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PBOC Hikes Interest Rate

On February 8, 2011, the People’s Bank of China announced that, effective February 9, it will raise the benchmark interest rate by 0.25%; the one-year deposit rate will be 3%; and the one-year lending rate will be 6.06%. Scholars suggest this increase is due to the pressure of high inflation and the real estate bubble. They expect that 2011 will bring even more rate hikes.

Ba Shusong, Deputy Director of the Financial Research Institute, Development Research Centre of the State Council, stated that China will adopt a monetary tightening policy in 2011. Ba outlined three causes for the rate increase: 1. A rapid increase in loans in January 2011, which some estimated at 1.2 trillion yuan. 2. Consumer product price increases due to weather and the Chinese New Year. 3. Continuous price increases for commodities overseas.

China News Service referred to the central bank’s monetary policy report, which was released before the Chinese New Year. The report stated it would "use ‘society’s total financing amount’ to measure the scale of financing." China News Service interpreted this to mean, "PBOC does not look just at ‘RMB loans,’ but also at corporate bonds, stock, trust loans, and entrusted loans, etc. for deciding on monetary tightening."

Sources:
1. People’s Bank of China Website, February 8, 2011
http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2011/20110208183128735889235/20110208183128735889235_.html
2. China News Service, February 8, 2011
http://www.chinanews.com/cj/2011/02-08/2828737.shtml
3. China News Service, February 8, 2011
http://www.chinanews.com/cj/2011/02-08/2828736.shtml

Briefings | | |   Economy/Resources

Official Media Says Promoting National Image a Strategic Investment

People’s Daily published an article commenting on how China is conducting an advertising campaign on CNN to promote China. The same ad is also being displayed with high frequency in New York’s Times Square. The ad started on January 17, 2011, and will continue until February 14, 2011. 
 

The article’s author stated that this kind of national image promotion campaign is a long-term investment. “With this type of strategic effort, we can develop a good international environment for China to prosper, and create a reputation as a good ‘product-manufacturing country’ to support Chinese companies. These efforts are a strategic investment in advertising our national image and can generate enormous value." 

Source: People’s Daily, February 8, 2011
http://opinion.people.com.cn/GB/13871770.html

Briefings | | |   US-China Relations

China to Extract North Korea’s Mineral Deposits

The World Journal reported that China will sign an agreement with North Korea on February 15, 2011, to jointly extract North Korea’s mineral deposits. 

“The agreement will specify the mineral sites. … The minerals to be extracted include gold, anthracite coal, and rare earth.” The two countries will set up a jointly owned company in Hong Kong to raise money from China’s private investors. South Korea estimates that North Korea’s total mineral deposits are worth US$6.3 trillion.

Source: World Journal, February 7, 2011
http://gb.worldjournal.com/view/aChinanews/11295144/article–ifbase4-base164-JUU1JTgzJUI5JUU1JTgwJUJDNi0zJUU1JTg1JTg2JUU3JUJFJThFJUU1JTg1JTgzLSVFNCVCOCVBRCVFNSU4
RiVBRiVFOSU5NiU4QiVFNyU5OSVCQyVFNSU4QyU5NyVFOSU5RiU5MyVFNyVBNCVBNiVFOCU5NyU4Rg~~?
instance=chin

Briefings | | |   Geo-Strategic Trend

China Starts Research Project to Study Astronauts Living in Space

Officials from the China Astronauts Research and Training Center reported on January 26, 2011, that China has just established its first national basic manned-space flight research project. The Ministry of Science and Technology approved the project, titled “research on astronauts operating capability, adaptability to change, and mechanisms for long-term space flight.” The project will focus on the impact on astronauts of weightlessness, the rapid shift between day and night, and living in a confined space. The research will be done from 2011 to 2015. The results are critical to China’s space station.

Source: Xinhua, January 26, 2011
http://news.xinhuanet.com/2011-01/26/c_121026078.htm

Briefings | | |   Defense/Military

China News Service: China’s Gold Production Exceeded 340 Tons in 2010

China News Service reported on January 27, 2011, that, according to the China Gold Association, China’s gold production in 2010 set a new world record at 341 tons. This represents an 8.6% increase from 2009. China has thus remained the world’s top gold producer for the fourth year in a row since it overtook South Africa in 2007. More than 500 counties in China produce gold. The gold industry has become the key industry and a major source of income for over 100 counties. The top five gold producing provinces are Shandong, Henan, Jiangxi, Yunnan, and Fujian. Collectively, they produce 60% of the national output. China’s gold market is also very strong. In 2010, China consumed 510 tons of gold for jewelry production, use in industry, and investment.

Source: China News Service, January 27, 2011
http://www.chinanews.com/fortune/2011/01-27/2817180.shtml

Briefings | | |   Economy/Resources

China Uses Leaders’ Foreign Visits to Obtain Trade Orders

The China Economy website reported that, “Over the past two months, after China’s leaders visited foreign countries, China signed treaties and contracts worth about US$100 billion.” During Hu Jintao’s visit to the U.S., the Ministry of Commerce sent two delegations, in seven groups, to tour the U.S. China (Ed: which directly or indirectly controls all companies in China) signed 14 bilateral treaties and many commercial contracts. The total amount negotiated in the U.S. amounted to about US$60 billion. Last December, Wen Jiabao brought over 400 businessmen to India and Pakistan, where they signed contracts worth US$20 billion. In early January, Vice Premier Li Keqiang’s visited Spain, Germany, and the U.K., and signed contracts with those countries in the amounts of US$7.5 billion, US$8.7 billion, and US$4.7 billion respectively.


Source: China Economy website, January 24, 2011
http://www.ce.cn/cysc/newmain/yc/jsxw/201101/24/t20110124_20755334.shtml

Briefings | | |   Government/Politics

Executive VP of Bank of China: Advancing the Renminbi on the World Stage

China Review News published an interview with Xie Yonghai, Executive Vice President of the Bank of China and Chairman of the Hong Kong Chinese Securities Association. Xie stated that, “The current international monetary system based on the U.S. dollar is biased. China, given its present economic wherewithal needs to become a greater international power.” Xie pointed out that getting regional adoption of the renminbi is the key to internationalizing the renminbi. China has signed treaties with countries on renminbi exchange and free trade. Agreements about the regional adoption of the renminbi are being made with countries in Southeast Asia, South Asia, North Asia, and possibly Latin America, where China is working with Brazil and Argentina.

“Hong Kong will play a major role as the off-shore renminbi trading center.” Xie predicts that “within five years, Hong Kong’s renminbi trade volume will reach 8 trillion yuan. By then, the renminbi will become the third most popular currency in the world, after the dollar and the euro, and part of the IMF’s SDR.”


Source: China Review News, January 24, 2011
http://gb.chinareviewnews.com/doc/1015/7/8/1/101578140.html?coluid=10&kindid=253&docid=101578140&mdate=0124002018

Briefings | | |   Economy/Resources

China Youth Online: China Increases Overseas Acquisitions

The “2011 World Economy Analysis and Forecasts” published a report by the World Economy and Politics Center of the China Social Science Academy. The report noted a rapidly increasing trend, which is that Chinese companies are acquiring more assets overseas. State-Owned-Enterprises (SOEs), including Petro China, Sinopec, CNOOC, the Baosteel Group, and CHALCO, were the leaders in these acquisitions. The sectors most coveted are those in the extraction industry. Chinese companies acquired 91 companies with a value of US$32 billion between 2005 and mid-2010. Chinese companies made purchases in other industries: Geely (automaker) bought Volvo for US$1.8 billion and Sany Group (a machinery manufacturer) built plants in Germany. Morgan Stanley’s report showed that, by the first half of 2010, China became the second largest overseas acquirer of assets after the U.S.

“However, more than 50% of the overseas acquisitions were not successful after the acquisition, i.e., they didn’t generate more money for the parent company.”

Source: China Youth Online, January 24, 2011
http://zqb.cyol.com/html/2011-01/24/nw.D110000zgqnb_20110124_2-10.htm

Briefings | | |   Economy/Resources