Brazilian President Dilma Rousseff and Chinese Premier Wen Jiabao have just signed a number of new trade agreements, that they hope will boast both economies. Jiabao, who is in Brazil to attend the U.N. Rio+20 sustainable development summit, met with Rousseff to hammer out agreements for mining, industrial, aviation and infrastructure areas. They want to encourage more commerce flow between the two countries.

As Brazilian Finance Minister Guido Mantega said “The relation with China is greatly relevant for us because it is our most important trading partner. In spite of a potential slowdown, China will keep being the place where to do business, a dynamic economy.”

China and Brazil have had to overcome a number of economic conflicts to reach the agreements they have now created.  Since Rousseff came to office in 2011, Brazil has complained that they have manufacturing roadblocks in China. They have blamed China with flooding the Brazilian market, as well, with cheap imports that hinder the growth of local factories.

China has also complained that Brazil has raised taxes on Chinese-made cars and has created barriers on products that come from their country.

The National Bureau of Statistics in China recently revealed that the income difference between urban and rural residents was reduced significantly in 2011, according to an article by Adam Roseman of ARC China.

In the article, Roseman explains that “the income ratio between urban and rural residents stood at 3.13:1 in 2011, meaning city dwellers’ average income was 3.13 times that of rural people. The ratio shrank from 3.23:1 in 2010 and 3.33:1 in 2009.”

It continues, stating that the results of a survey show that the per-capita wage income of residents in rural areas increased by more than twenty percent in 2011, and that wages accounted for more than 40 percent of these residents’ incomes.

According to the NBS, the jump in income levels in rural areas is a result of migrant workers throughout 2011. Still, the falling prices of produce and other farming products had a negative impact on farmers’ incomes.

Chinese inflation lessened slightly in December, preparing the nation for increasingly relaxed policies in the face of a slowing economy, according to an ARC China newsletter written by Adam Roseman.

“Consumer prices rose 4.1% from a year earlier, the lowest in 15 months and well below July’s peak of 6.5%,” he wrote. “It was only the fifth consecutive month of receding inflation. However, China’s consumer price index only edged 0.1 percentage point lower from November, compared with larger 1.3 and 0.6 percentage point drops in the previous two months.

“Analysts said that seasonal factors were partly to blame for the more moderate dip in inflation, as Chinese New Year fell earlier in 2012 than in recent years, fueling a mini-spending splurge in December, which helped push up food prices.”

As the region adjusted to the slow economic growth, Chinese consumer confidence climbed in December following a nearly all-time low in November.

Adam Roseman of ARC China discussed the trend in a newsletter. He wrote: “The headline China Consumer Sentiment Index and all seven sub-indexes rose in December 2011, the research company said, but remained below levels seen at the end of 2010 and early 2011, before the domestic economic slowdown prior to Europe’s simmering debt problems morphing into a fill blown crisis at the end of summer.

“The total index measuring consumer confidence rose to 89.0 in December from 86.7 the previous month (which was just shy of September’s record low of 86.5). The index measuring current confidence rose to 91.4 from 87.3 in November and 89.2 in October, while that measuring future expectations rose to 87.7 from 86.3 in November but remained below October’s 88.3.”

In a newsletter for ARC China, Adam Roseman explained that Chinese consumers are becoming more attracted to luxury products, or, ‘the finer things’.

Roseman quotes Liang Haoji, one such consumer, who said “I’ve been fond of high-quality coats since I was very young. A good quality jacket priced at no more than 20,000 yuan is acceptable to me. I work hard, so I should treat myself better,” he added.

Though global growth may have flatlined, China has become one of the primary players in the world’s luxury market.

“Following China’s entry into the WTO, global luxury brands are jostling to expand in a country that opens wider,” explained Michael Ouyang of the World Luxury Association.

In an article in ARC China’s newsletter, Adam Roseman discussed property prices in China. The property market, a primary player in Chinese economy, has shown signs of an increasing slowdown as prices flatline. The average housing prices throughout the nation has risen just 0.01% since Agust.

“Cooling red-hot housing prices is just like putting out a wildfire,” explained Wang Haibin of Shenzehn World Union Properties Consultancy Co. “Now we can say the fire won’t spread further, but it will still take time before its extinguished.”

In the company newsletter, Adam Roseman of ARC China discussed the sales in Shanghai during National Holiday. Local shoppers were thrilled with the significant discounts offered during the week-long shopping festival, sending the city into a shopping frenzy and raising reatail sales by 18%.

In the report, Roseman writes: “Consumers spent a record high 7.1 billion yuan ($1.1 billion), up an annual 17.6%, at 5,000 stores of 456 large and middle sized local retailers during October 1st to 7th.”

Though last year’s National Holiday week yielded more sales, this year’s increase still holds a 6.1% higher record than the Spring Festival.

Adam Roseman of ARC China publishes a newsletter discussing China’s economy. In a recent article, he explains that measures were drafted in an effort to promote domestic sales of products originally made for export.

Chen Linhui of the Department of Foreign Trade and Economic Cooperation explained that the measures will induce a slowdown in export growth as well as boost domestic consumption.  “They will include simplifying the approval process for domestic sales, establishing convenient financing, expanding sales channels and enhancing brand image,” he said.

Adam Roseman of ARC China recently updated the company’s newsletter, explaining that China is focusing on its goal to reduce carbon intensity in the region.

He quoted Xie Zhenhua of the National Development and Reform Commission, stating: “China will soon release detailed plans on ensuring that its goal for reducing carbon intensity from 2011 to 2015 is attainable, and it has started looking at technical options for cutting carbon dioxide emissions after 2020.”

Su Wei of the Department of Climate Change of the NDRC also said “The targets surely need to be handed over to local governments, and a specialized blueprint for cutting greenhouse-gas emissions is a necessity.”

According to official surveys, China’s manufacturing sector has showed recent signs of stabilizing, after a slight drop in July. The PMI, which indicates industrial conditions, fell from 50.9 to 50.7 in June, and the drop was less significant than previous predictions had indicated.

Adam Roseman of ARC Investment Partners explained in a newsletter, stating that:

“A figure above 50 denotes expansion, while a reading below that level points to contraction. At its current level, the Chinese PMI suggests that manufacturing growth has nearly stalled in month-on-month terms. The question now is whether the next step for Chinese factory growth will be outright contraction or stabilization. A separate PMI published by HSBC a week ago had pointed at contraction, but the official PMI on Monday offered grounds for cautious optimism.”

About this blog

Stay up to date on the economic news from China. Gain insight from leading investors in the Chinese market, like Adam Roseman of ARC Investment Partners. Follow the economic trends and changes occurring in the global marketplace, as they relate to changes taking place in China.