China

World Bank Group President Robert B. Zoellick said the institution was ready to help the victims of China’s earthquake as he expressed his condolences following the disaster that hit the central province of Sichuan on May 12, killing about 15,000 people.

“The World Bank stands ready to support the Chinese Government in any way it may find useful in the recovery and reconstruction process,” Mr. Zoellick wrote in a May 12 letter to Chinese Premier Mr. Wen Jiabao. “Our thoughts are with the Chinese people at this tragic and sorrowful time,” he wrote.

Mr. Zoellick said the Bank Group would draw on its considerable expertise in catastrophe management and reconstruction.

World Bank representatives on Tuesday held detailed discussions on possible technical support for the recovery effort with representatives of the Chinese Ministry of Finance and the National Reform and Development Commission.

The Web is abuzz with the role of Twitter (which I wrote about last week) in spreading news about the China earthquake. A reminder and an update: Twitter is the site where users post messages of no more than 140 characters to say what they're doing at any certain moment. This is kind of... limited, and users of Twitter are coming up with other applications. But yesterday, the first news about the earthquake in Sichuan were made known to the world not through CNN or BBC, but through Twitter, when Robert Scoble started reporting accounts from residents in China just as the earthquake was happening. He was ahead of even the USGS (U.S. Geological Survey) by three minutes.  Does this mean Twitter has "come of age" and proved itself to fill a niche that other media can't?

The question of whether China is overwhelmed by capital inflows has been asked for quite a while now. If a question continues to be asked, there is probably a good reason for it. Whether the answer is yes or no depends on how you look at it.

Brad Setser, in his highly recommended blog at RGE Monitor, has written a lot about the drivers of capital inflows into emerging markets and how they challenge fixed exchange rate policies.

Last week China reported its first quarter GDP data.  Consumer inflation for the quarter was 8%, which is too high, but we already knew that.  The main news was that GDP growth came in at 10.6% year-on-year.  This is down from last year’s 11.7% rate, but higher than most forecasts for 2008 (including the Bank’s revised 9.4% forecast).  There was a healthy decline in the trade surplus for the quarter of about $5 billion or 10%.  The trade adjustment took a good form in that exports grew at a respectable 21% rate while imports surged 29%.  Most of this increase in exports was to the European Union, while growth of exports to the U.S. moderated to a 5% rate.  All of this looks to be in the direction of the rebalancing that China is trying to achieve.

High food prices on the international markets are getting a lot of attention and are leading to different types of policy action in different countries. Discussions on the impact of international commodity prices on domestic prices often look at how much food countries import. The reasoning is that if countries are significant importers of food, domestic food prices are affected a lot by international prices, and if they are not significant importers, the impact of international prices should be limited.

Andrew  Leonard posts in his blog an interesting report from journalist Tony Cheng of Al-Jazeera:

China has banned, for environmental reasons, the free hand-out of plastic bags.  As a result, the country’s largest plastic bag factory has closed, throwing 20,000 workers out on the street.  Some see this as posing a dilemma between environment and economy, but I don’t agree that good environmental policies are bad for the economy, just the opposite.  What this case illustrates instead is the dilemma between doing something good for the whole people, but at the expense of adjustment costs borne by a small group – the 20,000 workers and the factory owner. 

Only pedestrians and bikes are allowed on Pingyao's main street.

China’s coastal areas have benefited the most from reform and opening up because they were allowed to go first and also because their geography gives them better connection to the global market.  But now some of China’s lagging interior regions are turning their disadvantages to advantages.  Developing later, some interior towns have the opportunity to preserve their ancient character and use this as an asset to attract tourists and create jobs. 

In the Bank's recent China macro quarterly we included an appendix on the implications of the new PPP estimates for poverty analysis in China (PPP or Purchasing Power Parity).  Perhaps because it was an appendix it did not receive much attention. 

New York City Mayor Michael R. Bloomberg was at the World Bank’s Washington, DC headquarters last Thursday to speak on elements of the Big Apple’s success in attracting “the free, global movement of labor, capital and ideas.”  Bloomberg noted that New York has joined more than 700 other American cities in pledging to meet Kyoto protocol standards for carbon reduction – in sharp contrast to the current U.S.