China's supply-side structural reform has delivered initial results and started to provide new impetus for economic growth, the country's top economic planner said on January 10.

"China has met 2016 target of reducing 45 million tonnes of steel and 250 million tonnes of coal production capacity ahead of schedule," Xu Shaoshi, head with the National Development and Reform Commission (NDRC) told a press conference.

He said that steel firms under the China Iron and Steel Industry Association had posted a profit of 33.1 billion yuan ($4.76 billion) in the first eleven months of 2016, compared with a loss of 52.9 billion yuan in the same period of 2015.

The reform, proposed by Chinese policy makers at the end of 2015 to resolve structural imbalances in the economy, has focused on five tasks: cutting industrial capacity, reducing the housing inventory, cutting leverage, lowering corporate costs and improving weak economic links.

Xu said that the government's efforts in these areas had paid off and provided precious experiences for solving deeply-rooted problems in the nation's economy, and that China would embrace a new stage of economic growth.

He said that last year was only a start, and that China was facing a tougher battle in 2017, adding that this year the government would set a higher goal for reducing overcapacity and was determined to shut down "zombie enterprises."

Besides steel and coal industries, he said the Chinese government would target other sectors with low production capacity utilization rates or serious overcapacity issues.

Xu said that despite economic downward pressure and external uncertainties, the Chinese economy has not lost its growth momentum.

He said economic growth in 2016 is expected to be 6.7%.

Plans for cutting overcapacity this year are expected to be released this month before the Spring Festival holidays, according to Xu.

http://www.sxcoal.com/news/4551201/info/en

China vowed on Tuesday to contain high company debt levels and further cut excess coal and steel capacity, as Beijing attempts to maintain solid and more balanced economic growth while avoiding destabilizing asset bubbles.

The world's second-largest economy likely grew around 6.7 percent last year -- roughly in the middle of the government's target range -- but it faces increasing uncertainties in 2017, the head of the country's state planning agency told a news briefing.

Global investors are buzzing over whether China's leaders will be willing to accept more modest growth this year, amid worries about the risks from years of debt-fueled stimulus driven by the political obsession with meeting official targets.

China's credit growth has been "very fast" by global standards, and without a comprehensive strategy to tackle the debt overhang there is a growing risk it will have a banking crisis or sharply slower growth or both, the International Monetary Fund said in October.

"Although the domestic economy is stable and improving, it still faces contradictions and problems," said Xu Shaoshi, the top official at the National Development and Reform Commission NDRC).

"We have the confidence, conditions and ability to ensure the economy operates within a reasonable range."

Xu said China will not allow debt of non-financial firms to rise beyond current levels, and will step up efforts to encourage companies to restructure their debts. China's corporate debt has soared to 169 percent of gross domestic product (GDP).

China's leaders are likely to accept growth this year of around 6.5 percent, policy insiders say.

In theory, that would give the government more room to focus on tackling the nation's debt pile, and on tamping down speculation that was seen last year in the housing, commodities and debt markets.

But an official tap on the brakes that is too vigorous would threaten to stall economic momentum.

SPECULATORS DRIVE SPIKE IN PRODUCER PRICES

After a rough start to 2016, China's economy performed better than many economists had expected, with higher government infrastructure spending, a housing rally and record lending by state banks fuelling a construction boom.

Producer prices, in particular, saw a stunning turnaround, emerging in September from nearly five years of deflation and helping to boost reflationary pressures worldwide.

That helped put the long ailing manufacturing sector on steadier footing, boosting profits and giving factories more cash flow to whittle down a mountain of debt.

Data on Tuesday showed producer prices continued to rise as 2016 drew to a close, with producer inflation surging 5.5 percent in December year-on-year, the fastest in more than five years, as the prices of coal and building materials soared.

Along with a rebound in demand, state-mandated cuts in industrial capacity have helped fuel the spike in prices.

But some analysts worry the strong gains may also be driven by growing speculation in commodities futures markets, adding to the broader risk of bubbles in China's economy even as leaders attempt to control explosive debt growth.

"I don't think there's an inflation issue in China, it's an asset bubble," said Commerzbank senior emerging market economist Zhou Hao in Singapore.

While the NDRC's Xu said on Tuesday that China will put more pressure on coal and steel firms to reduce overcapacity this year, analysts at ANZ predict higher prices and fatter profits may thwart those efforts.

"Producers are tempted to fire their engines again in the face of rising prices. The government will not fully welcome the rapid recovery of the PPI," said ANZ economists David Qu and Raymond Yeung in a note.

GLOBAL REFLATION, HIGHER INTEREST RATES?

For the first time in nearly five years, economists at HSBC have raised their forecast for global growth and inflation, encouraging by robust manufacturing activity, a resilient China and above all the fiscal boost expected to come in the United States under incoming President Donald Trump.

Hopes of stronger spending under Trump are sparking expectations of stronger U.S. economic growth and inflation, with more interest rate hikes seen from the Federal Reserve.

A sharp jump in borrowing costs would heighten the risk of loan defaults, though China's producer price recovery has not yet started filtering into consumer prices, suggesting its central bank will not be under pressure to tighten monetary policy as soon, analysts say.

"A sharp increase in inflation at the start of 2017 may fuel speculation that rising price pressures will soon force the People’s Bank into more aggressive policy tightening. But

we think the pick-up will mainly be driven by movements in commodity prices and is unlikely to be sustained," economists at Capital Economics said in a research note.

Commerzbank's Zhou said that a bubble in commodities, led by coal and steel prices, could complicate policy decisions if economic growth slows and some easing of monetary conditions is needed.

But policy insiders already expect a tilt towards more conservative monetary policy this year as top leaders struggle to strike a balance between supporting the economy with ample credit and slowly trying to defuse the risks posed by the rapid debt build-up.

The NDRC's Xu said on Tuesday China will further push forward its debt-to-equity swap program this year as it looks to cut the debt burden on companies.

The PBOC has reaffirmed it would keep liquidity in the financial system stable while taking steps to prevent asset bubbles and financial risks in its annual work meeting for 2017.

http://www.reuters.com/article/us-china-economy-inflation-idUSKBN14U05Y

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Extremely cold weather has not only gripped much of the US during the past couple of days, but severe cold has hit Europe as well with widespread consequences including power and water outages, cut off villages, frozen rivers and lakes, and, unfortunately, numerous deaths.  

Temperature anomalies across Europe last 7 days; map courtesy Weather Bell Analytics

Here is a sampling of the highlights from Europe in just the past few days:

-the mercury dropped to -22°F in Moscow and -11°F in St. Petersburg.  In fact, the Russians celebrated the coldest Orthodox Christmas (January 7th) in 120 years [coldest Orthodox Christmas was more than 130 years ago in 1881 when it reached -31°F].

-parts of southern Italy received more than 3 feet of snow and in Rome the fountains at St. Peter’s Square froze.  There was heavy snowfall in central and southeast Italy with numerous airports closed including one as far south as Sicily.

-in Greece, Athens dropped to 32°F while several Greek Islands including Lesbos experienced heavy snowfall.  Thessaloniki, Greece fell to 19°F and temperatures plunged to near freezing on the island of Crete well south of the mainland.
 
-in Sarajevo, Bosnia, temperatures dipped to -16°F, and in the Swiss village of La Brevine, temperatures fell to -22°F.

- in the mountains of southern Poland, temperatures dropped to -22°F  and the death toll from the cold has risen to 55 since November 1st.

-in Turkey, a heavy snowstorm paralyzed Istanbul where 25 inches accumulated

-in Romania, a dozen major roads remained closed due to heavy snow and some ferry services between Romania and Bulgaria (across the Danube) were canceled.  In fact, the Danube River was slowly freezing in Budapest, a rare sight in recent years.

- in the Czech mountains, several weather stations reported temperatures below -20°F including -30°F in the south-western Sumava mountains.

-in Hungary, record lows were broken on Sunday both nationally and in Budapest registering -19°F and -1°F, respectively.

Sharp drop in Northern Hemisphere temperatures last few days (far right of plot); map courtesy Weather Bell Analytics at weatherbell.com (Dr. Ryan Maue)

The combination of the bitter cold in Europe and much of the US has dropped northern hemisphere temperatures sharply (>1°C) in just the past few days relative to the climatological averages (1981-2010).

http://www.vencoreweather.com/blog/2017/1/9/225-pm-europe-suffering-through-some-severe-cold-as-well

Extreme cold and snow pound the northern hemisphere as some scientists warn of the potential for ice age conditions.

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Optimism among America’s small businesses soared in December by the most since 1980 as expectations about the economy’s prospects improved dramatically in the aftermath of the presidential election.

The National Federation of Independent Business’s index jumped 7.4 points last month to 105.8, the highest since the end of 2004, from 98.4. While seven of the 10 components increased in December, 73 percent of the monthly advance was due to more upbeat views about the outlook for sales and the economy, the Washington-based group said.



https://www.bloomberg.com/news/articles/2017-01-10/u-s-small-business-optimism-index-surges-by-most-since-1980

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A sign adorns the building where mining company BHP Billiton has their office in Perth, Western Australia, November 19, 2015. REUTERS/David Gray/File photo

BHP Billiton, the world's biggest miner, said its chairman and chief executive held positive talks with U.S. President-elect Donald Trump on Tuesday, 10 days ahead of him taking office.

"BHP Billiton Chairman Jac Nasser and Chief Executive Andrew Mackenzie had a productive meeting with President-Elect Trump and Vice President-Elect Pence today in New York City," the company said in an emailed statement.

"They discussed a wide range of subject areas, including the global resources sector, and BHP Billiton's investment in the U.S.," BHP said.

BHP's U.S. investments include billions of dollars in onshore shale oil and gas production and deepwater oil stakes in the Gulf of Mexico, as well as an undeveloped copper project in Arizona that it co-owns with Rio Tinto.

Trump has promised to initiate big infrastructure renewal programs in the United States that would draw heavily on industrial raw materials, such as those supplied by BHP.

http://www.reuters.com/article/usa-trump-bhp-billiton-idUSL4N1F055C

The World Bank forecasts the global economy will accelerate slightly in 2017 after turning in the worst performance last year since the 2008 financial crisis.

The 189-nation lending agency said on January 10 that the global growth should expand at a 2.7% annual rate this year. That is down from the bank's June forecast for 2.8% growth this year, but it's better than last year's 2.3% growth.

The global economy faced a number of headwinds last year, from economic troubles in China to bouts of financial market turmoil.

"We are encouraged to see stronger economic prospects on the horizon," said Jim Yong Kim, president of the World Bank.

The World Bank's Global Economic Prospects report projects 2.2% growth in the United States, up from an estimated 1.6% in 2016.

The U.S. forecast for 2016 is lower than the June projection of 1.9% growth, while the outlook for this year is unchanged.

In the years since the 2008 financial crisis, the World Bank and the International Monetary Fund have both repeatedly proved too optimistic in their forecasts.

http://www.sxcoal.com/news/4551212/info/en

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