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Xia Bin: Urbanization Depends on Further Reforms

Xia Bin, Director-General, Financial Research Institute, Development Research Center of the State Council (DRC), People’s Republic of China, wrote that the two key issues affecting urbanization in China are welfare benefits to farmers and urban planning. 

 Xia stated that the Chinese leadership has adopted the strategy that China must accelerate urbanization in order to stabilize the economy. At the minimum, according to Xia, China must carry out reform in these areas: 
1. To accomplish the objective of increasing the welfare benefits to farmers, reform is needed in the household registration system, housing, the medical system, retirement, education, the financial system, and land use; 
2. To accomplish the objective of ensuring the source and efficacy of the funds for urban infrastructure construction, reform is needed in the financial system, land administration, the allocation of resources, the division of power between the central government and local governments, the price mechanism involved in the factors of production, and the overall government administrative system;
  
3. In order to optimize urban planning, including the creation of new municipalities, a series of policies must be revised.
“In short, we can say China has almost no existing system and policy it can follow without addressing the need for improvement in the areas of reform that must be carried out in order to achieve its urbanization strategy. Therefore, the current strategy to promote urbanization is to promote further reforms. The essence of the urbanization strategy is to accelerate China’s reforms.” 
Source: China Economic Times, December 2, 2013
 http://www.cet.com.cn/ycpd/sdyd/1045775.shtml
Briefings | | |   Economy/Resources

General Luo Yuan on China’s New State Security Committee

Major General Luo Yuan of the People’s Liberation Army wrote an article in which he stated that China’s New State Security Committee is to handle long term security matters from a strategic perspective. 

“The establishment of the State Security Committee is not geared towards a specific matter, such as the Japan issue, the South China Sea, the Senkaku (Diaoyu) Islands and other issues. It is not for any specific issue but is based on strategic and longer-term considerations, namely the country’s long-term stability.” 
Luo expressed the belief that various domestic reforms have now entered “deep waters,” touching the issue of system reform. The reform of the State security system requires that a top level apparatus be responsible for overall strategy. 
“In addition, we cannot avoid the reality of certain threats and challenges. To some extent, that reality is what accelerated the birth of the State Security Committee. China is now faced with a complex security environment, which includes both traditional and non-traditional security. It also faces challenges due to the gaming of some of the major powers, the borders on land, islands at sea, and maritime borders. Meanwhile, China also faces pressure from ‘three forces,’ namely terrorism, separatism, and extreme nationalism.” 
Source: International Herald Leader, November 25, 2013 
http://ihl.cankaoxiaoxi.com/2013/1125/306991.shtml
Briefings | | |   Government/Politics

Local Government Debts: Backdoor Loans

Xinhua reprinted a China Business News article reporting on backdoors loans made to local governments. The article stated that such loans are rampant and lack proper accounting. 

According to China Business News, when, due to their investment and financing platforms and the local governments existing debts, they find it difficult to obtain additional loans, some of them ask large companies that have international backgrounds to take out bank loans on their behalf. These large companies then use local governments’ land as collateral for the bank loans.

Because the loans are obtained to satisfy the needs of local governments, the funds are then remitted to the local governments, thus becoming debts of the local governments. However, as a result of special accounting treatment, the local governments do not record the loans on the books as actual loans, but as current accounts with these large companies. 

First, not all the fund transfers are recorded in the books. Second, since the local governments’ land is used as collateral for the loans, some local governments may call the loans “Assets” on their books. Third, because the large companies have already recorded the loans as liabilities, the local governments use that as a reason not to report the loans as their own liabilities. Fourth, some large companies have gone so far as to create a separate bank account for these loans. The money is set aside for the local governments to use so they can withdraw funds and deposit the payments for the loans. 

Source: China Business News reprinted by Xinhua, November 19, 2013

http://news.xinhuanet.com/fortune/2013-11/19/c_125723133.htm

Briefings | | |   Economy/Resources

Economist: Another 20 Years Needed to Absorb China’s Real Estate Surplus

According to Jiangnan Times, a publication under People’s Daily, Professor Li Daokui from Qinghua University, one of the most influential economists in China, predicted that it will take another 20 years to absorb China’s existing real estate surplus. 

“Currently, only 140 million urban residents are without housing. However, with existing land reserves [for housing], we have the capacity to provide housing for 200 million people. That means it will take at least another 20 years to assimilate these land reserves. China has a very serious housing surplus problem. China’s real estate bubble has grown to be so appalling! [It is unbelievable that] local governments actually are daydreaming about the sale of their land so they can pay up to 20 trillion yuan of the local governments’ debt!” 
Source: Jiangnan Times reprinted by People’s Daily, November 21, 2013 
http://house.people.com.cn/BIG5/n/2013/1121/c164220-23617892.html
Briefings | | |   Economy/Resources

Qiushi: Market to Play Vital Role in Resource Allocation

On November 20, Qiushi published an article explaining the goals of economic reform as proposed during the Third Session of the 18th Congress of the Communist Party. 

According to Qiushi, China preliminarily established a socialist market economy in which a lot of problems remain unresolved. In particular, the relationship between the government and the market has not been ironed out. Due to many constraints, the market has, therefore, not played an effective role in allocating resources . 
“To move in the direction of reform of the socialist market economy, the key is to balance well the relationship between the government and the market. The [Third] Session has established the task of deepening economic reform by enabling the market to play a vital role in resource allocation. This is a major advance for our Party, both in theory and in practice. From a ‘fundamental role’ to a ‘vital role’, this change reflects the general rule that the market determines the allocation of resources. It certainly will play an extremely important role in China’s reform and opening up, and its economic and social development.” 
Source: Qiushi, November 20, 2013 
http://www.qstheory.cn/zywz/201311/t20131120_293236.htm
Briefings | | |   Economy/Resources

More Party Officials with Ties to Jiang Zemin under Investigation

On November 14, Xinhua reprinted a China News Weekly report that in less than a year since Xi Jinping came to power in the 18th Congress of the Chinese Communist Party, 11 high ranking provincial officials and department heads have been put under investigation on corruption charges. The number doubled the average of 5.8 officials per year in the past five years. From 2008 through 2012, there were four, eight, six, seven, and four officials, respectively, at provincial or department level who were investigated.

[Editor’s Note: According to Asia Times, in one example, the CCP removed Ji Jianye, the mayor or Nanjing from office accusing him of "economic crimes," a euphemism for corruption. That article pointed out that "some analysts speak instead of a settling of scores within the Party, since Ji is very close to former President Jiang Zemin." Another source observed that almost all of these 11 officials have close ties to former President Jiang Zemin.] 
Source: China News Weekly reprinted by Xinhua, November 14, 2013 
http://news.xinhuanet.com/politics/2013-11/14/c_118138823.htm
Asia News, "Nanjing mayor arrested on corruption charges,"
http://www.asianews.it/news-en/China,-Nanjing-mayor-arrested-on-corruption-charges-29299.html
Briefings | | |   Government/Politics

CRN: State Security Committee Reflects Chinese Political System Reform

The Third Plenary session of the 18th Congress of the Chinese Communist Party just ended on November 12. China Review News published a commentary on the new State Security Committee that the Congrss established. 

The commentary stated that the establishment of the new State Security Committee represents a significant deviation from the Chinese political system. There is a common misunderstanding among China scholars about the Chinese political system. They look at the People’s Congress, but fail to understand that the People’s Congress is the highest political authority under the leadership of the Communist Party. Because of this misunderstanding, they tend to recommend that any decisions that the Communist Party makes should go through the existing political system to implement its agenda. “That is not true. … The Chinese Communist Party is not independent of the State apparatus; it is an important part of the State authority. In other words, the Chinese Communist Party is the core of the State apparatus as well as the leadership of the State authority.“ Without understanding this, one can hardly understand the role that the Communist Party plays in China’s political affairs. 
The commentary observed that the establishment of the State Security Committee not only enables the Chinese Communist Party General Secretary to lead the State apparatus directly; it also resolved the issue of coordination among State departments. 
 “The establishment of the State Security Committee marks a major change taking place in the Chinese constitutional system. The Chinese Communist Party’s leadership over State power will be further strengthened, the country’s political structure will be more perfect, and China’s President will change from a figurehead of the State to the country’s highest decision-maker.” 

Source: China Review News, November 15, 2013 
http://www.zhgpl.com/doc/1028/6/3/7/102863748.html?coluid=151&kindid=0&docid=102863748&mdate=1115005457

Briefings | | |   Government/Politics

PLA Editorial: Resolutely Resist the “Nationalization of the Military”

On November 10, 2013, during the third session of the 18th Congress of the Chinese Communist Party, People’s Liberation Army (PLA) Daily published an editorial titled, “Always Adhere to the Party’s Absolute Leadership over the Military.” 

According to the PLA Daily editorial, Xi Jinping’s met last week with PLA delegates. The editorial summarized the core of his remarks, “Always adhere to the Party’s absolute leadership over the military; always adhere to the fundamentals of the ability to fight and win the war; always adhere to the Party’s policy that the Party must tightly control the Party; and always adhere to the spirit of reform and innovation to strengthen the Party’s development.” The editorial continued, “To study diligently and to implement President Xi’s important instructions, we must first grasp the fundamental task of ensuring the Party’s absolute leadership over the military.” “Our military is the people’s army founded and led by the Party. It is the armed forces that implement the Party’s political tasks. The fundamental system of the Party’s absolute leadership is a scientific system that has been proven repeatedly in practice.” 
The editorial emphasized that, in the light of the activities of the hostile forces overseas, one must remain alert as some people lack the understanding of the Party’s absolute leadership of the military. “Under these circumstances, it is particularly important that we take "always adhering to the Party’s absolute leadership over the military" as the highest political principle to follow, as the highest political requirement to implement, and as the highest political discipline to observe.”
“[We] must unswervingly adhere to the fundamental principle and system of the Party’s absolute leadership of the military, proactively win the ideological struggle, and resolutely resist such wrong political views as "non-political and non-Party military” and “nationalization of the military.” 
Source: People’s Liberation Army Daily reprinted by People’s Daily, November 10, 2013 http://military.people.com.cn/n/2013/1110/c1011-23489856.html
Briefings | | |   Government/Politics