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China Responded to Moody’s Lowering of China’s Rating

China.com recently reported that major international rating agency Moody’s just downgraded China’s sovereign credit rating and expected its financial strength to weaken. The Chinese Ministry of Finance immediately responded that Moody’s had overestimated China’s challenges and underestimated the Chinese government’s capability to expand domestic demand. The Ministry suggested that Moody’s did not fully understand that the so-called “local government financing platform” and the debt that state-owned companies had would not actually increase the government’s debt. China’s primary news agency Xinhua also published a long commentary faulting Western rating agencies “traditional intent” to downplay China’s credit. Xinhua pointed out that the U.S. government fined Moody’s for “messing things up” during the financial crisis. Analysts of large Chinese commercial banks generally supported the government’s position and expressed the belief that Moody’s recent move was just business as usual and the impact would be very limited and marginal. China’s primary newspaper People’s Daily published a commentary as well. China’s own rating agency Dagong International questioned Moody’s motive and the timing behind its decision – China’s data in the past six months had just started showing a tangible recovery.

Source: China.com, May 24, 2017
http://news.china.com/international/1000/20170524/30563029_all.html#page_1

Chinese Currency Slid to Number Seven in Global Settlements

Well-known Chinese news site Sina recently reported that, based on the latest SWIFT (Society for Worldwide Interbank Financial Telecommunication) numbers, China’s currency was used in 1.6 percent of all of the world’s payment settlements. This is the lowest point since October 2014 and China’s rank slid to number seven (from number five). The Chinese currency peaked at 2.79 percent in 2015, with a rank of number four. SWIFT data showed that the Chinese currency internationalization went well until the first half of 2015. However, the trend slowed significantly after that; some indicators actually reversed. Experts expressed their belief that the obvious slowdown was the result of the slowdown pressure of the Chinese economy, the currency exchange rate fluctuations, as well as the atrophy of cross-border arbitrage activities.

Source: Sina, May 25, 2017
http://cj.sina.com.cn/article/detail/5839878256/262684?cre=financepagepc&mod=f&loc=3&r=9&doct=0&rfunc=100

China Uncovered the Largest Counterfeit Sports Shoes Case

Well-known Chinese news site Sina recently reported that the Chinese police declared success on resolving the largest case of counterfeiting Nike shoes. The case involved over half a million pairs of shoes, estimated to be worth more than RMB 600 million (around US$88 million). The case started near the end of 2015, when Nike China reported to the police of Anhui Province that it had discovered counterfeit shoes in the markets of the Middle East. Nike suspected the source of these shoes was in Anhui. The investigation that the report triggered eventually led to the discovery that the manufacturer was a factory under the Anhui Feiyu Group, which has two other legal shoe making factories. The factory making the counterfeits operated on a very large scale with a full chain of manufacturing, even including a quality assurance department. It also developed a complete wholesale and distribution network covering both domestic and global markets. The findings in the case revealed a highly professional criminal network. It could not have reached such a large scale without help from various levels of government branches across China.

Source: Sina, May 25, 2017
http://finance.sina.com.cn/consume/puguangtai/2017-05-25/doc-ifyfqqyh8267991.shtml

Chinese Researcher: 70 Percent of Housing Price Goes to Local Government

Fu Guangjun, a Researcher at the State Administration of Taxation, reported that the local government takes away the majority of the proceeds from housing sales.

In Beijing, the land cost is 60 percent of the housing price. The business taxes on the real estate developers along with the house transaction fees account for another 10 percent. The Beijing government claims 70 percent of the housing price. Thus the developer’s is left with a profit of only 10 percent. Therefore, the key to reducing the housing price is to reduce the cost of the land.

Fu also pointed out a problem with the deed. In China, the deed has two parts: the certificate of ownership of the property and the certificate of the right to use the land. The land belongs to the state and the property owner only has a right to use the land for 70 years. This has created a conflict: the property ownership is a permanent ownership, but in reality the property can’t be used in perpetuity as the land right is fixed at 70 years, even though, in reality the land lasts forever.

Source: China.com, May 10, 2017
http://house.china.com.cn/newscenter/view/918289.htm

Tianjin Forces Non-Public Companies and Social Organizations to Create Political Commissar Position

Tianjin’s Working Committee on Non-Public Economic Organizations and Social Organizations recently held a meeting to launch an effort to set up the (Communist Party’s) Political Commissar position in all non-public organizations and social organizations.

“The meeting emphasized that creating the Political Commissar position is a political task designed to enhance the Communist Party’s presence in social organizations. It requested that organizations that are real business entities complete this task by the end of June and all other organizations complete it by the end of this year.”

Tianjin Attorney offices plan to complete it by May 20. In 2016, there were 5,918 attorneys and 678 attorney offices in Tianjin. 2,038 attorneys were Communist Party members.

Many people expressed disapproval of this news. Beijing human rights attorney Cheng Hai said, “It cannot last. What will the Political Commissar manage? People’s minds? Attorneys are supposed to follow the law and be responsible to the law (but not to the Political Commissar).”

A citizen in Guizhou Province commented, “The law obeys the Party. (This move) clarifies the relationship between the law and the Party.”

Sources:
1. Peoples’ Daily, May 13, 2017
http://tj.people.com.cn/n2/2017/0513/c375366-30177346.html
2. China.com, May 19, 2017
http://news.china.com/domestic/945/20170519/30545130_all.html#page_2
3. Epoch Times, May 19, 2017
http://www.epochtimes.com/gb/17/5/19/n9162824.htm

U.S. Scholars: Xi Jinping Is Likely to Take on Zeng Qinghong

Two U.S. China experts, Bill Bishop {author of the Sinocism Newsletter (http://sinocism.com/)} and Joseph Fewsmith {author or editor of eight books on China}, have predicted that Xi Jinping is likely to target Zeng Qinghong in his anti-corruption campaign.

They were also asked about their views on Guo Weigui, a Chinese tycoon who moved to the U.S. and has kept releasing information about the corruption of top officials. Guo has repeatedly mentioned that he has a good connection with “old cadres.”

Bill Bishop said that he thought Beijing felt there was someone behind Guo Wengui. “Very likely they believe (in my view) that it is Zeng Qinghong.”

Joseph Fewsmith stated that if there will be another top-ranking tiger to fall in China, Zeng Qinghong is the most likely candidate.

Zeng Qinghong was the right-hand of former Communist Party leader Jiang Zemin. He served as Vice President of China and, previously, as a Politburo Standing Committee member.

Source: Radio Free Asia, May 18, 2017
http://www.rfa.org/cantonese/news/Guo-05182017100120.html

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