zhuang Jian, an Asian Development Bank economist, expected China's foreign trade to perform better in the second half, but said great difficulties and uncertainties still lie ahead.

Zhuang said China should continue to optimize its export structure, enlarging the share of electronic and machinery products.

Exports of electronic and machinery products grew by 4 percent to reach 102.85 billion U.S. dollars in July, accounting for 55.3 percent of total exports. The proportion was 57.8 percent in the first half, indicating more efforts in the coming months.

Liu Ligang said the long-expected detailed plan on building a pilot free trade zone in Shanghai is likely to be announced in late August or early September, which will give a boost to the service trade.

Source:   Xinhua

China's innovation ability looms large

The UK lags behind China and the US on investing in technology to drive innovation, according to a survey of business leaders across Britain.
In an Accenture survey two months ago of 500 executives and public sector leaders, more than two-thirds of those business leaders said China would reach or pull ahead of Europe in innovation by 2023. However, two-thirds of those polled also said European industry was still competitive internationally.

China spent about 1 trillion yuan ($160 billion) in research and development in 2012, accounting for a little less than 2 percent of its gross domestic product. About 74 percent of that investment was made by businesses.

As leaders of the second-largest economy vow to move to an innovation-driven society by 2020, the investment in GDP has increased 20 percent each year for the past six years.

The US is still leading China in total government and private-sector investment in R&D, with nearly a double amount. However, the White House Council of Advisors on Science and Technology warned that if the current trend continues, China may overtake over the US within a decade.

Ann Lee, an adjunct professor at New York University, said China is still not taking a lead in disruptive technological breakthroughs.

It is getting closer because China is catching up in its understanding of current technologies and will eventually be in a position to contribute more to breakthrough technologies," said Lee, author of the book What the US Can Learn from China.

Source: China Daily

Trade deficit narrows between China and U.S.

United States exports to China, which have been growing in recent years, increased 4.5 percent in June, narrowing the trade deficit between the world's two largest economies, according to US Commerce Department figures released on Tuesday.

Exports to China -- one of the fastest-growing markets for US goods -- were up 4.2 percent for the first half, the new data show.

Guo Feng, a senior economist at the Institute of International Finance, said that US-China trade dynamics were affected by China's currency rate and increases in certain categories of US goods in June.

The Chinese interbank cash crunch in June may have had some negative impact on exporters, and China increased imports from the US of goods such as machinery and agricultural products in June,"he added.

The yuan has appreciated by 1 percent against the dollar since the beginning of 2013.

The new US trade figures show imports from China fell 2.2 percent, lowering the contentious US trade deficit with China to $26.6 billion from $27.9 billion in May.

China remained the US' third-largest export market after Canada and Mexico, purchasing nearly $110 billion in US goods in 2012, according to the Washington-based US-China Business Council, which represents more than 200 US companies doing business in China.