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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 102

China Business Intelligence No. 102

Samsung Economic Research Institute Beijing Office

Jan. 21, 2009

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Highlights:

I. Economy

China's economic indicators for November 2008 show that deflation risk has been rising lately. Increased manufacturing capacity and rapid economic growth have created an oversupply. In addition, as the global financial crisis resulted in stagnant consumption in Europe and the US, China's major export destinations, China's exports slowed further. Excessive deflation leads to long-term price drops, diminishing profits for producers, and contracting production and investment. China thus needs to curb deflation in the short term while managing inflation in the long term. Although temporary deflation is expected in early 2009, inflation pressure will resurface in the long run.

II. Industry

The world's solar photovoltaic industry has been growing at a robust rate of 49.5% per annum over the past five years, including 56.2% for 2007. China's solar cell output shot up to 1,088MW in 2007 from 3MW in 2000. But despite its second-to-none solar cell production capability, China has problems in expanding domestic use of solar power due to high production cost. Solar photovoltaic power generation is used only for the peripheral areas with lack of electricity and the trial projects targeting the urban areas. The solar energy accounted for a mere 0.51% in China's primary energy consumption in 2006.

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